Item 5.02Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On February 19, 2020, the Digital Realty Trust, Inc. (the “Company”) Compensation Committee of the Board of Directors (the “Compensation Committee”) approved a one-time grant of performance-based Class D profits interest units (“Class D Units”) of Digital Realty Trust, L.P. (the “Operating Partnership”), subject to attainment of performance metrics related to successful integration of the pending combination between the Company and InterXion Holding N.V. (the “InterXion Transaction”), as more fully described below, and the one-time grant of time-based profits interest units (“PIUs”) of the Operating Partnership, subject to closing of the InterXion Transaction, as previously reported on Form 4s dated February 21, 2020, (collectively, the “awards”). The awards were granted under the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2014 Incentive Award Plan, as amended (the “Plan”), to certain of the Company’s named executive officers (the “executives”). The material terms and conditions of the awards are described below.
Class D Units
General. Pursuant to the Class D Unit awards, each executive is eligible to vest in a number of Class D Units of the Operating Partnership ranging from 0% to 100% of the total Class D Units granted, based on the attainment of the performance metrics described below (the “Performance Metrics”) during the three-year period commencing on the date on which the InterXion Transaction closes (the “Closing Date”) or, if earlier, ending on the date on which a change in control (as defined in the Plan) occurs (the “Performance Period”), subject to the executive’s continued service through the conclusion of the Performance Period. Class D Units are subject to the applicable terms and conditions of the Nineteenth Amended and Restated Agreement of Limited Partnership of the Operating Partnership (as amended, the “Partnership Agreement”).
Performance Vesting. A portion of each award of Class D Units is designated as a number of “base units” that will performance vest based on achieving key employee retention (33.3%), expense synergies (33.3%), EBITDA targets (16.7%) and EMEA signings (16.7%) over the three years after the InterXion Transaction closes, measured in installments at various measurement dates during the Performance Period.
An additional number of Class D Units subject to the award (the “distribution equivalent units”) having a value equal to the dividends that would have been paid during the Performance Period on the shares of common stock corresponding to the base units that become performance vested (less any actual distributions made with respect to such units) will vest in full as of the completion of the Performance Period. For purposes of calculating the number of distribution equivalent units, the dividend amount will be adjusted (plus or minus) to reflect the gain or loss on such amount had the dividends been reinvested in common stock of the Company on the applicable payment date.
Following the completion of the Performance Period, the Plan administrator will determine the number of base units that have become performance-vested and the number of distribution equivalent units. The number of Class D Units that constitute distribution equivalent units plus the number of performance-vested base units are referred to as the “Performance Vested Units.”
Upon the completion of the Performance Period, any Performance Vested Units will become fully vested and cease to be subject to forfeiture, subject to the executive’s continued service through the completion of the Performance Period.
Change in Control. In the event of a change in control of the Company, all outstanding Performance Vested Units (if any), including any Class D Units that become Performance Vested Units in connection with the change in control, will become fully vested and cease to be subject to forfeiture as of the date of the change in control, subject to the executive’s continued service until at least immediately prior to the change in control.
Certain Terminations of Service. Except as otherwise described below, any Class D Units that have not fully vested as of the date on which an executive’s service terminates for any reason will be cancelled and forfeited by the executive.
