PROXY STATEMENT
COMPANY OVERVIEW
Who We Are
We are a leading provider of data center solutions to the world's largest and most sophisticated hyperscale technology companies, enterprises
and government agencies. Through our technology-enabled platform, delivered across mega scale data center infrastructure, we offer a comprehensive portfolio of secure and compliant IT solutions. Our
data centers are facilities that power and support our customers' IT infrastructure equipment and provide seamless access and connectivity to a range of communications and IT services providers.
Across our broad footprint of strategically located data centers, we provide flexible, scalable and secure IT solutions, including data center space, power and cooling, connectivity and value-add
managed services for more than 1,200 customers in the financial services, healthcare, retail, government, technology and various other industries. We build out our data center facilities depending on
the needs of our customers to accommodate both multi-tenant environments (hybrid colocation) and customers that require significant amounts of space and power (hyperscale), including federal
customers. We believe that we own and operate one of the largest portfolios of multi-tenant data centers in the United States, as measured by gross square footage, and have the capacity to nearly
double our sellable data center raised floor space without constructing or
acquiring any new buildings. In addition, we own more than 785 acres of land that is available at our data center properties that provides us with the opportunity to significantly expand our capacity
to further support future demand from current and new potential customers.
As
of December 31, 2020, our data center portfolio consisted of 28 data centers located throughout the United States, Canada and Europe. Across our footprint, our data centers are
concentrated in the markets which we believe offer the highest growth opportunities. Our data centers are highly specialized, mission-critical facilities utilized by our customers to store, power and
cool the server, storage, and networking equipment that support their most critical business systems and processes. We believe that our data centers are best-in-class and engineered to adhere to the
highest specifications commercially available to customers, providing fully redundant, high-density power and cooling sufficient to meet the needs of the largest companies and organizations in the
world. We have demonstrated a strong operating track record of "five-nines" (99.999%) reliability since QTS' inception.
Unless
the context requires otherwise, references in this Proxy Statement to "QTS," "we," "our," "us" and the "Company" refer to QTS Realty Trust, Inc., a Maryland corporation,
together with its consolidated subsidiaries.
COVID-19 Pandemic
The COVID-19 pandemic has brought unprecedented and significant disruptions to the United States and global economy. Throughout the pandemic,
however, we have maintained 99.999%+ uptime at our facilities and completed the most active year of data center development in our history, while limiting workplace exposures to COVID-19. Our business
results were strong in 2020, demonstrating, in our view, the criticality of the data center solutions we provide to our customers' underlying businesses
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and
growth strategies. Across each of the respective jurisdictions in which we operate, our business has been deemed essential operations, which has allowed us to remain fully staffed with critical
personnel
in place to continue to provide service and support for our customers. We are proud that we have not implemented any broad-based layoffs, furloughs or pay cuts as a result of the pandemic. In fact,
the size of our workforce grew in 2020 and we were able to provide extra compensation to our frontline employees.
COVID-19
has had a dramatic impact on our employees and communities, and we were well-prepared to respond. As part of our Board-directed business contingency planning, we have had an
emergency response plan in place for several years, and the capabilities needed to execute that plan had been tested with our business continuity team. Our current pandemic response plan is regularly
reviewed, and lessons learned from other crisis responsesincluding natural disastershave been incorporated into our plan.
In
addition, three years ago, QTS began an initiative called "Vision 2020" which laid out a multi-year growth strategy for the Company. As part of this internal growth strategy, QTS
launched an accelerated path towards the digitization of our internal and external-facing systems. This accelerated digitization plan provided a strong foundation to support a broader remote workplace
environment for QTS employees and our customers. Fifteen percent of the workforce was already in a remote/flex work arrangement before the pandemic began. Once we began to realize the potential extent
of the pandemic, we made the decision to implement our pandemic response plan and, within a few days, approximately 70% of our workforce was working remotely with no discernable impact to business
continuity, operations or performance. Importantly, our mission-critical data center operations teams remained safely on-site to ensure operational continuity. We significantly increased our employee
communications structures during the year, including holding live virtual all-hands meetings and bi-weekly updates from the executive team, and closely monitored our employees' engagement.
Once
the scope of the pandemic became clearer, we initiated extensive safety measures at our facilities, screened personnel each time they entered a QTS facility and developed
contingency staffing plans three to four levels deep for mission-critical employees and core business functions. We developed a detailed and redundant plan for managing potential on-site COVID-19
cases, and we established "zoning" restrictions in our facilities and construction areas to minimize the opportunity for cross-exposure to the virus. Our construction programs continued safely
throughout the pandemic and we delivered new data center space to customers on schedule.
Our
employees' health and wellbeing throughout the year were always top of mind, and we implemented several programs to help employees cope with the impacts of the pandemic. We gave
employees the flexibility that they needed to care for their own health and that of family members, including flexibility for schooling of their children and a variety of wellness
programsincluding mental health programsto help employees and their families. We also had in place an Employee Emergency Crisis Fund so that our employees can assist one
another in times of critical need. This fund focuses on providing help to employees or eligible dependents (in the case of the death of an employee) experiencing serious financial hardship and who are
unable to afford housing, utilities and other basic living expenses due to a natural disaster, life-threatening illness or injury, death or other catastrophic or extreme circumstance beyond the
employee's control. Additionally, we were able to provide multiple employee grants in 2020 to assist those families in need.
In
addition to health and wellbeing, we believed it was important to recognize the extraordinary contributions of our employees during the pandemic, particularly those who staff on-site
mission-critical positions in our data centers. QTS created special recognition programs for these employees and provided extra bonuses for front-line employee as a way of recognizing them for their
service and rewarding them for a year of strong corporate performance.
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Beyond
our facilities, we also made efforts to help our customers throughout the pandemic. Our initiatives included creating a rapid-response program and internal task force focused on
COVID-19 named "Operation Safeguard," publishing our COVID-19 response plan on our website (available at https://www.qtsdatacenters.com/qts-covid-19-response-plan), and sending communications to
customers at each facility, including the measures taken, any time we are informed of a visitor who tested positive for COVID-19.
2020 ESG Highlights
QTS was formed with a vision to create a platform of highly secure state-of-the-art data centers. We are "Powered by
People" to ensure our customers enjoy world-class support and engagement and an environment that encourages the pursuit of excellence every day in our mission and purpose of
empowering people and technology. We believe that strong Environmental, Social and Governance ("ESG") principles and performance will be necessary for our success over the long term, including to
attract and retain customers. We use a Net Promoter Score Survey to measure customer satisfaction and brand perception, which is dependent on factors that include ESG. 2020 marked the fifth
consecutive year QTS has led the data center industry in Net Promoter Score (NPS), achieving an industry-best NPS score of 80+, approximately double the average score of all data center companies.
Sustainability Oversight and Leadership
QTS is committed to maintaining a company-wide approach that demonstrates a commitment to the future of our environment, drives data center
efficiency and encourages employee engagement. Our Board is responsible for overall risk oversight of the Company, which includes environmental, climate, social, supply chain and governance matters,
and receives periodic updates regarding the Company's sustainability initiatives and progress. In addition, our Nominating and Corporate Governance Committee is tasked with oversight of sustainability
and social matters, and the Company's Sustainability Leadership Team, led by the Vice President of Energy and Sustainability, is responsible for leading and implementing ESG initiatives across the
Company and reports directly to the CEO. Executive sponsorship of this team and its initiatives demonstrates the high level of dedication to environmental and social responsibility at QTS.
While
we maintain a wide range of ESG initiatives across many aspects of the business, our ESG priorities for 2021 are:
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People:
Create Opportunity and Foster a Diverse & Inclusive Culture
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Foster and promote our
Powered by People culture
Promote diversity and inclusion efforts
Develop our staff through training and leadership programs
Foster continued employee engagement
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Environment:
Reduce Our Carbon and Water Footprint
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Increase QTS' sourcing and
usage of renewable power sources to support our data center facilities
Reduce fresh water use through efficient construction and equipment
Foster programs that enable employees to reduce their carbon footprints
Enhance QTS' company-wide recycling
program
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Data Security and Privacy:
Protect QTS and Customer Data and Honor Privacy
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Maintain critical
certifications and accreditations including ISO 27001, SOC 1, SOC 2, HITRUST, PCI DSS, and FISMA
Protect QTS and customer data
Respect the privacy of individuals for whom QTS has data
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Communities:
Be a Responsible Partner
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Support the success of
communities in which we operate
Enable our employees to volunteer and contribute
Contribute to our communities, particularly in times of need
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Transparency:
Report Relevant ESG Data
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Extend our track record of
ESG transparency and accountability
Align disclosure with GRI, TCFD and SASB standards
Continue to report to CDP and GRESB
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People
The QTS community is comprised of over 640 talented and driven individuals who bring a hard-working and positive attitude to work each and every
day. From our inception, we have been Powered by People and recognize how critical it is to invest in all QTS employees, from the way we attract and
develop talent to our focus on accelerating engagement and fostering retention. For example, during 2020 we provided more than 7,000 training hours to our people, as well as our "Lead the Way"
leadership development program to nearly one-quarter of our workforce. This program provides tailored content and development training that ensures effective leadership practices throughout the
organization.
We
also support the "Women Inspiring Leadership" (WIL) program, which is open to all QTS employees and is a key part of our focus to encourage female leaders, particularly in the
technology industry where women are traditionally underrepresented. WIL features a mentoring program that provides structured relationships to drive individuals to their potential, as well as an
opportunity for our people to give back to those at an earlier stage in their careers. We have seen success of this internally developed program focused on developing and inspiring leaders through
focus panels, training events, partnering with a professional association for women in technology and hosting guest speakers from all backgrounds.
We
believe diversity and inclusion is important to achieve our long-term growth objectives, and we strive to build an even more diverse and inclusive organization. Moreover, we believe
that creating an environment where everyone feels they belong is simply the right thing to do. Our ongoing diversity efforts include recruitment at women's technology group events, targeted
recruitment campaigns aimed at attracting diverse employees, involvement with local diverse organizations focused on building bench strength, mentorship programs for women and diverse employees,
inclusive professional groups and involvement within the Veterans community.
We
are proud of our progress on diversity, and we strive for even more progress in the future. Our workforce, much of which is technical, is approximately 22% women and approximately 32%
racially or ethnically diverse, including approximately 45% racially or ethnically diverse in our mission-critical data center operations. QTS' efforts to create advancement opportunities for all
employees is having an impact; almost 30% of our managers are women and approximately 18% of our managers are racially or ethnically diverse.
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Environment
We seek to lead the industry in sustainability by implementing cost-effective, impactful programs that create value for investors and customers
and benefit society. This includes our goal of procuring 100% of our energy from renewable sources by 2025. We build world class LEED-inspired facilities, and conserve millions of gallons of water
each year through rainwater collection and greywater reuse systems. As of the end of 2020, 72% of our facilities are LEED or Green Design certified, 55% are supported by renewable power, approximately
36% of our total energy consumed comes from renewable sources, 44% of our portfolio is certified to ENERGY STAR and 100% of our customers are metered or sub-metered for electricity consumption. Our
environmental goals include the following:
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Procure 100% of our power from renewable energy sources by 2025.
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Develop a Carbon Emissions Goal that aligns with TCFD reporting standards by 2022.
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Pursue Green Building Certifications in 100% of owned facilities by 2025.
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Conserve at least 15 million gallons of water per year; going forward we plan to measure year-over-year improvement in water usage
effectiveness (WUE), with a goal to improve by 5% annually.
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Install Electric Vehicle (EV) charging stations at 75% of our facilities by 2025. It took us only two years to reach our initial goal of
installing EV charging stations at 55% of our facilities.
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Recycle 90% of our operational waste by 2025. To date, we have recycled over 1.3 billion pounds of material and recycle 68% of our
operational waste.
Data Security and Privacy
Today's cyber threat landscape is very dynamic, and organizations must adapt to an increasing volume and sophistication of cyber threat actors.
We have built a risk-based cyber security program that focuses on continuous identification and assessment of risks to our business and assets, including the critical information technology systems
that are needed to deliver data center colocation services. In addition, we have a documented cyber security incident response program to manage our response to incidents. We understand that every
member of the organization has an important role in safeguarding the confidentiality, integrity and availability of QTS and stakeholder assets. Accordingly, all of our personnel receive annual
security awareness training that includes cyber threat overview, cyber policies and reporting procedures, and we offer critical compliance certifications and accreditations for SOC 1, SOC 2, HITRUST,
PCI DSS, FISMA, ISO 27001 at sites important to our customers.
Community
Community service and volunteerism are pillars of our culture and engrained in our people. We continually focus on strengthening the communities
that we serve through our support of economic development and charitable organizations. We accomplish this through a culture of employee volunteerism, corporate sponsorships and grants, non-profit
board service by employees and organized employee fundraising donations for non-profit groups and associations in our communities. Every year, we provide all of our employees three paid days to
volunteer and give back to our communities. While many volunteer events were impacted by the pandemic during 2020, our employees continued to support the local communities in which we operate ranging
from donations to food banks to hosting toy and winter coat drives. We also facilitate employee philanthropy and volunteerism through our matching gift program. Following the establishment of our
Community Impact Program in 2012, we have donated in excess of $3.2 million to over 150 non-profit organizations including Big Brothers and Big Sisters, Habitat for Humanity and local food
depositories. From October 15, 2013, the date of our
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initial
public offering, through December 31, 2020, our employees have volunteered approximately 15,000 hours to more than 160 non-profit organizations.
Customers
Our customer-centric approach focuses on delivering a premium customer experience. In 2020, we conducted a Net Promoter Score (NPS) Survey to
measure customer satisfaction and brand perception, and 2020 marked the fifth consecutive year we have led the data center industry achieving an industry-best NPS score of 80+, approximately double
the average score of all data center companies. Other examples of our customer-centric approach include our Remote Work Survey that we conducted in the fourth quarter of 2020 to collect feedback about
life during the COVID-19 pandemic and evaluate where we could be of help to our customers, as well as the following measures we took to protect our customers in
2020:
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Creation of rapid-response program and internal task force focused on COVID-19 named "Operation Safeguard."
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Creation of COVID-19 response page on our website: https://www.qtsdatacenters.com/qts-covid-19-response-plan.
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Communications sent to customers at each facility, including measures taken, any time we are informed of a visitor who has tested positive.
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Temperature readings taken at all sites upon entering, masks required, extra cleaning protocols, additional sanitizer available throughout
facilities, and social distancing enforced.
Transparency
We are committed to continuing our efforts to inform stakeholders about actions and progress on our key ESG priorities. Our 2020 ESG and
Sustainability Accounting Standards Board (SASB) report will be published later in 2021, in alignment with the GRI Standards: Core option and the Sustainability Accounting Standards Board (SASB) real
estate standards.
Awards and Recognition
We are excited to announce that throughout 2020, we received a number of highly esteemed awards across multiple sectors. These awards further
demonstrate our commitment as an organization to Environmental, Social and Governance goals and initiatives.
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Rated "A" by CDP, 2020
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Rated "A" by CDP Supplier Engagement Rating (SER)
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CDPSupplier Engagement Leaderboard, 2020
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GRESB#1 in Global Data Centers, 2019, 2020
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World Finance MagazineMost Sustainable Global Data Center, 2019, 2020
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EPAGreen Power Partner Program#12 in Tech and Telecom, 2019, 2020
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EPAGreen Power Leadership Award, 2020
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ESGR Patriot Award, 2020
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Pro Patria ESGR Award, 2020
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Data Center Veterans Champion, 2020
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QTS placed in the top 30 employers nominated for the Secretary of Defense Employer Support Freedom Award, 2020
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NVTC Data Center Awards, 2020
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Frost & SullivanGlobal visionary Innovation Leadership Award, 2020
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Atlanta Community Food Bank Award, Tech Cares Tech Shares (for providing over 900 meals for the Atlanta community in 2020), 2020
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ABOUT THE MEETING
Why am I receiving this Proxy Statement?
This Proxy Statement is furnished by the Board of Directors (the "Board" or "Board of Directors") of QTS Realty Trust, Inc. in connection
with the Board's solicitation of proxies for the 2021 Annual Meeting of Stockholders of QTS Realty Trust, Inc. (the "Annual Meeting") to be held in a virtual-only meeting format at
www.virtualshareholdermeeting.com/QTS2021 on Tuesday,
May 4, 2021, at 9:00 a.m., Eastern Time, and at any adjournments or postponements thereof. Due to the ongoing COVID-19 pandemic and in order to continue to abide by social distancing
protocols and otherwise to protect the health and safety of stockholders, employees and the community, the Annual Meeting will be held as a virtual-only meeting format. This Proxy Statement will first
be made available to stockholders on or about March 18, 2021. Unless the context requires otherwise, references in this Proxy Statement to "QTS," "we," "our," "us" and the "Company" refer to
QTS Realty Trust, Inc., a Maryland corporation, together with its consolidated subsidiaries.
Why didn't I automatically receive a paper copy of the Proxy Statement, proxy card and Annual Report?
Pursuant to the U.S. Securities and Exchange Commission's (the "SEC") "notice and access" rules, we have elected to provide access to our proxy
materials via the Internet. Accordingly, rather than paper copies of our proxy materials, we are sending a Notice of Internet Availability of Proxy Materials (the "Proxy Notice") to our stockholders
that provides instructions on how to access our proxy materials on the Internet.
How can I receive electronic access to the proxy materials?
The Proxy Notice includes instructions on how to access our proxy materials over the Internet at www.proxyvote.com and how to request a
printed set of the proxy materials by mail or an electronic set of the proxy materials by email.
In
addition, stockholders may request to receive future proxy materials in printed form, by mail, or electronically by email, on an ongoing basis. Choosing to receive future proxy
materials by email will save the Company the cost of printing and mailing documents to you and will reduce the environmental impact of our Annual Meeting. If you choose to receive future proxy
materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive future proxy materials by
email will remain in effect until you terminate it.
What am I being asked to vote on?
You are being asked to vote on the following proposals:
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Proposal 1 (Election of
Directors): The election of the ten director nominees to the Board, to serve until the 2022 Annual Meeting of Stockholders and until their
successors have been duly elected and qualify;
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Proposal 2 (Say-on-Pay): The
approval, on a non-binding advisory basis, of the compensation of our named executive officers as disclosed in this Proxy Statement;
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Proposal 3 (Approval of Amended and Restated 2013 Equity Incentive
Plan): The approval of an amendment and restatement of the QTS Realty Trust, Inc. 2013 Equity Incentive Plan (as amended to date, the
"2013 Plan"); and
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Proposal 4 (Ratification of the appointment of Ernst &
Young LLP): The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm
for our fiscal year ending December 31, 2021.
The
Board knows of no other matters to be brought before the Annual Meeting.
What are the Board's voting recommendations?
The Board recommends that you vote as follows:
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Proposal 1 (Election of Directors): "FOR" each of the Board's nominees
for election as directors;
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Proposal 2 (Say-on-Pay): "FOR" the approval, on a non-binding advisory
basis, of the compensation of the Company's named executive officers as disclosed in this Proxy Statement;
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Proposal 3 (Approval of Amended and Restated 2013 Equity Incentive Plan): "FOR" the approval of an amendment and
restatement of the 2013 Plan; and
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Proposal 4 (Ratification of the appointment of Ernst & Young LLP): "FOR" ratification of the
appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending
December 31, 2021.
Who is entitled to vote at the Annual Meeting?
The close of business on March 8, 2021 has been fixed as the record date (the "Record Date") for the determination of stockholders
entitled to receive notice of and to vote at the Annual Meeting. Only holders of record of our Class A common stock, $0.01 par value per share ("Class A common stock"), and
Class B common stock, $0.01 par value per share ("Class B common stock," and together with the Class A common stock, "common stock"), as of the close of business on the Record
Date, or their duly appointed proxies, are entitled to receive notice of, to attend, and to vote at the Annual Meeting. If your shares are held in an account at a brokerage firm, bank, broker-dealer,
or other similar organization, then you are the beneficial owner of shares held in "street name" and you also are entitled to vote your shares at the Annual Meeting. On the Record Date, our
outstanding voting securities consisted of 64,861,508 shares of Class A common stock and 124,995 shares of Class B common stock.
What are the voting rights of stockholders?
Each share of Class A common stock is entitled to one vote on each matter to be voted on. Each share of Class B common stock is
entitled to 50 votes on each matter to be voted on. As an umbrella partnership real estate investment trust, limited partnership interests in the Company's operating
partnershipQualityTech, LP ("Operating Partnership")do not have any voting rights with respect to the Company, but may be converted by the holder into shares of
Class A common stock on a one-for-one basis or cash at the discretion of the Company. The shares of Class B common stock were issued in connection with our initial public offering in
2013 in order to provide the holder with voting rights that are aligned with the holder's economic interest in the Company, i.e., the voting rights that the holder would otherwise have if the
holder converted its limited partnership interests of our Operating Partnership into shares of Class A common stock. Without the votes afforded by the Class B common stock, the holder's
fully diluted ownership in the Company and our Operating Partnership would exceed the holder's voting rights in the Company. The shares of Class B common stock automatically convert into
Class A common stock on a one-to-one basis to the extent they are transferred to a person other than a permitted transferee (generally, the holder, a family member of the holder or entities
owned by or for the benefit of them), or to the extent the holder thereof transfers a proportional number of operating partnership units ("OP units") of our Operating Partnership to a person other
than a permitted transferee. The Board may not increase the number of
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shares
of Class B common stock that we have authority to issue or reclassify any shares of our capital stock as Class B common stock without stockholder approval. Mr. Chad L.
Williams, the Company's Chairman, President and Chief Executive Officer, is the sole beneficial owner of our Class B common stock and, as of the Record Date, beneficially owned 10% of the
Company's Class A common stock. Class A common stockholders and Class B common stockholders vote together as one class. Votes may not be cumulated.
How do I vote?
If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the
stockholder of record with respect to those shares, and the Proxy Notice was sent directly to you by us. In that case, if you choose not to attend the Annual Meeting in person, you may instruct the
proxy holders named in the proxy card how to vote your shares of common stock in one of the following ways:
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Vote online. You can access proxy materials and vote at
www.proxyvote.com. To vote online, you must have your stockholder identification number provided in the Proxy Notice.
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Vote by telephone. If you received printed materials, you also have the
option to vote by telephone by following the "Vote by Phone" instructions on the proxy card.
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Vote by regular mail. If you received printed materials and would like to
vote by mail, please mark, sign and date your proxy card and return it promptly in the postage-paid envelope provided.
If
your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in "street name," and the
Proxy Notice
was forwarded to you by that organization. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account. If you choose not to attend the
Annual Meeting and vote in person, you should instruct your broker or nominee how to vote your shares by following the voting instructions provided by your broker or nominee. If you request printed
copies of the proxy materials by mail, you will receive a vote instruction form for this purpose.
Of
course, you always may choose to attend the Annual Meeting and vote your shares in person. If you attend the Annual Meeting and have already submitted a proxy, you may withdraw your
proxy and vote in person.
How are proxy card votes counted?
Proxies submitted properly via one of the methods discussed above will be voted in accordance with the instructions contained therein. If the
proxy is submitted but voting directions are not made, the proxy will be voted "FOR" each of the ten director nominees, "FOR" approval, on a non-binding advisory basis, of the compensation of our
named executive officers as disclosed in this Proxy Statement, "FOR" the amendment and restatement of the 2013 Plan, "FOR" ratification of the appointment of Ernst & Young LLP as our
independent registered public accounting firm for the fiscal year ending December 31, 2021, and in such manner as the proxy holders named on the proxy (the "Proxy Agents"), in their discretion,
determine upon such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
If
your shares of common stock are held in street name, under applicable rules of the New York Stock Exchange (the "NYSE") (the exchange on which our Class A common stock is
traded), the brokers will vote your shares according to the specific instructions they receive from you. If brokers that hold shares of our common stock for a beneficial owner do not receive voting
instructions from that owner at least 10 days prior to the Annual Meeting, the broker may vote only on the proposal if it is considered a "routine" matter under the NYSE's rules. On
"non-routine" matters, brokers do not
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have
discretionary voting power and cannot vote without instructions from the beneficial owners, resulting in a so-called "broker non-vote." Pursuant to the rules of the NYSE, the election of
directors, the approval, on a non-binding advisory basis, of the Say-On-Pay proposal, and the approval of the amendment and restatement of the 2013 Plan are "non-routine" matters, and brokerage firms
may not vote on these matters without instructions from their clients, resulting in broker non-votes. In contrast,
ratification of the appointment of an independent registered public accounting firm is considered a "routine" matter under the NYSE's rules, which means that brokers have discretionary voting
authority to the extent they have not received voting instructions from their client on the matter.
How many votes are needed for the proposals to pass?
The proposals to be voted on at the Annual Meeting have the following voting requirements:
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Proposal 1 (Election of
Directors): With respect to Proposal One, you may vote "FOR" all nominees, "WITHHOLD" your vote as to all nominees, or "FOR" all nominees except
those specific nominees from whom you "WITHHOLD" your vote. Pursuant to our bylaws, directors will be elected by a plurality of votes cast at the Annual Meeting, with each share being entitled to vote
for as many individuals as there are directors to be elected and for whose election the share is entitled to vote. Therefore, the ten director nominees receiving the highest number of "FOR" votes will
be elected. There is no cumulative voting in the election of directors. For purposes of the election of directors, abstentions, votes marked "WITHHOLD" and other shares not voted (whether by broker
non-votes or otherwise) will not be counted as votes cast and will have no effect on the result of the vote. However, votes to WITHHOLD, abstentions and broker non-votes will be considered present for
the purpose of determining the presence of a quorum.
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Proposal 2 (Say-on-Pay): You may
vote "FOR," "AGAINST" or "ABSTAIN" on Proposal Two. Pursuant to our bylaws, the affirmative vote of a majority of the votes cast at the Annual Meeting is required to approve, on a non-binding advisory
basis, the compensation of our named executive officers as disclosed in this Proxy Statement. For purposes of the vote on Proposal Two, a majority of the votes cast means that the shares voted "FOR"
the proposal must exceed the votes "AGAINST" the proposal, and therefore abstentions and other shares not voted (whether by broker non-vote or otherwise) will not be counted as votes cast and will
have no effect on the result of the vote. However, both abstentions and broker non-votes will count toward the presence of a quorum.
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Proposal 3 (Approval of Amended and Restated 2013 Equity Incentive
Plan): You may vote "FOR," "AGAINST" or "ABSTAIN" on Proposal Three. The affirmative vote of a majority of the votes cast at the Annual Meeting
is required to approve the amendment and restatement of the 2013 Plan. For purposes of the vote on Proposal Three only, abstentions will be counted as votes cast and will have the same effect as votes
"AGAINST" the proposal, while other shares not voted (whether by broker non-vote or otherwise) will not be counted as votes cast and will have no effect on the result of the vote. However, both
abstentions and broker non-votes will count toward the presence of a quorum.
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Proposal 4 (Ratification of the appointment of Ernst &
Young LLP): You may vote "FOR," "AGAINST" or "ABSTAIN" on Proposal Four. Pursuant to our bylaws, the affirmative vote of a majority of the
votes cast at the Annual Meeting is required to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending
December 31, 2021. For purposes of the vote on Proposal Four, a majority of the votes cast means that the shares voted "FOR" the proposal must exceed the votes "AGAINST" the proposal, and
therefore abstentions and other shares not voted will not be counted as votes cast
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What will constitute a quorum at the Annual Meeting?
Holders representing a majority of all votes of our outstanding common stock entitled to be cast at the Annual Meeting must be present, in
person or by proxy, for a quorum to exist. If the shares present in person or by proxy at the Annual Meeting do not constitute a quorum, the Annual Meeting may be adjourned to a subsequent time.
Shares that are voted "FOR," "AGAINST," "ABSTAIN" or "WITHHOLD" will be treated as being present at the Annual Meeting for purposes of establishing a quorum. Accordingly, if you have returned a valid
proxy or attend the Annual Meeting in person, your shares will be counted for the purpose of determining whether there is
a quorum, even if you wish to abstain from voting on some or all matters at the Annual Meeting. Broker non-votes also will be counted as present for purposes of determining the presence of a quorum.
If I plan to attend the Annual Meeting, should I still vote by proxy?
Yes. Voting in advance does not impact your right to attend the Annual Meeting. If you vote your shares in advance and also attend the Annual
Meeting, you do not need to vote again at the Annual Meeting unless you want to change your vote. Stockholders of record and stockholders who hold shares through a broker or nominee
(i.e., in street name) will be able to vote in person at the virtual Annual Meeting. Even if you plan to attend the Annual Meeting, we recommend that
you also submit your proxy or voting instructions prior to the virtual meeting as described above so that your vote will be counted if you later decide not to attend the virtual meeting.
Who can attend the Annual Meeting?
Only stockholders as of the Record Date and stockholders who hold shares as of the Record Date through a broker or nominee (i.e., in
street name), or their duly appointed proxies, may attend the Annual Meeting.
How do I attend the Annual Meeting?
The Annual Meeting will be in a virtual-only format on Tuesday, May 4, 2021, at 9:00 a.m., Eastern Time. To access the virtual
meeting, stockholders should visit www.virtualshareholdermeeting.com/QTS2021. The Annual Meeting will start promptly at 9:00 a.m., Eastern Time, and online access will begin at
8:45 a.m., Eastern Time. To log in to the virtual meeting, you will be required to enter a control number, included on your proxy card, voting instruction form or other notice that you may
receive, which will allow you to participate in the virtual meeting and vote your shares of common stock if you are a stockholder as of the Record Date. Please contact Investor
Relations at (678) 835-4443 or email ir@qtsdatacenters.com if you have any other questions in connection with attending the virtual meeting.
Why are you holding a virtual Annual Meeting?
Due to the ongoing COVID-19 pandemic and in order to continue to abide by social distancing protocols and otherwise to protect the health and
safety of stockholders, employees and the community, this year's Annual Meeting will be held in a virtual-only meeting format. We have designed our virtual format to enhance, rather than constrain,
stockholder access, participation and communication. For example, the virtual format allows stockholders to communicate with us during the Annual Meeting so they can ask questions of our board of
directors or management. Similar to our in-person meetings, during the live Q&A session of the Annual Meeting, we may answer questions as they come in to the extent relevant to the business of the
Annual Meeting, as time permits.
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Will any other matters be voted on?
The proposals set forth in this Proxy Statement constitute the only business that the Board intends to present at the Annual Meeting. The proxy
does, however, confer discretionary authority upon the Proxy Agents or their substitutes to vote on any other business that may properly come before the meeting. If the Annual Meeting is postponed or
adjourned, the Proxy Agents can vote your shares on the new meeting date as well, unless you have revoked your proxy.
Can I change my vote after I have voted?
You may revoke your proxy at any time prior to its use by (i) delivering a written notice of revocation to our Secretary,
(ii) filing a duly executed proxy bearing a later date with us or (iii) attending the Annual Meeting and voting during the live webcast.
Who is solicting the proxies and who pays the costs?
The
enclosed proxy for the Annual Meeting is being solicited by the Board. We will pay the costs of soliciting proxies. We have also engaged MacKenzie Partners, Inc. ("MacKenzie
Partners") to assist in the solicitation of proxies for the Annual Meeting. We have agreed to pay MacKenzie Partners a fee of $17,500 and reimbursement of its reasonable expenses in connection with
the solicitation of proxies. We will also reimburse Mackenzie Partners for reasonable and customary out-of-pocket expenses. In addition to soliciting proxies by mail, certain of our directors,
officers and employees may solicit proxies by telephone, personal contact, or other means of communication. They will not receive any additional compensation for these activities. In addition, we
will, upon request, reimburse brokers, banks and other persons holding common stock on behalf of beneficial owners for the reasonable expenses incurred by them in forwarding proxy materials to
beneficial owners.
No
person is authorized to give any information or to make any representation not contained in this Proxy Statement, and, if given or made, you should not rely on that information or
representation as having been authorized by us. The delivery of this Proxy Statement does not imply that the information herein has remained unchanged since the date of this Proxy Statement.
Whom should I call if I have questions or need assistance voting my shares?
Please contact our proxy solicitor, MacKenzie Partners, at (800) 322-2885 or by sending an email to proxy@mackenziepartners.com. You may
also contact Investor Relations at (678) 835-4443 or email ir@qtsdatacenters.com if you have any questions in connection with voting your shares.
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2020 Executive Compensation Highlights
Based on our overall operating environment and our strong 2019 and 2020 performance, our Compensation Committee took the following key actions
with respect to the compensation of our named executive officers for 2020:
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Base SalaryDuring 2020, maintained the annual base salaries of each of our named
executive officers at their 2019 levels.
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Annual Incentive Bonus OpportunitiesFor performance year 2020, maintained target
annual incentive bonus opportunities at their 2019 levels125% of annual base salary for our CEO, and a range of 60% to 100% of annual base salary for our other named executive officers,
with such annual incentive bonuses subject to the achievement of rigorous performance metrics as set forth under "Individual Compensation ElementsAnnual Cash Bonuses."
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Annual Incentive Bonuses EarnedAfter the end of the fiscal year, in March 2021,
the Compensation Committee exercised 10% negative discretion to reduce the bonus payout that would have resulted from our actual performance down to
165% of target performance level in order to fund larger bonuses for non-executives (the reduction was unrelated to executive performance); the Compensation Committee then approved the payment of
annual incentive bonuses at 165% of target bonus opportunity for our named executive officers, with an individual performance measure adjustment increase of 255% for our former general counsel,
resulting in totals ranging from 165% to 253% of base salary.
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Long-Term Incentive Compensation GrantedIn March 2020, granted long-term incentive
compensation opportunities in the form of Performance-Based Funds From Operations Units ("Performance-Based FFO Units") that may be settled for shares of our Class A common stock,
Performance-Based Relative Total Stockholder Return Units ("Performance-Based Relative TSR Units") that may be settled for shares of our Class A common stock, and shares of restricted
Class A common stock subject to time-based vesting, in target amounts ranging from approximately $1,043,625 to $7,000,000, which includes a grant to our CEO of Performance-Based FFO Units,
Performance-Based Relative TSR Units and restricted stock with an aggregate target value of approximately $7,000,000.
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Long-Term Incentive Compensation EarnedFollowing the end of the performance period
of our 2019 performance-based OFFO awards on December 31, 2020, the Committee certified that executives earned 160% of the target number of restricted share units subject to the award,
resulting in amounts earned by our named executive officers of approximately 5,970 shares to 65,359 shares, including earned dividend equivalent rights. Two-thirds of the earned restricted share units
vested following the end of the performance period, and the remaining one-third will vest upon the third anniversary of the grant on March 5, 2022.
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"At-Risk" CompensationFor 2020, approximately 85% (and 91% for our CEO) of target
total direct compensation of named executive officers was considered variable "at-risk" compensation.
Response to Say-on-Pay Vote and Stockholder Engagement
In recent years, we have regularly engaged with our stockholders throughout the year to seek their feedback on our corporate governance
practices and our executive compensation program. In addition, after we file our proxy statement, typically we contact and engage with our largest stockholders to offer the opportunity to discuss
topics to be addressed at our annual meeting of stockholders. Stockholders also are provided with an annual opportunity to provide feedback through the non-binding advisory vote on our named executive
officer compensation (commonly known as a "Say-on-Pay" vote).
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In
2019, we substantially redesigned our Long-Term Incentive Plan in response to stockholder feedback and the results of our 2018 Say-on-Pay vote. At our 2020 Annual Meeting of
Stockholders, approximately 81% of the votes cast on our Say-on-Pay proposal were voted in favor of the 2019 compensation of our named executive officers. While this vote represented continued
improvement from the 2018 and 2019 Say-on-Pay votes, our Board of Directors noted that the support for our executive compensation program was still below historical levels and determined that we
should continue to reach out to our largest stockholders to continue the dialogue about our compensation framework and related policies and practices.
Accordingly,
over the remainder of 2020 and into 2021, we maintained a consistent dialogue with our largest stockholders who shared their opinions and perspectives on our broader
corporate governance policies, including our executive compensation program. Representatives of QTS, including independent members of our Board of Directors, engaged stockholders representing more
than 70% of our shares outstanding in the period between the 2020 annual meeting of stockholders and the filing of this Proxy Statement. These discussions with investors were led by our independent
directors and covered recent enhancements to governance policies, our overall approach to corporate governance and our executive compensation program. Investor feedback from these discussions was
supportive of our execution and
performance as well as the enhancements to our governance policies implemented over the last several years, including changes to our executive compensation program.
Overall,
we believe the positive input received through our engagement efforts confirm the structural soundness of our executive compensation program. Nonetheless, the Compensation
Committee determined that for the 2021 compensation cycle, the Company will enhance the performance orientation of our CEO's compensation by increasing the performance-based equity portion from 60% to
70% of target equity-based compensation. Based on the feedback we received from stockholders, the increasing level of support for our Say-on-Pay vote over the last three years and the ongoing impact
of our recent implementation of performance-based equity awards and other factors, our Board of Directors and the Compensation Committee determined to not implement any other significant changes to
our executive compensation program for 2021.
When
taken together with previous periods, however, over the last few years we have made numerous significant enhancements to our executive compensation program and overall governance
profile in response to what we have heard from stockholders and as a matter of good governance, including the following:
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Beginning in 2021, increasing the performance-based equity portion of our CEO's target equity-based compensation from 60% to 70%.
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In 2021, proposing an amended and restated equity incentive plan that would explicitly mandate a minimum one-year vesting period on 95% of share-based awards.
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Introduced a new performance-based long-term incentive compensation plan in 2019 as a significant portion of executive
compensation.
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Opted out of the Maryland Unsolicited Takeovers Act, commonly known as "MUTA."
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Eliminated the use of stock options for executive compensation; reduced the amount of time-based restricted stock used for executive
compensation.
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Amended our bylaws to permit stockholders to amend our bylaws by majority vote.
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Hired a new compensation consultantCompensia, a national compensation consulting firm with particular expertise in the technology industryto
evaluate and make recommendations regarding our executive compensation practice.
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Exercised negative discretion for two years in a row to reduce executive bonuses below the payout implied by
the corporate performance metrics in order to fund increased non-executive bonuses (the reduction was unrelated to executive performance).
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Established a new compensation peer group by considering various financial and statistical metrics, as well as a more customized industry
selection.
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Adopted a new clawback policy expanding coverage to all executive officers rather than only the CEO and CFO.
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Appointed a new Chair of the Compensation Committee and reconstituted the membership of the Compensation Committee.
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Added three new board members since mid-2018, refreshing the board and augmenting our directors' skill sets in line with our business and
industry.
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Continued to strengthen and enhance compensation disclosure.
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Reduced our related party transactions.
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We
value the opinion of our stockholders. Our Board of Directors and the Compensation Committee will continue to consider the result of the Say-on-Pay vote, as well as feedback received
throughout the year, when making compensation decisions for our executive officers, including our named executive officers.
In
addition, consistent with the recommendation of our Board of Directors and the preference of our stockholders as reflected in the non-binding stockholder advisory vote on the
frequency of future Say-on-Pay votes held at our 2016 Annual Meeting of Stockholders, we intend to continue to hold future Say-on-Pay votes on an annual basis. Accordingly, our next Say-on-Pay vote
will be conducted at the Annual Meeting.
Pay for Performance Analysis
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We
believe that our executive compensation program appropriately balances the goals of attracting, motivating, rewarding and retaining our executive officers, on the
one hand, with the goal of aligning their interests with those of our stockholders, on the other hand. To ensure these goals are met, in 2020 we designed our executive officers' target annual total
direct compensation opportunity so that the vast majority of this opportunity was variable and "at-risk" and a significant portion is also performance-based.
We
achieved these objectives through two separate but related compensation elements:
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First, we provided our executive officers the opportunity to participate in our annual cash bonus plan which provides cash payments based on
our achievement of financial, operational and strategic objectives set forth in our annual operating plan, as well as each executive officer's performance measured against pre-established individual
goals.
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Second, we again used our performance-based restricted stock unit grants in our long-term incentive compensation program. In 2020, these
performance-based awards comprised 60% of our CEO's long-term incentive compensation opportunity and 50% of the long-term incentive compensation opportunity for our other executive officers.
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One
half of the target value of these performance-based restricted stock unit awards are to be earned based on our ability to achieve or exceed pre-established
profitability goals (based on our Operating Funds From Operations ("OFFO") per diluted share) measured
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In
addition, our named executive officers received time-based equity awards the value of which is tied to share price appreciation, and, therefore, the overall performance of the
Company. These variable "at-risk" pay elements are wholly at risk, thereby ensuring that the majority of our executive officers' target annual total direct compensation is contingent (rather than
fixed) in nature, with the amounts ultimately payable subject to variability above or below target levels commensurate with our actual performance. In addition, more than half of our CEO's target
annual total direct compensation is performance-based.
This
pay mix design for our CEO and our other named executive officers for 2020 is reflected in the following graphics:
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~92% of 2020 Target Total Direct Compensation Is Performance-Based and/or Variable "At-risk"
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~84% of 2020 Target Total Direct Compensation Is Performance-Based and/or Variable "At-risk"
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We
believe that this design provides balanced incentives for our executive officers to drive financial performance and long-term growth. Accordingly, for 2021, the Compensation Committee
has determined to use a similar pay mix for our non-CEO executive officers' target annual total direct compensation. However, with respect to our CEO, as previously noted the Compensation Committee
has determined to increase the performance-based equity portion of target equity compensation from 60% to 70% for 2021.
To
ensure that we remain faithful to our compensation philosophy, the Compensation Committee regularly evaluates the relationship between the reported values of the equity awards granted
to our executive officers, the amount of compensation realizable (and, ultimately, realized) from such awards in subsequent years and our total stockholder return ("TSR") over this period.
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Executive Compensation Policies and Practices
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We
endeavor to maintain our executive compensation policies and practices consistent with sound governance standards. The Compensation Committee evaluates our executive
compensation program on a regular basis to ensure that it is consistent with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for
executive talent. The following summarizes our executive compensation and related policies and practices:
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WHAT WE DO
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WHAT WE DON'T DO
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Significant Portion of Compensation is At-Risk and Equity-based. A significant portion of our executive compensation program is variable "at risk," primarily based on corporate
performance and stockholder performance, as well as equity-based, to provide long-term incentives and align the interests of our executive officers and stockholders.
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No Guaranteed Salary Increases or Bonuses. We do not guarantee annual salary increases or annual incentive bonuses.
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Independent Compensation Committee. The Compensation Committee consists solely of independent
directors.
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Limited Perquisites. We provide limited perquisites or other personal benefits to our executive
officers.
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Independent Compensation Advisor. The Compensation Committee engaged its own compensation advisor to
provide information and analysis in connection with its 2020 compensation review, and other advice on executive compensation independent of management.
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No tax gross-up payments. We do not provide any tax reimbursement payments (including "gross ups") on any
severance or change in control payments or perquisites or other personal benefits.
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Annual Executive Compensation Review. The Compensation Committee conducts an annual review and approval
of our compensation strategy, including peer group reset and compensation risk-assessment.
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No Special Benefit or Retirement Plans. Our executive officers participate in broad-based
company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees, except that our executive officers also participate in an executive disability program.
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Stock Ownership Policy. We maintain a rigorous stock ownership policy that requires our CEO, other
executive officers and directors to maintain a minimum ownership level of our Class A common stock.
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No Single-Trigger Change in Control Severance. Our executive employment agreements impose a "double
trigger" requirement with respect to severance paid following a change in control.
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Compensation Recovery ("Clawback") Policy. In the event of a material restatement of our financial
results, our executive officers may be required to forfeit and repay any cash and equity-based compensation paid to them during the three fiscal years prior to the restatement if they engaged in fraud or intentional illegal conduct that led to the
restatement.
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No Hedging and Limited Pledging of Our Equity Securities. We prohibit our employees, including our
executive officers, and the non-employee members of the Board of Directors from pledging (subject to limited exceptions) or hedging our securities.
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WHAT WE DO
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WHAT WE DON'T DO
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Annual Stockholder Advisory Vote on NEO Compensation. We conduct an annual stockholder advisory vote on the compensation
of our named executive officers.
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No Stock Option Repricing. Our equity incentive plan does not permit options to be repriced to a lower exercise price
without the approval of our stockholders.
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Executive Compensation Philosophy
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The
primary objective of our executive compensation program is to align the interests of our executive officers, including our named executive officers, with those of
our stockholders in a way that allows us to attract and retain the best executive talent that can create long-term value for our stockholders. In order to align executive and stockholder interests, we
have designed and implemented an executive compensation program that pays for performance.
The
foundational elements of our executive compensation program that help us achieve our objective include:
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Base SalariesCentral to our ability to attract and retain our executive officers
is providing base salaries that are aligned with salaries of other executives in similarly situated roles within the industry and fairly reward them for their value to the organization in successfully
performing their respective roles.
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Incentive CompensationIncentive compensation is an important tool for providing
variable, or "at-risk," compensation tied to performance. We view it as a means to motivate and reward our executive officers for performance, including the achievement of our financial, operational
and strategic objectives, individual goals and value-creation for our stockholders. In accordance with our "pay-for-performance" orientation, we deliver a majority of the total direct compensation to
our executive officers in the form of incentive compensation consisting of short-term, annual cash incentives and long-term, equity-based incentives.
We
evaluate our executive compensation program and make pay decisions within the context of a total compensation framework, taking into account executive compensation for executives in
similar roles within the industry, in order to ensure our overall compensation objectives are met. In doing so, we recognize the distinct nature of the individual elements of our compensation program,
but are mindful of the interrelationship of the various elements to the successful execution of our overall pay strategy.
Governance of Executive Compensation Program
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The Compensation Committee, which is comprised of independent, non-employee directors, discharges many of the responsibilities of the Board of
Directors relating to the compensation of our executive officers, including our named executive officers, and the non-employee members of the Board of Directors. The Compensation Committee has overall
responsibility for overseeing our compensation and benefits policies generally, overseeing and evaluating the compensation plans, policies, and practices applicable to our CEO as well as our other
executive officers and making all final decisions regarding the compensation of our CEO and our other executive officers.
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The Compensation Committee reviews the base salary levels, annual cash bonus opportunities and long-term incentive compensation opportunities of
our executive officers, including our named executive officers, each fiscal year at the beginning of the year, and continues to monitor and assess these items throughout the year as warranted.
The
following graphic illustrates the timeline for our annual compensation-setting process:
When formulating its decisions for the amount of each compensation element and approving the target total direct compensation opportunity for
our executive officers, the Compensation Committee considers the following factors:
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our performance against the financial and operational objectives established by the Compensation Committee and the Board of Directors;
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each individual executive officer's skills, experience and qualifications relative to other similarly-situated executives at the companies in
our compensation peer group;
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the scope of each executive officer's role compared to other similarly-situated executives at the companies in our compensation peer group;
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the performance of each individual executive officer, based on an assessment of his or her contributions to our overall performance, ability to
lead his or her business unit or function, and work as part of a team, all of which reflect our core values;
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advancement of ESG objectives;
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alignment to Corporate 2025 strategic vision plan;
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compensation parity among our executive officers;
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leadership of corporate values, competencies, and code of business conduct & ethics;
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our financial performance relative to our peers;
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the compensation practices of our compensation peer group and the positioning of each executive officer's compensation in a ranking of peer
company compensation levels; and
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the recommendations of our CEO with respect to the performance level and compensation of our other executive officers.
These
factors provide the framework for compensation decision-making and final decisions regarding the target annual total direct compensation opportunity for each executive officer.
In discharging its responsibilities, the Compensation Committee works with members of management, including our CEO, who provide information on
corporate and individual performance, and management's perspective on compensation matters. The Compensation Committee solicits and reviews our CEO's recommendations and proposals with respect to
adjustments to annual cash compensation, long-term incentive compensation opportunities, program structures and other compensation-related matters for our other executive officers.
The
Compensation Committee reviews and discusses these recommendations and proposals with our CEO and considers them as one factor in making its decisions for the compensation for our
other executive officers, including our named executive officers. The Compensation Committee makes final CEO pay decisions after the CEO recuses himself.
The Compensation Committee engages an external compensation consultant to assist it by providing information, analysis and other advice relating
to our executive compensation program and the decisions resulting from its annual executive compensation review. The Compensation Committee has authority to approve the compensation consultant's fees
and the terms of its engagement.
The
Compensation Committee engaged Compensia, a national compensation consulting firm, as its compensation consultant beginning in 2018 to advise on executive compensation matters,
including competitive market pay practices for senior executives, and with the selection and data analysis of the companies in the compensation peer group. For 2020, the scope of Compensia's
engagement included:
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reviewing and proposing updates to our compensation peer group;
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conducting an assessment of the compensation of our executive officers, including our named executive officers, against competitive market
data;
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reviewing and proposing revisions to our 2020 long-term incentive compensation program to drive Company performance;
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reviewing and providing input on the "Compensation Discussion and Analysis" and compensation tables sections of this Proxy Statement for our
Annual Meeting; and
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providing support on other ad hoc matters throughout the engagement period.
The
terms of Compensia's engagement included reporting directly to the Compensation Committee chairperson. Compensia also coordinated with management for data collection and job matching for our
executive officers.
The
Compensation Committee evaluated its relationship with Compensia to ensure that it believes that the firm is independent from management. This review process included a review of the
services that Compensia provided, the quality of those services and the fees associated with the services provided during 2020. Based on this review, as well as consideration of the factors affecting
independence set forth in the listing standards of the NYSE and the relevant SEC rules, the Compensation Committee determined that no conflict of interest was raised as a result of the work performed
by Compensia.
Our Compensation Committee takes a very careful and thoughtful approach to choosing our compensation peer group. Our Compensation Committee
makes this determination based on research and advice from Compensia, its compensation consultant, based on Compensia's technology industry experience. Our peer group consists of companies of relative
size (based on consideration of revenue, market capitalization, one-year revenue growth, market capitalization to revenue multiple, and headcount) and industry, including where we compete for
executive talent (data center real estate investment trusts ("REITs") or communications infrastructure or technology companies with a focus on software for security, connectivity or unified
communications). As part of its objective to align our executive compensation with the interests of our stockholders and attract and retain executive talent, the Compensation Committee annually
evaluates and reassess our executive compensation program in light of the industry in which it operates.
Accordingly,
our compensation peer groups in 2019 and 2020 consisted of six data center REITs and the remainder consisted of technology companies with a focus of communications
infrastructure, software for security, connectivity or unified communications. As a data center REIT, we believe that our business crosses industries, and believe that our peer group should include
communications infrastructure or technology companies in lieu of traditional REITs that primarily own shopping centers, self-storage units, office, industrial or healthcare properties or timberlands.
We believe that our peer group includes companies that are not only comparable to the Company, but also represent companies with which we compete for executive talent. We believe that this approach
has created a benchmark against which it is appropriate to measure both pay and performance. This distinction is notable when evaluating the separate peer group selected and used for comparative
purposes by the proxy advisory firms.
In
July 2019, with the assistance of Compensia, the Compensation Committee reviewed and updated its then-existing compensation peer group to help with the evaluation and determination of
compensation for our executive officers. In developing this compensation peer group, the following selection criteria were used to identify comparable companies:
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Industry: data center real estate investment trusts, communications
infrastructure or technology companies with a focus on software for security, connectivity or unified communications;
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Revenue: approximately $150 million to approximately
$1.4 billion (0.33x to 3.0x the Company's trailing 12-month revenues of approximately $450 million as of June 2019);
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Market capitalization: approximately $630 million to approximately
$10.1 billion (0.25x to 4.0x the Company's market capitalization of approximately $2.5 billion as of June 2019);
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One-year revenue growth: greater than 10%;
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Market capitalization to revenue multiple: generally 3x to 10x; and
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Headcount: generally 0.5x to 2.0x of our headcount.
Based
on these criteria, the Compensation Committee approved an updated compensation peer group reflecting Compensia's recommendations and consisting of the following 21 publicly-traded
companies:
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8x8
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Progress Software
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Cogent Communications
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Proofpoint
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Commvault Systems
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Qualys
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CoreSite Realty
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Rapid7
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CyrusOne
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RealPage
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Digital Realty Trust
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Ribbon Communications
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Elastic N.V.
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SBA Communications
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Equinix
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Uniti Group
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ForeScout Technologies
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Varonis Systems
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Limelight Networks
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Zayo Group Holdings
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MongoDB
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The
Compensation Committee used this compensation peer group through July 2020 as a reference for understanding the competitive market for executive positions in our industry sector, and
as a basis for informing 2020 compensation decisions.
In
July 2020, at the direction of the Compensation Committee, Compensia reviewed and recommended updates to our compensation peer group to reflect changes in our market capitalization,
recognize our evolving business focus, and account for acquisitions of and other changes in our peer companies. The companies in this updated compensation peer group were selected on the basis of
their similarity to us, based on the following criteria:
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Industry: data center real estate investment trusts, communications
infrastructure or technology with a focus on software for security, connectivity or unified communications;
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Revenue: approximately $160 million to approximately
$1.5 billion (0.33x to 3.0x the Company's trailing 12-month revenues of approximately $490 million as of June 2020);
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Market capitalization: approximately $1.0 billion to approximately
$16.5 billion (0.25x to 4.0x the Company's market capitalization of approximately $4.1 billion as of June 2020);
-
-
One-year revenue growth: greater than 10%;
-
-
Market capitalization to revenue multiple: generally 3x to 10x; and
-
-
Headcount: generally 0.5x to 2.0x of our headcount.
Using
these criteria and updated data for peer and potential peer companies, we removed three peer companies (Limelight Networks, Ribbon Communications, and Zayo Group Holdings) and
added four peer companies (Five9, New Relic, Switch, and Vonage Holdings).
63
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Based
on these criteria, the Compensation Committee approved an updated compensation peer group reflecting Compensia's recommendations and consisting of the following 22 publicly-traded
companies:
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8x8
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New Relic
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Cogent Communications
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Progress Software
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Commvault Systems
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Proofpoint
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CoreSite Realty
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Qualys
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CyrusOne
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Rapid7
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Digital Realty Trust
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RealPage
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Elastic N.V.
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SBA Communications
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Equinix
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Switch
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Five9
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Uniti Group
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ForeScout Technologies
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Varonis Systems
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MongoDB
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Vonage Holdings
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At
the time the peer group was selected, the Company was at approximately the 51st percentile of the peer group for market capitalization, and the 44th percentile of the
peer group for revenue. The Compensation Committee used this updated compensation peer group in connection with its executive compensation deliberations from July 2020 forward.
The
Compensation Committee uses data drawn from our compensation peer group, as well as Compensia's proprietary database, to evaluate the competitive market when making its decisions
with respect to the total direct compensation packages for our executive officers, including base salary, target annual cash bonus opportunities and long-term incentive compensation opportunities. The
Compensation Committee does not benchmark compensation to a specific percentage of the compensation of the comparator companies or otherwise apply a formula or assign the comparator group or groups a
relative weight.
The
Compensation Committee reviews our compensation peer group at least annually and makes adjustments to its composition if warranted, taking into account changes in both our business
and the businesses of the companies in the peer group.
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Table of Contents
Individual Compensation Elements
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In
2020, the principal elements of our executive compensation program were base salary, annual cash bonus opportunities, and long-term incentive compensation in the
form of performance-based and time-based equity awards.
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Element
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Description
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Objective
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Factors Influencing
Amount
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Base salary
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Fixed compensation delivered in cash; reviewed annually and adjusted if appropriate
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Provides base amount of market competitive pay
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Individual role and responsibilities, experience, expertise, individual performance and competitive market data
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Annual cash bonuses
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Variable at-risk cash compensation based on performance against series of annual goals for revenue, bookings*, Adjusted EBITDA*, OFFO per diluted share*, and ROIC* and individual performance
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Motivates and rewards achievement of key financial results for the year
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Target annual cash bonus opportunity determined annually based on individual role and responsibilities, experience, expertise, individual performance and competitive market data; payments based on corporate performance
and individual performance
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Long-term incentive compensation
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Performance-Based FFO Unit Awards
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Variable at-risk, performance-based compensation with payment in shares based on OFFO per diluted share* measured over two-year performance period ending December 31, 2021; two-thirds of earned shares vest following
end of performance period; remaining one-third of earned shares vest three years from award grant date
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Directly aligns interests of executive with long-term stockholder value creation by linking potential payments to achievement of financial performance metrics; also promotes retention; represents 25% of long term
incentive ("LTI") award (30% for CEO)**
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Target value of long-term incentive compensation based on individual role and responsibilities and competitive market data; payment based on common stock price at time of settlement (for performance-based units) or
vesting (for restricted stock); minimum one-year vesting for all long-term incentive compensation
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Performance-Based Relative TSR Unit Awards
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Variable at-risk, performance-based compensation with payment in shares based on relative total stockholder returns performance measured against MSCI U.S. REIT Index over three-year performance period ending
December 31, 2022
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Directly aligns interests of executive with long-term stockholder value creation by linking potential payments to stock price performance; also promotes retention; represents 25% of LTI award (30% for CEO)**
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Restricted Stock Awards
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Variable at-risk compensation with payment in shares subject to time-based vesting; vesting period of three years
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Directly aligns interests of executives with long-term stockholder value creation and retention; represents 50% of LTI award (40% for CEO)**
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-
*
-
Defined
in "Special Note Regarding Non-GAAP Financial Measures and Other Metrics."
-
**
-
As
previously noted, for 2021 the Compensation Committee has determined to increase the performance-based equity portion of target equity-based compensation from 60%
to 70% with 35% each of Performance-Based FFO Unit Awards
65
Table of Contents
and
Performance-Based Relative TSR Unit Awards comprising equal portions of such performance-based equity compensation.
Base salary represents the fixed portion of the target total direct compensation of our executive officers, including our named executive
officers, and is intended to reward them fairly for their value to the organization based on their respective roles and responsibilities.
When
establishing and reviewing base salaries, the Compensation Committee considers each of the factors described in "Governance of Executive Compensation
ProgramCompensation-Setting Process" above. Although the Compensation Committee
bases its initial positioning of base salaries with reference to the competitive range of the market median of our compensation peer group and applicable executive compensation survey data, the actual
positioning is based on the Compensation Committee's assessment of these factors.
In
February 2020, the Compensation Committee reviewed the base salary of each of our named executive officers and determined to maintain the base salary of each at their 2019 level. 2020
represented the second year of no salary increase for our CEO and CFO. The base salaries of our named executive officers for 2020 were as follows:
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Named Executive Officer
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2019 Base Salary
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2020 Base Salary
|
|
Percentage
Increase
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Mr. Williams
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$
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720,000
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$
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720,000
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Mr. Berson
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$
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375,000
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$
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375,000
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Mr. Robey
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$
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300,000
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$
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300,000
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Mr. Greaves
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$
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340,000
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$
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340,000
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Ms. Goza
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$
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325,000
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$
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325,000
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The
actual base salaries paid to our named executive officers in 2020 are set forth in the "Summary Compensation Table" below.
We use an annual cash bonus plan to motivate our executive officers, including our named executive officers, to achieve our short-term business
objectives as set forth in our annual operating plan. In 2020, the Compensation Committee approved annual cash bonus opportunities for
our executive officers, including our named executive officers, to motivate them to achieve outstanding performance at both a company and individual level for the year.
Under
the terms of their respective employment agreements, our named executive officers are eligible for target annual cash bonus opportunities, expressed as a
percentage of each executive officer's respective base salary. In February 2020, consistent with the recommendation of our CEO and after considering the factors described in "Governance
of Executive Compensation ProgramCompensation-Setting Process" above, the Compensation Committee determined to maintain the target annual cash bonus opportunities of our named executive
officers at their 2019 levels. 2020 represented the second year of no increase in target annual cash bonus opportunities for our named executive officers.
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The
target annual cash bonus opportunities of our named executive officers for 2020 were as follows:
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Named Executive Officer
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|
2019 Annual
Cash Bonus
Opportunity
(as a percentage of
base salary)
|
|
2020 Annual
Cash Bonus
Opportunity
(as a percentage of
base salary)
|
|
Percentage
Increase
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Mr. Williams
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125
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%
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125
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%
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Mr. Berson
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100
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%
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100
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%
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Mr. Robey
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100
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%
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100
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%
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Mr. Greaves
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100
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%
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100
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%
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Ms. Goza
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60
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%
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60
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%
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|
Each
year the Compensation Committee considers the appropriate corporate performance measures for use in determining our annual cash bonuses. For purposes of the 2020
annual cash bonuses, the Compensation Committee selected revenue, bookings, Adjusted EBITDA, OFFO per share, and ROIC as the corporate performance measures. These measures have been consistently used
in our program since 2015 and were re-selected for 2020 because, together, they continue to capture key indicators management uses to assess the Company's overall corporate performance for the year.
Each of these measures was equally weighted. The target corporate goals for each executive officer were rigorously set based on factors including our business strategy, internal budgets and market
projections. For information on how each of these corporate performance measures is calculated, see "Special Note Regarding Non-GAAP Financial Measures and Other Metrics" below.
The
following table includes the 2020 threshold, target, and maximum performance levels for each of these corporate performance measures, as well as their relative weighting (which the
Compensation Committee reviews annually and may change in future years) ($ in thousands):
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Threshold
(0% Payout)
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Target
(100% Payout)
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Maximum
(200% Payout)
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|
Element
Weighting
|
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Revenue
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$
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512,000
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|
$
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530,000
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|
$
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548,000
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|
|
20
|
%
|
Bookings
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|
$
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7,600
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|
$
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8,200
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$
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8,800
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20
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%
|
Adj. EBITDA
|
|
$
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266,000
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$
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280,000
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$
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294,000
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20
|
%
|
OFFO/Share
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$
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2.67
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$
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2.76
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$
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2.85
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|
|
20
|
%
|
ROIC
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10.0
|
%
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11.0
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%
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12.0
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%
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|
20
|
%
|
-
Note:
-
See
"Special Note Regarding Non-GAAP Financial Measures and Other Metrics" below for information regarding the corporate performance measures and
related performance levels described above.
The
2020 targets for each of these measures were set after rigorous analysis. In addition, the 2020 targets for each of these measures, except ROIC, were set higher than both the 2019
target and 2019 actual performance. The target for ROIC was set at an aggressive level and in-line with the 2019 target, reflecting our expected ongoing budget for capital expenditures needed to fund
continued growth in the business.
In
addition to company performance, annual cash bonuses also are determined in part based on each executive officer's individual performance for the year. At the
beginning of the year, our CEO meets with each executive officer to identify and establish his or her individual performance goals and
67
Table of Contents
objectives
for the year. Such goals and objectives involve both quantitative and qualitative items and are specifically tailored to the functional area or business unit or segment led by the executive
officer and aligned to the achievement of our overall annual operating plan. Such goals consist of a mix of financial, operational and strategic items, which vary among our executive officers based on
his or her role and responsibilities within the Company. The Compensation Committee may also consider performance with respect to human capital factors including diversity and inclusion, people
development and succession planning; environmental factors such as the Company's efforts to minimize its carbon footprint; and data security efforts, including securing both QTS data as well as
assisting customers to secure their own data within QTS data centers.
The
Compensation Committee establishes the individual performance goals and objectives for our CEO with input from the independent members of our Board of Directors. These goals and
objectives typically relate to driving our long term and growth strategy, succession planning and the other key areas necessary for us to achieve our annual operating plan.
A
sample, non-comprehensive list of objectives for each executive officer includes:
|
|
|
|
|
Named Executive Officer
|
|
Sample Goal for this NEO
|
|
Sample Goals for all NEOs
|
Mr. Williams
|
|
Continue to develop and maintain our long term strategy, drive operating efficiency and enhance service delivery model by leveraging digitization initiatives
|
|
Achievement of annual
operating plan
Alignment to Corporate 2025 strategic vision plan
Advancement of ESG objectives
|
Mr. Berson
|
|
Ensure access to capital to meet or exceed the accelerating growth of the business
|
|
Leadership of corporate
values, competencies, and code of business conduct and ethics
|
Mr. Robey
|
|
Successfully execute data center development plan in support of booked-not-billed backlog
|
|
Demonstrate increased
operating efficiency leveraging digitization initiatives
|
Mr. Greaves
|
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Accelerate differentiation through continued enhancements of the Service Delivery Platform
|
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|
Ms. Goza
|
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Hire, mentor and equip General Counsel successor in support of retirement plans
|
|
|
After
the completion of the fiscal year, our CEO evaluates the performance of each executive officer against his or her individual goals and objectives for the year and assigns him or
her an achievement rating, which is then submitted to the Compensation Committee for its consideration along with his recommendations as to how this individual performance should be factored into its
bonus and equity determinations. The Compensation Committee also evaluates the performance of our CEO against his individual goals and objectives for the year to make bonus and equity determinations
with respect to our CEO.
When
the Compensation Committee determines that individual performance has deviated significantly from expectations, they may exercise discretion to adjust the payouts indicated by the
company performance measures in amounts they deem appropriate in light of such determination. If exercised, discretion may be upward or downward, and need not be exercised in the same direction or
magnitude for each executive.
In
early 2021, the Compensation Committee reviewed our actual 2020 performance against the target levels established for each of the corporate performance measures. The
following table includes the 2020 threshold, target, and maximum performance levels for each of these corporate performance measures, as well as their relative weighting (which the Compensation
Committee reviews annually and may change in future years), our actual performance results and the payout that would have resulted
68
Table of Contents
for
each measure absent the overlay of individual performance measures and negative discretion of the Compensation Committee in order to fund increased bonuses for non-executives (which, as described
below, resulted in a downward adjustment) ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Threshold
(0% Payout)
|
|
Target
(100% Payout)
|
|
Maximum
(200% Payout)
|
|
Element
Weighting
|
|
Actual
Performance
|
|
Resulting
Element
Payout
|
|
Revenue
|
|
$
|
512,000
|
|
$
|
530,000
|
|
$
|
548,000
|
|
|
20
|
%
|
$
|
539,400
|
|
|
152.2
|
%
|
Bookings
|
|
$
|
7,600
|
|
$
|
8,200
|
|
$
|
8,800
|
|
|
20
|
%
|
$
|
11,649
|
|
|
200.0
|
%
|
Adj. EBITDA
|
|
$
|
266,000
|
|
$
|
280,000
|
|
$
|
294,000
|
|
|
20
|
%
|
$
|
299,300
|
|
|
200.0
|
%
|
OFFO/Share
|
|
$
|
2.67
|
|
$
|
2.76
|
|
$
|
2.85
|
|
|
20
|
%
|
$
|
2.84
|
|
|
188.9
|
%
|
ROIC
|
|
|
10.0
|
%
|
|
11.0
|
%
|
|
12.0
|
%
|
|
20
|
%
|
|
11.8
|
%
|
|
180.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
184.2
|
%
|
-
Note:
-
See
"Special Note Regarding Non-GAAP Financial Measures and Other Metrics" for information regarding the corporate performance measures and related
performance levels described above.
The
Compensation Committee noted that, as shown in the table above, the payout percentage established for each corporate performance measure and its relative weighting indicated an
aggregate
corporate performance payout of 184% of target, based on straight-line interpolation between the threshold, target and maximum levels. Upon the recommendation of our CEO and after assessing
management's overall performance for the year, including consideration of the executive team's effective management of COVID-19 impacts on the business and employees, furthering the company's strong
culture including its commitments to sustainability, people and community orientation, and strong business results, balanced against the desire to provide extra performance bonus funding for
non-executive employees, the Compensation Committee exercised negative discretion to reduce the payout percentage for the corporate performance measures
to 165% of the target performance level, notwithstanding the higher payout level suggested by the results achieved under the corporate performance measures set forth above. The Compensation Committee
determined that a 165% corporate payout level struck the right balance of appropriately rewarding our executive officers for superior performance, reflecting stockholder outcomes and freeing up cash
to allow increased bonus payouts to non-executive employees; the reduction was unrelated to executive performance.
In
addition, our CEO evaluated the individual performance of each of our executive officers, including each of our other named executive officers, against his or her pre-established
goals and objective to determine his or her contributions to our overall financial and operational performance during 2020 and to formulate an achievement rating for such executive officer. Our CEO
then made recommendations to the Compensation Committee as to how such individual performance should be considered in determining the amounts payable as annual cash bonuses for the year. In the case
of our CEO, his individual performance was evaluated by the Compensation Committee with input from the independent members of our Board of Directors.
Following
these evaluations, on March 3, 2021, the Compensation Committee approved annual cash bonuses, in its discretion, for each of our executive officers, including each of
our named executive
69
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officers.
The target and actual cash bonus paid to each of our named executive officers for 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Annual
Cash Bonus
Opportunity ($)
|
|
Corporate
Performance
Measure
Achievement
|
|
Individual
Performance
Measure
Achievement
|
|
Actual Annual
Cash Bonus
Earned ($)
|
|
Actual Annual
Cash Bonus
Earned
(percentage of
base salary)
|
|
Mr. Williams
|
|
$
|
900,000
|
|
|
165
|
%
|
|
100
|
%
|
$
|
1,485,000
|
|
|
206
|
%
|
Mr. Berson
|
|
$
|
375,000
|
|
|
165
|
%
|
|
100
|
%
|
$
|
618,750
|
|
|
165
|
%
|
Mr. Robey
|
|
$
|
300,000
|
|
|
165
|
%
|
|
100
|
%
|
$
|
495,000
|
|
|
165
|
%
|
Mr. Greaves
|
|
$
|
340,000
|
|
|
165
|
%
|
|
100
|
%
|
$
|
561,000
|
|
|
165
|
%
|
Ms. Goza(1)
|
|
$
|
195,000
|
|
|
165
|
%
|
|
255
|
%
|
$
|
821,750
|
|
|
253
|
%
|
-
(1)
-
$321,750
represents the portion of Ms. Goza's award attributable to corporate performance measure achievement, and $500,000 represents the portion
attributable to individual performance. In addition to her overall outperformance during 2020, Ms. Goza's bonus reflects her extraordinary efforts in transitioning her role to her successor
during 2020.
The
actual annual cash bonuses paid to our named executive officers for 2020 are set forth in the "Summary Compensation Table" below.
We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. The realized
value of these equity awards bears a direct relationship to our stock price, and, therefore, these awards are an incentive for our executive officers, including our named executive officers, to focus
on long-term value creation for our stockholders. These equity awards also serve as an important retention tool for our executive officers.
For
2020, the Compensation Committee continued to grant performance-based equity awards as a substantial component of our long-term incentive compensation and to
continue the emphasis that began with the 2019 equity awards to structure such awards to focus on two key metrics that we use to gauge our ability to successfully execute on our long-term strategic
planthe achievement of pre-established OFFO targets and our TSR as measured against companies that own and/or operate income-producing real estate in our industry sector. The Compensation
Committee believed that the use of dual awards with a focused balance on the achievement of specific corporate performance goals, on the one hand, and sustained stock price growth, on the other hand,
would provide the appropriate incentives for our executive officers to build long-term stockholder value.
In
consideration of performance for 2019, on March 4, 2020, the Compensation Committee determined that the equity awards to be granted to our executive officers, including our
named executive officers, should be in the form of:
-
-
Performance-Based FFO Unitsthese are performance-based restricted share unit
awards which may be earned and settled for shares of our Class A common stock based on our OFFO per diluted share measured over a two-year performance period ending December 31, 2021,
with two-thirds of the earned shares of our Class A common stock vesting following the end of the performance period and the remaining one-third of the shares vesting at the end of three years
from the award grant date. The number of shares of our Class A common stock subject to the awards will be earned from 0% to 200% of the target number of units subject to the awards based on our
actual performance over the performance period, with the number of units to be determined based on a straight-line interpolation basis between threshold and target and target
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and
maximum performance. We have not disclosed the performance goals for the 2020 Performance-based FFO Unit awards because the multi-year performance period for these awards has not been completed
and we believe that the disclosure of this information while such performance period is still in progress could result in competitive harm to the Company. We observe that this is
customary practice for long-term incentive compensation awards that are based on absolute internal performance measures. However, for these awards, the Compensation Committee considered the target
performance achievement levels for the awards to be challenging but achievable with significant effort on the part of our executive officers, requiring circumstances to align as projected in our
long-term business forecasting.
-
-
Performance-Based Relative TSR Unitsthese are performance-based restricted share
unit awards which may be earned and settled for shares of our Class A common stock based on our TSR as compared to the MSCI U.S. REIT Index over a three-year performance period ending
December 31, 2022. The number of shares of our Class A common stock subject to the awards will be earned from 0% to 200% of the target number of units subject to the awards based on our
TSR compared to the MSCI U.S. REIT Index as follows:
|
|
|
|
|
|
|
|
|
TSR Percentage Points
Compared to Index
|
|
Target Units
Earned
|
|
Maximum
|
|
Equal or greater than +50 percentage points
|
|
|
200
|
%
|
Target
|
|
Matching Index
|
|
|
100
|
%
|
Threshold
|
|
50 percentage points
|
|
|
50
|
%
|
Below threshold
|
|
<50 percentage points
|
|
|
0
|
%
|
The
form and amount of such equity awards was determined by the Compensation Committee after considering the factors described in "Governance of Executive Compensation
ProgramCompensation Setting Process" above. Of the performance share unit awards
granted to our executive officers, based on the Compensation Committee determination, 25% of the award value (30% in the case of our CEO) was granted in the form of Performance-Based FFO Units, 25% of
the award value (30% in the case of our CEO) was granted in the form of Performance-Based Relative TSR Units, and 50% of the award value (40% in the case of our CEO) was granted in the form of a
time-based restricted stock award.
71
Table of Contents
The
Compensation Committee approved the following aggregate equity awards for our named executive officers in March 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Performance-
Based
FFO Units
Target Number
of Units
(#)(1)
|
|
Performance-
Based
FFO Units
Equity Award
Value
($)(2)
|
|
Performance-
Based
Relative
TSR Units
Target
Number of
Units
(#)(1)
|
|
Performance-
Based
Relative
TSR Units
Equity Award
Value
($)(2)
|
|
Restricted
Stock
Number of
Shares
(#)(1)
|
|
Restricted
Stock
Equity Award
Value
($)(3)
|
|
Aggregate
Grant
Equity Award
Value
($)
|
|
Mr. Williams
|
|
|
35,289
|
|
$
|
2,100,000
|
|
|
35,289
|
|
$
|
2,100,000
|
|
|
49,262
|
|
$
|
2,800,000
|
|
$
|
7,000,000
|
|
Mr. Berson
|
|
|
12,914
|
|
$
|
768,488
|
|
|
12,914
|
|
$
|
768,488
|
|
|
27,041
|
|
$
|
1,536,975
|
|
$
|
3,073,950
|
|
Mr. Robey
|
|
|
4,385
|
|
$
|
260,906
|
|
|
4,385
|
|
$
|
260,906
|
|
|
9,181
|
|
$
|
521,813
|
|
$
|
1,043,625
|
|
Mr. Greaves
|
|
|
5,613
|
|
$
|
334,012
|
|
|
5,613
|
|
$
|
334,012
|
|
|
11,753
|
|
$
|
668,024
|
|
$
|
1,336,047
|
|
Ms. Goza
|
|
|
4,703
|
|
$
|
279,838
|
|
|
4,703
|
|
$
|
279,838
|
|
|
9,847
|
|
$
|
559,676
|
|
$
|
1,119,353
|
|
-
(1)
-
Represents
the total number of target units or shares awarded. Performance Based FFO Units and Performance Based TSR Units were calculated by dividing the equity
award value by $59.51, which is the 20-day average closing price as of the grant date, rounded-up to a whole share. Shares of restricted stock were calculated by dividing the equity award value by
$56.84, which is the closing price on the grant date.
-
(2)
-
Represents
the total dollar value of awards assuming they were settled on the grant date for shares of Class A common stock at $59.51 per share, which is the
20-day average closing price as of the grant date. Amounts are not based on the grant date fair value as calculated in accordance with FASB ASC Topic 718.
-
(3)
-
Represents
the grant date fair value of shares of restricted Class A common stock granted to our named executive officers on March 4, 2020, calculated
in accordance with FASB ASC Topic 718. The aggregate grant date value of the restricted stock was calculated by multiplying the closing grant date price of $56.84 per share by the number of shares of
restricted stock granted. The assumptions used to calculate the grant date fair value of the shares of restricted Class A common stock are described in Note 12"Partners'
Capital, Equity and Incentive Compensation Plans" to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.
The
equity awards granted to our named executive officers in 2020 are set forth in the "Summary Compensation Table" and the "2020 Grants of Plan-Based Awards Table" below.
On
March 5, 2019, the Company granted to our named executive officers performance-based restricted share unit awards that could be earned based on the Company's
OFFO per diluted share over a two-year performance period that ended on December 31, 2020, with actual performance calculated as annualized fourth quarter 2020 OFFO per diluted share. The goal
for the award was set rigorously at the outset of the two-year period, and due to our strong performance, was achieved between target and maximum levels of performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below
Threshold
(0% Payout)
|
|
Threshold
(50% Payout)
|
|
Target
(100% Payout)
|
|
Maximum
(200% Payout)
|
|
Actual
Performance
|
|
Percent
Payout
|
|
OFFO per share:
|
|
<$
|
2.85
|
|
$
|
2.85
|
|
$
|
3.00
|
|
$
|
3.20
|
|
$
|
3.12
|
(1)
|
|
160
|
%
|
-
(1)
-
Calculated
as annualized fourth quarter 2020 OFFO per diluted share of $0.78 as reported in our Earnings Release for the fourth quarter and full year 2020, dated
February 16, 2021.
Payouts
resulting from these awards vest in two tranches. Two-thirds of the shares earned by each named executive officer vested on the certification date following the end of the
performance period, and the remaining one-third will vest on March 5, 2022, the third anniversary of the grant date. Details
72
Table of Contents
on
shares earned and vested for each named executive officer under the 2019 Performance-Based FFO Unit Awards are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Shares
|
|
Payout as
% of target
|
|
Shares
Earned(1)
|
|
Shares
Vested on
March 5, 2021(1)
|
|
Earned RSUs,
Unvested
Until
March 5, 2022(1)
|
|
Mr. Williams
|
|
|
38,230
|
|
|
160
|
%
|
|
65,359
|
|
|
43,572
|
|
|
21,787
|
|
Mr. Berson
|
|
|
13,033
|
|
|
160
|
%
|
|
22,280
|
|
|
14,853
|
|
|
7,427
|
|
Mr. Robey
|
|
|
3,493
|
|
|
160
|
%
|
|
5,970
|
|
|
3,980
|
|
|
1,990
|
|
Mr. Greaves
|
|
|
6,517
|
|
|
160
|
%
|
|
11,141
|
|
|
7,427
|
|
|
3,714
|
|
Ms. Goza
|
|
|
4,056
|
|
|
160
|
%
|
|
6,933
|
|
|
4,622
|
|
|
2,311
|
|
-
(1)
-
Includes
dividend equivalent rights accrued during the performance period and reinvested in additional shares.
In
March 2021, the Compensation Committee determined to continue to grant performance-based equity awards as a substantial component of our long-term incentive
compensation and to continue to structure such awards to focus on two key metrics that we use to gauge our ability to successfully execute on our long-term strategic planthe achievement
of pre-established OFFO targets and our TSR as measured against companies that own and/or operate income-producing real estate in our industry sector. The remainder of the equity awards are granted in
the form of time-based restricted stock. With respect to grants to our CEO, as discussed above, the Compensation Committee determined that for 2021, the Company will enhance the performance
orientation of our CEO's compensation by increasing the performance-based equity portion from 60% to 70% of target total equity-based compensation.
The
Compensation Committee believed that the use of dual awards, consisting of performance-based and time-based vehicles, promotes a focused balance on the achievement of specific
corporate performance goals with sustained stock price growth.
The
form and amount of such equity awards was determined by the Compensation Committee after considering the factors described in "Governance of Executive Compensation
ProgramCompensation-Setting Process" above. When considering the equity award grant for our CEO, the Compensation Committee in particular focused on the following factors: strong overall
performance of QTS, both on an absolute basis and relative to data center and REIT peers, including value created for our stockholders; the strength of the fourth quarter and full year financial
results and record bookings; and record on-time and within-budget delivery of new data center space despite the COVID-19 pandemic. The Compensation Committee also noted Mr. Williams'
extraordinary leadership during the pandemic, in addition to the strong overall performance of the Company, and compensation data of peers as factors influencing the Compensation Committee's decision
to increase the CEO's proportion of performance-based equity as noted above.
Based
on the Compensation Committee determination, 25% of the award value (35% in the case of our CEO) was granted in the form of Performance-Based FFO Units, 25% of the award value (35%
in the case of our CEO) was granted in the form of Performance-Based Relative TSR Units, and 50% of the award value (30% in the case of our CEO) was granted in the form of a time-based restricted
stock award.
73
Table of Contents
The
Compensation Committee approved the following equity award values for our continuing named executive officers (i.e., those named executive officers other than
Mr. Greaves and Ms. Goza, who have transitioned to a new role and retired, respectively) for the awards granted in March 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Named Executive Officer
|
|
Performance-
Based FFO
Unit
Award Value
($)(1)
|
|
Performance-
Based Relative
TSR Unit
Award Value
($)(1)
|
|
Restricted
Stock
Award Value
($)(2)
|
|
Aggregate
Equity
Award Value
($)
|
|
Mr. Williams
|
|
$
|
2,933,000
|
|
$
|
2,933,000
|
|
$
|
2,514,000
|
|
$
|
8,380,000
|
|
Mr. Berson
|
|
$
|
1,015,300
|
|
$
|
1,015,300
|
|
$
|
2,030,600
|
|
$
|
4,061,200
|
|
Mr. Robey
|
|
$
|
448,938
|
|
$
|
448,938
|
|
$
|
897,875
|
|
$
|
1,795,750
|
|
-
(1)
-
Represents
the total dollar value of awards assuming they were settled on the grant date for shares of Class A common stock at $62.32 per share, which is the
20-day average closing price as of the grant date. Amounts are not based on the grant date fair value as calculated in accordance with FASB ASC Topic 718.
-
(2)
-
The
number of shares granted was determined based on the closing sales price of the Company's class A common stock on March 5, 2021 of $59.06 per
share.
The
Performance-Based FFO Units may be earned and settled for shares of our Class A common stock based on our OFFO per diluted share measured over a two-year performance period
ending December 31, 2022, with two-thirds of the earned shares of our Class A common stock vesting following the end of the performance period and the remaining one-third of the shares
vesting at the end of three years from the award grant date. The number of shares of our Class A common stock subject to the awards will be earned from 0% to 200% of the target number of units
subject to the awards based on our actual performance over the performance period, with the number of units to be determined based on a straight-line interpolation basis between threshold and target
and target and maximum performance.
The
Performance-Based Relative TSR Units may be earned and settled for shares of our Class A common stock based on our TSR as compared to the MSCI U.S. REIT Index over a
three-year performance period ending December 31, 2023. The number of shares of our Class A common stock subject to the awards will be earned from 0% to 200% of the target number of
units subject to the awards based on our TSR compared to the MSCI U.S. REIT Index based on a matrix approved by the Compensation Committee that establishes a threshold performance level below which no
units will be earned and a maximum performance level that caps the number of units that may be earned at 200% of the target number of units. In addition, award payouts will be determined on a
straight-line interpolation basis between threshold and target and target and maximum performance; and will be capped at the target performance level if our TSR is negative.
The
restricted stock awards vest as to 33% of the shares subject to the awards on the first anniversary of the date of grant and as to 8.375% of the shares subject to the awards each
quarter-end thereafter, subject to the named executive officer's continued service as an employee as of each vesting date.
Our executive officers, including our named executive officers, are eligible to receive the same employee benefits that are generally available
to all our full-time employees, including medical, dental, vision, disability insurance and life insurance coverage. In addition to the foregoing, our executive officers, including our named executive
officers, are eligible to participate in a special executive disability insurance program that we have established for them.
74
Table of Contents
In addition, our employees, including our executive officers, who satisfy certain eligibility requirements may participate in our
Section 401(k) Retirement Savings Plan (the "401(k) Plan"). Under the 401(k) Plan, employees are eligible to defer a portion of their salary or annual cash compensation, and we, at our
discretion, may make a matching contribution and/or a profit-sharing contribution. During 2020, we matched 100% of the first 1% of employee contributions as a percentage of qualified earnings, and 50%
of the next 5% of an employee's contributions as a percentage of qualified earnings (subject to qualified plan maximum amounts). We provide no supplemental or additional retirement benefits for our
executive officers.
We do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not
provide significant perquisites or other personal benefits to our executive officers, including our named executive officers, except as generally made available to our employees, or in situations
where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective and for recruitment and retention
purposes (such as, for example, tax return preparation and financial planning assistance that we offer to our executives). All future practices with respect to
perquisites or other personal benefits are subject to approval and periodic review by the Compensation Committee.
75
Table of Contents
We
have entered into written employment agreements with our CEO and each of our other executive officers, including our other named executive officers. These agreements
protect these individuals by providing:
-
-
Economic stability that enables our executive officers to focus on the performance of their duties in all economic environments;
-
-
Death or disability payments and benefits in the event of certain terminations of employment; and
-
-
In some cases, payments and benefits in the event of certain qualifying terminations of employment, including in connection with a change in
control of the Company.
Each
of these agreements provides for "at will" employment. They also protect us from certain business risks, such as threats from competitors, loss of confidentiality, disparagement and
solicitation
of employees. These post-employment compensation arrangements are discussed in "Post-Employment Compensation Arrangements" below.
For
detailed descriptions of the employment agreements we maintained with our named executive officers during 2020, see "Compensation of Executive OfficersNarrative
Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table" below.
Post-Employment Compensation Arrangements
|
The
employment agreements we have entered into with each of our executive officers, including our CEO and our other named executive officers, provide for certain
payments and benefits (including the full or partial acceleration of vesting of outstanding equity awards) in the event of certain qualifying terminations of employment, including in connection with a
change-in-control of the Company. We believe that having in place reasonable and competitive post-employment compensation arrangements are essential to attracting and retaining highly-qualified
executive officers. These arrangements are designed to provide reasonable compensation to executive officers who leave our employ under certain circumstances to facilitate their transition to new
employment. Further, we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing executive officer to sign a separation and release agreement
acceptable to us as a condition to receiving severance compensation payments or benefits.
We
believe that these arrangements are designed to align the interests of our executive officers and our stockholders when considering our long-term future. The primary purpose of these
arrangements is to keep our most senior executive officers focused on pursuing all corporate transaction activity that is in the best interests of our stockholders regardless of whether those
transactions may result in their own
job loss. Reasonable post-acquisition payments and benefits should serve the interests of both the executive officer and our stockholders.
In
the event of a change-in-control of the Company, to the extent Section 280G or 4999 of the Code is applicable to an executive officer, including a named executive officer, such
individual is entitled to receive either:
-
-
payment of the full amounts specified in the arrangement to which he or she is entitled; or
-
-
payment of such lesser amount that does not trigger the excise tax imposed by Section 4999, whichever results in him or her receiving a
higher amount after taking into account all federal, state, and local income, excise and employment taxes.
76
Table of Contents
We
do not provide excise tax gross-ups relating to a change-in-control of the Company and have no such obligations under the employment agreements with any of our executive officers, including our
named executive officers.
In
addition, under our 2013 Plan, in the event of a change-in-control of the Company in which outstanding equity awards will not be assumed or continued by the surviving entity, with the
exception of any performance share or performance units, all restricted shares will vest, and all share units and dividend equivalent rights will vest and the underlying shares will be delivered
immediately before the change in control. In the case of performance shares and performance units generally, unless alternative treatment is provided in an award agreement (such as for our
Performance-Based FFO Units and Performance-Based Relative TSR Units), if more than half of the performance period has lapsed, the performance shares will be converted into restricted shares based on
actual performance to date. If less than half of the performance period has lapsed, or if actual performance is not determinable, the performance shares will be converted into restricted shares
assuming target performance has been achieved. However, with respect to our Performance-Based FFO Units and Performance-Based Relative TSR Units, the treatment upon a change-in-control is set forth in
the applicable award agreements and described below under "Compensation of Executive OfficersNarrative Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards TableEquity Incentive PlansVesting and Change-in-Control."
For
detailed descriptions of the post-employment compensation arrangements we maintained with our named executive officers during 2020, as well as an estimate of the potential payments
and benefits payable under these arrangements, see "Compensation of Executive OfficersPotential Payments upon Termination or Change in Control" below.
Other Compensation Policies and Practices
|
We have adopted formal share ownership guidelines applicable to our executive officers and the non-employee members of the Board of Directors.
At least on an annual basis, we evaluate the share ownership status of these individuals.
Our
CEO is required to own securities of the Company equal in value to at least five times his base salary. Each of our other executive officers is required to own securities of the
Company equal to at
least three times his or her base salary. Our CEO and other executive officers must comply with the applicable ownership requirement within five years of being so named.
Our
stock ownership guidelines with respect to our non-employee directors require stock ownership by them of five times their annual base cash retainer. Our non-employee directors must
comply with the ownership requirement within five years of becoming a member of the Board of Directors and are required to hold shares at this level while serving as a director.
77
Table of Contents
-
(1)
-
Includes
Class A common stock, Class B common stock, restricted shares, vested options, unvested options and OP units held as of December 31,
2020.
-
(2)
-
Based
on average 2020 closing price per share of $61.88.
As
of the December 31, 2020, all of our executive officers and non-employee members of the Board of Directors either satisfied their applicable stock ownership requirement or were
on the way to satisfying the requirement within the applicable time period.
Our Board adopted a new Executive Compensation Recovery Policy in 2020. Pursuant to this policy, in the event of a restatement of the Company's
financial results (other than a restatement caused by a change in applicable accounting rules or interpretations), the result of which is that any cash or equity performance-based compensation paid to
our executive officers (defined to include our Chief Executive Officer, our Chief Financial Officer and all other Section 16 officers) would have been a lower amount had it been calculated
based on such restated results, a committee consisting of the non-management members of the Board (the "Independent Director Committee") shall review such performance-based compensation. If the
Independent Director Committee determines that any such executive officer engaged in fraud or intentional illegal conduct which materially contributed to the need for a restatement, the committee may
seek to recover from the executive the after-tax portion of the difference between the performance-based compensation actually paid and the amount that would have been paid had the performance-based
compensation been calculated based on the restated financial statements for the three-year period prior to the restatement.
We do not permit hedging of our securities by our directors and employees, including our named executive officers, and we permit only limited
pledging. Our Insider Trading Policy prohibits our employees, including our executive officers, and the non-employee members of the Board of Directors from engaging in the following transactions,
among others:
-
-
trading in call or put options involving our securities and other derivative securities;
-
-
engaging in short sales of our securities;
-
-
holding our securities in a margin account; and
-
-
pledging our securities to secure margins or other loans, subject to limited exceptions.
78
Table of Contents
Tax and Accounting Considerations
|
Generally, Section 162(m) of the Code disallows public companies a tax deduction for federal income tax purposes of remuneration in
excess of $1 million paid to so-called "covered employees," which includes the chief executive officer, chief financial officer, and certain other highly-compensated current and former
executive officers.
In
approving the amount and form of compensation for our named executive officers, the Compensation Committee considers all elements of our cost of providing such compensation, including
the potential impact of Section 162(m). The Compensation Committee may, in its judgment, approve compensation for our named executive officers that is not deductible for federal income tax
purposes when it believes that such compensation is in the best interests of the Company and our stockholders.
While
the Internal Revenue Service had previously issued private letter rulings holding that, under certain circumstances, Section 162(m) does not apply to compensation paid to
employees of a real estate investment trust's operating partnership, final regulations released on December 18, 2020, provide that compensation subject to Section 162(m) now includes
compensation paid to a covered employee by an operating partnership after December 18, 2020, to the extent the publicly held corporation is allocated a distributive share of the operating
partnership's deduction for that compensation. However, to the extent that compensation paid by an operating partnership is paid pursuant to a written binding contract that is in effect on
December 20, 2019, and that is not materially modified after that date, then it would not be subject to Section 162(m). Therefore, deductions for compensation paid to our executive
officers that may otherwise have been allowable may now be limited.
We follow the Financial Accounting Standard Board's Accounting Standards Codification Topic 718 ("FASB ASC Topic 718") for our stock-based
compensation awards. FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our employees and non-employee members of the Board of Directors,
including options to purchase shares of our common stock and other stock awards, based on the grant date "fair value" of these awards. This grant date fair value is calculated using a variety of
assumptions. This calculation is performed for financial reporting purposes and included in the executive compensation tables required by the federal securities laws, even though the recipient of the
awards may never realize any value from their awards. FASB ASC Topic 718 also requires us to recognize the compensation cost of our share-based awards in our income statements over the period that an
employee and non-employee member of the Board of Directors is required to render service in exchange for the award.
Special Note Regarding Non-GAAP Financial Measures and Other Metrics
|
This
Compensation Discussion and Analysis contains certain non-GAAP financial measures and other metrics, which are described in more detail as
follows:
-
-
BookingsWe define bookings as incremental annualized rent, plus half of bookings
of the joint venture that owns our Manassas data center.
-
-
Operating Funds from OperationsWe generally calculate OFFO as FFO (calculated in
accordance with the standards established by the National Association of Real Estate Investment Trusts) excluding certain non-routine charges and gains and losses that management believes are not
indicative of the results of our operating real estate portfolio. A reconciliation of Operating
79
Table of Contents
80
Table of Contents
Stockholder Proposals and Nominations for the 2022 Annual Meeting
Any proposal of a stockholder intended to be included in our proxy statement for the 2022 Annual Meeting of Stockholders (the "2022 Annual
Meeting") pursuant to SEC Rule 14a-8 must be received by us no later than November 18, 2021 unless the date of our 2022 Annual Meeting is more than 30 days before or after
May 4, 2022, in which case the proposal must be received a reasonable time before we begin to print and mail our proxy materials. All proposals should be directed to our Corporate Secretary, at
12851 Foster Street, Overland Park, Kansas 66213.
In
addition, any stockholder who wishes to propose a nominee to the Board or propose any other business to be considered by the stockholders (other than a stockholder proposal included
in our proxy materials pursuant to Rule 14a-8 of the rules promulgated under the Exchange Act) must comply with the advance notice provisions and other requirements of Article II,
Section 12 of our bylaws, which are on file with the SEC and may be obtained from Investor Relations upon request. These notice provisions require that nominations of persons for election to
the Board and the proposal of business to be considered by the stockholders for the 2022 Annual Meeting must be received no earlier than October 19, 2021 and no later than 5:00 p.m.,
Eastern Time, on November 18, 2021. However, in the event that the 2022 Annual Meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the 2022
Annual Meeting, notice by the stockholder to be timely must be received no earlier than the 150th day prior to the date of the meeting and not later than 5:00 p.m., Eastern
Time, on the later of the 120th day prior to the date of the meeting or the tenth day following the date of the first public announcement of the meeting.
Householding of Proxy Materials
If you and other residents at your mailing address own shares of common stock in street name, your broker or bank may have sent you a notice
that your household will receive only one annual report and proxy statement for each company in which you hold shares through that broker or bank. This practice of sending only one copy of proxy
materials is known as "householding." If you did not respond that you did not want to participate in householding, you were deemed to have consented to the process. If the foregoing procedures apply
to you, your broker has sent one copy of our annual report and Proxy Statement to your address. You may revoke your consent to householding at any time by sending your name, the name of your brokerage
firm and your account number to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717 (telephone number: 1-800-542-1061). The revocation of your consent to householding will
be effective 30 days following its receipt. In any event, if you did not receive an individual copy of this Proxy Statement or our annual report, we will promptly send a copy to you if you
address your written request to or call QTS Realty Trust, Inc., 12851 Foster Street, Overland Park, Kansas 66213, Attention: Investor Relations at (678) 835-4443 or ir@qtsdatacenters.com.
If you are receiving multiple copies of our annual report and proxy statement, you can request householding by contacting
Investor Relations in the same manner.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 4, 2021
This Proxy Statement and our 2020 Annual Report are available on our website at
www.qtsdatacenters.com. In addition, our stockholders may access this information, as well as transmit their voting instructions, at www.proxyvote.com by
having their proxy card and related instructions in hand.
Additional
copies of this Proxy Statement and our 2020 Annual Report will be furnished to our stockholders upon written request to the Corporate Secretary at the mailing address for our
executive offices set forth on the first page of this Proxy Statement. If requested by eligible stockholders, we will provide copies of exhibits to our 2020 Annual Report on Form 10-K for the
year ended December 31, 2020 for a reasonable fee.
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By Order of the Board of Directors
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Matt N. Thomson
General Counsel, Vice President and Secretary
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March 18,
2021
Overland Park, Kansas
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Appendix A
QTS REALTY TRUST, INC.
AMENDED AND RESTATED 2013 EQUITY INCENTIVE PLAN
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QTS REALTY TRUST, INC.
AMENDED AND RESTATED 2013 EQUITY INCENTIVE PLAN
QTS Realty Trust, Inc., a Maryland corporation (the "Company"), sets forth herein the terms of its Amended and Restated 2013 Equity
Incentive Plan (the "Plan"), as follows:
1. PURPOSE
The Plan is intended to (a) provide incentive to officers, employees, directors and other eligible persons to stimulate their efforts towards the success
of the Company and to operate and manage its business
in a manner that will provide for the long term growth and profitability of the Company; and (b) provide a means of obtaining, rewarding and retaining key personnel. To this end, the Plan
provides for the grant of share options, share appreciation rights, restricted shares, unrestricted shares, share units (including deferred share units), dividend equivalent rights, long-term
incentive units, other equity-based awards and cash bonus awards. Any of these awards may, but need not, be made as performance incentives to reward attainment of annual or long-term performance goals
in accordance with the terms hereof. Share options granted under the Plan may be non-qualified share options or incentive share options, as provided herein.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:
2.1 "Affiliate" means, with respect to the Company, any company or other trade or business that controls, is controlled by or
is under common control with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary. For purposes of granting
Options or Share Appreciation Rights, an entity may not be considered an Affiliate of the Company unless the Company holds a "controlling interest" in such entity, where the term "controlling
interest" has the same meaning as provided in Treasury Regulation Section 1.414(c)-2(b)(2)(i), provided that the language "at least 50 percent" is used instead of "at least
80 percent" and, provided further, that where granting of Options or Share Appreciation Rights is based upon a legitimate business criteria, the language "at least 20 percent" is used
instead of "at least 80 percent" each place it appears in Treasury Regulation Section 1.414(c)-2(b)(2)(i).
2.2 "Annual Incentive Award" means an Award, denominated in cash, made subject to attainment of performance goals (as
described in Section 14) over a Performance Period of up to one (1) year (which shall correspond to the Company's fiscal year, unless
otherwise specified by the Board).
2.3 "Applicable Laws" means the legal requirements relating to the Plan and the Awards under applicable provisions of the
corporate, securities, tax and other laws, rules, regulations and government orders, and the rules of any applicable stock exchange or national market system, of any jurisdiction applicable to Awards
granted to residents therein.
2.4 "Award" means a grant of an Option, Share Appreciation Right, Restricted Share, Unrestricted Share, Share Unit, Dividend
Equivalent Right, Performance Award, Annual Incentive Award, LTIP Unit, or Other Equity-Based Award under the Plan.
2.5 "Award Agreement" means the agreement between the Company and a Grantee that evidences and sets out the terms and
conditions of an Award.
2.6 "Benefit Arrangement" shall have the meaning set forth in Section 16.
2.7 "Board" means the Board of Directors of the Company.
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2.8 "Cause" means, as determined by the Board and unless otherwise provided in an applicable agreement (including an
employment agreement) with the Company or an Affiliate, in which case the definition contained in such agreement shall control: (i) gross negligence or willful misconduct in connection with the
performance of duties; (ii) conviction of a felony; (iii) conviction of any other criminal offense involving an act of dishonesty intended to result in substantial personal enrichment of
such Grantee at the expense of the Company or an Affiliate; or (iv) material breach of any term of any employment, consulting or other services, confidentiality, intellectual property or
non-competition agreements, if any, between the Service Provider and the Company or an Affiliate.
2.9 "Change in Control" means:
(1) Any
"person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company or any corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the same proportion as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding voting securities;
(2) During
any period of twelve consecutive months, individuals who at the beginning of such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (1), (3) or (4) hereof) whose election by the Board or
nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or actual threatened solicitation of proxies or consents by or on behalf of a person other than the Board;
(3) The
consummation of a merger or consolidation of the Company with any other entity or approve the issuance of voting securities in connection with a merger or
consolidation of the Company (or any direct or indirect subsidiary thereof) pursuant to applicable exchange requirements, other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent
entity) at least 50.1% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation or
(B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as defined above) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 50% or more of either of the then outstanding shares of Common Shares or the combined voting power of the Company's then outstanding
voting securities; or
(4) The
consummation of the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction or series of transactions within a
period of twelve months ending on the date of the last sale or disposition having a similar effect).
Notwithstanding
anything herein to the contrary, the determination as to whether a "Change in Control" as defined herein has occurred shall be determined in accordance with the requirements of Code
Section 409A and shall be intended to constitute a "change in control event" within the meaning
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of
Code Section 409A, except to that the extent the provisions herein are more restrictive than the requirements of Code Section 409A.
2.10 "Code" means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.
2.11 "Committee" means a committee of, and designated from time to time by resolution of, the Board, which shall be
constituted as provided in Section 3.2 (or, if no Committee has been designated, the Board itself).
2.12 "Company" means QTS Realty Trust, Inc., a Maryland corporation.
2.13 "Determination Date" means the Grant Date or such other date as of which the Fair Market Value of a Share is required to
be established for purposes of the Plan.
2.14 "Disability" means the Grantee is unable to perform each of the essential duties of such Grantee's position by reason of
a medically determinable physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not less than 12 months; provided,
however, that, with respect to rules regarding expiration of an Incentive Share Option
following termination of the Grantee's Service, Disability shall mean the Grantee is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.
2.15 "Dividend Equivalent Right" means a right, granted to a Grantee under Section 13, to receive cash, Shares, other Awards or other property equal in value to
dividends paid with respect to a specified number of
Shares, or other periodic payments.
2.16 "Effective Date" means May 4, 2021, the date of the approval of the Plan, as amended and restated, by the
Company's shareholders, the Plan, as amended and restated, having been approved by the Board on March 4, 2021.
2.17 "Exchange Act" means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.
2.18 "Fair Market Value" means the fair market value of a Share for purposes of the Plan, which shall be determined as of any
Determination Date as follows:
(a) If
on such Determination Date the Shares are listed on a Stock Exchange, or are publicly traded on another established securities market (a "Securities Market"), the
Fair Market Value of a Share shall be the closing price of the Share as reported on such Stock Exchange or such Securities Market (provided that, if
there is more than one such Stock Exchange or Securities Market, the Committee shall designate the appropriate Stock Exchange or Securities Market for purposes of the Fair Market Value determination).
If there is no such reported closing price on such Determination Date, the Fair Market Value of a Share shall be the closing price of the Share on the next trading day on which any sale of Shares
shall have been reported on such Stock Exchange or such Securities Market.
(b) If
on such Determination Date the Shares are not listed on a Stock Exchange or publicly traded on a Securities Market, the Fair Market Value of a Share shall be the
value of the Share as determined by
the Committee by the reasonable application of a reasonable valuation method, in a manner consistent with Code Section 409A.
Notwithstanding
this Section 2.18 or Section 19.3, for purposes of determining taxable
income and the amount of the related tax withholding obligation pursuant to Section 19.3, the Fair Market Value will be determined by the Company using
any reasonable method, determined by the Company in good faith on such basis as it deems appropriate and applied consistently with respect to Grantees.
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2.19 "Family Member" means a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent,
grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive relationships, of the Grantee, any person
sharing the Grantee's household (other than a tenant or employee), a trust in which any one or more of these persons have more than fifty percent (50%) of the beneficial interest, a foundation in
which any one or more of these persons (or the Grantee) control the management of assets, and any other entity in which one or more of these persons (or the Grantee) own more than fifty percent (50%)
of the voting interests.
2.20 "Grant Date" means, as determined by the Board, the latest to occur of (i) the date as of which the Company
completes the action constituting the Award, (ii) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 6, or (iii) such other later date as
may be specified by the Board.
2.21 "Grantee" means a person who receives or holds an Award under the Plan.
2.22 "Incentive Share Option" means an "incentive stock option" within the meaning of Code Section 422, or the
corresponding provision of any subsequently enacted tax statute, as amended from time to time.
2.23 "Long-Term Incentive Unit" or "LTIP Unit" means an Award under Section 15 of an interest in the operating
partnership affiliated with the Company.
2.24 "Non-qualified Share Option" means an Option that is not an Incentive Share Option.
2.25 "Option" means an option to purchase one or more Shares pursuant to the Plan.
2.26 "Option Price" means the exercise price for each Share subject to an Option.
2.27 "Original Effective Date" means October 8, 2013.
2.28 "Other Agreement" shall have the meaning set forth in Section 16.
2.29 "Other Equity-Based Award" means a right or other interest that may be denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, or related to, Shares, other than an Option, Share Appreciation Right, Restricted Share, Unrestricted Share, Share Unit, Dividend Equivalent Right,
Performance Award or Annual Incentive Award.
2.30 "Outside Director" means a member of the Board who is not an officer or employee of the Company.
2.31 "Performance Award" means an Award made subject to the attainment of performance goals (as described in Section 14) over a Performance Period of up to ten
(10) years.
2.32 "Performance Measures" shall have the meaning set forth in Section 14.5.
2.33 "Performance Period" means the period of time during which the performance goals must be met in order to determine the
degree of payout and/or vesting with respect to an Award.
2.34 "Plan" means this QTS Realty Trust, Inc. Amended and Restated 2013 Equity Incentive Plan, as amended from time to
time.
2.35 "Prior Plan" means the QualityTech L.P. 2010 Equity Incentive Plan, as amended from time to time.
2.36 "Purchase Price" means the purchase price for each Share pursuant to a grant of Restricted Shares, Share Units or
Unrestricted Shares.
2.37 "Reporting Person" means a person who is required to file reports under Section 16(a) of the Exchange Act.
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2.38 "Restricted Shares" means Shares, awarded to a Grantee pursuant to Section 10.
2.39 "SAR Exercise Price" means the per share exercise price of a SAR granted to a Grantee under Section 9.
2.40 "Securities Act" means the Securities Act of 1933, as now in effect or as hereafter amended.
2.41 "Service" means service as a Service Provider to the Company or any Affiliate. Unless otherwise stated in the applicable
Award Agreement, a Grantee's change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the Company or any
Affiliate. Subject to the preceding sentence, whether a termination of Service shall have occurred for purposes of the Plan shall be determined by the Board, which determination shall be final,
binding and conclusive. Notwithstanding any other provision to the contrary, for any individual providing services solely as a director, only service to the Company or any of its Subsidiaries
constitutes Service. If the Service Provider's employment or other service relationship is with an Affiliate and that entity ceases to be an Affiliate, a termination of Service shall be deemed to have
occurred when the entity ceases to be an Affiliate unless the Service Provider's employment or other service relationship has been transferred by the Company or one of its remaining Affiliates to the
Company or one of its remaining Affiliates.
2.42 "Service Provider" means an employee, officer, director, or a consultant or adviser (who is a natural person) providing
services to the Company or any of its Affiliates.
2.43 "Shares" means the shares of Class A common stock, par value $0.01 per share, of the Company.
2.44 "Share Appreciation Right" or "SAR" means a right granted to a Grantee
under Section 9.
2.45 "Share Units" means an Award representing the equivalent of one Share awarded to a Grantee pursuant to Section 10 that will be settled in an amount in cash, Shares
or both, subject to the terms and conditions of the Award.
2.46 "Stock Exchange" means the New York Stock Exchange or another established national or regional stock exchange.
2.47 "Subsidiary" means any "subsidiary corporation" of the Company within the meaning of Code Section 424(f).
2.48 "Substitute Award" means an Award granted upon assumption of, or in substitution for, outstanding awards previously
granted by a company or other entity acquired by the Company or an Affiliate or with which the Company or an Affiliate combines.
2.49 "Ten Percent Shareholder" means an individual who owns more than ten percent (10%) of the total combined voting power of
all classes of outstanding voting securities of the Company, its parent or any of its Subsidiaries. In determining Share ownership, the attribution rules of Code Section 424(d) shall be
applied.
2.50 "Unrestricted Shares" shall have the meaning set forth in Section 11.
Unless
the context otherwise requires, all references in the Plan to "including" shall mean "including without limitation."
References
in the Plan to any Code Section shall be deemed to include, as applicable, regulations promulgated under such Code Section.
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3. ADMINISTRATION OF THE PLAN
3.1. Board.
The Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company's certificate of incorporation and
by-laws and Applicable Laws. The Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement,
and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems
to be necessary or appropriate to the administration of the Plan, any Award or any Award Agreement, including the authority to adopt, alter and repeal administrative rules and guidelines governing the
Plan. All such actions and determinations shall be by the affirmative vote of a majority of the members of the Board present at a meeting at which a quorum is present or by unanimous consent of the
Board executed in writing in accordance with the Company's certificate of incorporation and by-laws and Applicable Laws. The interpretation and construction by the Board of any provision of the Plan,
any Award or any Award Agreement shall be final, binding and conclusive.
3.2. Committee.
The Board from time to time may delegate to the Committee such powers and authorities related to the administration and implementation of the Plan, as set forth
in Section 3.1 above and other applicable provisions, as the Board shall determine, consistent with the Company's certificate of incorporation
and by-laws and Applicable Laws.
(i) Except
as provided in Subsection (ii) and except as the Board may otherwise determine, the Committee, if any, appointed by the Board to administer the Plan shall
consist of two or more Outside Directors of the Company who: (a) meet such requirements as may be established from time to time by the Securities and Exchange Commission for plans intended to
qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act; and (b) comply with the independence requirements of the Stock Exchange on which the Shares are listed.
(ii) The
Board may also appoint one or more separate committees of the Board, each composed of one or more directors of the Company who need not be Outside Directors, who
may administer the Plan with respect to employees or other Service Providers who are not executive officers (as defined under Rule 3b-7 or the Exchange Act) or directors of the Company, may
grant Awards under the Plan to such employees or other Service Providers, and may determine all terms of such Awards, subject to the requirements of Rule 16b-3 and the rules of the Stock
Exchange on which the Shares are listed.
In
the event that the Plan, any Award or any Award Agreement entered into hereunder provides for any action to be taken by or determination to be made by the Board, such action may be
taken or such determination may be made by a Committee if the power and authority to do so has been delegated (and such delegated authority has not been revoked) to such Committee by the Board as
provided for in this Section. Unless otherwise expressly determined by the Board, any such action or determination by the Committee shall be final, binding and conclusive. To the extent permitted by
law, the Committee may delegate its authority under the Plan to a member of the Board, provided, that such member of the Board to whom the Committee delegates authority under the Plan must be an
Outside Director who satisfies the requirements of Subsection (i)(a)-(c) of this Section 3.2.
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3.3. Terms of Awards.
Subject to the other terms and conditions of the Plan, the Board shall have full and final authority to:
(i) designate
Grantees;
(ii) determine
the type or types of Awards to be made to a Grantee;
(iii) determine
the number of Shares to be subject to an Award;
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(iv)
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establish
the terms and conditions of each Award (including, but not limited to, the exercise price of any Option, the nature and duration of any restriction or
condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the Shares subject thereto, the treatment of an Award in the event of a Change in
Control, and any terms or conditions that may be necessary to qualify Options as Incentive Share Options);
(v) prescribe
the form of each Award Agreement evidencing an Award; and
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(vi)
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amend,
modify, or reprice (except as such practice is prohibited by Section 3.5 herein) the terms of any
outstanding Award. Such authority specifically includes the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to make or modify Awards to eligible individuals
who are foreign nationals or are individuals who are employed outside the United States to recognize differences in local law, tax policy, or custom. Notwithstanding the foregoing, no amendment,
modification or supplement of any Award shall, without the consent of the Grantee, impair the Grantee's rights under such Award.
3.4. Forfeiture; Recoupment.
The Company may reserve the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee with respect to an Award thereunder on account of
actions taken by, or failed to be taken by, such Grantee in violation or breach of or in conflict with any (a) employment agreement, (b) non-competition agreement, (c) agreement
prohibiting solicitation of employees or clients of the Company or any Affiliate, (d) confidentiality obligation with respect to the Company or any Affiliate, or (e) other agreement, as
and to the extent specified in such Award Agreement. The Company may annul an outstanding Award if the Grantee thereof is an employee and is terminated for Cause as defined in the Plan or the
applicable Award Agreement or for "cause" as defined in any other agreement between the Company or any Affiliate and such Grantee, as applicable.
Any
Award granted pursuant to the Plan is subject to mandatory repayment by the Grantee to the Company to the extent the Grantee is or in the future becomes subject to any Company
"clawback" or recoupment policy that requires the repayment by the Grantee to the Company of compensation paid by the Company to the Grantee in the event that the Grantee fails to comply with, or
violates, the terms or requirements of such policy. Such policy may authorize the Company to recover from a Grantee incentive-based compensation (including Options awarded as compensation) awarded to
or received by such Grantee during a period of up to three (3) years, as determined by the Committee, preceding the date on which the Company is required to prepare an accounting restatement
due to
material noncompliance by the Company, as a result of misconduct, with any financial reporting requirement under the federal securities laws.
Furthermore,
if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting
requirement under the federal securities laws, and any Award Agreement so provides, any Grantee of an Award under such Award Agreement who knowingly engaged in such misconduct, was grossly negligent
in engaging in such misconduct, knowingly failed to prevent such misconduct or was grossly negligent in failing to prevent such misconduct, shall reimburse the Company the amount of any payment in
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settlement
of an Award earned or accrued during the 12-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred)
of the financial document that contained information affected by such material noncompliance.
Notwithstanding
any other provision of the Plan or any provision of any Award Agreement, if the Company is required to prepare an accounting restatement, Grantees shall forfeit any cash
or Shares received in connection with an Award (or an amount equal to the Fair Market Value of such Shares on the date of delivery if the Grantee no longer holds the Shares) if pursuant to the terms
of the Award Agreement for such Award, the amount of the Award earned or the vesting in the Award was explicitly based on the achievement of pre-established performance goals set forth in the Award
Agreement (including earnings, gains, or other performance goals) that are later determined, as a result of the accounting restatement, not to have been achieved.
3.5. No Repricing.
Except in connection with a corporate transaction involving the Company (including, without limitation, any share dividend, distribution (whether in the form of
cash, shares, other securities or other property), share split, extraordinary cash dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of shares or other securities or similar transaction), the Company may not, without obtaining shareholder approval: (a) amend the terms of outstanding
Options or SARs to reduce the exercise price of such outstanding Options or SARs; (b) cancel outstanding Options or SARs in exchange for or substitution of Options or SARs with an exercise
price that is less than the exercise price of the original Options or SARs; or
(c) cancel outstanding Options or SARs with an exercise price above the current share price in exchange for cash or other securities.
3.6. No Liability.
No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award or Award
Agreement.
3.7. Share Issuance/Book-Entry.
Notwithstanding any provision of the Plan to the contrary, the issuance of the Shares under the Plan may be evidenced in such a manner as the Board, in its
discretion, deems appropriate, including, without limitation, book-entry or direct registration or issuance of one or more share certificates.
3.8. Minimum Vesting Requirement.
Awards granted on or after the Effective Date shall provide for a minimum vesting period of at least one year following the date of grant; provided that, the
Committee may grant Awards that do not conform to the requirements of this subsection 3.8 with respect to not more than 5% of the Shares authorized under the Plan.
4. SHARES SUBJECT TO THE PLAN
4.1. Number of Shares Available for Awards.
Subject to adjustment as provided in Section 18, effective May 4, 2021, the number of Shares
available for issuance under the Plan shall be Seven Million, Eight Hundred Sixty Thousand (7,860,000). Subject to adjustment as provided in Section 18, the number of Shares available for issuance
as Incentive Share Options shall be Seven Million, Eight Hundred Sixty Thousand
(7,860,000). Shares issued or to be issued under the Plan shall be authorized but unissued shares or treasury Shares or any combination of the foregoing, as may be determined from time to time by the
Board or by the Committee.
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4.2. Adjustments in Authorized Shares.
The Board shall have the right to substitute or assume Awards in connection with mergers, reorganizations, separations, or other transactions to which Code
Section 424(a) applies. The number of Shares reserved pursuant to Section 4 shall be increased by the corresponding number of awards
assumed and, in the case of a substitution, by the net increase in the number of Shares subject to awards before and after the substitution. Available shares under a shareholder approved plan of an
acquired company (as appropriately adjusted to reflect the transaction) may be used for Awards under the Plan and do not reduce the number of Shares available under the Plan, subject to requirements
of the Stock Exchange on which the Shares are listed.
4.3. Share Usage.
Shares covered by an Award shall be counted as used as of the Grant Date. Any Shares that are subject to Awards shall be counted against the limit set forth in Section 4.1 as one (1) Share for every one (1) Share subject to an Award. Awards of LTIP Units shall count against the limit set
forth in Section 4.1 on a one-for-one basis, i.e., each such unit shall be treated as an
award of one (1) Share. With respect to SARs, the number of Shares subject to an award of SARs will be counted against the aggregate number of Shares available for issuance under the Plan
regardless of the number of Shares actually issued to settle the SAR upon exercise. If any Shares covered by an Award granted under the Plan are not purchased or are forfeited or expire, or if an
Award otherwise terminates without delivery of any Shares subject thereto, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award
shall, to the extent of any such forfeiture, termination or expiration, again be available for making Awards under the Plan in the same amount as such Shares were counted against the limit set forth
in Section 4.1. The number of Shares available for issuance under the Plan shall not be increased by (i) any Shares tendered or withheld
or Award surrendered in connection with the purchase of Shares upon exercise of an Option as described in Section 12.2, (ii) any Shares
deducted or delivered from an Award payment in connection with the Company's tax withholding obligations as described in Section 19.3 or
(iii) any Shares purchased by the Company with proceeds from option exercises.
5. EFFECTIVE DATE, DURATION AND AMENDMENTS
5.1. Effective Date; Prior Plan.
The Plan became effective as of the Original Effective Date. The Plan, as amended and restated, shall be effective as of the Effective Date. The Plan as in effect
prior to its amendment and restatement shall apply to all awards granted on and after the Original Effective Date and prior to the Effective Date. Following the Original Effective Date, no new awards
will be granted under the Prior Plan.
5.2. Term.
The Plan shall terminate automatically ten (10) years after the Effective Date and may be terminated on any earlier date as provided in Section 5.3.
5.3. Amendment and Termination of the Plan.
The Board may, at any time and from time to time, amend, suspend, or terminate the Plan. An amendment shall be contingent on approval of the Company's
shareholders to the extent stated by the Board, required by Applicable Laws or required by the Stock Exchange on which the Shares are listed. No amendment will be made to the no-repricing provisions
of Section 3.5 or the option pricing provisions of Section 8.1 without the approval of the
Company's shareholders. No amendment,
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suspension,
or termination of the Plan shall, without the consent of the Grantee, impair rights or obligations under any Award theretofore awarded under the Plan.
6. AWARD ELIGIBILITY AND LIMITATIONS
6.1. Service Providers and Other Persons.
Subject to this Section 6, Awards may be made under the Plan to: (i) any Service Provider, as the
Board shall determine and designate from time to time and (ii) any other individual whose participation in the Plan is determined to be in the best interests of the Company by the Board.
6.2. Limitation on Shares Subject to Awards and Cash Awards.
During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act:
-
(i)
-
the
maximum number of Shares subject to Options or SARs that can be granted under the Plan to any person eligible for an Award under Section 6, other than an Outside Director, is four hundred fifty
thousand (450,000) Shares in a calendar year;
-
(ii)
-
the
maximum number of Shares that can be granted under the Plan, other than pursuant to an Option or SARs, to any person eligible for an Award under Section 6 is two hundred twenty-five thousand
(225,000) Shares in a calendar year;
-
(iii)
-
the
maximum number of Shares that can be granted under the Plan pursuant to any Performance Award to any person eligible for an Award under Section 6, other than an Outside Director, is seven hundred
fifty thousand (750,000) Shares in a calendar year;
-
(iv)
-
notwithstanding
the foregoing, the maximum number of Shares subject to Awards that can be granted under the Plan to any person eligible for an Award under Section 6, other than an Outside Director, in the calendar
year that the person is first employed by the Company or its Affiliates shall be three
times the number set forth in each of paragraphs (i), (ii) and (iii) above;
-
(v)
-
the
total value of the Awards granted during a single calendar year to any Outside Director (calculating the value of any such Awards based on the grant date fair
value of such Awards for financial reporting purposes), taken together with any cash retainers paid to such Outside Director during the calendar year, shall not exceed seven hundred fifty thousand
Dollars ($750,000); provided, that in any calendar year that an Outside Director is first providing Service as an Outside Director, the foregoing limit shall be one million Dollars ($1,000,000); and
-
(vi)
-
the
maximum amount that may be paid as an Annual Incentive Award in a calendar year to any person eligible for an Award shall be five million Dollars ($5,000,000)
and the maximum amount that may be paid as a cash-settled Performance Award in respect of a performance period by any person eligible for an Award shall be five million Dollars ($5,000,000).
The
preceding limitations in this Section 6.2 are subject to adjustment as provided in Section 18.
6.3. Stand-Alone, Additional, Tandem and Substitute Awards.
Subject to Section 3.5, Awards granted under the Plan may, in the discretion of the Board, be granted
either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate, or any business entity to be
acquired by the Company or an Affiliate, or any other right of a Grantee to receive payment from the Company or any Affiliate. Such additional, tandem, and substitute or exchange Awards may
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be
granted at any time. Subject to Section 3.5, if an Award is granted in substitution or exchange for another Award, the Board shall require the
surrender of such other Award in consideration for the grant of the new Award. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other
plans of the Company or any Affiliate. Notwithstanding Section 8.1 and Section 9.1 but
subject to Section 3.5, the Option Price of an Option or the grant price of an SAR that is a Substitute Award may be less than 100% of the Fair
Market Value of a Share on the original date of grant; provided, that, the Option Price or grant price is determined in accordance with the principles of Code Section 424 and the regulations
thereunder for any Incentive Share Option and consistent with Code Section 409A for any other Option or SAR.
7. AWARD AGREEMENT
Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine. Award
Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan. Each Award Agreement evidencing an Award of Options
shall specify whether such Options are intended to be Non-qualified Share Options or Incentive Share Options, and in the absence of such specification such options shall be deemed Non-qualified Share
Options.
8. TERMS AND CONDITIONS OF OPTIONS
8.1. Option Price.
The Option Price of each Option shall be fixed by the Board and stated in the Award Agreement evidencing such Option. Except in the case of Substitute Awards, the
Option Price of each Option shall be at least the Fair Market Value of a Share on the Grant Date; provided, however, that in the event that a Grantee is a
Ten Percent Shareholder, the Option Price of an Option granted to such Grantee that is intended to be an
Incentive Share Option shall be not less than one hundred ten percent (110%) of the Fair Market Value of a Share on the Grant Date. In no case shall the Option Price of any Option be less than the par
value of a Share.
8.2. Vesting.
Subject to Sections 8.3 and 18.3, each Option granted under the Plan shall become exercisable at such times
and under such conditions as shall be determined by the Board and stated in the Award Agreement. For purposes of this Section 8.2, fractional
numbers of Shares subject to an Option shall be rounded down to the next nearest whole number.
8.3. Term.
Each Option granted under the Plan shall terminate, and all rights to purchase Shares thereunder shall cease, upon the expiration of ten (10) years from
the date such Option is granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award Agreement relating to
such Option; provided, however, that in the event that the Grantee is a Ten Percent Shareholder, an
Option granted to such Grantee that is intended to be an Incentive Share Option shall not be exercisable after the expiration of five (5) years from its Grant Date.
8.4. Termination of Service.
Each Award Agreement shall set forth the extent to which the Grantee shall have the right to exercise the Option following termination of the Grantee's Service,
and if an Award Agreement does not contain such a provision, vested Options may be exercised for 90 days following termination of the Grantee's Service, unless such termination is for Cause, in
which case all Options shall expire upon the
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termination
of the Grantee's Service. Such provisions shall be determined in the sole discretion of the Board, need not be uniform among all Options issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of Service.
8.5. Limitations on Exercise of Option.
Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, prior to the date the Plan is approved by the
shareholders of the Company as provided herein or after the occurrence of an event referred to in Section 18 which results in termination of the
Option.
8.6. Method of Exercise.
Subject to the terms of Section 12 and Section 19.3,
an Option that is exercisable may be exercised by the Grantee's delivery to the Company of notice of exercise on any business day, at the Company's principal office, on the form specified by the
Company and in accordance with any additional procedures specified by the Board. Such notice shall specify the number of Shares with respect to which the Option is being exercised and shall be
accompanied by payment in full of the Option Price of the Shares for which the Option is being exercised plus the amount (if any) of federal and/or other taxes which the Company may, in its judgment,
be required to withhold with respect to an Award.
8.7. Rights of Holders of Options.
Unless otherwise stated in the applicable Award Agreement, an individual or entity holding or exercising an Option shall have none of the rights of a shareholder
(for example, the right to receive cash or dividend payments or distributions attributable to the subject Shares or to direct the voting of the subject Shares or to receive notice of any meeting of
the Company's shareholders) until the Shares covered thereby are fully paid and issued to him. Except as provided in Section 18, no adjustment
shall be made for dividends, distributions or other rights for which the record date is prior to the date of such issuance.
8.8. Delivery of Share Certificates.
Promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price with respect thereto, such Grantee shall be entitled to receive
such evidence of such Grantee's ownership of the Shares subject to such Option as shall be consistent with Section 3.8.
8.9. Transferability of Options.
Except as provided in Section 8.10, during the lifetime of a Grantee, only the Grantee (or, in the event of
legal incapacity or incompetency, the Grantee's guardian or legal representative) may exercise an Option. Except as provided in Section 8.10, no
Option shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.
8.10. Family Transfers.
If authorized in the applicable Award Agreement or by the Board, in its sole discretion, a Grantee may transfer, not for value, all or part of an Option which is
not an Incentive Share Option to any Family Member. For the purpose of this Section 8.10, a "not for value" transfer is a transfer which is
(i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) unless Applicable Law does not permit such transfers, a transfer to
an entity in which more than fifty percent (50%) of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under this Section 8.10, any such Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to
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transfer,
and Shares acquired pursuant to the Option shall be subject to the same restrictions on transfer of shares as would have applied to the Grantee. Subsequent transfers of transferred Options
are prohibited except to Family Members of the original Grantee in accordance with this Section 8.10 or by will or the laws of descent and distribution.
The events of termination of Service of Section 8.4 shall continue to be applied with respect to the original Grantee, following which the Option
shall be exercisable by the transferee only to the extent, and for the periods specified, in Section 8.4.
8.11. Limitations on Incentive Share Options.
An Option shall constitute an Incentive Share Option only (i) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company;
(ii) to the extent specifically provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of
the Shares with respect to which all Incentive Share Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee's
employer and its Affiliates) does not exceed $100,000. Except to the extent provided in the regulations under Code Section 422, this limitation shall be applied by taking Options into account
in the order in which they were granted.
8.12. Notice of Disqualifying Disposition.
If any Grantee shall make any disposition of Shares issued pursuant to the exercise of an Incentive Share Option under the circumstances described in Code
Section 421(b) (relating to certain disqualifying dispositions), such Grantee shall notify the Company of such disposition within ten (10) days thereof.
9. TERMS AND CONDITIONS OF SHARE APPRECIATION RIGHTS
9.1. Right to Payment and Grant Price.
A SAR shall confer on the Grantee to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one Share on
the date of exercise over (B) the SAR Exercise Price as determined by the Board. The Award Agreement for a SAR shall specify the SAR Exercise Price, which shall be at least the Fair Market
Value of one (1) Share on the Grant Date. SARs may be granted in conjunction with all or part of an Option granted under the Plan or at any subsequent time during the term of such Option, in
conjunction with all or part of any other Award or without regard to any Option or other Award; provided that a SAR that is granted subsequent to the Grant Date of a related Option must have a SAR
Exercise Price that is no less than the Fair Market Value of one Share on the SAR Grant Date; and provided further that a Grantee may only exercise
either the SAR or the Option with which it is granted in tandem and not both.
9.2. Other Terms.
The Board shall determine on the Grant Date or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part
(including based on achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following termination of Service or
upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Shares will be delivered or deemed to be delivered to
Grantees, whether or not a SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR.
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9.3. Term.
Each SAR granted under the Plan shall terminate, and all rights thereunder shall cease, upon the expiration of ten (10) years from the date such SAR is
granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award Agreement relating to such SAR.
9.4. Transferability of SARS.
Except as provided in Section 9.5, during the lifetime of a Grantee, only the Grantee (or, in the event of
legal incapacity or incompetency, the Grantee's guardian or legal representative) may exercise a SAR. Except as provided in Section 9.5, no SAR
shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.
9.5. Family Transfers.
If authorized in the applicable Award Agreement and by the Board, in its sole discretion, a Grantee may transfer, not for value, all or part of a SAR to any
Family Member. For the purpose of this Section 9.5, a "not for value" transfer is a transfer which is (i) a gift, (ii) a transfer
under a domestic relations order in settlement of marital property rights; or (iii) unless Applicable Law does not permit such transfers, a transfer to an entity in which more than fifty
percent (50%) of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under this Section 9.5, any such SAR shall
continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, and
Shares acquired pursuant to a SAR shall be subject to the same restrictions on transfer or shares as would have applied to the Grantee. Subsequent transfers of transferred SARs are prohibited except
to Family Members of the original Grantee in accordance with this Section 9.5 or by will or the laws of descent and distribution.
10. TERMS AND CONDITIONS OF RESTRICTED SHARES AND SHARE UNITS
10.1. Grant of Restricted Shares or Share Units.
Awards of Restricted Shares or Share Units may be made for consideration or no consideration (other than the par value of the Shares which shall be deemed paid by
past Service or, if so provided in the related Award Agreement or a separate agreement, the promise by the Grantee to perform future Service to the Company or an Affiliate of the Company).
10.2. Restrictions.
At the time a grant of Restricted Shares or Share Units is made, the Board may, in its sole discretion, establish a period of time (a "restricted period")
applicable to such Restricted Shares or Share Units. Each Award of Restricted Shares or Share Units may be subject to a different restricted period. The Board may in its sole discretion, at the time a
grant of Restricted Shares or Share Units is made, prescribe restrictions in addition to or other than the expiration of the restricted period, including the satisfaction of corporate or individual
performance objectives, which may be applicable to all or any portion of the Restricted Shares or Share Units as described in Section 14. Neither
Restricted Shares nor Share Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the restricted period or prior to the satisfaction of any other restrictions
prescribed by the Board with respect to such Restricted Shares or Share Units.
10.3. Restricted Share Certificates.
Pursuant to Section 3.8, to the extent that ownership of Restricted Shares is evidenced by a book-entry
registration or direct registration, such registration shall be notated to evidence the
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restrictions
imposed on such Award of Restricted Shares under the Plan and the applicable Award Agreement. Subject to Section 3.8 and the
immediately following sentence, the Company may issue, in the name of each Grantee to whom Restricted Shares have been granted, share certificates representing the total number of Restricted Shares
granted to the Grantee, as soon as reasonably practicable after the Grant Date. The Board may provide in an Award Agreement that either (i) the Secretary of the Company shall hold such
certificates for the Grantee's benefit until such time as the shares of Restricted Shares are forfeited to the Company or the restrictions applicable thereto lapse
and such Grantee shall deliver a stock power to the Company with respect to each certificate, or (ii) such certificates shall be delivered to the Grantee, provided, however, that such certificates shall bear a legend or legends that comply with the applicable
securities laws and regulations and make appropriate reference to the restrictions imposed under the Plan and the Award Agreement.
10.4. Rights of Holders of Restricted Shares.
Unless the Board otherwise provides in an Award Agreement, holders of Restricted Shares shall have the right to vote such Shares and the right to receive any
dividends declared or paid with respect to such Shares. The Board may provide that any dividends paid on Restricted Shares must be reinvested in Shares, which may or may not be subject to the same
vesting conditions and restrictions applicable to such Restricted Shares. All distributions, if any, received by a Grantee with respect to Restricted Shares as a result of any share split, share
dividend, combination of shares, or other similar transaction shall be subject to the restrictions applicable to the original Grant. Holders of Restricted Shares may not make an election under Code
Section 83(b) with regard to the grant of Restricted Shares without Board approval.
10.5. Rights of Holders of Share Units.
-
10.5.1.
-
Voting and Dividend Rights.
Holders
of Share Units shall have no rights as shareholders of the Company (for example, the right to receive cash or dividend payments or distributions attributable to the Shares
subject to such Share Units, to direct the voting of the Shares subject to such Share Units, or to receive notice of any meeting of the Company's shareholders). The Board may provide in an Award
Agreement evidencing a grant of Share Units that the holder of such Share Units shall be entitled to receive, upon the Company's payment of a cash dividend on its outstanding Shares, a cash payment
for each Share Unit held equal to the per-share dividend paid on the Shares. Such Award Agreement may also provide that such cash payment will be deemed reinvested in additional Share Units at a price
per unit equal to the Fair Market Value of a Share on the date that such dividend is paid. Notwithstanding the foregoing, if a grantor trust is established in connection with the Awards of Share Units
and Shares are held in the
grantor trust for purposes of satisfying the Company's obligation to deliver Shares in connection with such Share Units, the Award Agreement for such Share Units may provide that such cash payment
shall be deemed reinvested in additional Share Units at a price per unit equal to the actual price paid for each Share by the trustee of the grantor trust upon such trustee's reinvestment of the cash
dividend received.
-
10.5.2.
-
Creditor's Rights.
A
holder of Share Units shall have no rights other than those of a general creditor of the Company. Share Units represent an unfunded and unsecured obligation of the Company, subject to
the terms and conditions of the applicable Award Agreement.
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10.6. Termination of Service.
Unless the Board otherwise provides in an Award Agreement or in writing after the Award Agreement is issued, upon the termination of a Grantee's Service, any
Restricted Shares or Share Units held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited.
Upon forfeiture of Restricted Shares or Share Units, the Grantee shall have no further rights with respect to such Award, including but not limited to any right to vote Restricted Shares or any right
to receive dividends with respect to Restricted Shares or Share Units.
10.7. Purchase of Restricted Shares and Shares Subject to Share Units.
The Grantee shall be required, to the extent required by Applicable Laws, to purchase the Restricted Shares or Shares subject to vested Share Units from the
Company at a Purchase Price equal to the greater of (i) the aggregate par value of the Shares represented by such Restricted Shares or Share Units or (ii) the Purchase Price, if any,
specified in the Award Agreement relating to such Restricted Shares or Share Units. The Purchase Price shall be payable in a form described in Section 12 or, in the discretion of the Board, in
consideration for past or future Services rendered to the Company or an Affiliate.
10.8. Delivery of Shares.
Upon the expiration or termination of any restricted period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to
Restricted Shares or Share Units settled in Shares shall lapse, and, unless otherwise provided in the applicable Award Agreement, a book-entry or direct registration or a share certificate evidencing
ownership of such Shares shall, consistent with Section 3.8, be issued, free of all such restrictions, to the Grantee or the Grantee's
beneficiary or estate, as the case may be. Neither the Grantee, nor the Grantee's beneficiary or estate, shall have any further rights with regard to a Share Unit once the Shares represented by the
Share Unit has been delivered.
11. TERMS AND CONDITIONS OF UNRESTRICTED SHARE AWARDS AND OTHER EQUITY-BASED AWARDS
The Board may, in its sole discretion, grant (or sell at par value or such other higher purchase price determined by the Board) an Unrestricted Share Award to any
Grantee pursuant to which such Grantee may receive Shares free of any restrictions ("Unrestricted Shares") under the Plan. Unrestricted Share Awards may be granted or sold to any Grantee as provided
in the immediately preceding sentence in respect of past or, if so provided in the related Award Agreement or a separate agreement, the promise by the Grantee to perform future Service to the Company
or an Affiliate or other valid consideration, or in lieu of, or in addition to, any cash compensation due to such Grantee.
The
Board may, in its sole discretion, grant Awards to Participants in the form of Other Equity-Based Awards, as deemed by the Board to be consistent with the purposes of the Plan.
Awards granted
pursuant to this Section 11 may be granted with vesting, value and/or payment contingent upon the attainment of one or more performance goals.
The Board shall determine the terms and conditions of such Awards at the date of grant or thereafter. Unless the Board otherwise provides in an Award Agreement or in writing after the Award Agreement
is issued, upon the termination of a Grantee's Service, any Other Equity-Based Awards held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions
have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of Other Equity-Based Awards, the Grantee shall have no further rights with respect to such Award.
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12. FORM OF PAYMENT FOR OPTIONS AND RESTRICTED SHARES
12.1. General Rule.
Payment of the Option Price for the Shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Shares shall be made in cash or in
cash equivalents acceptable to the Company.
12.2. Surrender of Shares.
To the extent the Award Agreement so provides and subject to Applicable Law, payment of the Option Price for Shares purchased pursuant to the exercise of an
Option or the Purchase Price for Restricted Shares may be made all or in part through the tender or attestation to the Company of Shares, which shall be valued, for purposes of determining the extent
to which the Option Price or Purchase Price has been paid thereby, at their Fair Market Value on the date of exercise or surrender, as applicable.
12.3. Cashless Exercise.
With respect to an Option only (and not with respect to Restricted Shares), to the extent permitted by law and to the extent the Award Agreement so provides,
payment of the Option Price for Shares purchased pursuant to the exercise of an Option may be made all or in part (i) by delivery (on a form acceptable to the Board) by the Grantee of an
irrevocable direction to a licensed securities broker acceptable to the Company to sell Shares and to deliver all or part of the sales proceeds to the Company in payment of the Option Price and any
withholding taxes described in Section 19.3, or (ii) with the consent of the Company, by the Grantee electing to have the Company issue to
Grantee only that the number of Shares equal in value to the difference between the Option Price and the Fair Market Value of the Shares subject to the portion of the Option being exercised.
12.4. Other Forms of Payment.
To the extent the Award Agreement so provides and/or unless otherwise specified in an Award Agreement, payment of the Option Price for Shares purchased pursuant
to exercise of an Option or the Purchase Price for Restricted Shares may be made in any other form that is consistent with Applicable Laws, regulations and rules, including, without limitation,
Service to the Company or an Affiliate or net exercise.
13. TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS
13.1. Dividend Equivalent Rights.
A Dividend Equivalent Right is an Award entitling the recipient to receive credits based on cash distributions that would have been paid on the Shares specified
in the Dividend Equivalent Right (or other award to which it relates) if such Shares had been issued to and held by the recipient. A Dividend Equivalent Right may be granted hereunder to any Grantee, provided that no Dividend Equivalent Rights may be granted in connection with, or related to, an Award of Options or SARs. The terms and conditions of
Dividend Equivalent Rights shall be specified in the grant. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in
additional Shares, which may thereafter accrue additional equivalents. Any such reinvestment shall be at Fair Market Value on the date of reinvestment. Dividend Equivalent Rights may be settled in
cash or Shares or a combination thereof, in a single installment or installments, all determined in the sole discretion of the Board. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other award, and that such
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Dividend
Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other award. A Dividend Equivalent Right granted as a component of another Award may also contain
terms and conditions different from the terms and conditions of such other Award. A cash amount credited pursuant to a Dividend Equivalent Right granted as a component of another Award which vests or
is earned based upon the achievement of performance goals shall not vest unless such performance goals for such underlying Award are achieved.
13.2. Termination of Service.
Except as may otherwise be provided by the Board either in the Award Agreement or in writing after the Award Agreement is issued, a Grantee's rights in all
Dividend Equivalent Rights or interest equivalents shall automatically terminate upon the Grantee's termination of Service for any reason.
14. TERMS AND CONDITIONS OF PERFORMANCE AWARDS AND ANNUAL INCENTIVE AWARDS
14.1. Grant of Performance Awards and Annual Incentive Awards.
Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Performance Awards and/or Annual Incentive Awards to
a Plan participant in such amounts and upon such terms as the Committee shall determine.
14.2. Value of Performance Awards and Annual Incentive Awards.
Each Performance Award and Annual Incentive Award shall have an actual or target number of Shares or initial value that is established by the Committee at the
time of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Awards that will
be paid out to the Plan participant.
14.3. Earning of Performance Awards and Annual Incentive Awards.
Subject to the terms of the Plan, after the applicable Performance Period has ended, the holder of Performance Awards or Annual Incentive Awards shall be entitled
to receive payout on the value and number of the Performance Awards or Annual Incentive Awards earned by the Plan participant over the Performance Period, to be determined as a function of the extent
to which the corresponding performance goals have been achieved.
14.4. Form and Timing of Payment of Performance Awards and Annual Incentive Awards.
Payment of earned Performance Awards and Annual Incentive Awards shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the
terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Awards in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance
Awards at the close of the applicable Performance Period, or as soon as practicable after the Committee has determined that the performance goal or goals relating thereto have been achieved; provided
that, unless specifically provided in the Award Agreement pertaining to the grant of the Award, such payment shall occur no later than the 15th day of the third month following the end of the
calendar year in which the Performance Period ends. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the
form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
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14.5. Performance Measures.
The Committee may specify that the attainment of one or more performance goals based on the Performance Measures set forth in this Section 14.5 shall determine the degree of granting, vesting and/or payout with respect to Performance Awards. The performance goals to be used
for such Performance Awards shall be based on one or more of the following business criteria or other measures of performance as the Committee may determine (the "Performance
Measures"):
-
(a)
-
funds
from operations;
-
(b)
-
adjusted
funds from operations;
-
(c)
-
pretax
earnings, net earnings, net income, operating earnings, and/or net operating income;
-
(d)
-
earnings
per share;
-
(e)
-
share
price, including growth measures and total shareholder return;
-
(f)
-
earnings
before interest and taxes;
-
(g)
-
earnings
before interest, taxes, depreciation and/or amortization;
-
(h)
-
adjusted
earnings before interest, taxes, depreciation and/or amortization;
-
(i)
-
monthly
recurring revenue;
-
(j)
-
return
measures, including return on assets, capital, investment, equity, sales or revenue;
-
(k)
-
cash
flow, including operating cash flow, free cash flow, cash flow return on equity and cash flow return on investment;
(l) booked-not-billed
balances;
(m) leasing
measures, including rental churn;
-
(n)
-
targets
with regard to our product offering;
-
(o)
-
expense
targets;
-
(p)
-
market
share;
-
(q)
-
financial
ratios as provided in credit agreements of the Company and its subsidiaries;
-
(r)
-
working
capital targets;
-
(s)
-
completion
of asset acquisitions, dispositions or development, and/or achievement of acquisition, disposition or development goals;
-
(t)
-
revenues
under management;
-
(u)
-
distributions
to shareholders;
-
(v)
-
customer
satisfaction measures;
-
(w)
-
net
promoter scores;
-
(x)
-
employee
diversification measures;
-
(y)
-
employee
satisfaction measures;
-
(z)
-
employee
retention measures; and
-
(aa)
-
any
combination of any of the foregoing business criteria.
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Business
criteria may be (but are not required to be) measured on a basis consistent with U.S. Generally Accepted Accounting Principles.
Any
Performance Measure(s) may be used to measure the performance of the Company, Subsidiary, and/or Affiliate as a whole or any business unit of the Company, Subsidiary, and/or
Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparable companies, or published or
special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (e) above as compared to various stock market indices. The Committee
also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Section 14.
14.6. Evaluation of Performance.
The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occur during a Performance
Period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions
affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30
and/or in "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing in the Company's annual report to shareholders for the applicable year;
(f) acquisitions or divestitures; and (g) foreign exchange gains and losses.
15. TERMS AND CONDITIONS OF LONG-TERM INCENTIVE UNITS
LTIP Units are intended to be profits interests in the operating partnership affiliated with the Company, if any (such operating partnership, if any, the
"Operating Partnership"), the rights and features of which, if applicable, will be set forth in the agreement of limited partnership for the Operating Partnership (the "Operating Partnership
Agreement"). Subject to the terms and provisions of the Plan and the Operating Partnership Agreement, the Committee, at any time and from time to time, may grant LTIP Units to Plan participants in
such amounts and upon such terms as the Committee shall determine. LTIP Units must be granted for service to the Operating Partnership. Subject to Section 18, each LTIP Unit granted under the Plan
shall vest at such times and under such conditions as shall be determined by the Committee and
stated in the Award Agreement.
16. PARACHUTE LIMITATIONS
If the Grantee is a "disqualified individual," as defined in Code Section 280G(c), then, notwithstanding any other provision of the Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by a Grantee with the Company or an Affiliate, except an agreement, contract, or understanding that expressly addresses Code
Section 280G or Code Section 4999 (an "Other Agreement"), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the
Grantee (including groups or classes of Grantees or beneficiaries of which the Grantee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for
the Grantee (a "Benefit Arrangement"), any right to exercise, vesting, payment or benefit to the Grantee under the Plan shall be reduced or eliminated:
-
(i)
-
to
the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Grantee under the
Plan, all Other Agreements, and all Benefit Arrangements, would cause any exercise, vesting, payment or benefit to the Grantee under the Plan to be considered a "parachute payment" within the meaning
of Code Section 280G(b)(2) as then in effect (a "Parachute Payment") and
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(ii)
-
if,
as a result of receiving such Parachute Payment, the aggregate after-tax amounts received by the Grantee from the Company under the Plan, all Other Agreements,
and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by the Grantee without causing any such payment or benefit to be considered a Parachute Payment.
The
Company shall accomplish such reduction by first reducing or eliminating any cash payments (with the payments to be made furthest in the future being reduced first), then by reducing
or eliminating any accelerated vesting of Performance Awards, then by reducing or eliminating any accelerated vesting of Options or SARs, then by reducing or eliminating any accelerated vesting of
Restricted Shares or Share Units, then by reducing or eliminating any other remaining Parachute Payments.
17. REQUIREMENTS OF LAW
17.1. General.
No participant in the Plan will be permitted to acquire, or will have any right to acquire, Shares thereunder if such acquisition would be prohibited by any share
ownership limits contained in charter
or bylaws or would impair the Company's status as a REIT. The Company shall not be required to offer, sell or issue any Shares under any Award if the offer, sale or issuance of such Shares would
constitute a violation by the Grantee, any other individual or entity exercising an Option, or the Company or an Affiliate of any provision of any law or regulation of any governmental authority,
including without limitation any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the offering, listing, registration or
qualification of any Shares subject to an Award upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance
or purchase of Shares hereunder, no Shares may be offered, issued or sold to the Grantee or any other individual or entity exercising an Option pursuant to such Award unless such offering, listing,
registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date
of termination of the Award. Without limiting the generality of the foregoing, in connection with the Securities Act, upon the exercise of any Option or any SAR that may be settled in Shares or the
delivery of any Shares underlying an Award, unless a registration statement under such Act is in effect with respect to the Shares covered by such Award, the Company shall not be required to offer,
sell or issue such Shares unless the Board has received evidence satisfactory to it that the Grantee or any other individual or entity exercising an Option or SAR or accepting delivery of such Shares
may acquire such Shares pursuant to an exemption from registration under the Securities Act. Any determination in this connection by the Board shall be final, binding, and conclusive. The Company may,
but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the
exercise of an Option or a SAR or the issuance of Shares pursuant to the Plan to comply with any Applicable Laws. As to any jurisdiction that expressly imposes the requirement that an Option (or SAR
that may be settled in Shares) shall not be exercisable until the Shares covered by such Option (or SAR) are registered under the securities laws thereof or are exempt from such registration, the
exercise of such Option (or SAR) under circumstances in which the laws of such jurisdiction apply shall be deemed conditioned upon the effectiveness of such registration or the availability of such an
exemption.
17.2. Rule 16b-3.
During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that
Awards pursuant to the Plan and the exercise of Options and SARs granted hereunder that would otherwise be subject to Section 16(b) of the Exchange Act will qualify for the exemption provided
by Rule 16b-3 under the Exchange Act. To the extent that
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any
provision of the Plan or action by the Board does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative with respect to such Awards to the extent permitted by
Applicable Law
and deemed advisable by the Board, and shall not affect the validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify the Plan
in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement.
18. EFFECT OF CHANGES IN CAPITALIZATION
18.1. Changes in Shares.
If the number of outstanding Shares is increased or decreased or the Shares are changed into or exchanged for a different number or kind of Shares or other
securities of the Company on account of any recapitalization, reclassification, share split, reverse share split, spin-off, combination of share, exchange of shares, share dividend or other
distribution payable in capital shares, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds
of shares for which grants of Options and other Awards may be made under the Plan, including, without limitation, the limits set forth in Section 6.2, shall be adjusted proportionately and
accordingly by the Company in a manner deemed equitable by the Committee in order to prevent
undue dilution or enlargement of a Grantee's benefits under an Award. In addition, the number and kind of shares for which Awards are outstanding shall be adjusted proportionately and accordingly so
that the proportionate interest of the Grantee immediately following such event shall, to the extent practicable, be the same as immediately before such event. Any such adjustment in outstanding
Options or SARs shall not change the aggregate Option Price or SAR Exercise Price payable with respect to shares that are subject to the unexercised portion of an outstanding Option or SAR, as
applicable, but shall include a corresponding proportionate adjustment in the Option Price or SAR Exercise Price per share. The conversion of any convertible securities of the Company shall not be
treated as an increase in shares affected without receipt of consideration. Notwithstanding the foregoing, in the event of any distribution to the Company's shareholders of securities of any other
entity or other assets (including an extraordinary dividend but excluding a non-extraordinary dividend of the Company) without receipt of consideration by the Company, the Company shall, in such
manner as the Company deems appropriate, adjust (i) the number and kind of shares subject to outstanding Awards and/or (ii) the exercise price of outstanding Options and Share
Appreciation Rights to reflect such distribution.
18.2. Reorganization in Which the Company Is the Surviving Entity Which Does not Constitute a Change in Control.
Subject
to Section 18.3, if the Company shall be the surviving entity in any reorganization, merger, or consolidation of the
Company with one or more other entities which does not constitute a Change in Control, any Option or SAR theretofore granted pursuant to the Plan shall pertain to and apply to the securities to which
a holder of the number of Shares subject to such Option or SAR would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding proportionate
adjustment of the Option Price or SAR Exercise Price per share so that the aggregate Option Price or SAR Exercise Price thereafter shall be the same as the aggregate Option Price or SAR Exercise Price
of the Shares remaining subject to the Option or SAR immediately prior to such reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement evidencing an Award, or
in another agreement with the Grantee, or otherwise set forth in writing, any restrictions applicable to such Award shall apply as well to any replacement shares received by the Grantee as a result of
the reorganization, merger or consolidation. In the event of a transaction described in this Section 18.2, Performance Awards shall be adjusted
(including any adjustment to the Performance Measures applicable to such Awards deemed appropriate by the Committee) so as to
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apply
to the securities that a holder of the number of Shares subject to the Performance Awards would have been entitled to receive immediately following such transaction.
18.3. Change in Control in which Awards are not Assumed.
Except as otherwise provided in the applicable Award Agreement or in another agreement with the Grantee, or as otherwise set forth in writing, upon the occurrence
of a Change in Control in which outstanding Options, SARs, Share Units, Dividend Equivalent Rights, Restricted Shares, LTIP Units or other Equity-Based Awards are not being assumed or
continued:
-
(i)
-
in
each case with the exception of any Performance Award, all outstanding Restricted Shares and LTIP Units shall be deemed to have vested, all Share Units shall be
deemed to have vested and the Shares subject thereto shall be delivered, and all Dividend Equivalent Rights shall be deemed to have vested and the Shares subject thereto shall be delivered,
immediately prior to the occurrence of such Change in Control, and
-
(ii)
-
either
or both of the following two actions shall be taken:
-
(A)
-
five
(5) days prior to the scheduled consummation of a Change in Control, all Options and SARs outstanding hereunder shall become immediately exercisable and
shall remain exercisable for a period of five (5) days, or
-
(B)
-
the
Board may elect, in its sole discretion, to cancel any outstanding Awards of Options, Restricted Shares, Share Units, and/or SARs and pay or deliver, or cause to
be paid or delivered, to the holder thereof an amount in cash or securities having a value (as determined by the Board acting in good faith), in the case of Restricted Shares or Share Units, equal to
the formula or fixed price per share paid to holders of Shares and, in the case of Options or SARs, equal to the product of the number of Shares subject to the Option or SAR (the "Award Shares")
multiplied by the amount, if any, by which (I) the formula or fixed price per share paid to holders of Shares pursuant to such transaction exceeds (II) the Option Price or SAR Exercise
Price applicable to such Award Shares. In the event that the Option Price or SAR Exercise Price of an Award exceeds the formula or fixed price per share paid to holders of Shares pursuant to such
transaction, such Options or SARs may be terminated for no consideration.
-
(iii)
-
for
Performance Awards denominated in Shares, Share Units or LTIP Units, if less than half of the Performance Period has lapsed, the Awards shall be converted into
Restricted Shares or Share Units assuming target performance has been achieved (or Unrestricted Shares if no further restrictions apply). If more than half the Performance Period has lapsed, the
Awards shall be converted into Restricted Shares or Share Units based on actual performance to date (or Unrestricted Shares if no further restrictions apply). If actual performance is not
determinable, then Performance Awards shall be converted into Restricted Shares or Share Units assuming target performance has been achieved, based on the discretion of the Committee (or Unrestricted
Shares if no further restrictions apply).
-
(iv)
-
Other-Equity
Based Awards shall be governed by the terms of the applicable Award Agreement.
With
respect to the Company's establishment of an exercise window, (i) any exercise of an Option or SAR during such five (5)-day period shall be conditioned upon the consummation
of the event and shall be effective only immediately before the consummation of the event, and (ii) upon consummation of any Change in Control, the Plan and all outstanding but unexercised
Options and SARs shall terminate. The Board shall send notice of an event that will result in such a termination to all individuals and entities that hold Options and SARs not later than the time at
which the Company gives notice thereof to its shareholders.
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18.4. Change in Control in which Awards are Assumed.
Except as otherwise provided in the applicable Award Agreement or in another agreement with the Grantee, or as otherwise set forth in writing, upon the occurrence
of a Change in Control in which outstanding Awards are being assumed or continued, the following provisions shall apply to such Award, to the extent assumed or continued:
The
Plan, Options, SARs, Share Units, Restricted Shares and Other Equity-Based Awards theretofore granted shall continue in the manner and under the terms so provided in the event of any
Change in Control to the extent that provision is made in writing in connection with such Change in Control for the assumption or continuation of the Options, SARs, Share Units, Restricted Shares and
Other Equity-Based Awards theretofore granted, or for the substitution for such Options, SARs, Share Units, Restricted Shares and Other Equity-Based Awards for new common stock options and stock
appreciation rights and new common stock units, restricted stock and other equity-based awards relating to the stock of a successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number of shares (disregarding any consideration that is not common stock) and option and stock appreciation rights exercise prices.
18.5. Adjustments
Adjustments under this Section 18 related to Shares or securities of the Company shall be made by the
Board, whose determination in that respect shall be final, binding and conclusive. No fractional shares
or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole
share. The Board shall determine the effect of a Change in Control upon Awards other than Options, SARs, Share Units and Restricted Shares, and such effect shall be set forth in the appropriate Award
Agreement. The Board may provide in the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, for different provisions to apply to an Award in place of those
described in Sections 18.1, 18.2, 18.3 and 18.4. This Section 18 does not limit the Company's
ability to provide for alternative treatment of Awards outstanding under the Plan in the event of change
in control events that do not constitute a Change in Control.
18.6. No Limitations on Company.
The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets (including all or
any part of the business or assets of any Subsidiary or other Affiliate) or engage in any other transaction or activity.
19. GENERAL PROVISIONS
19.1. Disclaimer of Rights.
No provision in the Plan or in any Award or Award Agreement shall be construed to confer upon any individual or entity the right to remain in the employ or
Service of the Company or an Affiliate, or to interfere in any way with any contractual or other right or authority of the Company or an Affiliate either to increase or decrease the compensation or
other payments to any individual or entity at any time, or to terminate any employment or other relationship between any individual or entity and the Company or an Affiliate. In addition,
notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement, in another agreement with the Grantee, or
otherwise in writing, no Award granted under the Plan shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to provide Service. The obligation of the
Company to pay any benefits pursuant to the Plan shall be interpreted as a contractual obligation to
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pay
only those amounts described herein, in the manner and under the conditions prescribed herein. The Plan and Awards shall in no way be interpreted to require the Company to transfer any amounts to
a third party trustee or otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms of the Plan.
19.2. Nonexclusivity of the Plan.
Neither the adoption of the Plan nor the submission of the Plan to the shareholders of the Company for approval shall be construed as creating any limitations
upon the right and authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or
specifically to a particular individual or particular individuals) as the Board in its discretion determines desirable.
19.3. Withholding Taxes.
The Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state, or local
taxes of any kind required by law to be withheld with respect to the vesting of or other lapse of restrictions applicable to an Award or upon the issuance of any Shares upon the exercise of an Option
or pursuant to an Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay in cash to the Company or an Affiliate, as the case may be, any amount that the Company or an Affiliate
may reasonably determine to be necessary to satisfy such withholding obligation; provided, that if there is a same-day sale of Shares subject to an
Award, the Grantee shall pay such withholding obligation on the day on which such same-day sale is completed. Subject to the prior approval of the Company or an Affiliate, which may be withheld by the
Company or an Affiliate, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company or an Affiliate to
withhold Shares
otherwise issuable to the Grantee or (ii) by delivering to the Company or an Affiliate Shares already owned by the Grantee. The Shares so delivered or withheld shall have an aggregate Fair
Market Value equal to such withholding obligations. The Fair Market Value of the Shares used to satisfy such withholding obligation shall be determined by the Company or an Affiliate as of the date
that the amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to this Section 19.3 may satisfy his or
her withholding obligation only with Shares that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements. The maximum number of Shares that may be withheld
from any Award to satisfy any federal, state or local tax withholding requirements upon the exercise, vesting, lapse of restrictions applicable to such Award or payment of Shares pursuant to such
Award, as applicable, cannot exceed such number of Shares having a Fair Market Value equal to the minimum statutory amount required by the Company or an Affiliate to be withheld and paid to any such
federal, state or local taxing authority with respect to such exercise, vesting, lapse of restrictions or payment of Shares. Notwithstanding Section 2.19 or this Section 19.3, for purposes of determining taxable income and the
amount of the related tax withholding obligation pursuant to this Section 19.3, for any Shares subject to an Award that are sold by or on behalf
of a Grantee on the same date on which such shares may first be sold pursuant to the terms of the related Award Agreement, the Fair Market Value of such shares shall be the sale price of such shares
on such date (or if sales of such shares are effectuated at more than one sale price, the weighted average sale price of such shares on such date), so long as such Grantee has provided the Company or
an Affiliate, or its designee or agent, with advance written notice of such sale.
19.4. Captions.
The use of captions in the Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or
such Award Agreement.
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19.5. Other Provisions.
Each Award granted under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in its sole
discretion.
19.6. Number and Gender.
With respect to words used in the Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the
context requires.
19.7. Severability.
If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining
provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
19.8. Governing Law.
The validity and construction of the Plan and the instruments evidencing the Awards hereunder shall be governed by, and construed and interpreted in accordance
with, the laws of the State of Maryland, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan and the instruments
evidencing the Awards granted hereunder to the substantive laws of any other jurisdiction.
19.9. Code Section 409A.
The Company intends to comply with Code Section 409A, or an exemption to Code Section 409A, with regard to Awards hereunder that constitute
nonqualified deferred compensation within the meaning of Code Section 409A. To the extent that the Company determines that a Grantee would be subject to the
additional twenty percent (20%) tax imposed on certain nonqualified deferred compensation plans pursuant to Code Section 409A as a result of any provision of any Award granted under the Plan,
such provision shall be deemed amended to the minimum extent necessary to avoid application of such additional tax. The nature of any such amendment shall be determined by the Board. Notwithstanding
any other provision of the Plan or an Award Agreement to the contrary, if at the time of payment or settlement of an Award, a Grantee is a specified employee (within the meaning of Code
Section 409A and using the identification methodology selected by the Company, from time to time), and the Company makes a good faith determination that an amount payable to such a Grantee
constitutes nonqualified deferred compensation (within the meaning of Code Section 409A) the payment of which is required to be delayed pursuant to the six (6) month delay rule set forth
in Code Section 409A in order to avoid taxes or penalties under Code Section 409A, then the Company will not pay such amount on the otherwise scheduled payment date but will instead pay
it in a lump sum on the first business day after such six (6) month period (or upon Grantee's death, if earlier). Notwithstanding anything to the contrary in the Plan or an Award Agreement, in
no event shall the Company or an Affiliate be required to indemnify a Grantee for any taxes imposed by Code Section 409A.
* * *
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To record adoption of the Plan by the Board as
of , 2021, and approval of the Plan by the shareholders
on , 2021, the Company has
caused its authorized officer to execute the Plan.
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QTS REALTY TRUST, INC.
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By:
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Appendix B
QTS REALTY TRUST, INC.
AMENDED AND
RESTATED 2013 EQUITY INCENTIVE PLAN
Table of Contents
TABLE OF CONTENTS
B-i
Table of Contents
B-ii
Table of Contents
QTS REALTY TRUST, INC.
AMENDED AND RESTATED 2013 EQUITY INCENTIVE PLAN
QTS Realty Trust, Inc., a Maryland corporation (the "Company"), sets forth herein the terms of its Amended and Restated 2013 Equity Incentive Plan (the "Plan"), as follows:
1. PURPOSE
The Plan is intended to (a) provide incentive to officers, employees, directors and other eligible persons to stimulate their efforts towards the success
of the Company and to operate and manage its business in a manner that will provide for the long term growth and profitability of the Company; and (b) provide a means of obtaining, rewarding
and retaining key personnel. To this end, the Plan provides for the grant of share options, share appreciation rights, restricted shares, unrestricted shares, share units (including deferred share
units), dividend equivalent rights, long-term incentive units, other equity-based awards and cash bonus awards. Any of these awards may, but need not, be made as performance incentives to reward
attainment of annual or long-term performance goals in accordance with the terms hereof. Share options granted under the Plan may be non-qualified share options or incentive share options, as provided
herein.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:
2.1 "Affiliate" means, with respect to the Company, any company or other trade or business that controls, is controlled by or
is under common control with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary. For purposes of granting
Options or Share Appreciation Rights, an entity may not be considered an Affiliate of the Company unless the Company holds a "controlling interest" in such entity, where the term "controlling
interest" has the same meaning as provided in Treasury Regulation Section 1.414(c)-2(b)(2)(i), provided that the language "at least 50 percent" is used instead of "at least
80 percent" and, provided further, that where granting of Options or Share Appreciation Rights is based upon a legitimate business criteria, the language "at least 20 percent" is used
instead of "at least 80 percent" each place it appears in Treasury Regulation Section 1.414(c)-2(b)(2)(i).
2.2 "Annual Incentive Award" means an Award, denominated in cash, made subject to attainment of performance goals (as
described in Section 14) over a Performance Period of up to one (1) year (which shall correspond to the Company's fiscal year, unless
otherwise specified by the Board).
2.3 "Applicable Laws" means the legal requirements relating to the Plan and the Awards under applicable provisions of the
corporate, securities, tax and other laws, rules, regulations and government orders, and the rules of any applicable stock exchange or national market system, of any jurisdiction applicable to Awards
granted to residents therein.
2.4 "Award" means a grant of an Option, Share Appreciation Right, Restricted Share, Unrestricted Share, Share Unit, Dividend
Equivalent Right, Performance Award, Annual Incentive Award, LTIP Unit, or Other Equity-Based Award under the Plan.
2.5 "Award Agreement" means the agreement between the Company and a Grantee that evidences and sets out the terms and
conditions of an Award.
2.6 "Benefit Arrangement" shall have the meaning set forth in Section 16.
2.7 "Board" means the Board of Directors of the Company.
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2.8 "Cause" means, as determined by the Board and unless otherwise provided in an applicable agreement (including an
employment agreement) with the Company or an Affiliate, in which case the definition contained in such agreement shall control: (i) gross negligence or willful misconduct in connection with the
performance of duties; (ii) conviction of a felony; (iii) conviction of any other criminal offense involving an act of dishonesty intended to result in substantial personal enrichment of
such Grantee at the expense of the Company or an Affiliate; or (iv) material breach of any term of any employment, consulting or other services, confidentiality, intellectual property or
non-competition agreements, if any, between the Service Provider and the Company or an Affiliate.
2.9 "Change in Control" means:
(1) Any
"person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company or any corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the same proportion as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding voting securities;
(2) During
any period of twelve consecutive months, individuals who at the beginning of such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (1), (3) or
(4) hereof) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof, but excluding,
for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or actual
threatened solicitation of proxies or consents by or on behalf of a person other than the Board;
(3) The
consummation of a merger or consolidation of the Company with any other entity or approve the issuance of voting securities in connection with a merger or
consolidation of the Company (or any direct or indirect subsidiary thereof) pursuant to applicable exchange requirements, other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent
entity) at least 50.1% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation or
(B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as defined above) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 50% or more of either of the then outstanding shares of Common Shares or the combined voting power of the Company's then outstanding
voting securities; or
(4) The
consummation of the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction or series of transactions within a
period of twelve months ending on the date of the last sale or disposition having a similar effect).
Notwithstanding
anything herein to the contrary, (i) the determination as to whether a "Change in Control" as defined herein
has occurred shall be determined in accordance with the requirements of Code Section 409A and shall be intended to constitute a "change in control event" within the meaning of Code
Section 409A, except to that the extent the provisions herein are more restrictive than the
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requirements
of Code Section 409A, and (ii) in no event shall there be a Change in Control if General Atlantic or one of its Affiliates continues to
beneficially own more than 50% of the voting securities of the Company (or the surviving or parent entity).
2.10 "Code" means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.
2.11 "Committee" means a committee of, and designated from time to time by resolution of, the Board, which shall be
constituted as provided in Section 3.2 (or, if no Committee has been designated, the Board itself).
2.12 "Company" means QTS Realty Trust, Inc., a Maryland corporation.
2.13 "Covered Employee"
means a Grantee who is a covered employee within the meaning of Code Section 162(m)(3).
2.13 2.14"Determination Date" means the Grant Date or such other date as of which the
Fair Market Value of a Share is required to be established for purposes of
the Plan.
2.14 2.15"Disability" means the Grantee is unable to perform each of the essential duties
of such Grantee's position by reason of a medically determinable
physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not less than 12 months; provided, however, that, with respect to rules regarding expiration of an Incentive Share Option
following termination of the Grantee's Service, Disability shall mean the Grantee is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.
2.15 2.16"Dividend Equivalent Right" means a right, granted to a Grantee under
Section 13, to receive
cash, Shares, other Awards or other property equal in value to dividends paid with respect to a specified number of Shares, or other periodic payments.
2.16 2.17"Effective Date" means May 4, 20132021, the date the Securities and Exchange Commission declares the Company's registration statement on Form S-11, related to its initial public
offering, to be
effective.of the approval of the Plan, as amended and restated, by the Company's shareholders, the Plan, as amended and restated,
having been approved by the Board on March 4, 2021.
2.17 2.18"Exchange Act" means the Securities Exchange Act of 1934, as now in effect or as
hereafter amended.
2.18 2.19"Fair Market Value" means the fair market value of a Share for purposes of the
Plan, which shall be determined as of any Determination Date as follows:
(a) If
on such Determination Date the Shares are listed on a Stock Exchange, or are publicly traded on another established securities market (a "Securities Market"), the
Fair Market Value of a Share shall be the closing price of the Share as reported on such Stock Exchange or such Securities Market (provided that, if
there is more than one such Stock Exchange or Securities Market, the Committee shall designate the appropriate Stock Exchange or Securities Market for purposes of the Fair Market Value determination).
If there is no such reported closing price on such Determination Date, the Fair Market Value of a Share shall be the closing price of the Share on the next trading day on which any sale of Shares
shall have been reported on such Stock Exchange or such Securities Market.
(b) If
on such Determination Date the Shares are not listed on a Stock Exchange or publicly traded on a Securities Market, the Fair Market Value of a Share shall be the
value of the Share as determined by the Committee by the reasonable application of a reasonable valuation method, in a manner consistent with Code Section 409A.
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Notwithstanding
this Section 2.192.18 or
Section 19.3, for purposes of determining taxable income and the amount of the related tax withholding obligation pursuant to Section 19.3, for any Shares subject to an Award that are sold by or on behalf of a Grantee on the same date on which such
Shares may first be sold pursuant to the terms of the related Award Agreement, the Fair Market Value of such Shares shall be
the sale price of such Shares on such date.will be determined by the Company using any reasonable method, determined by the
Company in good faith on such basis as it deems appropriate and applied consistently with respect to Grantees.
2.19 2.20"Family Member" means a person who is a spouse, former spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive relationships, of the Grantee, any person sharing the Grantee's
household (other than a tenant or employee), a trust in which any one or more of these persons have more than fifty percent (50%) of the beneficial interest, a foundation in which any one or more of
these persons (or the Grantee) control the management of assets, and any other entity in which one or more of these persons (or the Grantee) own more than fifty percent (50%) of the voting interests.
2.20 2.21
"Grant Date" means, as determined by the Board, the latest to occur of (i) the date as of which the Company
completes the action constituting the Award, (ii) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 6, or (iii) such other later date as
may be specified by the Board.
2.21 2.22"Grantee" means a person who receives or holds an Award under the Plan.
2.22 2.23"Incentive Share Option" means an "incentive stock option" within the meaning of
Code Section 422, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.23 2.24"Long-Term Incentive Unit" or "LTIP Unit" means an Award under Section 15 of an interest in the operating partnership affiliated with the Company.
2.24 2.25"Non-qualified Share Option" means an Option that is not an Incentive Share
Option.
2.25 2.26"Option" means an option to purchase one or more Shares pursuant to the Plan.
2.26 2.27
"Option Price" means the exercise price for each Share subject to an Option.
2.27 "Original Effective
Date" means October 8, 2013.
2.28 "Other Agreement" shall have the meaning set forth in Section 16.
2.29 "Other Equity-Based Award" means a right or other interest that may be denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, or related to, Shares, other than an Option, Share Appreciation Right, Restricted Share, Unrestricted Share, Share Unit, Dividend Equivalent Right,
Performance Award or Annual Incentive Award.
2.30 "Outside Director" means a member of the Board who is not an officer or employee of the Company.
2.31 "Performance Award" means an Award made subject to the attainment of performance goals (as described in Section 14) over a Performance Period of up to ten
(10) years.
2.32 "Performance Measures"
shall have the meaning set forth in Section 14.5.
2.32 "Performance-Based
Compensation" means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for "qualified
performance-based compensation" paid to Covered Employees. Notwithstanding the foregoing, nothing in the Plan shall be construed to mean that an Award which does not satisfy the requirements for
"qualified performance-based compensation" under Code Section 162(m) does not constitute performance-based compensation for other purposes, including for
purposes of Code Section 409A.
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2.33 "Performance
Measures" means measures as described in
Section 14 on which the performance goals are based and which have
been approved by the Company's shareholders pursuant to the Plan in order to qualify Awards as Performance-Based Compensation.
2.33 2.34"Performance Period" means the period of time during which the performance goals
must be met in order to determine the degree of payout and/or vesting
with respect to an Award.
2.34 2.35"Plan" means this QTS Realty Trust, Inc. Amended and Restated 2013 Equity
Incentive Plan, as amended from time to time.
2.35 2.36
"Prior Plan" means the QualityTech L.P. 2010 Equity Incentive Plan, as amended from time to time.
2.36 2.37
"Purchase Price" means the purchase price for each Share pursuant to a grant of Restricted Shares, Share Units or
Unrestricted Shares.
2.37 2.38"Reporting Person" means a person who is required to file reports under
Section 16(a) of the Exchange Act.
2.38 2.39"Restricted Shares" means Shares, awarded to a Grantee pursuant to Section 10.
2.39 2.40
"SAR Exercise Price" means the per share exercise price of a SAR granted to a Grantee under Section 9.
2.40 2.41"Securities Act" means the Securities Act of 1933, as now in effect or as
hereafter amended.
2.41 2.42"Service" means service as a Service Provider to the Company or any Affiliate.
Unless otherwise stated in the applicable Award Agreement, a Grantee's
change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the Company or any Affiliate. Subject to the preceding
sentence, whether a termination of Service shall have occurred for purposes of the Plan shall be determined by the Board, which determination shall be final, binding and conclusive. Notwithstanding
any other provision to the contrary, for any individual providing services solely as a director, only service to the Company or any of its Subsidiaries constitutes Service. If the Service Provider's
employment or other service relationship is with an Affiliate and that entity ceases to be an Affiliate, a termination of Service shall be deemed to have occurred when the entity ceases to be an
Affiliate unless the Service Provider's employment or other service relationship has been transferred by the Company or one of its remaining Affiliates to the Company or one of its remaining
Affiliates.
2.42 2.43"Service Provider" means an employee, officer, director, or a consultant or
adviser (who is a natural person) providing services to the Company or any
of its Affiliates.
2.43 2.44"Shares" means the shares of Class A common stock, par value $0.01 per
share, of the Company.
2.44 2.45"Share Appreciation Right" or "SAR" means a right granted to a Grantee under Section 9.
2.45 2.46"Share Units" means an Award representing the equivalent of one Share awarded to
a Grantee pursuant to Section 10 that will be settled in an amount in cash, Shares or both, subject to the terms and conditions of the Award.
2.46 2.47"Stock Exchange" means the New York Stock Exchange or another established
national or regional stock exchange.
2.47 2.48"Subsidiary" means any "subsidiary corporation" of the Company within the
meaning of Code Section 424(f).
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2.48 2.49"Substitute Award" means an Award granted upon assumption of, or in substitution
for, outstanding awards previously granted by a company or other entity
acquired by the Company or an Affiliate or with which the Company or an Affiliate combines.
2.49 2.50"Ten Percent Shareholder" means an individual who owns more than ten percent
(10%) of the total combined voting power of all classes of outstanding
voting securities of the Company, its parent or any of its Subsidiaries. In determining Share ownership, the attribution rules of Code Section 424(d) shall be applied.
2.50 2.51"Unrestricted Shares" shall have the meaning set forth in Section 11.
Unless
the context otherwise requires, all references in the Plan to "including" shall mean "including without limitation."
References
in the Plan to any Code Section shall be deemed to include, as applicable, regulations promulgated under such Code Section.
3. ADMINISTRATION OF THE PLAN
3.1. Board.
The
Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company's certificate of incorporation and by-laws and Applicable
Laws. The Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement, and shall have full
power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems to be necessary or
appropriate to the administration of the Plan, any Award or any Award Agreement, including the authority to adopt, alter and repeal administrative rules and guidelines governing the Plan. All such
actions and determinations shall be by the affirmative vote of a majority of the members of the Board present at a meeting at which a quorum is present or by unanimous consent of the Board executed in
writing in accordance with the Company's certificate of incorporation and by-laws and Applicable Laws. The interpretation and construction by the Board of any provision of the Plan, any Award or any
Award Agreement shall be final, binding and conclusive.
3.2. Committee.
The
Board from time to time may delegate to the Committee such powers and authorities related to the administration and implementation of the Plan, as set forth in Section 3.1 above and other
applicable provisions, as the Board shall determine, consistent with the Company's certificate of incorporation and
by-laws and Applicable Laws.
(i) Except
as provided in Subsection (ii) and except as the Board may otherwise determine, the Committee, if any, appointed by the Board to administer the Plan shall
consist of two or more Outside Directors of the Company who: (a) qualify as "outside directors" within the meaning of Section 162(m) of the Code;
(b) meet such other requirements as may be established from time to time by the
Securities and Exchange Commission for plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act; and
(cb) comply with the independence requirements of the Stock
Exchange on which the Shares are listed.
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(ii) The
Board may also appoint one or more separate committees of the Board, each composed of one or more directors of the Company who need not be Outside Directors, who
may administer the Plan with respect to employees or other Service Providers who are not executive officers (as defined under Rule 3b-7 or the Exchange Act) or directors of the Company, may
grant Awards under the Plan to such employees or other Service Providers, and may determine all terms of such Awards, subject to the requirements of Code
Section 162(m), Rule 16b-3 and the rules of the Stock Exchange on which the Shares are listed.
In the event that the Plan, any Award or any Award Agreement entered into hereunder provides for any action to be taken by or determination to be made by the
Board, such action may be taken or such determination may be made by a Committee if the power and authority to do so has been delegated (and such delegated authority has not been revoked) to such
Committee by the Board as provided for in this Section. Unless otherwise expressly determined by the Board, any such action or determination by the Committee shall be final, binding and conclusive. To
the extent permitted by law, the Committee may delegate its authority under the Plan to a member of the Board, provided, that such member of the Board to whom the Committee delegates authority under
the Plan must be an Outside Director who satisfies the requirements of Subsection (i)(a)-(c) of this Section 3.2.
3.3. Terms of Awards.
Subject to the other terms and conditions of the Plan, the Board shall have full and final authority to:
-
(i)
-
designate
Grantees;
-
(ii)
-
determine
the type or types of Awards to be made to a Grantee;
-
(iii)
-
determine
the number of Shares to be subject to an Award;
-
(iv)
-
establish
the terms and conditions of each Award (including, but not limited to, the exercise price of any Option, the nature and duration of any restriction or
condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the Shares subject thereto, the treatment of an Award in the event of a Change in
Control, and any terms or conditions that may be necessary to qualify Options as Incentive Share Options);
-
(v)
-
prescribe
the form of each Award Agreement evidencing an Award; and
-
(vi)
-
amend,
modify, or reprice (except as such practice is prohibited by Section 3.5 herein) the terms of any
outstanding Award. Such authority specifically includes the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to make or modify Awards to eligible individuals
who are foreign nationals or are individuals who are employed outside the United States to recognize differences in local law, tax policy, or custom. Notwithstanding the foregoing, no amendment,
modification or supplement of any Award shall, without the consent of the Grantee, impair the Grantee's rights under such Award.
3.4. Forfeiture; Recoupment.
The Company may reserve the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee with respect to an Award thereunder on account of
actions taken by, or failed to be taken by, such Grantee in violation or breach of or in conflict with any (a) employment agreement, (b) non-competition agreement, (c) agreement
prohibiting solicitation of employees or clients of the Company or any Affiliate, (d) confidentiality obligation with respect to the Company or any Affiliate, or (e) other agreement, as
and to the extent specified in such Award Agreement. The Company may annul an outstanding Award if the Grantee thereof is an employee and is terminated for Cause as
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defined
in the Plan or the applicable Award Agreement or for "cause" as defined in any other agreement between the Company or any Affiliate and such Grantee, as applicable.
Any
Award granted pursuant to the Plan is subject to mandatory repayment by the Grantee to the Company to the extent the Grantee is or in the future becomes subject to any Company
"clawback" or recoupment policy that requires the repayment by the Grantee to the Company of compensation paid by the Company to the Grantee in the event that the Grantee fails to comply with, or
violates, the terms or requirements of such policy. Such policy may authorize the Company to recover from a Grantee incentive-based compensation (including Options awarded as compensation) awarded to
or received by such Grantee during a period of up to three (3) years, as determined by the Committee, preceding the date on which the Company is required to prepare an accounting restatement
due to material noncompliance by the Company, as a result of misconduct, with any financial reporting requirement under the federal securities laws.
Furthermore,
if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting
requirement under the federal securities laws, and any Award Agreement so provides, any Grantee of an Award under such Award Agreement who knowingly engaged in such misconduct, was grossly negligent
in engaging in such misconduct, knowingly failed to prevent such misconduct or was grossly negligent in failing to prevent such misconduct, shall reimburse the Company the amount of any payment in
settlement of an Award earned or accrued during the 12-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred)
of the financial document that contained information affected by such material noncompliance.
Notwithstanding
any other provision of the Plan or any provision of any Award Agreement, if the Company is required to prepare an accounting restatement, Grantees shall forfeit any cash
or Shares received in connection with an Award (or an amount equal to the Fair Market Value of such Shares on the date of delivery if the Grantee no longer holds the Shares) if pursuant to the terms
of the Award Agreement for such Award, the amount of the Award earned or the vesting in the Award was explicitly based on the achievement of pre-established performance goals set forth in the Award
Agreement (including earnings, gains, or other performance goals) that are later determined, as a result of the accounting restatement, not to have been achieved.
3.5. No Repricing.
Except in connection with a corporate transaction involving the Company (including, without limitation, any share dividend, distribution (whether in the form of
cash, shares, other securities or other property), share split, extraordinary cash dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of shares or other securities or similar transaction), the Company may not, without obtaining shareholder approval: (a) amend the terms of outstanding
Options or SARs to reduce the exercise price of such outstanding Options or SARs; (b) cancel outstanding Options or SARs in exchange for or substitution of Options or SARs with an exercise
price that is less than the exercise price of the original Options or SARs; or (c) cancel outstanding Options or SARs with an exercise price above the current share price in exchange for cash
or other securities.
3.6. No Liability.
No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award or Award
Agreement.
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3.7. Share Issuance/Book-Entry.
Notwithstanding any provision of the Plan to the contrary, the issuance of the Shares under the Plan may be evidenced in such a manner as the Board, in its
discretion, deems appropriate, including, without limitation, book-entry or direct registration or issuance of one or more share certificates.
3.8. Minimum Vesting Requirement.
Awards granted on or after the Effective Date shall provide for a minimum vesting period of at least one year following the date
of grant; provided that, the Committee may grant Awards that do not conform to the requirements of this subsection 3.8 with respect to not more than 5% of the Shares authorized under the
Plan.
4. SHARES SUBJECT TO THE PLAN
4.1. Number of Shares Available for Awards.
Subject to adjustment as provided in Section 18, effective May 4,
2021, the number of Shares available for issuance under the Plan shall be one million seven hundred fifty thousand
(1,750,000Seven Million, Eight Hundred Sixty Thousand (7,860,000). Subject to adjustment as
provided in Section 18, the number of Shares available for issuance as Incentive Share Options shall be one million seven hundred fifty thousand
(1,750,000Seven Million, Eight Hundred Sixty
Thousand (7,860,000). Shares issued or to be issued under the Plan shall be authorized but unissued shares or treasury Shares or any combination of the foregoing, as
may be determined from time to time by the Board or by the Committee.
4.2. Adjustments in Authorized Shares.
The Board shall have the right to substitute or assume Awards in connection with mergers, reorganizations, separations, or other transactions to which Code
Section 424(a) applies. The number of Shares reserved pursuant to Section 4 shall be increased by the corresponding number of awards
assumed and, in the case of a substitution, by the net increase in the number of Shares subject to awards before and after the substitution. Available shares under a shareholder approved plan of an
acquired company (as appropriately adjusted to reflect the transaction) may be used for Awards under the Plan and do not reduce the number of Shares available under the Plan, subject to requirements
of the Stock Exchange on which the Shares are listed.
4.3. Share Usage.
Shares covered by an Award shall be counted as used as of the Grant Date. Any Shares that are subject to Awards shall be counted against the limit set forth in Section 4.1 as one (1) Share for every one (1) Share subject to an Award. Awards of LTIP Units shall count against the limit set
forth in Section 4.1 on a one-for-one basis, i.e., each such unit shall be treated as an
award of one (1) Share. With respect to SARs, the number of Shares subject to an award of SARs will be counted against the aggregate number of Shares available for issuance under the Plan
regardless of the number of Shares actually issued to settle the SAR upon exercise. If any Shares covered by an Award granted under the Plan are not purchased or are forfeited or expire, or if an
Award otherwise terminates without delivery of any Shares subject thereto, then the number of Shares counted against the aggregate number of
Shares available under the Plan with respect to such Award shall, to the extent of any such forfeiture, termination or expiration, again be available for making Awards under the Plan in the same
amount as such Shares were counted against the limit set forth in Section 4.1. The number of Shares available for issuance under the Plan shall
not be increased by (i) any Shares tendered or withheld or Award surrendered in connection with the purchase of Shares upon exercise of an Option as described in Section 12.2, (ii) any
Shares deducted or delivered from an Award payment in connection with the
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Company's
tax withholding obligations as described in Section 19.3 or (iii) any Shares purchased by the Company with proceeds from option
exercises.
5. EFFECTIVE DATE, DURATION AND AMENDMENTS
5.1. Effective Date; Prior Plan.
The Plan shall be effective as of the Effective Date. Following the Effective Date, no new awards will be granted under the
Prior Plan.
The Plan became effective as of the Original Effective Date. The Plan, as amended and restated, shall be effective as of the Effective Date. The Plan as
in effect prior to its amendment and restatement shall apply to all awards granted on and after the Original Effective Date and prior to the Effective Date. Following the Original Effective Date, no
new awards will be granted under the Prior Plan.
5.2. Term.
The Plan shall terminate automatically ten (10) years after the Effective Date and may be terminated on any earlier date as provided in Section 5.3.
5.3. Amendment and Termination of the Plan.
The Board may, at any time and from time to time, amend, suspend, or terminate the Plan. An amendment shall be contingent on approval of the Company's
shareholders to the extent stated by the Board, required by Applicable Laws or required by the Stock Exchange on which the Shares are listed. No amendment will be made to the no-repricing provisions
of Section 3.5 or the option pricing provisions of Section 8.1 without the approval of the
Company's shareholders. No amendment, suspension, or termination of the Plan shall, without the consent of the Grantee, impair rights or obligations under any Award theretofore awarded under the Plan.
6. AWARD ELIGIBILITY AND LIMITATIONS
6.1. Service Providers and Other Persons.
Subject to this Section 6, Awards may be made under the Plan to: (i) any Service Provider, as the
Board shall determine and designate from time to time and (ii) any other individual whose participation in the Plan is determined to be in the best interests of the Company by the Board.
6.2. Limitation on Shares Subject to Awards and Cash Awards.
During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act and
the transition period under Treasury Regulation Section 1.162-27(f)(2) has lapsed or does not apply:
-
(i)
-
the
maximum number of Shares subject to Options or SARs that can be granted under the Plan to any person eligible for an Award under Section 6, other than an Outside Director,
is four hundred fifty thousand
(450,000) Shares in a calendar year;
-
(ii)
-
the
maximum number of Shares that can be granted under the Plan, other than pursuant to an Option or SARs, to any person eligible for an Award under Section 6 is two hundred twenty-five thousand
(225,000) Shares in a calendar year;
and
(iii) the maximum number of Shares that can be granted under the Plan pursuant to any
Performance Award to any person eligible for an Award under Section 6, other than an
Outside Director, is seven hundred fifty thousand (750,000) Shares in a calendar year;
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(iv) notwithstanding the foregoing, the maximum number of Shares subject
to Awards that can be granted under the Plan to any person eligible for an Award under Section 6, other than an Outside Director, in the calendar year
that the person is first employed by
the Company or its Affiliates shall be three times the number set forth in each of paragraphs (i), (ii) and (iii) above;
(v) the total value of the Awards granted during a single calendar year
to any Outside Director (calculating the
value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes), taken together with any cash retainers paid to such Outside Director during the calendar
year, shall not exceed seven hundred fifty thousand Dollars ($750,000); provided, that in any calendar year that an Outside Director is first providing Service as an Outside Director, the foregoing
limit shall be one million Dollars ($1,000,000); and
(iiivi) the maximum amount
that may be paid as an Annual Incentive Award in a calendar year to any person eligible for an Award shall be five million Dollars ($5,000,000) and the maximum amount that may be paid as a
cash-settled Performance Award in respect of a performance period by any person eligible for an Award shall be five million Dollars ($5,000,000).
The
preceding limitations in this Section 6.2 are subject to adjustment as provided in Section 18.
6.3. Stand-Alone, Additional, Tandem and Substitute Awards.
Subject to Section 3.5, Awards granted under the Plan may, in the discretion of the Board, be granted
either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate, or any business entity to be
acquired by the Company or an Affiliate, or any other right of a Grantee to receive payment from the Company or any Affiliate. Such additional, tandem, and substitute or exchange Awards may be granted
at any time. Subject to Section 3.5, if an Award is granted in substitution or exchange for another Award, the Board shall require the surrender
of such other Award in consideration for the grant of the new Award. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the
Company or any Affiliate. Notwithstanding Section 8.1 and Section 9.1 but subject to Section 3.5, the Option Price of an Option or the grant price of an SAR that is a Substitute Award may be less than 100% of the Fair Market Value
of a Share on the original date of grant; provided, that, the Option Price or grant price is determined in accordance with the principles of Code Section 424 and the regulations thereunder for
any Incentive Share Option and consistent with Code Section 409A for any other Option or SAR.
7. AWARD AGREEMENT
Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine. Award
Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan. Each Award Agreement evidencing an Award of Options
shall specify whether such Options are intended to be Non-qualified Share Options or Incentive Share Options, and in the absence of such specification such options shall be deemed Non-qualified Share
Options.
8. TERMS AND CONDITIONS OF OPTIONS
8.1. Option Price.
The Option Price of each Option shall be fixed by the Board and stated in the Award Agreement evidencing such Option. Except in the case of Substitute Awards, the
Option Price of each Option shall be at least the Fair Market Value of a Share on the Grant Date; provided, however, that in the event
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that
a Grantee is a Ten Percent Shareholder, the Option Price of an Option granted to such Grantee that is intended to be an Incentive Share Option shall be not less than one hundred ten percent
(110%) of the Fair Market Value of a Share on the Grant Date. In no case shall the Option Price of any Option be less than the par value of a Share.
8.2. Vesting.
Subject to Sections 8.3 and 18.3, each Option granted under the Plan shall become exercisable at such times
and under such conditions as shall be determined by the Board and stated in the Award Agreement. For purposes of this Section 8.2, fractional
numbers of Shares subject to an Option shall be rounded down to the next nearest whole number.
8.3. Term.
Each Option granted under the Plan shall terminate, and all rights to purchase Shares thereunder shall cease, upon the expiration of ten (10) years from
the date such Option is granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award Agreement relating to
such Option; provided, however, that in the event that the Grantee is a Ten Percent Shareholder, an
Option granted to such Grantee that is intended to be an Incentive Share Option shall not be exercisable after the expiration of five (5) years from its Grant Date.
8.4. Termination of Service.
Each Award Agreement shall set forth the extent to which the Grantee shall have the right to exercise the Option following termination of the Grantee's Service,
and if an Award Agreement does not contain such a provision, vested Options may be exercised for 90 days following termination of the Grantee's Service, unless such termination is for Cause, in
which case all Options shall expire upon the termination of the Grantee's Service. Such provisions shall be determined in the sole discretion of the Board, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.
8.5. Limitations on Exercise of Option.
Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, prior to the date the Plan is approved by the
shareholders of the Company as provided herein or after the occurrence of an event referred to in Section 18 which results in termination of the
Option.
8.6. Method of Exercise.
Subject to the terms of Section 12 and Section 19.3,
an Option that is exercisable may be exercised by the Grantee's delivery to the Company of notice of exercise on any business day, at the Company's principal office, on the form specified by the
Company and in accordance with any additional procedures specified by the Board. Such notice shall specify the number of Shares with respect to which the Option is being exercised and shall be
accompanied by payment in full of the Option Price of the Shares for which the Option is being exercised plus the amount (if any) of federal and/or other taxes which the Company may, in its judgment,
be required to withhold with respect to an Award.
8.7. Rights of Holders of Options.
Unless otherwise stated in the applicable Award Agreement, an individual or entity holding or exercising an Option shall have none of the rights of a shareholder
(for example, the right to receive cash or dividend payments or distributions attributable to the subject Shares or to direct the voting of
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the
subject Shares or to receive notice of any meeting of the Company's shareholders) until the Shares covered thereby are fully paid and issued to him. Except as provided in Section 18, no adjustment
shall be made for dividends, distributions or other rights for which the record date is prior to the date of such
issuance.
8.8. Delivery of Share Certificates.
Promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price with respect thereto, such Grantee shall be entitled to receive
such evidence of such Grantee's ownership of the Shares subject to such Option as shall be consistent with Section 3.8.
8.9. Transferability of Options.
Except as provided in Section 8.10, during the lifetime of a Grantee, only the Grantee (or, in the event of
legal incapacity or incompetency, the Grantee's guardian or legal representative) may exercise an Option. Except as provided in Section 8.10, no
Option shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.
8.10. Family Transfers.
If authorized in the applicable Award Agreement or by the Board, in its sole discretion, a Grantee may transfer, not for value, all or part of an Option which is
not an Incentive Share Option to any Family Member. For the purpose of this Section 8.10, a "not for value" transfer is a transfer which is
(i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) unless Applicable Law does not permit such transfers, a transfer to
an entity in which more than fifty percent (50%) of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under this Section 8.10, any such Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, and
Shares acquired pursuant to the Option shall be subject to the same restrictions on transfer of shares as would have applied to the Grantee. Subsequent transfers of transferred Options are prohibited
except to Family Members of the original Grantee in accordance with this Section 8.10 or by will or the laws of descent and distribution. The events of
termination of Service of Section 8.4 shall continue to be applied with respect to the original Grantee, following which the Option shall be
exercisable by the transferee only to the extent, and for the periods specified, in Section 8.4.
8.11. Limitations on Incentive Share Options.
An Option shall constitute an Incentive Share Option only (i) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company;
(ii) to the extent specifically provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of
the Shares with respect to which all Incentive Share Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee's
employer and its Affiliates) does not exceed $100,000. Except to the extent provided in the regulations under Code Section 422, this limitation shall be applied by taking Options into account
in the order in which they were granted.
8.12. Notice of Disqualifying Disposition.
If any Grantee shall make any disposition of Shares issued pursuant to the exercise of an Incentive Share Option under the circumstances described in Code
Section 421(b) (relating to certain disqualifying dispositions), such Grantee shall notify the Company of such disposition within ten (10) days thereof.
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9. TERMS AND CONDITIONS OF SHARE APPRECIATION RIGHTS
9.1. Right to Payment and Grant Price.
A SAR shall confer on the Grantee to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one Share on
the date of exercise over (B) the SAR Exercise Price as determined by the Board. The Award Agreement for a SAR shall specify the SAR Exercise Price, which shall be at least the Fair Market
Value of one (1) Share on the Grant Date. SARs may be granted in conjunction with all or part of an Option granted under the Plan or at any subsequent time during the term of such Option, in
conjunction with all or part of any other Award or without regard to any Option or other Award; provided that a SAR that is granted subsequent to the Grant Date of a related Option must have a SAR
Exercise Price that is no less than the Fair Market Value of one Share on the SAR Grant Date; and provided further that a Grantee may only exercise
either the SAR or the Option with which it is granted in tandem and not both.
9.2. Other Terms.
The Board shall determine on the Grant Date or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part
(including based on achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following termination of Service or
upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Shares will be delivered or deemed to be delivered to
Grantees, whether or not a SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR.
9.3. Term.
Each SAR granted under the Plan shall terminate, and all rights thereunder shall cease, upon the expiration of ten (10) years from the date such SAR is
granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award Agreement relating to such SAR.
9.4. Transferability of SARS.
Except as provided in Section 9.5, during the lifetime of a Grantee, only the Grantee (or, in the event of
legal incapacity or incompetency, the Grantee's guardian or legal representative) may exercise a SAR. Except as provided in Section 9.5, no SAR
shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.
9.5. Family Transfers.
If authorized in the applicable Award Agreement and by the Board, in its sole discretion, a Grantee may transfer, not for value, all or part of a SAR to any
Family Member. For the purpose of this Section 9.5, a "not for value" transfer is a transfer which is (i) a gift, (ii) a transfer
under a domestic relations order in settlement of marital property rights; or (iii) unless Applicable Law does not permit such transfers, a transfer to an entity in which more than fifty
percent (50%) of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under this Section 9.5, any such SAR shall
continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, and
Shares acquired pursuant to a SAR shall be subject to the same restrictions on transfer or shares as would have applied to the Grantee. Subsequent transfers of transferred SARs are prohibited except
to Family Members of the original Grantee in accordance with this Section 9.5 or by will or the laws of descent and distribution.
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10. TERMS AND CONDITIONS OF RESTRICTED SHARES AND SHARE UNITS
10.1. Grant of Restricted Shares or Share Units.
Awards of Restricted Shares or Share Units may be made for consideration or no consideration (other than the par value of the Shares which shall be deemed paid by
past Service or, if so provided in the
related Award Agreement or a separate agreement, the promise by the Grantee to perform future Service to the Company or an Affiliate of the Company).
10.2. Restrictions.
At the time a grant of Restricted Shares or Share Units is made, the Board may, in its sole discretion, establish a period of time (a "restricted period")
applicable to such Restricted Shares or Share Units. Each Award of Restricted Shares or Share Units may be subject to a different restricted period. The Board may in its sole discretion, at the time a
grant of Restricted Shares or Share Units is made, prescribe restrictions in addition to or other than the expiration of the restricted period, including the satisfaction of corporate or individual
performance objectives, which may be applicable to all or any portion of the Restricted Shares or Share Units as described in Section 14. Neither
Restricted Shares nor Share Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the restricted period or prior to the satisfaction of any other restrictions
prescribed by the Board with respect to such Restricted Shares or Share Units.
10.3. Restricted Share Certificates.
Pursuant to Section 3.8, to the extent that ownership of Restricted Shares is evidenced by a book-entry
registration or direct registration, such registration shall be notated to evidence the restrictions imposed on such Award of Restricted Shares under the Plan and the applicable Award Agreement.
Subject to Section 3.8 and the immediately following sentence, the Company may issue, in the name of each Grantee to whom Restricted Shares have
been granted, share certificates representing the total number of Restricted Shares granted to the Grantee, as soon as reasonably practicable after the Grant Date. The Board may provide in an Award
Agreement that either (i) the Secretary of the Company shall hold such certificates for the Grantee's benefit until such time as the shares of Restricted Shares are forfeited to the Company or
the restrictions applicable thereto lapse and such Grantee shall deliver a stock power to the Company with respect to each certificate, or (ii) such certificates shall be delivered to the
Grantee, provided, however, that such certificates shall bear a legend or legends that comply with the
applicable securities laws and regulations and make appropriate reference to the restrictions imposed under the Plan and the Award Agreement.
10.4. Rights of Holders of Restricted Shares.
Unless the Board otherwise provides in an Award Agreement, holders of Restricted Shares shall have the right to vote such Shares and the right to receive any
dividends declared or paid with respect to such Shares. The Board may provide that any dividends paid on Restricted Shares must be reinvested in Shares, which may or may not be subject to the same
vesting conditions and restrictions applicable to such Restricted Shares. All distributions, if any, received by a Grantee with respect to Restricted Shares as a result of any share split, share
dividend, combination of shares, or other similar transaction shall be subject to the restrictions applicable to the original Grant. Holders of Restricted Shares may not make an election under Code
Section 83(b) with regard to the grant of Restricted Shares without Board approval.
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10.5. Rights of Holders of Share Units.
10.5.1. Voting and Dividend Rights.
Holders
of Share Units shall have no rights as shareholders of the Company (for example, the right to receive cash or dividend payments or distributions attributable to the Shares
subject to such Share Units, to direct the voting of the Shares subject to such Share Units, or to receive notice of any meeting of the Company's shareholders). The Board may provide in an Award
Agreement evidencing a grant of Share Units that the holder of such Share Units shall be entitled to receive, upon the Company's payment of a cash dividend on its outstanding Shares, a cash payment
for each Share Unit held equal to the per-share dividend paid on the Shares. Such Award Agreement may also provide that such cash payment will be deemed reinvested in additional Share Units at a price
per unit equal to the Fair Market Value of a Share on the date that such dividend is paid. Notwithstanding the foregoing, if a grantor trust is established in connection with the Awards of Share Units
and Shares are held in the grantor trust for purposes of satisfying the Company's obligation to deliver Shares in connection with such Share Units, the Award Agreement for such Share Units may provide
that such cash payment shall be deemed reinvested in additional Share Units at a price per unit equal to the actual price paid for each Share by the trustee of the grantor trust upon such trustee's
reinvestment of the cash dividend received.
10.5.2. Creditor's Rights.
A
holder of Share Units shall have no rights other than those of a general creditor of the Company. Share Units represent an unfunded and unsecured obligation of the Company, subject to
the terms and conditions of the applicable Award Agreement.
10.6. Termination of Service.
Unless the Board otherwise provides in an Award Agreement or in writing after the Award Agreement is issued, upon the termination of a Grantee's Service, any
Restricted Shares or Share Units held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited.
Upon forfeiture of Restricted Shares or Share Units, the Grantee shall have no further rights with respect to such Award, including but not limited to any right to vote Restricted Shares or any right
to receive dividends with respect to Restricted Shares or Share Units.
10.7. Purchase of Restricted Shares and Shares Subject to Share Units.
The Grantee shall be required, to the extent required by Applicable Laws, to purchase the Restricted Shares or Shares subject to vested Share Units from the
Company at a Purchase Price equal to the greater of (i) the aggregate par value of the Shares represented by such Restricted Shares or Share Units or (ii) the Purchase Price, if any,
specified in the Award Agreement relating to such Restricted Shares or Share Units. The Purchase Price shall be payable in a form described in Section 12 or, in the discretion of the Board, in
consideration for past or future Services rendered to the Company or an Affiliate.
10.8. Delivery of Shares.
Upon the expiration or termination of any restricted period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to
Restricted Shares or Share Units settled in Shares shall lapse, and, unless otherwise provided in the applicable Award Agreement, a book-entry or direct registration or a share certificate evidencing
ownership of such Shares shall, consistent with Section 3.8, be issued, free of all such restrictions, to the Grantee or the Grantee's
beneficiary or estate, as the case may be. Neither the Grantee, nor the Grantee's beneficiary or estate,
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shall
have any further rights with regard to a Share Unit once the Shares represented by the Share Unit has been delivered.
11. TERMS AND CONDITIONS OF UNRESTRICTED SHARE AWARDS AND OTHER EQUITY-BASED AWARDS
The Board may, in its sole discretion, grant (or sell at par value or such other higher purchase price determined by the Board) an Unrestricted Share Award to any
Grantee pursuant to which such Grantee may receive Shares free of any restrictions ("Unrestricted Shares") under the Plan. Unrestricted Share Awards may be granted or sold to any Grantee as provided
in the immediately preceding sentence in respect of past or, if so provided in the related Award Agreement or a separate agreement, the promise by the Grantee to perform future Service to the Company
or an Affiliate or other valid consideration, or in lieu of, or in addition to, any cash compensation due to such Grantee.
The
Board may, in its sole discretion, grant Awards to Participants in the form of Other Equity-Based Awards, as deemed by the Board to be consistent with the purposes of the Plan.
Awards granted pursuant to this Section 11 may be granted with vesting, value and/or payment contingent upon the attainment of one or more
performance goals. The Board shall determine the terms and conditions of such Awards at the date of grant or thereafter. Unless the Board otherwise provides in an Award Agreement or in writing after
the Award Agreement is issued, upon the termination of a Grantee's Service, any Other Equity-Based Awards held by such Grantee that have not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of Other Equity-Based Awards, the Grantee shall have no further rights with respect to such Award.
12. FORM OF PAYMENT FOR OPTIONS AND RESTRICTED SHARES
12.1. General Rule.
Payment of the Option Price for the Shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Shares shall be made in cash or in
cash equivalents acceptable to the Company.
12.2. Surrender of Shares.
To the extent the Award Agreement so provides and subject to Applicable Law, payment of the Option Price for Shares purchased pursuant to the exercise of an
Option or the Purchase Price for Restricted Shares may be made all or in part through the tender or attestation to the Company of Shares, which shall be valued, for purposes of determining the extent
to which the Option Price or Purchase Price has been paid thereby, at their Fair Market Value on the date of exercise or surrender, as applicable.
12.3. Cashless Exercise.
With respect to an Option only (and not with respect to Restricted Shares), to the extent permitted by law and to the extent the Award Agreement so provides,
payment of the Option Price for Shares purchased pursuant to the exercise of an Option may be made all or in part (i) by delivery (on a form acceptable to the Board) by the Grantee of an
irrevocable direction to a licensed securities broker acceptable to the Company to sell Shares and to deliver all or part of the sales proceeds to the Company in payment of the Option Price and any
withholding taxes described in Section 19.3, or (ii) with the consent of the Company, by the Grantee electing to have the Company issue to
Grantee
only that the number of Shares equal in value to the difference between the Option Price and the Fair Market Value of the Shares subject to the portion of the Option being exercised.
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12.4. Other Forms of Payment.
To the extent the Award Agreement so provides and/or unless otherwise specified in an Award Agreement, payment of the Option Price for Shares purchased pursuant
to exercise of an Option or the Purchase Price for Restricted Shares may be made in any other form that is consistent with Applicable Laws, regulations and rules, including, without limitation,
Service to the Company or an Affiliate or net exercise.
13. TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS
13.1. Dividend Equivalent Rights.
A Dividend Equivalent Right is an Award entitling the recipient to receive credits based on cash distributions that would have been paid on the Shares specified
in the Dividend Equivalent Right (or other award to which it relates) if such Shares had been issued to and held by the recipient. A Dividend Equivalent Right may be granted hereunder to any Grantee, provided that no Dividend Equivalent Rights may be granted in connection with, or related to, an Award of Options or SARs. The terms and conditions of
Dividend Equivalent Rights shall be specified in the grant. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in
additional Shares, which may thereafter accrue additional equivalents. Any such reinvestment shall be at Fair Market Value on the date of reinvestment. Dividend Equivalent
Rights may be settled in cash or Shares or a combination thereof, in a single installment or installments, all determined in the sole discretion of the Board. A Dividend Equivalent Right granted as a
component of another Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other award, and that such
Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other award. A Dividend Equivalent Right granted as a component of another Award may also contain
terms and conditions different from the terms and conditions of such other Award. A cash amount credited pursuant to a Dividend Equivalent Right granted as a component of another Award which vests or
is earned based upon the achievement of performance goals shall not vest unless such performance goals for such underlying Award are achieved.
13.2. Termination of Service.
Except as may otherwise be provided by the Board either in the Award Agreement or in writing after the Award Agreement is issued, a Grantee's rights in all
Dividend Equivalent Rights or interest equivalents shall automatically terminate upon the Grantee's termination of Service for any reason.
14. TERMS AND CONDITIONS OF PERFORMANCE AWARDS AND ANNUAL INCENTIVE AWARDS
14.1. Grant of Performance Awards and Annual Incentive Awards.
Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Performance Awards and/or Annual Incentive Awards to
a Plan participant in such amounts and upon such terms as the Committee shall determine.
14.2. Value of Performance Awards and Annual Incentive Awards.
Each Performance Award and Annual Incentive Award shall have an actual or target number of Shares or initial value that is established by the Committee at the
time of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Awards that will
be paid out to the Plan participant.
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14.3. Earning of Performance Awards and Annual Incentive Awards.
Subject to the terms of the Plan, after the applicable Performance Period has ended, the holder of Performance Awards or Annual Incentive Awards shall be entitled
to receive payout on the value and number of the Performance Awards or Annual Incentive Awards earned by the Plan participant over the Performance Period, to be determined as a function of the extent
to which the corresponding performance goals have been achieved.
14.4. Form and Timing of Payment of Performance Awards and Annual Incentive Awards.
Payment of earned Performance Awards and Annual Incentive Awards shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the
terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Awards in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance
Awards at the close of the applicable Performance Period, or as soon as practicable after the Committee has determined that the performance goal or goals relating thereto have been achieved; provided
that, unless specifically provided in the Award Agreement pertaining to the grant of the Award, such payment shall occur no later than the 15th day of the third month following the end of the
calendar year in which the Performance Period ends. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the
form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
14.5. Performance ConditionsMeasures.
The Committee may specify that the attainment of one or more performance goals based on the Performance Measures set forth in this
Section 14.5
shall determine the degree of granting, vesting and/or payout with respect to Performance Awards. The performance goals to be used for such Performance Awards shall be based on one or more of the
following business criteria or other measures of performance as the Committee may determine (the "Performance Measures"):
The right of a Grantee to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance
conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions.
If and to the extent required under Code Section 162(m), any power or authority relating to an Award intended to qualify under Code Section 162(m), shall be exercised by the Committee
and not the Board.
14.6. Performance Awards or Annual Incentive Awards Granted to Designated Covered
Employees.
If and to the extent that the Committee determines that a Performance or Annual Incentive Award to be granted to a Grantee
who is designated by the Committee as likely to be a Covered Employee should qualify as "qualified performance-based compensation" for purposes of Code Section 162(m), the grant, exercise
and/or settlement of such Award shall be contingent upon achievement of pre-established performance goals and other terms set forth in this
Section 14.6.
-
14.6.1.
-
Performance
Goals Generally.
The performance goals for Performance or Annual Incentive Awards shall consist of one or more business criteria and a targeted level or levels of
performance with respect to each of such criteria, as specified by the Committee consistent with this
Section 14.6.
Performance goals shall be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations thereunder including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of performance goals being "substantially uncertain." The Committee may determine that such Awards shall be granted, exercised and/or
settled upon achievement of any one performance goal
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or that two or more of the performance goals must be achieved as a condition to the grant, exercise and/or settlement of such Awards. Performance goals may differ
for Awards granted to any one Grantee or to different Grantees.
-
14.6.2.
-
Timing
For Establishing Performance Goals.
Performance goals shall be established not later than the earlier of (i) 90 days after the beginning of any performance period
applicable to such Awards and (ii) the day on which twenty-five percent (25%) of any performance period applicable to such Awards has expired, or at such other date as may be required or
permitted for "qualified performance-based compensation" under Code Section 162(m).
-
14.6.3.
-
Settlement
of Awards; Other Terms.
Settlement of such Awards shall be in cash, Shares, other Awards or other property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in connection with such Awards. The Committee shall specify the circumstances in which such Performance or Annual Incentive Awards
shall be paid or forfeited in the event of termination of Service by the Grantee prior to the end of a performance period or settlement of
Awards.
-
14.6.4.
-
Performance
Measures.
The performance goals upon which the payment or vesting of a Performance or Annual Incentive Award to a Covered Employee that is intended to qualify
as Performance-Based Compensation shall be limited to the following Performance Measures, with or without adjustment:
-
(a)
-
funds
from operations;
-
(b)
-
adjusted
funds from operations;
-
(c)
-
pretax earnings, net earnings
or, net
income;,
(d) operating earnings, and/or net operating
income;
(e)pretax earnings;
(fd) earnings per share;
(ge) Shareshare price,
including growth measures and total
shareholder return;
(hf) earnings before interest and taxes;
(ig) earnings before interest, taxes,
depreciation and/or amortization;
(h)adjusted earnings before interest, taxes, depreciation and/or
amortization;
(i)monthly recurring revenue;
-
(j)
-
return
measures, including return on assets, capital, investment, equity, sales or revenue;
-
(k)
-
cash
flow, including operating cash flow, free cash flow, cash flow return on equity and cash flow return on investment;
(l)booked-not-billed balances;
(m)leasing measures, including rental churn;
(n)targets with regard to our product offering;
(lo) expense targets;
(mp) market share;
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(nq) financial ratios as provided in credit
agreements of the Company and its subsidiaries;
(or) working capital targets;
(ps) completion of asset
acquisitions or, dispositions or development, and/or achievement of
acquisition
or, disposition or development
goals;
(qt) revenues under management;
(ru) distributions to shareholders; and
(v)customer satisfaction measures;
(w)net promoter scores;
(x)employee diversification measures;
(y)employee satisfaction measures;
(z)employee retention measures; and
(saa) any combination of any of the foregoing business
criteria.
Business
criteria may be (but are not required to be) measured on a basis consistent with U.S. Generally Accepted Accounting Principles.
Any
Performance Measure(s) may be used to measure the performance of the Company, Subsidiary, and/or Affiliate as a whole or any business unit of the Company, Subsidiary, and/or
Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparable companies, or published or
special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure
(fe) above as compared to various stock market indices. The
Committee also has the authority to provide for
accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Section 14.
-
14.6.
-
14.6.5.
Evaluation of Performance.
The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occur
during a Performance Period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws
or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion
No. 30 and/or in "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing in the Company's annual report to shareholders for the applicable year;
(f) acquisitions or divestitures; and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered
Employees that are intended to qualify as Performance-Based Compensation, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for
deductibility.
-
14.6.6.
-
Adjustment
of Performance-Based Compensation.
Awards that are intended to qualify as Performance-Based Compensation may not be adjusted upward. The Committee shall retain the discretion to
adjust such Awards downward, either on a formula or discretionary basis, or any combination as the Committee determines.
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-
14.6.7.
-
Board
Discretion.
In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without
obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval provided the exercise of such discretion does not
violate Code Sections 162(m) or 409A. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the
Committee may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth
inSection 14.6.4.
14.7. Status of Awards Under Code
Section 162(m).
It is the intent of the Company that Awards underSection 14.6granted to persons
who are designated by the Committee as likely to be Covered Employees within the meaning of Code Section 162(m) and regulations thereunder shall, if so designated by the Committee, constitute
"qualified performance-based compensation" within the meaning of Code Section 162(m) and regulations thereunder. Accordingly, the terms ofSection 14.6, including the
definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder. If any provision of the Plan or
any agreement relating to such Awards does not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed
amended to the extent necessary to conform to such requirements.
15. TERMS AND CONDITIONS OF LONG-TERM INCENTIVE UNITS
LTIP Units are intended to be profits interests in the operating partnership affiliated with the Company, if any (such operating partnership, if any, the
"Operating Partnership"), the rights and features of which, if applicable, will be set forth in the agreement of limited partnership for the Operating Partnership (the "Operating Partnership
Agreement"). Subject to the terms and provisions of the Plan and the Operating Partnership Agreement, the Committee, at any time and from time to
time, may grant LTIP Units to Plan participants in such amounts and upon such terms as the Committee shall determine. LTIP Units must be granted for service to the Operating Partnership. Subject to Section 18, each LTIP Unit granted under the Plan shall vest at such times and under such conditions as shall be determined by the Committee and
stated in the Award Agreement.
16. PARACHUTE LIMITATIONS
If the Grantee is a "disqualified individual," as defined in Code Section 280G(c), then, notwithstanding any other provision of the Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by a Grantee with the Company or an Affiliate, except an agreement, contract, or understanding that expressly addresses Code
Section 280G or Code Section 4999 (an "Other Agreement"), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the
Grantee (including groups or classes of Grantees or beneficiaries of which the Grantee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for
the Grantee (a "Benefit Arrangement"), any right to exercise, vesting, payment or benefit to the Grantee under the Plan shall be reduced or eliminated:
-
(i)
-
to
the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Grantee under the
Plan, all Other Agreements, and all Benefit Arrangements, would cause any exercise, vesting, payment or
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The
Company shall accomplish such reduction by first reducing or eliminating any cash payments (with the payments to be made furthest in the future being reduced first), then by reducing
or eliminating any accelerated vesting of Performance Awards, then by reducing or eliminating any accelerated vesting of Options or SARs, then by reducing or eliminating any accelerated vesting of
Restricted Shares or Share Units, then by reducing or eliminating any other remaining Parachute Payments.
17. REQUIREMENTS OF LAW
17.1. General.
No participant in the Plan will be permitted to acquire, or will have any right to acquire, Shares thereunder if such acquisition would be prohibited by any share
ownership limits contained in charter or bylaws or would impair the Company's status as a REIT. The Company shall not be required to offer, sell or issue any Shares under any Award if the offer, sale
or issuance of such Shares would constitute a violation by the Grantee, any other individual or entity exercising an Option, or the Company or an Affiliate of any provision of any law or regulation of
any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the offering, listing,
registration or qualification of any Shares subject to an Award upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection
with, the issuance or purchase of Shares hereunder, no Shares may be offered, issued or sold to the Grantee or any other individual or entity exercising an Option pursuant to such Award unless such
offering, listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no
way affect the date of termination of the Award. Without limiting the generality of the foregoing, in connection with the Securities Act, upon the exercise of any Option or any SAR that may be settled
in Shares or the delivery of any Shares underlying an Award, unless a registration statement under such Act is in effect with respect to the Shares covered by such Award, the Company shall not be
required to offer, sell or issue such Shares unless the Board has received evidence satisfactory to it that the Grantee or any other individual or
entity exercising an Option or SAR or accepting delivery of such Shares may acquire such Shares pursuant to an exemption from registration under the Securities Act. Any determination in this
connection by the Board shall be final, binding, and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The
Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or a SAR or the issuance of Shares pursuant to the Plan to comply with any Applicable Laws. As
to any jurisdiction that expressly imposes the requirement that an Option (or SAR that may be settled in Shares) shall not be exercisable until the Shares covered by such Option (or SAR) are
registered under the securities laws thereof or are exempt from such registration, the exercise of such Option (or SAR) under circumstances in which the laws of such jurisdiction apply shall be deemed
conditioned upon the effectiveness of such registration or the availability of such an exemption.
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17.2. Rule 16b-3.
During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that
Awards pursuant to the Plan and the exercise of Options and SARs granted hereunder that would otherwise be subject to Section 16(b) of the Exchange Act will qualify for the exemption provided
by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by the Board does not comply with the requirements of Rule 16b-3, it shall be deemed
inoperative with respect to such Awards to the extent permitted by Applicable Law and deemed advisable by the Board, and shall not affect the validity of the Plan. In the event that Rule 16b-3
is revised or replaced, the Board may exercise its discretion to modify the Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption
or its replacement.
18. EFFECT OF CHANGES IN CAPITALIZATION
18.1. Changes in Shares.
If the number of outstanding Shares is increased or decreased or the Shares are changed into or exchanged for a different number or kind of Shares or other
securities of the Company on account of any recapitalization, reclassification, share split, reverse share split, spin-off, combination of share, exchange of shares, share dividend or other
distribution payable in capital shares, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds
of shares for which grants of Options and other Awards may be made under the Plan, including, without limitation, the limits set forth in Section 6.2, shall be adjusted proportionately and
accordingly by the Company in a manner deemed equitable by the Committee in order to prevent
undue dilution or enlargement of a Grantee's benefits under an Award. In addition, the number and kind of shares for which Awards are outstanding shall be adjusted proportionately and accordingly so
that the proportionate interest of the Grantee immediately following such event shall, to the extent practicable, be the same as immediately before such event. Any such adjustment in outstanding
Options or SARs shall not change the aggregate Option Price or SAR Exercise Price payable with respect to shares that are subject to the unexercised portion of an outstanding Option or SAR, as
applicable, but shall include a corresponding proportionate adjustment in the Option Price or SAR Exercise Price per share. The conversion of any convertible securities of the Company shall not be
treated as an increase in shares affected without receipt of consideration. Notwithstanding the foregoing, in the event of any distribution to the Company's shareholders of securities of any other
entity or other assets (including an extraordinary dividend but excluding a non-extraordinary dividend of the Company) without receipt of consideration by the Company, the Company shall, in such
manner as the Company deems appropriate, adjust (i) the number and kind of shares subject to outstanding Awards and/or (ii) the exercise price of outstanding Options and Share
Appreciation Rights to reflect such distribution.
18.2. Reorganization in Which the Company Is the Surviving Entity Which Does not Constitute a Change in Control.
Subject to Section 18.3, if the Company shall be the surviving entity in any reorganization, merger, or
consolidation of the Company with one or more other entities which does not constitute a Change in Control, any Option or SAR theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of Shares subject to such Option or SAR would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding
proportionate adjustment of the Option Price or SAR Exercise Price per share so that the aggregate Option Price or SAR Exercise Price thereafter shall be the same as the aggregate Option Price or SAR
Exercise Price of the Shares remaining subject to the Option or SAR immediately prior to such reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement
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evidencing
an Award, or in another agreement with the Grantee, or otherwise set forth in writing, any restrictions applicable to such Award shall apply as well to any replacement shares received by
the Grantee as a result of the reorganization, merger or consolidation. In the event of a transaction described in this Section 18.2, Performance
Awards shall be adjusted (including any adjustment to the Performance Measures applicable to such Awards deemed appropriate by the Committee) so as to apply to the securities that a holder of the
number of Shares subject to the Performance Awards would have been entitled to receive immediately following such transaction.
18.3. Change in Control in which Awards are not Assumed.
Except as otherwise provided in the applicable Award Agreement or in another agreement with the Grantee, or as otherwise set forth in writing, upon the occurrence
of a Change in Control in which outstanding Options, SARs, Share Units, Dividend Equivalent Rights, Restricted Shares, LTIP Units or other Equity-Based Awards are not being assumed or
continued:
-
(i)
-
in
each case with the exception of any Performance Award, all outstanding Restricted Shares and LTIP Units shall be deemed to have vested, all Share Units shall be
deemed to have vested and the Shares subject thereto shall be delivered, and all Dividend Equivalent Rights shall be deemed to have vested and the Shares subject thereto shall be delivered,
immediately prior to the occurrence of such Change in Control, and
-
(ii)
-
either
or both of the following two actions shall be taken:
-
(A)
-
five
(5) days prior to the scheduled consummation of a Change in Control, all Options and SARs outstanding hereunder shall become immediately exercisable and
shall remain exercisable for a period of five (5) days, or
-
(B)
-
the
Board may elect, in its sole discretion, to cancel any outstanding Awards of Options, Restricted Shares, Share Units, and/or SARs and pay or deliver, or cause to
be paid or delivered, to the holder thereof an amount in cash or securities having a value (as determined by the Board acting in good faith), in the case of Restricted Shares or Share Units, equal to
the formula or fixed price per share paid to holders of Shares and, in the case of Options or SARs, equal to the product of the number of Shares subject to the Option or SAR (the "Award Shares")
multiplied by the amount, if any, by which (I) the formula or fixed price per share paid to holders of Shares pursuant to such transaction exceeds (II) the Option Price or SAR Exercise
Price applicable to such Award Shares. In the event that the Option Price or SAR Exercise Price of an Award exceeds the formula or fixed price per share paid to holders of Shares pursuant to such
transaction, such Options or SARs may be terminated for no consideration.
-
(iii)
-
for
Performance Awards denominated in Shares, Share Units or LTIP Units, if less than half of the Performance Period has lapsed, the Awards shall be converted into
Restricted Shares or Share Units assuming target performance has been achieved (or Unrestricted Shares if no further restrictions apply). If more than half the Performance Period has lapsed, the
Awards shall be converted into Restricted Shares or Share Units based on actual performance to date (or Unrestricted Shares if no further restrictions apply). If actual performance is not
determinable, then Performance Awards shall be converted into Restricted Shares or Share Units assuming target performance has been achieved, based on the discretion of the Committee (or Unrestricted
Shares if no further restrictions apply).
-
(iv)
-
Other-Equity
Based Awards shall be governed by the terms of the applicable Award Agreement.
With
respect to the Company's establishment of an exercise window, (i) any exercise of an Option or SAR during such five (5)-day period shall be conditioned upon the consummation
of the event and
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shall
be effective only immediately before the consummation of the event, and (ii) upon consummation of any Change in Control, the Plan and all outstanding but unexercised Options and SARs
shall terminate. The Board shall send notice of an event that will result in such a termination to all individuals and entities that hold Options and SARs not later than the time at which the Company
gives notice thereof to its shareholders.
18.4. Change in Control in which Awards are Assumed.
Except as otherwise provided in the applicable Award Agreement or in another agreement with the Grantee, or as otherwise set forth in writing, upon the occurrence
of a Change in Control in which outstanding Awards are being assumed or continued, the following provisions shall apply to such Award, to the extent assumed or continued:
The
Plan, Options, SARs, Share Units, Restricted Shares and Other Equity-Based Awards theretofore granted shall continue in the manner and under the terms so provided in the event of any
Change in Control to the extent that provision is made in writing in connection with such Change in Control for the assumption or continuation of the Options, SARs, Share Units, Restricted Shares and
Other Equity-Based Awards theretofore granted, or for the substitution for such Options, SARs, Share Units, Restricted Shares and Other Equity-Based Awards for new common stock options and stock
appreciation rights and new common stock units, restricted stock and other equity-based awards relating to the stock of a successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number of shares (disregarding any consideration that is not common stock) and option and stock appreciation rights exercise prices.
18.5. Adjustments
Adjustments under this Section 18 related to Shares or securities of the Company shall be made by the
Board, whose determination in that respect shall be final, binding and conclusive. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting
from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share. The Board shall determine the effect of a Change in Control upon Awards other than Options,
SARs, Share Units and Restricted Shares, and such effect shall be set forth in the appropriate Award Agreement. The Board may provide in the Award Agreements at the time of grant, or any time
thereafter with the consent of the Grantee, for different provisions to apply to an Award in place of those described in Sections 18.1, 18.2,
18.3 and 18.4. This Section 18 does not limit the Company's ability to
provide for alternative treatment of Awards outstanding under the Plan in the event of change in control events that do not constitute a Change in Control.
18.6. No Limitations on Company.
The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets (including all or
any part of the business or assets of any Subsidiary or other Affiliate) or engage in any other transaction or activity.
19. GENERAL PROVISIONS
19.1. Disclaimer of Rights.
No provision in the Plan or in any Award or Award Agreement shall be construed to confer upon any individual or entity the right to remain in the employ or
Service of the Company or an Affiliate, or to interfere in any way with any contractual or other right or authority of the Company or an Affiliate either to increase or decrease the compensation or
other payments to any individual or entity at any
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time,
or to terminate any employment or other relationship between any individual or entity and the Company or an Affiliate. In addition, notwithstanding anything contained in the Plan to the
contrary, unless otherwise stated in the applicable Award Agreement, in another agreement with the Grantee, or otherwise in writing, no Award granted under the Plan shall be affected by any change of
duties or position of the Grantee, so long as such Grantee continues to provide Service. The obligation of the Company to pay any benefits pursuant to the Plan shall be interpreted as a contractual
obligation to pay only those amounts described herein, in the manner and under the conditions prescribed herein. The Plan and Awards shall in no way be interpreted to require the Company to transfer
any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms of the Plan.
19.2. Nonexclusivity of the Plan.
Neither the adoption of the Plan nor the submission of the Plan to the shareholders of the Company for approval shall be construed as creating any limitations
upon the right and authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or
specifically to a particular individual or particular individuals) as the Board in its discretion determines desirable.
19.3. Withholding Taxes.
The Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state, or local
taxes of any kind required by law to be withheld with respect to the vesting of or other lapse of restrictions applicable to an Award or upon the issuance of any Shares upon the exercise of an Option
or pursuant to an Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay in cash to the Company or an Affiliate, as the case may be, any amount that the Company or an Affiliate
may reasonably determine to be necessary to satisfy such withholding obligation; provided, that if there is a same-day sale of Shares subject to an
Award, the Grantee shall pay such withholding obligation on the day on which such same-day sale is completed. Subject to the prior approval of the Company or an Affiliate, which may be withheld by the
Company or an Affiliate, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company or an Affiliate to
withhold Shares otherwise issuable to the Grantee or (ii) by delivering to the Company or an Affiliate Shares already owned by the Grantee. The Shares so delivered or withheld shall have an
aggregate Fair Market Value equal to such withholding obligations. The Fair Market Value of the Shares used to satisfy such withholding obligation shall be determined by the Company or an Affiliate as
of the date that the amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to this Section 19.3 may
satisfy his or her withholding obligation only with Shares that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements. The maximum number of Shares that may
be withheld from any Award to satisfy any federal, state or local tax withholding requirements upon the exercise, vesting, lapse of restrictions applicable to such Award or payment of Shares pursuant
to such Award, as applicable, cannot exceed such number of Shares having a Fair Market Value equal to the minimum statutory amount required by the Company or an Affiliate to be withheld and paid to
any such federal, state or local taxing authority with respect to such exercise, vesting, lapse of restrictions or payment of Shares. Notwithstanding Section 2.19 or this Section 19.3, for purposes of determining taxable income and the
amount of the related tax withholding obligation pursuant to this Section 19.3, for any Shares subject to an Award that are sold by or on behalf
of a Grantee on the same date on which such shares may first be sold pursuant to the terms of the related Award Agreement, the Fair Market Value of such shares shall be the sale price of such shares
on such date (or if sales of such shares are effectuated at more than one sale price, the weighted average sale price of such shares on such date), so long as such Grantee has provided the Company or
an Affiliate, or its designee or agent, with advance written notice of such sale.
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19.4. Captions.
The use of captions in the Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or
such Award Agreement.
19.5. Other Provisions.
Each Award granted under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in its sole
discretion.
19.6. Number and Gender.
With respect to words used in the Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the
context requires.
19.7. Severability.
If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining
provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
19.8. Governing Law.
The validity and construction of the Plan and the instruments evidencing the Awards hereunder shall be governed by, and construed and interpreted in accordance
with, the laws of the State of Maryland, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan and the instruments
evidencing the Awards granted hereunder to the substantive laws of any other jurisdiction.
19.9. Code Section 409A.
The Company intends to comply with Code Section 409A, or an exemption to Code Section 409A, with regard to Awards hereunder that constitute
nonqualified deferred compensation within the meaning of Code Section 409A. To the extent that the Company determines that a Grantee would be subject to the additional twenty percent (20%) tax
imposed on certain nonqualified deferred compensation plans pursuant to Code Section 409A as a result of any provision of any Award granted under the Plan, such provision shall be deemed
amended to the minimum extent necessary to avoid application of such additional tax. The nature of any such amendment shall be determined by the Board. Notwithstanding any other provision of the Plan
or an Award Agreement to the contrary, if at the time of payment or settlement of an Award, a Grantee is a specified employee (within the meaning of Code Section 409A and using the
identification methodology selected by the Company, from time to time), and the Company makes a good faith determination that an amount payable to such a Grantee constitutes nonqualified deferred
compensation (within the meaning of Code Section 409A) the payment of which is required to be delayed pursuant to the six (6) month delay rule set forth in Code Section 409A in
order to avoid taxes or penalties under Code Section 409A, then the Company will not pay such amount on the otherwise scheduled payment date but will instead pay it in a lump sum on the first
business day after such six (6) month period (or upon Grantee's death, if earlier). Notwithstanding anything to the contrary in the Plan or an Award Agreement, in no event shall the Company or
an Affiliate be required to indemnify a Grantee for any taxes imposed by Code Section 409A.
* * *
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To record adoption of the Plan by the Board as
of , 20132021, and approval of the Plan by the shareholders on
, 20132021, the Company has caused its
authorized officer to execute the Plan.
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QTS REALTY TRUST, INC.
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VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 05/03/2021. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. Computershare 211 Quality Circle, Suite 210 College Station, TX 77845 VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on 05/03/2021. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. For Withhold For All Except To withhold authority to vote for any individual nominee(s), mark For All Except and write the number(s) of the AllAll The Board of Directors recommends you vote FOR the following: nominee(s) on the line below. 0 0 0 1. Election of Directors Nominees 01 Chad L. Williams 06 Scott D. Miller 02 John W. Barter 07 Mazen Rawashdeh 03 Joan A. Dempsey 08 Wayne M. Rehberger 04 Catherine R. Kinney 09 Philip P. Trahanas 05 10 Peter A. Marino Stephen E. Westhead The Board of Directors recommends you vote FOR proposals 2, 3 and 4. For 0 0 0 Against 0 0 0 Abstain 0 0 0 2 To approve, on a non-binding advisory basis, the compensation paid to the Company's named executive officers. 3 To approve an amendment and restatement of the QTS Realty Trust, Inc. 2013 Equity Incentive Plan. 4 To ratify the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2021. NOTE: In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 0000489401_1 R1.0.0.153
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report is/ are available at www.proxyvote.com QTS REALTY TRUST, INC. Annual Meeting of Stockholders May 4, 2021 9:00 AM EDT This proxy is solicited by the Board of Directors The undersigned stockholder(s) hereby appoint(s) Jeffrey H. Berson and Matt N. Thomson, or either of them, as proxies, each with the power to appoint (his/her) substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of QTS REALTY TRUST, INC. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholder(s) to be held at 9:00 AM, EDT on May 4, 2021, via the Internet through a web conference at www.virtualshareholdermeeting.com/QTS2021, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. Continued and to be signed on reverse side 0000489401_2 R1.0.0.153