Exhibit 10.12
SEVERANCE
AGREEMENT
This Severance Agreement (“
Agreement ”) is entered into effective
March 13, 2009 (“ Effective Date ”),
by and between Richard A. Montfort, Jr. (“
Executive ”) and Dupont Fabros Technology, Inc.
(“ Company ”).
The Company, either directly or
through one of its subsidiaries, desires to continue to employ
Executive and, in connection with such employment, to provide
Executive specified severance benefits upon the termination of
Executive’s employment under certain circumstances and
certain adverse changes to his or her employment.
Accordingly, in consideration of the
mutual promises and covenants contained herein, the parties agree
to the following:
1. Term .
The term of this Agreement shall
commence on the Effective Date, and shall continue for three
(3) years from that date, unless terminated prior thereto by
either the Company or Executive as provided in Section 2. If
either the Company or Executive does not wish to renew this
Agreement when it expires at the end of the initial or any renewal
term hereof, or if either the Company or Executive wishes to renew
this Agreement on different terms than those contained herein, the
Company or Executive, as applicable, shall give written notice to
the other party in accordance with Section 4.1 below of such
intent at least sixty (60) days prior to the expiration date.
In the absence of such notice, this Agreement shall be renewed on
the same terms and conditions contained herein for a term of one
year from the date that the Agreement would expire. The parties
agree that designation of a term and renewal provisions in this
Agreement does not in any way limit the right of the parties to
terminate this Agreement at any time pursuant to Section 2
below. Reference in this Agreement to the “
Term ” shall refer both to the initial term and
any renewal term, as the context requires.
2. Termination Of Employment
. The parties acknowledge that either Executive or the Company may
terminate Executive’s employment relationship at any time,
with or without Cause. The provisions in this Section govern the
amount of compensation, if any, to be provided to Executive upon
termination of employment, and do not alter this right to
terminate.
2.1 Termination by the Company
for Cause .
(a) Subject to Section 2.1(c)
below, the Company shall have the right to terminate
Executive’s employment with the Company at any time for Cause
by giving notice as described in Section 2.7 of this
Agreement.
(b) In the event that
Executive’s employment is terminated for Cause, Executive
shall not receive a payment under any applicable short-term
incentive compensation plan for the year in which termination
occurs, and shall not receive any severance payments, or any other
severance benefits or compensation, except Executive shall be paid
and become eligible for any Accrued Obligations.
(c) “ Accrued
Obligations ” means (i) any accrued but unpaid
salary of Executive through the date of termination, any bonuses or
incentive compensation awarded for which payments have been earned
but have not yet been paid for years ending prior to the year of
termination, and any accrued vacation pay in accordance with the
Company’s vacation policies, all of which will be paid to
Executive no later than the
1
Company’s first regularly
scheduled payroll date after the date of Executive’s
termination from employment, and (ii) eligibility for any
benefit continuation or conversion rights provided by the
provisions of a Company benefit plan or by law.
(d) “ Cause
” for termination shall mean Executive’s:
(i) material breach of any covenant or condition under this
Agreement or any other agreement between the parties;
(ii) conviction of a felony (other than a violation of traffic
laws) or a crime involving moral turpitude; (iii) commission
of any act constituting theft, fraud (including, but not limited
to, fraudulent conduct with respect to the Company’s
accounting records and financial statements), embezzlement or
misappropriation against the Company or one of its subsidiaries or
affiliates; (iv) misconduct, immoral or disreputable conduct,
or violation of Company policy that materially, adversely impacts
the Company; (v) violation of the Company’s Code of
Business Conduct and Ethics; (vi) refusal to follow or
implement a clear, reasonable and legal directive of Company;
(vii) breach of fiduciary duty; (viii) gross negligence
or gross incompetence in the performance of Executive’s
duties, where such negligence, incompetence or failure is not
remedied within 30 calendar days after written demand for
substantial performance is delivered by the Company which
specifically identifies the manner in which the Company believes
that Executive has been grossly negligent or grossly
incompetent.
2.2 Resignation by Executive
.
(a) Executive may resign from
Executive’s employment with the Company at any time by giving
notice as described in Section 2.7.
(b) In the event that Executive
resigns from Executive’s employment with the Company, other
than for Good Reason, Executive shall not receive a payment under
any applicable short-term incentive compensation plan for the year
in which termination occurs, and shall not receive any severance
payments, or any other severance benefits or compensation, except
Executive shall be paid and become eligible for any Accrued
Obligations.
(c) “ Good
Reason ” for resignation shall mean the occurrence of
any of the following without Executive’s prior written
consent: (i) a material diminution in Executive’s
authority, duties or responsibilities; (ii) a change in the
location of the principal place where Executive is required to
perform services under this Agreement to a location that is more
than fifty (50) miles from the location where Executive is
required to perform services hereunder on the Effective Date;
(iii) other than for across-the-board reductions generally
applicable to the Company’s senior executives, a greater than
5% reduction by the Company in either (A) Executive’s
then-current annualized base salary (“ Base
Salary ”) or (B) Executive’s then-current
target bonus opportunity in effect on the last day of the
applicable period under the Company’s then-current short-term
incentive compensation plan (“ Target Bonus
”); (iv) the failure of the Company to obtain a written
agreement from any successor to the Company to fully assume the
Company’s obligations and to perform under this Agreement
which, for purposes of this provision shall be a material breach of
this Agreement; or (v) any other failure by the Company to
perform any material obligation under, or breach by the Company of
any material provision of, this Agreement. Notwithstanding the
foregoing, any actions taken by the Company to accommodate a
disability of Executive (including a reduction in
duties,
2
functions or responsibilities, or
the reassignment to a new position), pursuant to the Family and
Medical Leave Act shall not be a Good Reason for purposes of this
Agreement.
2.3 Termination by the Company
Without Cause .
(a) The Company shall have the right
to terminate Executive’s employment with the Company pursuant
to this Section 2.3 at any time without Cause by giving notice
as described in Section 2.7. A termination pursuant to
Sections 2.5 or 2.6 below is not a termination without Cause for
purposes of this Section 2.3.
(b) If Executive’s employment
is terminated without Cause, then Executive shall be paid and
become eligible for any Accrued Obligations.
(c) If Executive’s employment
is terminated without Cause, then, subject to Sections 2.12 and
2.13:
(i) the Company shall pay to
Executive an amount equal to twelve (12) months of his/her
then current Base Salary, plus an additional amount equal to one
hundred percent (100%) of Executive’s Target Bonus for
the year in which the termination occurs, less applicable
withholdings and deductions, paid in a lump sum on the
Company’s first regular payroll date after the Release Date
(as defined below);
(ii) if Executive timely elects and
if he/she remains eligible for continued coverage under COBRA, the
Company will reimburse insurance premiums paid by Executive under
the Company’s group health plan for the continuation of
health care coverage under COBRA during the twelve- (12-) month
period after the date of termination, provided that the Company
shall be required to reimburse only up to the amount of the
premiums it was paying on behalf of Executive and his eligible
dependents immediately prior to the date of termination (and
provided that such reimbursements shall cease if Executive becomes
eligible for benefits under a group health plan of another
employer); and
(iii) all stock options, common
stock subject to forfeiture, restricted stock units and other
equity awards held by Executive at the time of his/her termination
of employment that would have become vested and exercisable or free
from repurchase restrictions, as applicable, during the twelve
(12) month period commencing on the date of termination if
Executive had remained employed during such period shall become
vested and exercisable or free from such repurchase restrictions as
of the Release Date; provided, however, that, in the case of equity
awards subject to vesting based on criteria other than service
(i.e., performance–based vesting), no additional vesting
shall be credited unless specifically authorized by the Board or
Compensation Committee. All other terms of such awards shall be
governed by the plans, programs, agreements and other documents
pursuant to which such equity awards were granted.
(d) Executive shall not be entitled
to receive a payment under any applicable short-term incentive
compensation plan for the year in which his or her termination from
employment occurs. If a termination without Cause occurs within
three (3) months before or twelve (12) months follow a
Change in Control, as defined in Section 2.10 below, then the
enhanced benefits described in Section 2.10 will supersede the
benefits described in this section.
3
(e) Any damages caused by the
termination of Executive’s employment without Cause would be
difficult to ascertain, and, therefore, the severance for which
Executive is eligible pursuant to Section 2.3 in exchange for
the Release is agreed to by the parties as liquidated damages, to
serve as full compensation, and not a penalty.
2.4 Resignation by Executive for
Good Reason .
(a) Provided that
Executive has not previously been notified of the Company’s
intention to terminate Executive’s employment, Executive may
resign from employment with the Company for Good Reason by giving
notice to the Company no later than sixty (60) days after the
initial occurrence of one of the events specified in the definition
of Good Reason that Executive intends to terminate his/her
employment for Good Reason on the thirtieth (30
th
) day
following the Company’s receipt of Executive’s notice,
if the Company has not cured the event that gives rise to Good
Reason before the end of such 30-day period. If Executive does not
resign within that 30-day period, then Good Reason shall no longer
exist based on the applicable event.
(b) In the event that Executive
resigns from employment for Good Reason other than pursuant to
Section 2.10, and subject to Sections 2.12 and 2.13, Executive
shall be eligible for the same payments and benefits as Executive
would receive under Section 2.3 and on the same conditions as
if Executive had been terminated by the Company without Cause,
provided, however, that, if (i) a reduction in Base Salary or
Target Bonus was the basis for Executive’s resignation for
Good Reason, then the Base Salary or Target Bonus in effect before
such reduction, as applicable, shall be used to calculate the
severance payment.
2.5 Termination by Virtue of
Death or Disability of Executive .
(a) In the event of
Executive’s death while employed pursuant to this Agreement,
all obligations of the parties hereunder shall terminate
immediately, and Executive’s estate or beneficiaries shall
not receive a payment under any applicable short-term incentive
compensation plan for the year in which his or her termination from
employment occurs, and shall not receive any severance payments or
any other severance benefits or compensation. The Company shall,
pursuant to its standard payroll policies, pay to Executive’s
legal representatives any Accrued Obligations.
(b) Subject to applicable state and
federal law, the Company shall have the right, upon written notice
to Executive, to terminate this Agreement based on
Executive’s Disability. Termination by the Company of
Executive’s employment based on “
Disability ” shall mean termination because
Executive is unable due to a physical or mental condition to
perform the essential functions of his/her position with or without
reasonable accommodation for six (6) months in the aggregate
during any twelve (12) month period or based on the written
certification by two licensed physicians of the likely continuation
of such condition for such period. This definition shall be
interpreted and applied consistent with the Americans with
Disabilities Act, the Family and Medical Leave Act, and other
applicable law. In the event that Executive’s employment is
terminated based on Executive’s Disability, and subject to
Sections 2.12 and 2.13 below,
4
Executive will not receive severance
payments, or any other severance compensation or benefit, except
that: (i) if Executive timely elects (or his eligible
dependents in the event that Executive dies following such
termination) and if he/she remains eligible for continued coverage
under COBRA, the Company will reimburse insurance premiums paid by
Executive or his dependents under the Company’s group health
plan for the continuation of health care coverage under COBRA
during the twelve- (12-) month period after the date of
termination, provided that the Company shall be required to
reimburse only up to the amount of premiums it was paying on behalf
of Executive and his eligible dependents immediately prior to the
date of termination (and provided that such reimbursements shall
cease if Executive becomes eligible for benefits under a group
health plan of another employer); and (ii) Executive shall
receive payment in a lump-sum on the first regular payroll date
after the Release Date, subject to applicable withholding and
deductions, of a payment under any applicable short-term incentive
compensation plan for the year in which his or her termination from
employment occurs, calculated by multiplying Executive’s
Target Bonus for the year of termination by a fraction, the
numerator of which is the number of days Executive was employed in
the year of termination (disregarding any period of Disability
prior to being terminated during that year) and the denominator of
which is the total number of days in the year of
termination.
(c) In the event that
Executive’s employment is terminated based on
Executive’s Disability, then Executive shall be paid or
become eligible for any Accrued Obligations.
2.6 Termination for Non-Renewal
of the Agreement . In the event that Executive’s
employment is terminated in connection with an election not to
renew this Agreement at the end of the initial term or any renewal
period by either the Company or Executive, Executive shall not
receive any payments, or any other severance benefits or
compensation, except Executive shall be paid or become eligible for
any Accrued Obligations.
2.7 Notice; Effective Date of
Termination .
(a) Termination of Executive’s
employment pursuant to this Agreement shall be effective on the
earliest of:
(i) immediately after the Company
gives notice to Executive of Executive’s termination, with or
without Cause, unless the Company specifies a later date, in which
case, termination shall be effective as of such later
date;
(ii) immediately upon
Executive’s death;
(iii) ten (10) days after the
Company gives notice to Executive of Executive’s termination
on account of Executive’s Disability, unless the Company
specifies a later date, in which case termination shall be
effective as of such later date provided that Executive has not
returned to the full time performance of Executive’s duties
prior to such date; or
(iv) thirty (30) days after
Executive gives written notice to the Company of Executive’s
resignation or immediately after the cure period set forth in
Section 2.4(a) expires in the case of a resignation for Good
Reason, provided that the Company may set a termination date at any
time between the date of notice and the date of resignation, in
which case Executive’s resignation shall be effective as of
such other date. Executive will receive Base Salary through any
required notice period.
5
(b) In the event that notice of a
termination under subsections (a)(i), (iii) and (iv) is
given orally, at the other party’s request, the party giving
notice must provide written confirmation of such notice within five
(5) business days of the request in compliance with the
requirement of Section 4.1 below. In the event of a
termination for Cause, written confirmation shall specify the
subsection(s) of the definition of Cause relied on to support the
decision to terminate.
2.8 Cooperation With Company
After Termination of Employment . Following termination of
Executive’s employment for any reason, Executive shall
cooperate fully with the Company in all matters relating to the
winding up of Executive’s pending work including, but not
limited to, any litigation in which the Company is involved, and
the orderly transfer of any such pending work to such other
employees as may be designated by the Company. The Company agrees
to reimburse Executive, on an after-tax basis, for all reasonable
expenses actually incurred in connection with his provision of
testimony or assistance and to pay Executive for any assistance
provided after termination of Executive’s employment that
does not occur during a Severance Period an hourly fee calculated
by dividing Executive’s Base Salary at the time of
termination by 2,080. The term “ Severance
Period ” refers to the number of months with respect
to which he/she is paid Base Salary as part of his/her severance
payments (e.g., 12 months for termination without Cause
pursuant to Section 2.3 or for Good Reason pursuant
to
