Item 5.02 Departure of Directors or
Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Transition of Jon D. Greaves
On January 12,
2021, Jon D. Greaves, Chief Technology Officer of QTS Realty Trust, Inc. (the “Company”) and QualityTech, LP (the “Operating
Partnership”), and the Company agreed that effective February 1, 2021 (the “Transition Date”), Jon D. Greaves
will transition from his current position to the position of Executive Vice President of Quality Special Operations. In his new
position, Mr. Greaves will have primary oversight responsibility for the Company’s federal service delivery and strategy
and will also support the new Chief Technology Officer on the Company’s broader technology and service delivery functions,
including direct customer and partner engagement. Mr. Greaves’ current base salary and benefit levels will continue until
the Transition Date.
In connection with his
transition, on January 13, 2021, the Company, the Operating Partnership and Quality Technology Services, LLC entered into a new
employment agreement (the “Employment Agreement”) with Mr. Greaves that will become effective on February 1, 2021 and
will supersede and terminate his current employment agreement. Under the Employment Agreement, Mr. Greaves will serve
as Executive Vice President of Quality Special Operations of the Company and the Operating Partnership. The Employment Agreement
provides for an initial term of two years, expiring February 1, 2023, with automatic renewal terms of two years each unless either
party gives a non-renewal notice within a specified time frame. The Employment Agreement provides for a base salary of $300,000
and a bonus opportunity for threshold performance targeted at 50% of base salary (with additional amounts being paid for exceptional
performance as determined by the Compensation Committee of the Board of Directors of the Company), four weeks paid vacation and
certain other benefits. In addition, the Employment Agreement provides that the executive will be eligible to receive grants of
equity awards, typically subject to a three-year time-based vesting, with a target award value of 100% of the executive’s
base salary. A performance-based component with a different vesting schedule also may be included in the grants of equity awards.
For the avoidance of doubt, Mr. Greaves also remains eligible to receive any bonus equity awards earned under his prior employment
agreement for performance in 2020 that are scheduled to be paid or awarded, as applicable, in 2021.
The Employment Agreement
provides that if the executive’s employment is terminated by the Company without “cause” (including nonrenewal
by the Company of the Employment Agreement upon expiration) or by the executive for “good reason,” the executive will,
upon execution of a release reasonably acceptable to the Company, be eligible to receive the following severance benefits in addition
to his “accrued compensation”:
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one year of base pay plus the target bonus
in effect on the termination date;
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all bonus amounts earned but not yet paid
for the year prior to the year in which the termination date occurs;
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full vesting of any equity awards that would
otherwise vest during the then-current term of the Employment Agreement;
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reimbursement for premiums for 18 months
of COBRA coverage if the executive elects COBRA coverage; and
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outplacement services and support for a period
of one year.
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However, if any such termination occurs within
two years following a “change in control,” the executive will be eligible to receive the following benefits (in lieu
of the benefits listed above) in addition to his “accrued compensation”:
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an amount equal to the sum of (A) two
times his base salary in effect on the date of the change in control or the date of the termination, whichever is higher, and (B) two
times his annual bonus on date of termination or date of change in control, whichever is higher, calculated based on maximum bonus
available assuming all performance goals are fully met;
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reimbursement of the cost of health, disability
and accidental death and dismemberment insurance in an amount not less than that provided at the time of the executive’s
termination or, if greater, on the date on which the change in control occurred, until the earlier of (x) the date on which
the executive becomes eligible to receive substantially the same or greater benefits from another employer or (y) the second
anniversary of the date of the termination; and
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one year of outplacement services and support.
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In addition, if the Employment
Agreement is terminated following death or disability of the executive, the executive will be eligible to receive all “accrued
compensation” and, if not previously vested in full, all equity awards granted to the executive will fully vest as of the
termination date.
In the event the Employment
Agreement is terminated by the Company with “cause” or by the executive without “good reason,” the Company
will be obligated to pay the executive all “accrued compensation.”
The Employment Agreement
generally defines:
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“change in control” as (i) any
transaction that results in any person (as such term is used in Section 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)), other than current stockholders of the Company, becoming the beneficial
owner (as defined in the Exchange Act), directly or indirectly, of securities representing 25% or more of the then-combined voting
power of the Company’s then-outstanding voting securities, (ii) individuals who, at the beginning of any 12-month period,
constitute the Company’s board of directors cease for any reason to constitute a majority of the Company’s board of
directors at the end of such 12-month period, treating any individual whose election or nomination was approved by a majority of
the incumbent directors as an incumbent director for this purpose, (iii) a merger, consolidation or recapitalization other
than one following which voting securities prior to the transaction continue to represent more than 75% of the Company’s
(or surviving entity’s) voting securities after the transaction, or (iv) a sale of all or substantially all of Company’s
assets in one transaction or a series of transactions over a 12-month period;
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“cause” as the executive’s
(i) conviction of, or pleading guilty or nolo contendere to, a crime involving dishonesty or moral turpitude; (ii) any
commission by the executive of an act of dishonesty, theft, fraud or embezzlement; or (iii) any willful act that has a significant
adverse effect on the Company’s reputation;
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“good reason” as (i) a material
diminution in the executive’s authority, duties or responsibilities, or any significant adverse change in his title, as identified
above, (ii) a material diminution in the executive’s base compensation, as in effect from time to time; (iii) movement
of the executive’s place of employment more than fifty miles from his assigned location, or (iv) the failure of any
successor to the Company to assume the Employment Agreement; and
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“accrued compensation” as (i) the
executive’s salary through the termination date to the extent not theretofore paid, (ii) the amount of any accrued but
unused vacation pay, (iii) any business expense reimbursements incurred by the executive as of the termination date and duly
submitted for reimbursement, in each case consistent with the policy for such reimbursements, and (iv) any performance or
discretionary bonus earned or declared for a bonus period ending before the termination date but not yet paid.
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The Employment Agreement includes a non-compete
covenant providing that during the term and for a period of one year following termination, the executive may not (a) directly
or indirectly, engage in any business involving the development, construction, acquisition, ownership or operation of data center
properties, colocation facilities and/or the provision of managed or cloud services, whether such business is conducted by the
executive individually or as a principal, partner, member, stockholder, joint venturer, director, trustee, officer, employee, consultant,
advisor or independent contractor of any person or (b) own any direct or indirect interests in any data center facilities,
colocation facilities or managed or cloud service providers in the United States, other than up to five percent of the outstanding
shares of any public company. Moreover, the Employment Agreement provides that, during the term and for a one-year period following
termination, the executive will not solicit any of the Company’s customers for data center space within the United States,
encourage any of the Company’s customers to reduce their patronage of the Company, solicit or hire, other than clerical employees,
any of the Company’s current employees or independent contractors (or authorize or knowingly cooperate with other persons
taking such action ) or former employees or independent contractors who left employment within the prior year, or encourage any
of the Company’s employees to leave their employment with us. Finally, the Employment Agreement includes a confidentiality
covenant on the part of the executive and a covenant that both the Company and the executive agree not to talk about or otherwise
communicate to any third parties in a malicious, disparaging or defamatory manner regarding the other.
A copy of the Employment
Agreement is attached to this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference. The summary set
forth above is qualified in its entirety by reference to Exhibit 10.1.