Item 1.01 Entry Into a Material Definitive Agreement.
Agreement and Plan of Merger
On June 7, 2021, QTS Realty Trust, Inc., a Maryland corporation ("QTS" or the
"Company"), QualityTech LP, a Delaware limited partnership and the operating
partnership of the Company (the "Partnership"), Volt Upper Holdings LLC, a
Delaware limited liability company ("Parent"), Volt Lower Holdings LLC, a
Delaware limited liability company ("Merger Sub I"), and Volt Acquisition LP, a
Delaware limited partnership ("Merger Sub II") entered into an Agreement and
Plan of Merger (the "Merger Agreement"). Parent, Merger Sub I and Merger Sub II
are affiliates of Blackstone Infrastructure Partners L.P. and BREIT Operating
Partnership L.P. ("BREIT OP") (the "Guarantors"), which are affiliates of The
Blackstone Group Inc. Pursuant to the terms and subject to the conditions set
forth in the Merger Agreement, at the closing of the Mergers (the "Closing"),
Merger Sub II will merge with and into the Partnership (the "Partnership
Merger"), and, immediately following the Partnership Merger, the Company will
merge with and into Merger Sub I (the "Company Merger" and, together with the
Partnership Merger, the "Mergers"). Upon completion of the Partnership Merger,
the Partnership will survive and the separate existence of Merger Sub II will
cease (the "Surviving Partnership"). Upon completion of the Company Merger,
Merger Sub I will survive and the separate existence of the Company will cease
(the "Surviving Company"). The Mergers and the other transactions contemplated
by the Merger Agreement were unanimously approved by the Company's Board of
Directors (the "Company Board").
Merger Consideration. Pursuant to the terms and conditions of the Merger
Agreement, at the effective time of the Company Merger (the "Company Merger
Effective Time"), among other things:
· Company Shares: each share of Class A Common Stock of the Company, par value
$0.01 per share (each, a "Company Class A Share") and each share of Class B
Common Stock of the Company, par value $0.01 per share (each, a "Company Class
B Share" and together with the Company Class A Shares, the "Company Shares"),
other than shares owned by Parent, Merger Sub I or any subsidiary of Parent,
the Company or Merger Sub I (such shares, the "Excluded Shares"), that is
issued and outstanding immediately prior to the Company Merger Effective Time
will automatically be converted into the right to receive an amount in cash
equal to $78.00 (the "Per Company Share Merger Consideration"), without
interest;
· Series A Preferred Stock: each share of 7.125% Series A Cumulative Redeemable
Perpetual Preferred Stock of the Company, par value $0.01 per share (each, a
"Company Series A Preferred Share") (other than any Excluded Shares) issued and
outstanding immediately prior to the Company Merger Effective Time shall be
automatically converted into the right to receive the redemption price per
share equal to an amount in cash equal to $25.00 plus accrued and unpaid
dividends, if any, to and including the date of Closing (the "Closing Date"),
without interest; and prior to Closing, the Company will, following Parent's
request, provide a notice of special optional redemption to the holders of
record of Company Series A Preferred Shares in accordance with the Series A
Articles Supplementary (as defined in the Merger Agreement) and the Merger
Agreement; and
· Series B Preferred Stock: each share of 6.50% Series B Cumulative Convertible
Perpetual Preferred Stock, par value $0.01 per share (each, a "Company Series B
Preferred Share") (other than any Excluded Shares) issued and outstanding
immediately prior to the Company Merger Effective Time shall be, subject to the
terms and conditions set forth in the Merger Agreement, automatically converted
into one Series A Preferred Unit of the Surviving Company. Such Series A
Preferred Units shall have terms materially the same as the Company Series B
Preferred Shares, with changes to such terms as are required pursuant to and
made in compliance with the Series B Articles Supplementary (as defined in the
Merger Agreement). No later than twenty business days prior to the anticipated
Closing Date, the Company will provide the notice of fundamental change
contemplated by the Series B Articles Supplementary (as defined in the Merger
Agreement) to all holders of Company Series B Preferred Shares.
Class A Partnership Unit. Pursuant to the terms and conditions of the Merger
Agreement, at the effective time of the Partnership Merger (the "Partnership
Merger Effective Time"), each outstanding Class A Unit of the Partnership (a
"Class A Partnership Unit"), other than Class A Partnership Units held by the
Company or any of the Company's wholly-owned subsidiaries or Parent, Merger Sub
II or any of their respective wholly-owned subsidiaries, that is issued and
outstanding immediately prior to the Partnership Merger Effective Time will
automatically be converted into, and will be cancelled in exchange for, the
right to receive an amount in cash equal to the Per Company Share Merger
Consideration, without interest (the "Per Partnership Unit Merger
Consideration"), or in lieu of receiving the Per Partnership Unit Merger
Consideration, each Class A Partnership Unit may elect to retain such Class A
Partnership Unit as a Class A Partnership Unit in the Surviving Partnership.
Company LTIP Units. With respect to each Company Class O LTIP Unit ("Company
LTIP Unit") that has vested in accordance with the terms of the relevant award
agreement prior to the Partnership Merger Effective Time (each, a "Vested LTIP
Unit"), the Company, as the general partner of the Partnership, will exercise
. . .
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
The disclosure contained in Item 8.01 under the section "Letter Agreement" is
incorporated herein by reference.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
On June 7, 2021, the Company Board approved the second amendment (the "Bylaws
Amendment") to the Company's Second Amended and Restated Bylaws, as amended (the
"Bylaws"), which provides that unless the Company consents in writing to the
selection of an alternative forum, (i) the Circuit Court for Baltimore City,
Maryland, or, if that Court does not have jurisdiction, the United States
District Court for the District of Maryland, Northern Division, shall be the
sole and exclusive forum for (a) any Internal Corporate Claim as defined under
the Maryland General Corporation Law (the "MGCL"), (b) any derivative action or
proceeding brought in the right or on behalf of the Company, (c) any action
asserting a claim of breach of any duty owed by any director, officer, employee
or agent of the Company to the Company or its stockholders, (d) any action
asserting a claim against the Company or any director, officer, employee or
agent of the Company arising pursuant to any provision of the MGCL, the
Company's charter or Bylaws or (e) any action asserting a claim against the
Company or any director, officer, employee or agent of the Company that is
governed by the internal affairs doctrine, and (ii) the federal district courts
of the United States of America shall, to the fullest extent permitted by law,
be the sole and exclusive forum for the resolution of any complaint asserting a
cause of action arising under the Securities Act of 1933, as amended (the
"Securities Act"). The Bylaws Amendment became effective on June 7, 2021.
The foregoing description of the Bylaws Amendment is only a summary, does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Bylaws Amendment, which is filed as Exhibit 3.1 hereto, and is
incorporated herein by reference.
Item 8.01 Other Events.
Support Agreement
On June 7, 2021, Chad L. Williams, in his capacities as a stockholder of the
Company and a unitholder of the Partnership, and certain of his affiliates
(collectively, the "Holders") entered into a Support Agreement with Parent
pursuant to which the Holders agreed, among other things, (i) to have counted as
present for purposes of establishing a quorum and to vote their respective
Company Class A Shares, Company Class B Shares and units of the Partnership in
favor of the adoption of the Merger Agreement and the approval of the Company
Merger or Partnership Merger, as applicable, (ii) to have counted as present for
purposes of establishing a quorum and to vote against any Company Acquisition
Proposal (as defined in the Merger Agreement) and any other action that could
reasonably be expected to impede, interfere with, delay, postpone or adversely
affect the Mergers or other transactions contemplated by the Merger Agreement or
result in a breach of any covenant, representation or warranty or other
obligation or agreement of the Company or the Partnership under the Merger
Agreement or of Holder under the Support Agreement, and (iii) not to transfer
their respective Company Class A Shares, Company Class B Shares and units of the
Partnership. The Support Agreement shall automatically terminate upon the
earliest of (i) the Company Merger Effective Time, (ii) the termination of the
Merger Agreement in accordance with its terms, and (iii) any amendment to the
Merger Agreement effected without the consent of the Holders that is an Adverse
Amendment (as defined in the Support Agreement).
The foregoing description of the Support Agreement is only a summary, does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Support Agreement, which is filed as Exhibit 99.1 hereto, and is
incorporated herein by reference.
Letter Agreement
On June 7, 2021, Chad L. Williams, the Chairman, President and Chief Executive
Officer of the Company, and certain of his affiliates (the "CW Parties") entered
into a letter agreement (the "Letter Agreement") with Parent, Merger Sub I and
Merger Sub II in connection with the Merger Agreement and with respect to
certain provisions of (a) the Tax Protection Agreement, dated as of October 15,
2013 (as amended, restated, supplemented or otherwise modified from time to
time, the "Tax Protection Agreement"), by and among the Company, the Partnership
and the signatories party thereto, and (b) the Employment Agreement entered into
on April 11, 2017 and effective as of April 3, 2017 (as amended June 23, 2017)
by and among the Company, the Partnership, Quality Technology Services, LLC, a
Delaware limited liability company and an affiliate of the Partnership (the
"Employer"), and the Mr. Williams (the "Employment Agreement"), pursuant to
which the Employer employs Mr. Williams and Mr. Williams serves as Chief
Executive Officer of the Company, the Partnership and the Employer.
Pursuant to the Letter Agreement and subject to the terms and conditions of the
Merger Agreement, the CW Parties agreed, among other things, to irrevocably and
unconditionally elect to (a) retain in the Partnership Merger, in lieu of the
Per Partnership Unit Merger Consideration (as defined in the Merger Agreement)
to which the CW Parties would otherwise be entitled, a total of 5,489,898 Class
A Partnership Units (the "Retained Class A Partnership Units") and (b) receive
in the Partnership Merger the Per Partnership Unit Merger Consideration in
respect of a total of 609,989 Class A Partnership Units (the "Cash-out Class A
Partnership Units" and together with the Retained Class A Partnership Units, the
"Owned Units"). In addition, the CW Parties agreed not to Transfer (as defined
in the Letter Agreement) any of the Owned Units through the Partnership Merger
Effective Time.
The Letter Agreement provides that the Partnership will make a payment, solely
with respect to Cash-out Class A Partnership Units, to each CW Party who is a
Tax Protected Party (as defined in the Letter Agreement) pursuant to the terms
of the Tax Protection Agreement and with such amounts calculated in accordance
with the terms of the Letter Agreement. The Letter Agreement also provides that
(a) all of the restrictions in the Tax Protection Agreement will continue to
apply with respect to any Tax Protected Party that holds Retained Class A
Partnership Units after Closing, (b) the Surviving Company and the Partnership
will be bound by the Tax Protection Agreement and (c) the Tax Protection Period
(as defined in the Tax Protection Agreement) will be extended such that it will
end at 12:01 a.m. on October 1, 2033.
In addition, the Letter Agreement provides that in the event Mr. Williams'
employment is terminated without Cause (as defined in the Employment Agreement)
or by Mr. Williams for Good Reason (as defined in the Employment Agreement, as
amended by the Letter Agreement) upon or following the closing of the Mergers,
the CW Parties will be entitled to exercise an exchange right to exchange the
Retained Class A Partnership Units for Class I units of BREIT OP subject to the
terms and conditions set forth in the Partnership's partnership agreement (other
than with respect to limitations on the number of Retained Class A Partnership
Units that may be subject to the exchange right during certain 12-month and
24-month periods), as expected to be amended in connection with Closing. In
addition, the Letter Agreement provides that (a) effective as of Closing, the
definition of "Good Reason" in the Employment Agreement will be modified so it
no longer includes an adverse change in Mr. Williams' title as Chairman of the
Board of the Company (including failure to be elected Chairman of the board at
any annual meeting of the Company's stockholders), or failure to nominate Mr.
Williams for election as Chairman of the Board at any annual meeting of the
Company's stockholders, and (b) a termination of Mr. Williams' employment as a
result of the Employer's delivery, within two years following the Closing, of
notice that the Employment Agreement will not be renewed, will constitute a
triggering event under the Employment Agreement.
The Letter Agreement will terminate upon the termination of the Merger
Agreement.
The foregoing description of the Letter Agreement is only a summary, does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Letter Agreement, which is filed as Exhibit 99.2 hereto, and is
incorporated herein by reference.
Additional Information and Where to Find It
This Current Report on Form 8-K relates to the proposed merger transaction
involving the Company. In connection with the proposed transaction, the Company
intends to file with the Securities and Exchange Commission (the "SEC") a proxy
statement on Schedule 14A. Promptly after filing its definitive proxy statement
with the SEC, the Company intends to mail the definitive proxy statement and a
proxy card to each stockholder entitled to vote at the special meeting relating
to the proposed transaction. INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE
URGED TO READ THE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS
THERETO) AND ANY OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE TRANSACTION
THAT THE COMPANY FILES WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The definitive
proxy statement, the preliminary proxy statement and any other documents filed
by the Company with the SEC may be obtained free of charge at the SEC's website
at www.sec.gov or at the Company's website at www.qtsdatacenters.com or by
writing to QTS Realty Trust, Inc., Attn: Investor Relations, 12851 Foster
Street, Overland Park, KS 66213.
The Company and its directors and certain of its executive officers may be
deemed to be participants in the solicitation of proxies from the Company's
stockholders with respect to the proposed transaction. Information about the
Company's directors and executive officers and their ownership of the Company
securities is set forth in the Company's proxy statement for its 2021 annual
meeting of stockholders on Schedule 14A filed with the SEC on March 18, 2021. To
the extent holdings of the Company's securities by directors and executive
officers have changed since the amounts disclosed in the Company's proxy
statement, such changes have been or will be reflected on Statements of Changes
in Beneficial Ownership on Form 4 filed with the SEC. You can obtain free copies
of these documents at the SEC's website at www.sec.gov or by accessing the
Company's website at www.qtsdatacenters.com. Additional information regarding
the identity of participants in the solicitation of proxies, and their direct or
indirect interests in the proposed transaction, by security holdings or
otherwise, will be set forth in the proxy statement and other materials to be
filed with the SEC in connection with the proposed transaction.
Cautionary Statement Regarding Forward Looking Statements
Some of the statements contained in this Current Report on Form 8-K 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 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 can also identify forward-looking statements by discussions of
strategy, plans or intentions.
The forward-looking statements contained in this Current Report on Form 8-K
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 actual results and future events to differ
significantly from those expressed in any forward-looking statement. 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: the ability of the Company to obtain stockholder approval required
. . .
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number Exhibit Description
2.1 Agreement and Plan of Merger, dated as of June 7, 2021, by and among
QTS Realty Trust, Inc., Volt Upper Holdings LLC, Volt Lower Holdings
LLC, Volt Acquisition LP, and QualityTech, LP.*
3.1 Second Amendment to Second Amended and Restated Bylaws of QTS Realty
Trust, Inc.
99.1 Support Agreement, dated as of June 7, 2021, by and between Volt Upper
Holdings LLC, Chad L. Williams and his affiliates signatory thereto.*
99.2 Letter Agreement, dated as of June 7, 2021, by and among Chad L.
Williams, his affiliates signatory thereto, Volt Upper Holdings LLC,
Volt Lower Holdings LLC, and Volt Acquisition LP. *
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
* Pursuant to Item 601(a)(5) of Regulation S-K, certain schedules and exhibits
have been omitted. The registrant hereby agrees to furnish a copy of any omitted
schedule or exhibit to the SEC upon request by the SEC.
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