UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 20, 2018

 


 

QTS Realty Trust, Inc.

Quality Tech, LP

(Exact name of registrant as specified in its charter)

 


 

Maryland (QTS Realty Trust, Inc.)
Delaware (Quality Tech, LP)

 

001-36109
333-201810

 

46-2809094
27-0707288

(State or other jurisdiction
of incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)

 

12851 Foster Street
Overland Park, KS

 


66213

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (913) 814-9988

 

Not Applicable

(Former name or former address, if changed since last report.)

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o                  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

  

  


 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

 



 

Item 2.05 Costs Associated with Exit or Disposal Activities.

 

On February 20, 2018, QTS Realty Trust, Inc. (the “Company”) commenced a restructuring plan regarding the organization of its business and product offerings.  Under the restructuring plan, the Company intends to realign its product offerings around hyperscale and hybrid colocation, while exiting certain of its Cloud and Managed Services offerings, including some estimated colocation impact from customers using an integrated solution (which are now labeled as “non-core” offerings), and to implement a broader cost reduction initiative reflecting the Company’s simplified product set.  The purpose of the restructuring plan is to increase growth, profitability and predictability in the Company’s business, while also reducing complexity and simplifying the Company’s cost structure.  The Company expects to complete the exit of its non-core Cloud and Managed Services offerings by the end of 2018.

 

In connection with the restructuring plan, the Company expects to incur estimated costs and report estimated charges of approximately $8 million to $10 million in the aggregate as a result of cash payments for severance, stay bonuses and related benefits to affected employees.  These payments and costs will be incurred over the course of 2018.  The Company may incur additional costs and report additional charges in connection with the restructuring plan, such as termination, disposition and impairment costs, which have yet to be determined.   These incremental charges will vary based on the timing and structure of the Company’s exit of its non-core business, including through a potential disposition.

 

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

 

Officer Departures

 

On February 20, 2018, the Company and Daniel T. Bennewitz, the Company’s Chief Operating Officer — Sales, Marketing and Product, agreed that Mr. Bennewitz will leave the Company and QualityTech, LP, the Company's operating partnership (the “Operating Partnership”) before the end of 2018.  Mr. Bennewitz’s departure will result in a termination of his Employment Agreement, dated April 11, 2017, effective as of the date of his departure.

 

On February 20, 2018, the Company and James H. Reinhart, the Company’s Chief Operating Officer — Operations, agreed that Mr. Reinhart will leave the Company and the Operating Partnership before the end of 2018.  However, effective February 21, 2018, Mr. Reinhart will no longer serve in the capacity of Chief Operating Officer — Operations of the Company or the Operating Partnership.  Mr. Reinhart’s departure will result in a termination of his Employment Agreement, dated April 11, 2017, effective as of the date of his departure.

 

Officer Appointments

 

On February 20, 2018, in connection with the Company’s restructuring plan and the departure of Mr. Bennewitz and Mr. Reinhart, the Company appointed David Robey to the position of Chief Operating Officer of the Company and the Operating Partnership.  Mr. Robey will assume the role of Chief Operating Officer on February 21, 2018.

 

Mr. Robey, 50, has served as the Company’s Vice President of Facilities in the Northeast region since the Company’s initial public offering in October 2013.  Previously, he served as the Vice President of Facilities of our predecessor from March 2011 to our initial public offering.  Mr. Robey has led the Company’s property development, hyperscale sales engineering and property engineering for the past four months.  Mr. Robey joined the Company in 2010 as part of the Company’s acquisition of its mega data center in Richmond.  Prior to joining the Company’s predecessor in 2010, Mr. Robey held various leadership positions at Infineon/Qimonda, a semiconductor manufacturer from 2001 to 2010 and has nearly 25 years of mission critical operations and facilities experience.  In his last position at Infineon/Qimonda, Mr. Robey was the Vice President & Managing Director of

 

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Infineon/Qimonda’s 210 acre technology campus in Richmond, Virginia where he was responsible for Operations, Human Resources, Finance, Purchasing, Facilities and Information Technology.  Mr. Robey earned a Bachelor of Science degree in physics from Missouri State University.

 

As of the date of this Current Report on Form 8-K, the Company and Mr. Robey have not enter into an employment agreement reflecting Mr. Robey’s new position, including any changes in compensation, but may do so in the future.  If the Company and Mr. Robey enter into an employment agreement, it will be reported in a Current Report on Form 8-K once the agreement is finalized and executed.

 

In connection with this appointment, on February 20, 2018, the Company entered into an indemnification agreement (the “Indemnification Agreement”) with Mr. Robey that obligates the Company to indemnify him to the maximum extent permitted by Maryland law. This Indemnification Agreement provides that if Mr. Robey is a party or is threatened to be made a party to any proceeding by reason of his status as an officer, the Company must indemnify him for all reasonable expenses and liabilities actually incurred by him, or on his behalf, unless it has been established that:

 

·                 the act or omission was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty;

·                 he actually received an improper personal benefit in money, property or services; or

·                 with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful;

 

provided, however, that the Company (i) has no obligation to indemnify Mr. Robey for a proceeding by or in the right of the Company, for reasonable expenses and liabilities actually incurred by him, or on his behalf, if it has been adjudged that he is liable to the Company with respect to such proceeding and (ii) has no obligation to indemnify or advance expenses to Mr. Robey for a proceeding brought by him against the Company, except for a proceeding brought to enforce indemnification under Section 2-418 of the Maryland General Corporation Law (“MGCL”) or as otherwise provided by the Company’s bylaws our charter, a resolution of the Company’s board of directors (“Board”) or an agreement approved by the Board.  Under the MGCL, a Maryland corporation may not indemnify an officer in a suit by or in the right of the corporation in which the officer was adjudged liable on the basis that a personal benefit was improperly received.

 

Upon Mr. Robey’s application to a court of appropriate jurisdiction, the court may order indemnification if:

 

·                 the court determines that he is entitled to indemnification under Section 2-418(d)(1) of the MGCL, in which case he will be entitled to recover from the Company the expenses of securing such indemnification; or

·                 the court determines that he is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not h has met the standards of conduct set forth in Section 2-418(b) of the MGCL or has been adjudged liable for receipt of an “improper personal benefit” under Section 2-418(c) of the MGCL; provided, however, that the Company’s indemnification obligations to him will be limited to the expenses actually and reasonably incurred by him, or on his or her behalf, in connection with any proceeding by or in the right of the Company or in which he will have been adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL.

 

Notwithstanding, and without limiting any other provisions of the Indemnification Agreement, if Mr. Robey is a party or is threatened to be made a party to any proceeding by reason of his status as an officer, and he is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such proceeding, the Company must indemnify him for all expenses actually and reasonably incurred by him, or on his behalf, in connection with each successfully resolved claim, issue or matter, including any claim, issue or matter in such a proceeding that is terminated by dismissal, with or without prejudice.

 

The Company is required to pay all indemnifiable expenses in advance of the final disposition of any proceeding if Mr. Robey furnishes us with a written affirmation of his good faith belief that the standard of conduct necessary for indemnification by us has been met and a written undertaking to reimburse the Company if a court of competent jurisdiction determines that he is not entitled to indemnification.

 

In addition to the Indemnification Agreement, the Company’s charter and bylaws obligate it, to the maximum extent permitted by Maryland law, to indemnify and to pay or reimburse reasonable expenses in advance

 

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of final disposition of a proceeding to (1) any of its present or former directors or officers who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or (2) any individual who, while serving as our director or officer and at the Company’s request, serves or has served another corporation, REIT, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, REIT, partnership, joint venture, trust, employee benefit plan or other enterprise, and who is made or threatened to be made a party to the proceeding by reason of his service in that capacity.

 

The foregoing description of the Indemnification Agreement does not purport to be complete, and is qualified in its entirety by reference to the full text of the Indemnification Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.

 

Item 7.01 Regulation FD Disclosure.

 

On February 20, 2018, the Company issued a press release announcing the restructuring plan.  A copy of the press release is attached hereto as Exhibit 99.1.

 

The information disclosed in this 7.01, including Exhibit 99.1 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit Number

 

Description

 

 

 

10.1

 

Indemnification Agreement, dated as of February 20, 2018, by and between QTS Realty Trust, Inc. and David Robey

99.1

 

Press Release issued by QTS Realty Trust, Inc. on February 20, 2018.

 

Cautionary Note Regarding Forward-Looking Statements

 

Some of the statements contained in this Form 8-K, including Exhibit 99.1, constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In particular, statements pertaining to the Company’s capital resources, portfolio performance, results of operations, anticipated growth in our funds from operations and anticipated market conditions contain forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You also can identify forward-looking statements by discussions of strategy, plans or intentions.

 

The forward-looking statements contained in this Form 8-K, including Exhibit 99.1, reflect the Company’s current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause the Company’s actual results to differ significantly from those expressed in any forward-looking statement. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:  adverse economic or real estate developments in our markets or the technology industry; obsolescence or reduction in marketability of our infrastructure due to changing industry demands; global, national and local economic conditions; risks related to our international operations; difficulties in identifying properties to acquire and completing acquisitions; our failure to successfully develop, redevelop and operate acquired properties or lines of

 

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business; significant increases in construction and development costs; the increasingly competitive environment in which we operate; defaults on, or termination or non-renewal of, leases by customers; decreased rental rates or increased vacancy rates; increased interest rates and operating costs, including increased energy costs; financing risks, including our failure to obtain necessary outside financing; dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers; our failure to qualify and maintain QTS’ qualification as a real estate investment trust; environmental uncertainties and risks related to natural disasters; financial market fluctuations; and changes in real estate and zoning laws, revaluations for tax purposes and increases in real property tax rates.

 

While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance.  The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes.  For a further discussion of these and other factors that could cause the Company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and other periodic reports the Company files with the Securities and Exchange Commission.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: February 20, 2018

 

QTS Realty Trust, Inc.

 

 

 

 

By:

/s/ Shirley E. Goza

 

 

Shirley E. Goza
Secretary and General Counsel

 

 

 

 

 

 

Date: February 20, 2018

 

Quality Tech, LP

 

 

 

 

By:

/s/ Shirley E. Goza

 

 

Shirley E. Goza
Secretary and General Counsel

 

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Exhibit 10.1

 

INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT (this “ Agreement ”) is entered into as of February 20, 2018, by and among QTS Realty Trust, Inc., a Maryland corporation (the “ Company ” or the “ Indemnitor ”) and David Robey (the “ Indemnitee ”).

 

WHEREAS , the Indemnitee is an officer of the Company and in such capacity is performing a valuable service for the Company;

 

WHEREAS , Maryland law permits the Company to enter into contracts with its officers or members of its Board of Directors with respect to indemnification of, and advancement of expenses to, such persons;

 

WHEREAS, the Articles of Amendment and Restatement of the Company (the “ Charter ”) provide that the Company shall indemnify and advance expenses to its directors and officers to the maximum extent permitted by Maryland law in effect from time to time;

 

WHEREAS , the Amended and Restated Bylaws of the Company (the “ Bylaws ”) provide that each director and officer of the Company shall be indemnified by the Company to the maximum extent permitted by Maryland law in effect from time to time and shall be entitled to advancement of expenses consistent with Maryland law; and

 

WHEREAS , to induce the Indemnitee to provide services to the Company as an officer, and to provide the Indemnitee with specific contractual assurance that indemnification will be available to the Indemnitee regardless of, among other things, any amendment to or revocation of the Charter or the Bylaws, or any acquisition transaction relating to the Company, the Indemnitor desires to provide the Indemnitee with protection against personal liability as set forth herein.

 

NOW, THEREFORE , in consideration of the premises and the covenants contained herein, the Indemnitor and the Indemnitee hereby agree as follows:

 

1.              DEFINITIONS

 

For purposes of this Agreement:

 

(A)           Change in Control ” shall have the definition set forth in the QTS Realty Trust, Inc. 2013 Equity Incentive Plan.

 

(B)           Corporate Status ” describes the status of a person who is or was a director or officer of the Company or is or was serving at the request of the Company as a director, officer, partner (limited or general), member, employee or agent of any other foreign or domestic corporation, partnership, joint venture, limited liability

 



 

company, trust, other enterprise (whether conducted for profit or not for profit) or employee benefit plan. The Company shall be deemed to have requested the Indemnitee to serve an employee benefit plan where the performance of the Indemnitee’s duties to the Company also imposes or imposed duties on, or otherwise involves or involved services by, the Indemnitee to the plan or participants or beneficiaries of the plan.

 

(C)           Determination ” means a determination that either (x) there is a reasonable basis for the conclusion that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee had met the applicable standard of conduct (a “ Favorable Determination ”) or (y) there is no reasonable basis for the conclusion that indemnification of the Indemnitee is proper in the circumstances (an “ Adverse Determination ”).

 

(D)           Disinterested Director ” means a director who is not and was not a party to the Proceeding in respect of which indemnification is sought by the Indemnitee and does not otherwise have an interest materially adverse to any interest of the Indemnitee.

 

(E)            Expenses ” shall include all attorneys’ and paralegals’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

 

(F)            Proceeding ” includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation (including any formal or informal internal investigation to which the Indemnitee is made a party by reason of the Corporate Status of the Indemnitee), administrative hearing, or any other proceeding, including appeals therefrom, whether civil, criminal, administrative, or investigative, except one initiated by the Indemnitee pursuant to paragraph 8 of this Agreement to enforce such Indemnitee’s rights under this Agreement.

 

(G)           Special Legal Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporate law and neither presently is, or in the past two years has been, retained to represent (i) the Indemnitor or the Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.

 

2.              INDEMNIFICATION

 

The Indemnitee shall be entitled to the rights of indemnification provided in this paragraph 2 and under applicable law, the Charter, the Bylaws, any other agreement, a vote of

 

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stockholders or resolution of the Board of Directors or otherwise if, by reason of such Indemnitee’s Corporate Status, such Indemnitee is, or is threatened to be made, a party to any threatened, pending, or contemplated Proceeding, including a Proceeding by or in the right of the Company.  Unless prohibited by paragraph 13 hereof and subject to the other provisions of this Agreement, the Indemnitee shall be indemnified hereunder, to the maximum extent permitted by Maryland law in effect from time to time, against judgments, penalties, fines and settlements and reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with such Proceeding or any claim, issue or matter therein; provided, however, that if such Proceeding was initiated by or in the right of the Company, indemnification may not be made in respect of such Proceeding if the Indemnitee shall have been finally adjudged to be liable to the Company.  For purposes of this paragraph 2, excise taxes assessed on the Indemnitee with respect to an employee benefit plan pursuant to applicable law shall be deemed fines.

 

3.              INDEMNIFICATION FOR EXPENSES IN CERTAIN CIRCUMSTANCES

 

(A)           Without limiting the effect of any other provision of this Agreement (including the Indemnitee’s rights to indemnification under paragraph 2 and advancement of expenses under paragraph 4), without regard to whether the Indemnitee is entitled to indemnification under paragraph 2 and without regard to the provisions of paragraph 6 hereof, to the extent that the Indemnitee is successful, on the merits or otherwise, in any Proceeding to which the Indemnitee is a party by reason of such Indemnitee’s Corporate Status, such Indemnitee shall be indemnified against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection therewith.

 

(B)           If the Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues, or matters in such Proceeding, the Indemnitor shall indemnify the Indemnitee against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with each successfully resolved claim, issue or matter.

 

(C)           For purposes of this paragraph 3 and without limitation, the termination of any claim, issue or matter in such Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

4.              ADVANCEMENT OF EXPENSES

 

Notwithstanding anything in this Agreement to the contrary, but subject to paragraph 13 hereof, if the Indemnitee is or was or becomes a party to or is otherwise involved in any Proceeding (including as a witness), or is or was threatened to be made a party to or a participant (including as a witness) in any such Proceeding, by reason of the Indemnitee’s Corporate Status, or by reason of (or arising in part out of) any actual or alleged event or occurrence related to the Indemnitee’s Corporate Status, or by reason of any actual or alleged act or omission on the part of the Indemnitee taken or omitted in or relating to the Indemnitee’s Corporate Status, then the

 

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Indemnitor shall advance all reasonable Expenses incurred by the Indemnitee in connection with any such Proceeding within twenty (20) days after the receipt by the Indemnitor of a statement from the Indemnitee requesting such advance from time to time, whether prior to or after final disposition of such Proceeding; provided that, such statement shall reasonably evidence the Expenses incurred or to be incurred by the Indemnitee and shall include or be preceded or accompanied by (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Indemnitor as authorized by this Agreement has been met and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amounts advanced if it should ultimately be determined that the standard of conduct has not been met.  The undertaking required by clause (ii) of the immediately preceding sentence shall be an unlimited general obligation of the Indemnitee but need not be secured and may be accepted without reference to financial ability to make the repayment.

 

5.              WITNESS EXPENSES

 

Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee is, by reason of such Indemnitee’s Corporate Status, a witness (or is forced or asked to respond to discovery requests) for any reason in any Proceeding to which such Indemnitee is not a named defendant or respondent, the Indemnitor shall advance all Expenses actually incurred by or on behalf of such Indemnitee, on an as-incurred basis in accordance with paragraph 4 of this Agreement, in connection therewith and indemnify the Indemnitee therefor.

 

6.              DETERMINATION OF ENTITLEMENT TO AND AUTHORIZATION OF INDEMNIFICATION

 

(A)           To obtain indemnification under this Agreement, the Indemnitee shall submit to the Indemnitor a written request, including therewith such documentation and information reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification.

 

(B)           The Indemnitor agrees that the Indemnitee shall be indemnified to the fullest extent permitted by law.  Indemnification under this Agreement may not be made unless authorized for a specific Proceeding after a Determination has been made in accordance with this paragraph 6(B) that indemnification of the Indemnitee is permissible in the circumstances because the Indemnitee has met the following standard of conduct: the Indemnitor shall indemnify the Indemnitee in accordance with the provisions of paragraph 2 hereof, unless it is established that: (a) the act or omission of the Indemnitee was material to the matter giving rise to the Proceeding and (x) was committed in bad faith or (y) was the result of active and deliberate dishonesty; (b) the Indemnitee actually received an improper personal benefit in money, property or services; or (c) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful.  Any Determination shall be made within thirty (30) days after receipt of the Indemnitee’s written request for indemnification pursuant to

 

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Section 6(A) and such Determination shall be made either (i) by the Disinterested Directors, even though less than a quorum, so long as the Indemnitee does not request that such Determination be made by Special Legal Counsel, or (ii) if so requested by the Indemnitee, in the Indemnitee’s sole discretion, by Special Legal Counsel in a written opinion to the Indemnitor and the Indemnitee. If a Determination is made that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within fifteen (15) business days after such Determination.  The Indemnitee shall reasonably cooperate with the person, persons or entity making such Determination with respect to the Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such Determination. Any Expenses incurred by the Indemnitee in so cooperating with the Disinterested Directors or Special Legal Counsel, as the case may be, making such determination shall be advanced and borne by the Indemnitor in accordance with paragraph 4 of this Agreement (irrespective of the Determination as to Indemnitee’s entitlement to indemnification). If the person, persons or entity empowered or selected under Section 6(B) of this Agreement to determine whether the Indemnitee is entitled to indemnification shall not have made a Favorable Determination within thirty (30) days after receipt by the Indemnitor of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent permitted by law, be deemed to have been made and the Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such thirty (30) day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 6(B) shall not apply if the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to Section 6(E).

 

(C)           The Indemnitor shall be bound by and shall have no right to challenge a Favorable Determination. If an Adverse Determination is made, or if for any other reason the Indemnitor does not make timely indemnification payments or advancement of Expenses required by this Agreement, the Indemnitee shall have the right to commence a Proceeding before a court of competent jurisdiction to challenge such Adverse Determination and/or to require the Indemnitor to make such payments or advancement of expenses (and the Indemnitor shall have the right to defend their position in such Proceeding and to appeal any adverse judgment in

 

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such Proceeding). The Indemnitee shall be entitled to have such Expenses advanced by the Indemnitor in accordance with paragraph 4 of this Agreement and applicable law.  If the Indemnitee fails to challenge an Adverse Determination within ninety (90) business days, or if Indemnitee challenges an Adverse Determination and such Adverse Determination has been upheld by a final judgment of a court of competent jurisdiction from which no appeal can be made, then, to the extent and only to the extent required by such Adverse Determination or final judgment, the Indemnitor shall not be obligated to indemnify the Indemnitee under this Agreement.

 

(D)           The Indemnitee shall cooperate with the person or entity making such Determination with respect to the Indemnitee’s entitlement to indemnification, including providing upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination.  Any reasonable costs or expenses (including reasonable attorneys’ fees and disbursements) incurred by the Indemnitee in so cooperating shall be borne by the Indemnitor (irrespective of the determination as to the Indemnitee’s entitlement to indemnification) and the Indemnitor hereby indemnifies and agrees to hold the Indemnitee harmless therefrom.

 

(E)            In the event the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to Section 6(B) hereof, the Indemnitee, or the Indemnitor, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Indemnitor or to the Indemnitee, as the case may be, a written objection to such selection.  Such objection may be asserted only on the grounds that the Special Legal Counsel so selected does not meet the requirements of “Special Legal Counsel” as defined in paragraph 1 of this Agreement.  If such written objection is made, the Special Legal Counsel so selected may not serve as Special Legal Counsel until a court has determined that such objection is without merit.  If, within twenty (20) days after submission by the Indemnitee of a written request for indemnification pursuant to
Section 6(A) hereof, no Special Legal Counsel shall have been selected or, if selected, shall have been objected to, either the Indemnitor or the Indemnitee may petition a court for resolution of any objection which shall have been made by the Indemnitor or the Indemnitee to the other’s selection of Special Legal Counsel and/or for the appointment as Special Legal Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Special Legal Counsel under Section 6(B) hereof.  The Indemnitor shall pay all reasonable fees and expenses of Special Legal Counsel incurred in connection with acting pursuant to Section 6(B) hereof, and all reasonable fees and expenses incident to the selection of such Special Legal Counsel pursuant to this Section 6(D).  In the event that a determination of entitlement to indemnification is to be

 

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made by Special Legal Counsel and such determination shall not have been made and delivered in a written opinion within ninety (90) days after the receipt by the Indemnitor of the Indemnitee’s request in accordance with Section 6(A), upon the due commencement of any judicial proceeding in accordance with Section 8(A) of this Agreement, Special Legal Counsel shall be discharged and relieved of any further responsibility in such capacity.

 

(F)            If the person or entity making the determination whether the Indemnitee is entitled to indemnification shall not have made a determination within thirty (30) days after receipt by the Indemnitor of the request therefor, the requisite Determination of entitlement to indemnification shall be deemed to have been made and the Indemnitee shall be entitled to such indemnification, absent:  (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.  Such 30-day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person or entity making said determination in good faith requires additional time for the obtaining or evaluating of documentation and/or information relating thereto.  The foregoing provisions of this Section 6(E) shall not apply if the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to Section 6(B) of this Agreement.

 

7.              PRESUMPTIONS

 

(A)           It shall be presumed that the Indemnitee is entitled to indemnification under this Agreement (notwithstanding any Adverse Determination), and the Indemnitor or any other person or entity challenging such right shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.

 

(B)           The termination of any Proceeding by conviction, or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

 

8.              REMEDIES

 

(A)           In the event that:  (i) an Adverse Determination is made, or (ii) advancement of reasonable Expenses is not timely made pursuant to this Agreement, or (iii) payment of indemnification due the Indemnitee under this Agreement is not timely made, the Indemnitee shall be entitled to an adjudication in an appropriate court of competent jurisdiction of such Indemnitee’s entitlement to such indemnification or advancement of Expenses.

 

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(B)           In the event that an Adverse Determination shall have been made pursuant to Section 6(B) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this paragraph 8 shall be conducted in all respects as a de novo trial, or arbitration, on the merits. The fact that an Adverse Determination has been made earlier pursuant to paragraph 6 of this Agreement that the Indemnitee was not entitled to indemnification shall not be taken into account in any judicial proceeding commenced pursuant to this paragraph 8 and (i) the Indemnitee shall not be prejudiced in any way by reason of that Adverse Determination and (ii) the Indemnitor shall have the burden of proving that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

 

(C)           If a Favorable Determination shall have been made or deemed to have been made pursuant to Section 6(B) of this Agreement that the Indemnitee is entitled to indemnification, the Indemnitor shall be bound by such Determination in any judicial proceeding or arbitration commenced pursuant to this paragraph 8, absent: (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 

(D)           The Indemnitor shall be precluded from asserting in any judicial proceeding commenced pursuant to this paragraph 8 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Indemnitor is bound by all the provisions of this Agreement.

 

(E)            In the event that the Indemnitee, pursuant to this paragraph 8, seeks a judicial adjudication of such Indemnitee’s rights under, or to recover damages for breach of, this Agreement, if successful on the merits or otherwise as to all or less than all claims, issues or matters in such judicial adjudication, the Indemnitee shall be entitled to recover from the Indemnitor, and shall be indemnified by the Indemnitor against, any and all reasonable Expenses actually incurred by such Indemnitee in connection with each successfully resolved claim, issue or matter.

 

(F)            Notwithstanding anything in this Agreement to the contrary, no Determination as to entitlement of the Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

 

9.              NOTIFICATION AND DEFENSE OF CLAIMS

 

The Indemnitee agrees promptly to notify the Indemnitor in writing upon being served with any summons, citation, subpoena, complaint, indictment, information, or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of

 

8



 

Expenses covered hereunder, but the failure so to notify the Indemnitor will not relieve the Indemnitor from any liability that the Indemnitor may have to Indemnitee under this Agreement unless the Indemnitor can establish that such omission to notify resulted in actual and material prejudice to which it cannot be reversed or otherwise eliminated without any material adverse effect on the Indemnitor.  With respect to any such Proceeding as to which Indemnitee notifies the Indemnitor of the commencement thereof:

 

(A)           The Indemnitor will be entitled to participate therein at its own expense.

 

(B)           Except as otherwise provided below, the Indemnitor will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee.  After notice from the Indemnitor to Indemnitee of the Indemnitor’s election to assume the defense thereof, the Indemnitor will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below.  The Indemnitee shall have the right to employ Indemnitee’s own counsel in such Proceeding, but the fees and disbursements of such counsel incurred after notice from the Indemnitor of the Indemnitor’s assumption of the defense thereof shall be at the expense of Indemnitee unless (a) the employment of counsel by the Indemnitee has been authorized by the Indemnitor, (b) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Indemnitor and the Indemnitee in the conduct of the defense of such action, (c) such Proceeding seeks penalties or other relief against the Indemnitee with respect to which the Indemnitor could not provide monetary indemnification to the Indemnitee (such as injunctive relief or incarceration) or (d) the Indemnitor shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and disbursements of counsel shall be at the expense of the Indemnitor.  The Indemnitor shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Indemnitor, or as to which the Indemnitee shall have reached the conclusion specified in clause (b) above, or which involves penalties or other relief against the Indemnitee of the type referred to in clause (c) above.

 

(C)            The Indemnitor shall not be liable to indemnify the Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without the Indemnitor’s written consent.  The Indemnitor shall not settle any action or claim in any manner that would impose any penalty or limitation on the Indemnitee without the Indemnitee’s written consent.  Neither the Indemnitor nor Indemnitee will unreasonably withhold or delay consent to any proposed settlement.

 

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10.           NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE SUBROGATION

 

(A)           The rights of indemnification and to receive advancement of reasonable Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may at any time be entitled under applicable law, the Charter, the Bylaws, any other agreement, a vote of stockholders, a resolution of the Board of Directors or otherwise, except that any payments otherwise required to be made by the Indemnitor hereunder shall be offset by any and all amounts received by the Indemnitee from any other indemnitor or under one or more liability insurance policies maintained by an indemnitor or otherwise and shall not be duplicative of any other payments received by an Indemnitee from the Indemnitor in respect of the matter giving rise to the indemnity hereunder; provided, however, that if indemnification rights are provided by an Additional Indemnitor as defined in Section 18(B) hereof, such Section shall govern.  No amendment, alteration or repeal of this Agreement or any provision hereof shall be effective as to the Indemnitee with respect to any action taken or omitted by the Indemnitee prior to such amendment, alteration or repeal.

 

(B)           To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors and officers of the Company, the Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available and upon any Change in Control the Company shall use commercially reasonable efforts to obtain or arrange for continuation and/or “tail” coverage for the Indemnitee to the maximum extent obtainable at such time.

 

(C)           Except as otherwise provided in Section 18(B) hereof, in the event of any payment under this Agreement, the Indemnitor shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and take all actions necessary to secure such rights, including execution of such documents as are necessary to enable the Indemnitor to bring suit to enforce such rights.

 

(D)           Except as otherwise provided in Section 18(B) hereof, the Indemnitor shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement, or otherwise.

 

11.           CONTINUATION OF INDEMNITY

 

(A)           All agreements and obligations of the Indemnitor contained herein shall continue during the period the Indemnitee is an officer or a member of the Board of Directors of the Company and shall continue thereafter so long as the Indemnitee shall be subject to any threatened, pending or completed Proceeding by reason of such Indemnitee’s Corporate Status and during the period of statute of limitations

 

10



 

for any act or omission occurring during the Indemnitee’s term of Corporate Status.  This Agreement shall be binding upon the Indemnitor and its respective successors and assigns and shall inure to the benefit of the Indemnitee and such Indemnitee’s heirs, executors and administrators.

 

(B)           The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance reasonably satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

12.           SEVERABILITY

 

If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provisions held invalid, illegal or unenforceable.

 

13.           EXCEPTIONS TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES

 

Notwithstanding any other provisions of this Agreement, the Indemnitee shall not be entitled to indemnification or advancement of reasonable Expenses under this Agreement with respect to (i) any Proceeding initiated by such Indemnitee against the Indemnitor other than a proceeding commenced pursuant to paragraph 8 hereof, or (ii) any Proceeding for an accounting of profits arising from the purchase and sale by Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, rules and regulations promulgated thereunder, or any similar provisions of any federal, state or local statute.

 

14.           NOTICE TO THE COMPANY STOCKHOLDERS

 

Any indemnification of, or advancement of reasonable Expenses, to an Indemnitee in accordance with this Agreement, if arising out of a Proceeding by or in the right of the Company, shall be reported in writing to the stockholders of the Company with the notice of the next Company stockholders’ meeting or prior to the meeting.

 

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15.           HEADINGS

 

The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

16.           MODIFICATION AND WAIVER

 

No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

17.           NOTICES

 

All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand or by a nationally recognized overnight delivery service and received by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, if so delivered or mailed, as the case may be, to the following addresses:

 

If to the Indemnitee, to the address set forth in the records of the Company.

 

If to the Indemnitor, to:

 

QTS Realty Trust, Inc.

12851 Foster Street

Overland Park, KS 66213

Attention:  General Counsel

 

or to such other address as may have been furnished to the Indemnitee by the Indemnitor or to the Indemnitor by the Indemnitee, as the case may be.

 

18.           CONTRIBUTION

 

(A)           To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, penalties, fines and settlements and reasonable expenses actually incurred by or on behalf of an Indemnitee, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or

 

12



 

transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

 

(B)           The Company acknowledges and agrees that as between the Company and any other entity that has provided indemnification rights in respect of Indemnitee’s service as a director of the Company at the request of such entity (an “ Additional Indemnitor ”), the Company shall be primarily liable to Indemnitee as set forth in this Agreement for any indemnification claim (including, without limitation, any claim for advancement of Expenses) by Indemnitee in respect of any Proceeding for which Indemnitee is entitled to indemnification hereunder.  In the event the Additional Indemnitor is liable to any extent to Indemnitee by virtue of indemnification rights provided by the Additional Indemnitor to Indemnitee in respect of Indemnitee’s service on the Board of Directors at the request of the Additional Indemnitor and Indemnitee is also entitled to indemnification under this Agreement (including, without limitation, for advancement of Expenses) as a result of any Proceeding, the Company shall pay, in the first instance, the entire amount of any indemnification claim (including, without limitation, any claim for advancement of Expenses) brought by the Indemnitee against the Company under this Agreement (including, without limitation, any claim for advancement of Expenses) without requiring the Additional Indemnitor to contribute to such payment and the Company hereby waives and relinquishes any right of contribution, subrogation or any other right of recovery of any kind it may have against the Additional Indemnitor in respect thereof.  The Company further agrees that no advancement or payment by the Additional Indemnitor on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing and the Additional Indemnitor shall be subrogated to the extent of such advancement or payment to all of the rights of recovery of the Indemnitee against the Company.

 

19.           GOVERNING LAW

 

The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without application of the conflict of laws principles thereof.

 

20.           NO ASSIGNMENTS

 

The Indemnitee may not assign its rights or delegate obligations under this Agreement without the prior written consent of the Indemnitor.  Any assignment or delegation in violation of this paragraph 20 shall be null and void.

 

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21.           NO THIRD PARTY RIGHTS

 

Nothing expressed or referred to in this Agreement will be construed to give any person other than the parties to this Agreement any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement; and (b) this Agreement and all of its provisions are for the sole and exclusive benefit of the parties to this Agreement and their successors and permitted assigns.

 

22.           COUNTERPARTS

 

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together constitute an agreement binding on all of the parties hereto.

 

[Signature page follows]

 

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IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the day and year first above written.

 

 

QTS REALTY TRUST, INC.

 

 

 

 

 

 

By:

/s/ Shirley E. Goza

 

Name:

Shirley E. Goza

 

Title:

General Counsel and Secretary

 

 

 

 

 

 

 

INDEMNITEE:

 

 

 

 

 

 

 

By:

/s/ David Robey

 

Name:

Chief Operating Officer

 

[Signature Page to Indemnification Agreement]

 


Exhibit 99.1

 

QTS Announces Strategic Plan to Accelerate Growth and Profitability

 

Plan expected to reduce business complexity, simplify QTS’ cost structure and lead to increased growth and predictability

 

Overland Park, Kan. (February 20, 2018) — QTS Realty Trust (NYSE: QTS), a leading provider of software-defined and mega-scale data center solutions, today announced a restructuring plan to increase growth, reduce complexity in the business and drive enhanced future profitability and bottom line financial performance.

 

“Today we are launching a restructuring plan to position QTS for accelerated future growth by re-focusing our organization around the two primary drivers of demand in our business, Hyperscale and Hybrid Colocation,” said Chad Williams, Chairman and CEO — QTS. “In addition, by simplifying our business and cost structure we anticipate achieving a meaningful increase in our profitability and long-term value for shareholders.”

 

QTS’ restructuring plan will focus on:

 

1.               Realigning its organization around: Hyperscale and Hybrid Colocation to drive accelerated growth. QTS is seeing significant momentum within both Hyperscale and Hybrid Colocation opportunities. As such, QTS is re-focusing its organization and salesforce on these two demand drivers to accelerate momentum and growth. Dan Bennewitz, COO — Sales and Marketing, plans to retire in 2018. QTS has commenced a search for a Chief Revenue Officer as a replacement who will lead both Hybrid Colocation Sales and Marketing. Tag Greason, EVP of Sales will continue to lead QTS’ Hyperscale sales team.

 

·                   Hyperscale . QTS’ momentum within Hyperscale continues to build and has accelerated since announcing new footprint expansion opportunities in Ashburn, VA; Phoenix, AZ; and Hillsboro, OR in late 2017. QTS’ current Hyperscale opportunity pipeline is four times larger than its pipeline at the beginning of 2017 and the Company is in active discussions with Hyperscale companies on needs ranging from 4 to 40MW.  In order to support accelerating momentum in the Hyperscale vertical, QTS has realigned its salesforce so that its former C1-Wholesale sales team will now focus exclusively on the top 30 Hyperscale accounts. QTS expects a more focused Hyperscale sales team will build on existing execution within the Hyperscale vertical and lead to accelerated leasing and revenue growth.

 

·                   Hybrid Colocation . QTS also continues to see ramping demand for colocation solutions, seamlessly integrated with a path to the cloud as evidenced by its recently announced CloudRamp partnership with the largest public cloud provider in the world. Through its industry-first software-defined data center platform and strategic partnerships with SDN-enabled connectivity platforms like Megaport and Packetfabric, QTS is able to deliver differentiated Hybrid Colocation solutions, complete with dynamic infrastructure visibility and control and premium customer support. In order to take full advantage of this opportunity, QTS has removed the artificial cap of 500kW for its Hybrid Colocation (formerly C2-Colocation) sales team which enables the bulk of QTS sales resources to now pursue all non-Hyperscale enterprise deals. QTS is already seeing success from this realignment, with multiple deals signed and in the pipeline in the 500kW to 2MW range.

 



 

·                   Jim Reinhart, QTS’ COO-Operations will be transitioning out of the organization. Mr. Reinhart’s operational responsibilities will be assumed as follows:

 

·                   David Robey, who currently leads QTS property development, hyperscale sales engineering and property engineering, will take on additional leadership of the facilities organization and will assume the role of Chief Operating Officer. Mr. Robey joined QTS in 2010 as part of the acquisition of QTS’ mega data center site in Richmond and has nearly 25 years of mission critical operations and technology management experience.

 

·                   Jon Greaves, Chief Technology Officer who currently leads all IT-related groups within QTS, will take on additional operational responsibility of the Hybrid Colocation business. The ability to enable hybrid solutions through a technology platform serves as the foundation of QTS’ differentiation within Hybrid Colocation, which makes Mr. Greaves a natural choice to lead this business.

 

2.               Further narrowing focus of C3 — Cloud and Managed Services products to reduce complexity in the business, improve predictability and operating efficiency. QTS has expanded the previously announced initiative of reducing the scope of products within C3 to focus exclusively on solutions that serve as a direct complement to colocation. As part of this initiative, QTS will seek to exit certain C3 custom products the company has identified as “Non-Core,” which includes dedicated cloud, specific managed services, and colocation revenue attached to specific dedicated cloud customers. QTS will seek to transition the affected Non-Core customer contracts to a strategic partner to maintain consistent customer support. This expanded initiative will reduce the number of cloud and managed services products at QTS from more than 100 to approximately 15 and thereby significantly reduce complexity within the business. In addition, by exiting Non-Core products, the Company expects to realize meaningful operating cost savings and enhanced predictability in the business. QTS expects to complete the exit of Non-Core products by the end of 2018.

 

3.               Implementing a broader cost reduction initiative to align QTS’ cost structure with a simplified product set. In light of a narrowed product focus, QTS plans to implement a company-wide initiative to reduce costs within the business across several areas including: 1) rent expense associated with certain leased data centers, 2) software licenses, 3) communications expense, 4) hardware depreciation and 5) personnel. QTS expects these cost reduction initiatives will enable the Company’s go-forward “Core” business to achieve a significant adjusted EBITDA margin improvement over the course of 2018 with additional margin expansion potential over time. QTS anticipates its restructuring plan to have only a relatively modest impact on its consolidated 2018 Adjusted EBITDA and Operating FFO per diluted share results as a result of a more efficient cost structure and it will provide an opportunity for improved growth in future years.

 

Williams concluded, “Our restructuring plan allows QTS to re-focus 100% of our resources on the two strongest growth drivers in our business and accelerate value creation for shareholders. In addition, this realignment creates an opportunity for several of our leaders to step into more substantial roles and help lead QTS into our next phase of growth supported by Hyperscale and Hybrid Colocation.”

 



 

Beginning in the first quarter 2018, QTS will modify its earnings reporting and supplemental disclosures to reflect the realignment of its business around Hyperscale and Hybrid Colocation. QTS also expects to separate out the reporting of primary financial measures between its Core and Non-Core businesses to enable enhanced disclosure transparency.

 

Cautionary Note Regarding Forward-Looking Statements

 

Some of the statements contained in this press release constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In particular, statements pertaining to the Company’s capital resources, portfolio performance, results of operations, anticipated growth in our funds from operations and anticipated market conditions contain forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You also can identify forward-looking statements by discussions of strategy, plans or intentions.

 

The forward-looking statements contained in this press release reflect the Company’s current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause the Company’s actual results to differ significantly from those expressed in any forward-looking statement. The Company does not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:  adverse economic or real estate developments in our markets or the technology industry; obsolescence or reduction in marketability of our infrastructure due to changing industry demands; global, national and local economic conditions; risks related to our international operations; difficulties in identifying properties to acquire and completing acquisitions; our failure to successfully develop, redevelop and operate acquired properties or lines of business; significant increases in construction and development costs; the increasingly competitive environment in which we operate; defaults on, or termination or non-renewal of, leases by customers; decreased rental rates or increased vacancy rates; increased interest rates and operating costs, including increased energy costs; financing risks, including our failure to obtain necessary outside financing; dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers; our failure to qualify and maintain QTS’ qualification as a real estate investment trust; environmental uncertainties and risks related to natural disasters; financial market fluctuations; and changes in real estate and zoning laws, revaluations for tax purposes and increases in real property tax rates.

 

While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance.  The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes.  For a further discussion of these and other factors that could cause the Company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and other periodic reports the Company files with the Securities and Exchange Commission.

 



 

About QTS

 

QTS Realty Trust, Inc. (NYSE: QTS) is a leading provider of data center solutions across a diverse footprint spanning more than 6 million square feet of owned mega scale data center space throughout North America. Through its software-defined technology platform, QTS is able to deliver secure, compliant infrastructure solutions, robust connectivity and premium customer service to more than 1,100 leading hyperscale technology companies, enterprises, and government entities. Visit QTS at www.qtsdatacenters.com, call toll-free 877.QTS.DATA or follow on Twitter @DataCenters_QTS.

 

Investor Relations Contact:

Stephen Douglas, VP Investor Relations and Strategic Planning

QTS Realty Trust

ir@qtsdatacenters.com

 

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