8-KLeadership ChangesMaterial Agreements

DIGITAL REALTY TRUST, INC. 8-K Report, Material Agreement (Feb 18, 2014)

Filed February 18, 2014For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

This 8-K filing by Digital Realty Trust, Inc. (DLR) on February 18, 2014, primarily details amendments to the Partnership Agreement and new compensatory arrangements for its named executive officers. The company entered into the Twelfth Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P. in conjunction with the issuance of Class D profits interest units. These units, along with performance-based and time-based Restricted Stock Units (RSUs), are designed to incentivize executive performance tied to the company's total shareholder return (TSR) relative to the MSCI US REIT Index over a three-year performance period. Investors should note that a significant portion of the executive compensation is now linked to achieving specific relative TSR hurdles. The structure includes performance vesting based on relative TSR and subsequent time vesting. Provisions for vesting acceleration upon a change in control and specific conditions for vesting in cases of termination of service (including death, disability, termination by the company, or retirement) are also outlined. The filing indicates that the full Partnership Agreement and award agreements will be filed as exhibits to the upcoming Form 10-K.

Key Highlights

  • 1Digital Realty Trust, Inc. (DLR) amended its Limited Partnership Agreement to facilitate the issuance of Class D profits interest units.
  • 2New compensation awards were granted to named executive officers, including Class D profits interest units, performance-based RSUs, and time-based RSUs.
  • 3A substantial portion of executive compensation is now performance-based, tied to Digital Realty's Total Shareholder Return (TSR) relative to the MSCI US REIT Index over a three-year period.
  • 4Specific performance targets for vesting are defined, ranging from 0% to 100% based on achieving certain relative TSR levels.
  • 5Awards are subject to both performance-based vesting and subsequent time-based vesting schedules.
  • 6Vesting of these awards may accelerate in the event of a change in control of the company.
  • 7Detailed provisions address vesting upon various termination scenarios, including death, disability, termination by the company, and retirement.

Frequently Asked Questions

The main purpose of this 8-K filing is to report on amendments to Digital Realty Trust, Inc.'s (DLR) Limited Partnership Agreement and to disclose new material compensatory arrangements for its named executive officers, specifically involving Class D profits interest units and Restricted Stock Units (RSUs).

A significant portion of the executive compensation is now performance-based. This includes Class D profits interest units and performance-based RSUs that vest based on Digital Realty's Total Shareholder Return (TSR) compared to the MSCI US REIT Index over a three-year performance period. There are also time-based RSUs that vest solely based on continued service.

The performance-based awards vest based on achieving specific relative Total Shareholder Return (TSR) levels compared to the MSCI US REIT Index. The vesting percentage ranges from 0% to 100%, with defined 'threshold,' 'target,' and 'high' levels. Once performance vesting is met, the awards are subject to additional time-based vesting over several years.

In the event of a change in control of Digital Realty Trust, Inc., all outstanding performance-vested units and RSUs (including those that become performance-vested in connection with the change in control) will vest in full, subject to the executive's continued service immediately prior to the change in control.