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Termination Severance Agreement

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 This Termination Severance Agreement involves

CORESITE REALTY CORP | CoreSite Realty Corporation | CoreSite, LLC | CoreSite, LP | Operating Partnership

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Title: CONSULTING AND SEPARATION AGREEMENT
Governing Law: Colorado     Date: 7/28/2016
Industry: Real Estate Operations     Law Firm: Venable     Sector: Services

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Exhibit 10.1

 

EXECUTION VERSION

 

CONSULTING AND SEPARATION AGREEMENT

 

THIS CONSULTING AND SEPARATION AGREEMENT (the “ Agreement ”) is made and entered into as of July 27, 2016, by and among CoreSite Realty Corporation, a Maryland corporation (the “ Company ”), CoreSite, L.P., a Delaware limited partnership (the “ Operating Partnership ”), CoreSite., L.L.C., a Delaware limited liability company (“ CoreSite L.L.C .”), and Thomas Ray (“ Consultant ”) (each, a “ Party ” and, collectively referred to herein as the “ Parties ”).

 

RECITALS

 

A.                                     Consultant currently serves as President and Chief Executive Officer of the Company pursuant to that certain employment agreement with CoreSite, L.L.C., dated August 1, 2010 (the “ Employment Agreement ”).

 

B.                                     Consultant and the Company desire to effect an orderly and collaborative transition of Consultant’s role with the Company from that of President and Chief Executive Officer of the Company and member of the Board of Directors of the Company (the “Board”) to that of a non-employee consultant to the Company, effective as of September 10, 2016 (the “ Transition Date ”).  Consultant and the Company mutually desire that, effective as of the Transition Date, (i) the Employment Agreement will terminate, this Agreement will supersede and replace the Employment Agreement in its entirety, except with respect to Sections 5, 6 and 7 of the Employment Agreement, which shall survive the termination of the Employment Agreement and shall continue in effect, and (ii) Consultant will cease to be an employee of the Company and will thereupon become an independent contractor of the Company performing consulting services.

 

C.                                     Consultant desires to perform such services on the terms and conditions set forth herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

1.                                       Resignation; Accrued Compensation .  Consultant hereby (a) resigns from his position as President and Chief Executive Officer of the Company, as a member of the Board, and from all other offices held with the Company and/or its affiliates, including, without limitation, the Operating Partnership and CoreSite L.L.C., and (b) terminates his employment with all such entities, in each case, effective as of the Transition Date.  For the avoidance of doubt, except as set forth in Section 7 hereto, the Date of Termination (as defined in the Employment Agreement) shall be the Transition Date.  The Parties acknowledge and agree that the termination of Consultant’s employment as of the Transition Date shall constitute a termination of employment by mutual agreement of the Parties and that, without limiting any other provision, Consultant shall (i) not be entitled to receive any severance payments, benefits or accelerated vesting pursuant to Section 4(c) or any other provision of the Employment Agreement or be entitled to any other compensation, payments, reimbursement, equity, stock, options, benefits and remuneration (other than as expressly contemplated by this Agreement) and

 



 

(ii) be entitled to the compensation, payments, reimbursement, equity, stock, options, benefits and remuneration expressly set forth in this Agreement.  As of the Transition Date, the Employment Agreement shall terminate and shall be of no further force and effect, and neither the Company nor Consultant shall have any further obligations pursuant thereto; provided, however, that Sections 5, 6 and 7 of the Employment Agreement shall survive the termination of the Employment Agreement and shall continue in full force and effect.  Upon the Transition Date, the Company shall pay to Consultant (i) all accrued but unpaid Base Salary (as defined in the Employment Agreement), if any, through the Transition Date, (ii) all reasonable travel and other business expenses in accordance with Section 2(f) of the Employment Agreement, which have accrued but have not been paid (if any), in each case, subject to any applicable withholding. Executive shall also be entitled to (i) all amounts accrued as of the Transition Date that arose from Executive’s participation in, or benefits accrued as of the Transition Date under, any employee benefit plans, programs or arrangements, which amounts or benefits shall be paid or provided in accordance with the terms and conditions of such employee benefit plans, programs or arrangements, including but not limited to accrued but unused vacation, and (ii)  subject to the terms of this Agreement (to the extent applicable), any equity interests or awards that vest on or before the Transition Date.  In addition, subject to and conditioned upon Consultant’s execution and delivery to the Company of the Release (as defined below) within 21 days following the Transition Date and non-revocation of such Release during any applicable revocation period and Consultant’s continued compliance with the terms and conditions of this Agreement, the Company shall pay to Consultant a cash bonus (the “ Pro-Rated Performance Bonus ”) as follows:

 

A.             $321,622 multiplied by the company bonus performance multiplier as determined under Company’s 2016 Executive Short-Term Incentive Plan (the “ 2016 Short-Term Incentive Plan ”), including the bonus payout grid, approved by the Board on March 2, 2016; plus

 

B.             $80,405

 

The Pro-Rated Performance Bonus shall be paid as set forth in the 2016 Short-Term Incentive Plan in cash in a single lump sum, subject to payroll taxes and tax withholding, on March 13, 2017 (the “ Performance Bonus Payment Date ”).  Notwithstanding anything contained in the 2016 Short-Term Incentive Plan, Consultant shall be entitled to payment of the Pro-Rated Performance Bonus notwithstanding the termination of his employment as President and Chief Executive Officer of the Company prior to the date the Pro-Rated Performance Bonus is made eligible for payment under the 2016 Short-Term Incentive Plan.

 

2.                                       Term .  The term of this Agreement shall be for a period commencing as of the Transition Date and ending on June 30, 2017 (the “ Consulting Period ”), unless this Agreement and the consulting relationship established hereby are earlier terminated as provided for herein.  Consultant shall not request or seek any extension of the Consulting Period.

 

3.                                       Services .

 

(a)                                  During the Consulting Period, Consultant, as an independent contractor and not as an employee, shall provide (i) such services as are reasonably necessary in order to support a smooth and orderly transition in the transfer of Consultant’s prior employment responsibilities to the new President and Chief Executive Officer of the Company or, at his direction, other employees of the Company, particularly including pending matters of which

 

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Consultant has the principal knowledge and background information, (ii) introductions to key investors, analysts and customers, as requested by the new President and Chief Executive Officer of the Company, and (iii) such other services as reasonably agreed to between Consultant and the new President and Chief Executive Officer of the Company, including, without limitation, reviewing iterative drafts of the 2017 budget prepared by the Company and the new President and Chief Executive Officer of the Company (the “Budget”), providing comments and suggestions to the new President and Chief Executive Officer of the Company regarding the Budget and providing guidance on the oversight of the Company’s in-process development projects (collectively, the “ Services ”).

 

(b)                                  Consultant shall devote such time as is reasonably necessary to perform such Services.  Consultant may perform any and all services under this Agreement by telephone and by email.  To the extent that Consultant performs the Services on the Company’s premises, Consultant’s primary office shall be located at the Company’s principal executive office at 1001 17th Street, Suite 500, Denver, Colorado 80202.  Consultant shall comply with all applicable policies and procedures of the Company in all material respects (including, without limitation, any technology use, confidentiality, insider trading and work authorization policies and procedures).

 

(c)                                   The Parties agree that Consultant’s engagement pursuant to this Agreement is non-exclusive, and during the Consulting Period, Consultant shall be entitled to perform or engage in any activity that is not prohibited by this Agreement, including any provision of the Employment Agreement incorporated herein.

 

(d)                                  Notwithstanding anything contained in this Agreement, Consultant does not have any authority to enter into agreements or contracts on behalf of the Company, and shall not represent that he possesses any such authority.

 

4.                                       Compensation for Services .  Subject to and conditioned upon Consultant’s execution and delivery to the Company of the release of claims in the form attached hereto as Exhibit A (the “ Release ”) within 21 days following the Transition Date and non-revocation of such Release during any applicable revocation period and Consultant’s continued compliance with the terms and conditions of this Agreement, including, without limitation, the confidentiality, non-disparagement and non-solicitation covenants described in Section 7 below:

 

(a)                                  During the Consulting Period, the Company shall pay Consultant a fee of $349,192 (the “ Consulting Fee ”).  The Consulting Fee shall be paid to Consultant in substantially equal installments (other than the first, which shall be prorated for the number of days in September that Consultant served as Consultant), payable within five business days of the last day of each month during the Consulting Period; provided, that in no event shall any portion of the Consulting Fee be paid to Consultant later than July 3, 2017, and any portion of the Consulting Fee that would otherwise be paid after July 3, 2017 (if any) shall instead be paid on July 3, 2017.  Notwithstanding the foregoing, in no event shall any portion of the Consulting Fee be paid to Consultant prior to the expiration of any revocation period applicable under the Release (and any amounts that would otherwise be paid prior to such expiration shall instead be paid on the next monthly payment date).

 

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(b)                                  Subject to Section 6(a) hereof, (i) each  performance-based restricted stock award (and related accrued dividends), award of restricted stock (and related accrued dividends) and stock option granted to Consultant under the Amended and Restated 2010 Incentive Award Plan (the “ Plan ”) of the Company and the Operating Partnership prior to the Transition Date that remains outstanding as of the Transition Date  shall, subject to Consultant’s continued provision of Services hereunder, remain outstanding and eligible to vest during the Consulting Period in accordance with its terms (other than any continued employment requirement), as contemplated by the Plan.  For the avoidance of doubt, through the Consulting Period (including any equity awards outstanding as of the Transition Date), a maximum of 38,118 performance-based restricted stock awards and related accrued dividends (subject to downward adjustment based on (i) the Company’s performance for fiscal 2016 and (ii) the Company’s cumulative performance for fiscal 2014 through fiscal 2016), 36,759 awards of restricted stock and related accrued dividends and 15,045 stock options granted to Consultant, in each case, under the Plan may vest in accordance with the preexisting vesting schedules attached hereto as Exhibit B and the terms and conditions of this Agreement (each, an “ Employment Award ”).

 

(c)                                   During the Consulting Period, the Company shall reimburse Consultant for reasonable business travel and other reasonable documented business expenses incurred in connection with Consultant’s provision of the Services.

 

5.                                       Termination of Awards .  Any and all equity awards granted to Consultant under the Plan that have not vested as of the termination of the Consulting Period shall be terminated and forfeited as of June 30, 2017, unless earlier terminated and forfeited in accordance with this Agreement or the Plan, as applicable, and Consultant shall have no further right to or interest in any such equity awards.  Notwithstanding the foregoing, unless this Agreement is terminated in accordance with Section 6(b), any stock options granted to Consultant under the Plan that are vested and remain exercisable may be exercised by Consultant in accordance with the Plan on or prior to June 30, 2018; provided that no stock option may be exercised more than 10 years from the Grant Date (as defined in Exhibit A of the Employment Agreement).  Any and all stock options granted to Consultant under the Plan that have not been exercised or exchanged by June 30, 2018, shall be terminated and forfeited.

 

6.                                       Termination of Consultancy .  Either the Company or Consultant may terminate the Consulting Period and the consulting relationship established hereby at any time, for any reason, upon written notice to the other party, subject to the following requirements upon termination.

 

(a)                                  Termination Without Cause, or For Good Reason .  If the Consulting Period and the consulting relationship established hereby are terminated (i) by the Company without Cause (as defined below) or (ii) by Consultant for Good Reason (as defined below), then, subject to Consultant’s timely execution and delivery to the Company of a release within 21 days following the termination date and non-revocation of such release during any applicable revocation period, which release shall be substantially similar to the Release (and notwithstanding anything in Section 4 hereof to the contrary), (A) each Employment Award shall vest in full immediately prior to any such termination, (B) the Company shall pay the Pro-Rated Performance Bonus on the Pro-Rated Performance Bonus Payment Date and (C) the Company shall continue to pay the Consulting Fee in accordance with Section 4(a) hereof, provided,

 

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however, that the accelerated vesting and payment continuation contemplated by this Section 6(a) shall not occur or begin, as applicable, until any revocation period applicable under the Release has expired and, if the consideration and revocation periods span two calendar years, all such vesting and payments shall occur in the latter calendar year (and, in the case of the Consulting Fee, on or prior to June 30, 2017).  For the avoidance of doubt, upon a termination of the Consulting Period and Consultant’s Services hereunder pursuant to this Section, each Employment Award shall remain outstanding and eligible to vest during any Release consideration and revocation period.

 

(b)                                  Termination upon Death or Disability, or for Non-Performance .  If the Consulting Period and the consulting relationship established hereby are terminated (i) by reason of Consultant’s death or Disability (as defined below), or (ii) by the Company for Non-Performance, pursuant to Section 6(f)(i)(A) of the “Cause” definition below, then, subject to Consultant’s timely execution and delivery to the Company of a release within 21 days following the termination date and non-revocation of such release during any applicable revocation period, which release shall be in the form of the Release (and notwithstanding anything in Section 4 hereof to the contrary), (A) each Employment Award shall vest in full immediately prior to any such termination, (B) the Company shall pay the Pro-Rated Performance Bonus on the Pro-Rated Performance Bonus Payment Date and (C) the Company shall pay the Consulting Fee earned through the date of termination, but not yet paid to Consultant, and Consultant shall immediately forfeit all Consulting Fees payable with respect to periods of service following such termination; provided, however, that the accelerated vesting contemplated by this Section 6(b) shall not occur, as applicable, until any revocation period applicable under the Release has expired and, if the consideration and revocation periods span two calendar years, all such vesting shall occur in the latter calendar year.  For the avoidance of doubt, upon a termination of the Consulting Period and Consultant’s Services hereunder pursuant to this Section, each Employment Award shall remain outstanding and eligible to vest during any Release consideration and revocation period.

 

(c)                                   Termination For Cause (other than Non-Performance) or Without Good Reason .  If the Consulting Period and the consulting relationship are terminated by the Company for Cause (other than Non-Performance as defined by Section 6(f)(i)(A), below) or by Consultant without Good Reason, the Company shall pay to Consultant (i) any portion of the Consulting Fee that has been earned but unpaid through such date of termination, and (ii) the Pro-Rated Performance Bonus on the Pro-Rated Performance Bonus Payment Date.  Notwithstanding anything contained in this Agreement, Consultant shall immediately forfeit (i) all Consulting Fees payable with respect to periods of service following such termination date, and (ii) any and all then-unvested Company equity awards held by Consultant (including without limitation any Employment Awards) and Consultant shall have no further right to or interest in any such equity awards.

 

(d)                                  Return of Property; Inventions .

 

(i)                                      Upon the termination of the Consulting Period and Consultant’s Services hereunder for any reason, Consultant agrees to return to the Company all documents of the Company and its affiliates (and all copies thereof) and all other Company or Company affiliate property that Consultant has in his possession, custody or control.  Such property includes, without limitation:  (A) any materials of any kind that Consultant knows contain or embody any proprietary or confidential information of the Company or an affiliate of the

 

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Company (and all reproductions thereof), (B) computers (including, but not limited to, laptop computers, desktop computers and similar devices) and other portable electronic devices (including, but not limited to, tablet computers), cellular phones/smartphones, credit cards, phone cards, entry cards, identification badges and keys, (C) any correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning the customers, business plans, marketing strategies, products and/or processes of the Company or any of its affiliates and any information received from the Company or any of its affiliates regarding third parties and (D) electronically stored information.

 

(ii)                                   All rights to discoveries, inventions, improvements and innovations (including all data and records pertaining thereto) related to the business of the Company, whether or not patentable, copyrightable, registrable as a trademark, or reduced to writing, that Consultant may discover, invent or originate during the Consulting Period, either alone or with others and whether or not during working hours or by the use of the facilities of the Company (“ Inventions ”), shall be the exclusive property of the Company. Consultant shall promptly disclose all Inventions to the Company, shall execute at the request of the Company any assignments or other documents the Company may deem reasonably necessary to protect or perfect its rights therein, and shall assist the Company, upon reasonable request and at the Company’s expense, in obtaining, defending and enforcing the Company’s rights therein. Consultant hereby appoints the Company as Consultant’s attorney-in-fact to execute on Consultant’s behalf any assignments or other documents reasonably deemed necessary by the Company to protect or perfect its rights to any Inventions.

 

(e)                                   Exclusivity of Benefits .  Except as expressly provided in this Agreement, the Company shall have no further obligations to Consultant upon termination of the Consulting Period and Consultant’s Services hereunder.

 

(f)                                    Definitions .  For purposes of this Agreement, the following definitions shall apply:

 

(i) “ Cause ” shall mean the occurrence of any one or more of the following events:

 

(A)  Consultant’s failure to substantially perform the Services (other than any such failure resulting from Consultant’s death or Disability) (“ Non-Performance ”);

 

(B)   Consultant’s material breach of this Agreement (other than Non-Performance);

 

(C) Consultant’s conviction, plea of no contest, plea of  nolo contendere , or imposition of unadjudicated probation for any felony;

 

(D) Consultant’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s (or any of its affiliate’s) premises or while performing Consultant’s duties and responsibilities under this Agreement; or

 

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(E)  Consultant’s commission of an act of fraud, embezzlement, misappropriation, willful misconduct or breach of fiduciary duty against the Company or any of its affiliates; provided that   no act or failure to act on the part of Consultant shall be considered “willful” unless it is done, or omitted to be done, by Consultant in bad faith or without reasonable belief that Consultant’s action or omission was in the best interests of the Company. Any act or failure to act, based upon written authority issued by the President and Chief Executive Officer of the Company shall be conclusively presumed to be done, or omitted to be done, by Consultant in good faith and in the best interests of the Company

 

Notwithstanding the foregoing, in the case of clauses (A) and (B)  above, no Cause will have occurred unless and until the Company has: (a) provided Consultant, within 60 days of the Company’s knowledge of the occurrence of the facts and circumstances underlying the Cause event, written notice stating with specificity the applicable facts and circumstances underlying such finding of Cause; and (b) provided Consultant with an opportunity to cure the same within 30 days after the receipt of such notice. If Consultant fails to cure the same within such 30 days, then “Cause” shall be deemed to have occurred as of the expiration of the 30-day cure period. For the avoidance of doubt, Consultant’s death or Disability shall not constitute “Cause” hereunder.

 

(ii)                                   Disability ” shall mean Consultant’s inability to perform, with or without reasonable accommodation, the essential functions of Consultant’s Services hereunder for a total of three months (unless a longer period is required by applicable law) during any six-month period as a result of incapacity due to mental or physical illness as determined by a physician selected by the Company or its insurers and acceptable to Consultant or Consultant’s legal representative, with such agreement as to acceptability not to be unreasonably withheld or delayed.  Any refusal by Consultant to submit to a medical examination for the purpose of determining Disability shall be deemed to constitute conclusive evidence of Consultant’s Disability.

 

(iii)                                Good Reason ” shall mean the Company’s material breach of the Company’s obligations under this Agreement; provided that, no Good Reason will have occurred unless and until Consultant has: (a) provided the Company, within 60 days of Consultant’s knowledge of the occurrence of the facts and circumstances underlying the Good Reason event, written notice stating with specificity the applicable facts and circumstances underlying such finding of Good Reason; and (b) provided the Company with an opportunity to cure the same within 30 days after the receipt of such notice. If the Company fails to cure the same within such 30 days, then the termination shall be deemed to occur as of the expiration of the 30-day cure period.

 

7.                                       Reaffirmation of Prior Agreements .  The parties acknowledge and agree that Consultant previously made certain representations, warranties and covenants with respect to (i) confidential information and (ii) competition and non-solicitation as set forth in Sections 5 and 6 of the Employment Agreement.  Notwithstanding anything contained in this Agreement, Consultant hereby reaffirms the representations, warranties and covenants set forth in Sections 5 and 6 of the Employment Agreement and acknowledges and agrees that the provisions of Sections 5 and 6 of the Employment Agreement shall survive the termination of Consultant’s employment with the Company and shall remain in full force and effect and that Consultant shall

 

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be bound by their terms and conditions; provided that, the Restriction Period (as defined in Section 5(d) of the Employment Agreement) shall end on the date that is at the conclusion of 12 months following the termination of the Consulting Period.  Notwithstanding anything to the contrary in this Agreement or Sections 5, 6, and 7 of the Employment Agreement, Consultant’s continuing confidentiality obligations under the Employment Agreement do not prohibit him from disclosing Confidential Information (as defined in the Employment Agreement) to a federal, state or local government official or to an attorney for the purpose of reporting or investigating a violation of law or in a court filing under seal.  Accordingly, Consultant hereby acknowledges and understands that pursuant to the Federal Trade Secrets Act of 2016, he has been advised that he has immunity from being held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

8.                                       Cooperation; P


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