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):  July 27, 2016

 


 

CoreSite Realty Corporation

(Exact name of registrant as specified in its charter)

 


 

Maryland

 

001-34877

 

27-1925611

(State or other jurisdiction
of incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)

 

1001 17th Street, Suite 500
Denver, CO

 

80202

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (866) 777-2673

 

N/A

(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:

 

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))

 

 

 



 

Section 2 — Financial Information

 

Item 2.02 Results of Operations and Financial Condition.

 

On July 28, 2016, CoreSite Realty Corporation (“CoreSite”) issued a press release reporting financial results and operating information for the quarter ended June 30, 2016. In addition, CoreSite made available on its website supplemental operating and financial data for the same period. The text of the press release and the supplemental information package are furnished herewith as Exhibits 99.1 and 99.2, respectively.

 

The information in this report, including Exhibits 99.1 and 99.2 attached hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Retirement of Thomas M. Ray

 

On July 28, 2016, CoreSite announced that Thomas M. Ray retired as President and Chief Executive Officer and as a member of the Board of Directors of CoreSite (the “Board”), effective as of September 10, 2016 (the “Transition Date”). Following his retirement, Mr. Ray will become a consultant to CoreSite.

 

In connection with his retirement, Mr. Ray entered into a Consulting and Separation Agreement, dated as of July 27, 2016 (the “Consulting and Separation Agreement”), with CoreSite, CoreSite, L.P. (“CoreSite LP”), and CoreSite, L.L.C., the term of which ends on June 30, 2017.  Under the Consulting and Separation Agreement, Mr. Ray’s employment with CoreSite will end as of the Transition Date and his employment agreement will terminate and, in lieu of any severance or other benefits provided for therein, Mr. Ray will be entitled to the compensation, payments and other benefits set forth in the Consulting and Separation Agreement.

 

For Mr. Ray’s prior service as CoreSite’s President and Chief Executive Officer, the Consulting and Separation Agreement provides that Mr. Ray will receive (i) his accrued and unpaid base salary through the Transition Date, if any, (ii) reimbursement for reasonable business travel and other reasonable business expenses which have accrued but have not been paid (if any), (iii) certain other accrued benefits, including, without limitation, accrued but unused vacation, (iv) any equity interests or awards that vest on or before the Transition Date, and (v), subject to his timely execution and non-revocation of a release of claims and his continued compliance with the Consulting and Separation Agreement, a pro-rated performance bonus in an amount equal to (a) $321,622 multiplied by the bonus performance multiplier as determined under CoreSite’s 2016 Executive Short-Term Incentive Plan (the “2016 Short-Term Incentive Plan”), including the bonus payout grid previously approved by the Board; plus (b) $80,405.  Pursuant to the 2016 Short-Term Incentive Plan and the bonus payout grid, Mr. Ray is eligible to receive between 0% and 175% of the $321,622, based on CoreSite’s actual performance.

 

Under the Consulting and Separation Agreement, Mr. Ray will provide (i)  services that are reasonably necessary in order to support a smooth and orderly transition in the transfer of Mr. Ray’s prior employment responsibilities to the new President and Chief Executive Officer of CoreSite, (ii) introductions to key investors, analysts and customers, as requested by the new President and Chief Executive Officer of CoreSite and (iii) other services as reasonably agreed to between Mr. Ray and the new President and Chief Executive Officer of CoreSite, including services related to CoreSite’s 2017 budget.

 

Under the Consulting and Separation Agreement, Mr. Ray will receive the following payments and benefits in connection with consulting services that he will provide to CoreSite, subject to his timely execution and non-revocation of a release of claims: (i) a consulting fee of $349,192, payable in substantially equal installments, (ii) continued vesting of performance-based restricted stock awards, awards of restricted stock and stock options granted to Mr. Ray under the Amended and Restated 2010 Incentive Award Plan (the “Plan”) of CoreSite and CoreSite LP

 

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prior to the Transition Date that remain outstanding as of the Transition Date (each, an “Employment Award”) in accordance with their terms (other than any continued employment required) and (iii) reimbursement of reasonable business travel expenses and other reasonable documented business expenses incurred by Mr. Ray in connection with performing his services under the Consulting and Separation Agreement. Any and all equity awards (other than options) granted to Mr. Ray under the Plan that have not vested as of June 30, 2017 will be terminated and forfeited, and any options granted to Mr. Ray under the Plan that have vested and are exercisable as of June 30, 2017 may be exercised by Mr. Ray in accordance with the Plan on or prior to June 30, 2018 (subject to certain limitations).  During the term of the Consulting and Separation Agreement, Mr. Ray is required to own vested common stock in an amount not less than the lesser of (i) 34,000 shares of common stock of CoreSite and (ii) the number of shares of common stock of CoreSite correlating to a market value of not less than $2,900,000.

 

In the event that the Consulting and Separation Agreement is terminated by CoreSite without cause or by Mr. Ray for good reason, Mr. Ray will receive the following, subject to his timely execution and non-revocation of a release of claims: (i) continued payment of any remaining portion of Mr. Ray’s consulting fee, (ii) accelerated vesting of each Employment Award in full and (iii) his pro-rated performance bonus.

 

If the Consulting and Separation Agreement is terminated by CoreSite for non-performance by Mr. Ray or by reason of Mr. Ray’s death or disability, Mr. Ray will receive the following, subject to his timely execution and non-revocation of a release of claims, (i) the consulting fee earned through the date of termination, (ii) accelerated vesting of each Employment Award in full and (iii) his pro-rated performance bonus.

 

If the Consulting and Separation Agreement is terminated by CoreSite for cause (other than for non-performance), or by Mr. Ray without good reason, Mr. Ray will receive the following, (i) the consulting fee earned through the date of termination, (ii) his pro-rated performance bonus and (iii) any Employment Award that vested prior to such termination.

 

The Consulting and Separation Agreement also contains a mutual non-disparagement covenant and certain confidentiality covenants prohibiting Mr. Ray from, among other things, disclosing confidential information relating to CoreSite. The Consulting and Separation Agreement also contains non-competition and non-solicitation restrictions, pursuant to which Mr. Ray will not be permitted to compete with CoreSite in certain circumstances for a period of 12 months following the termination or conclusion of Mr. Ray’s services under the Consulting and Separation Agreement.

 

The foregoing description of terms of the Consulting and Separation Agreement is qualified in its entirety by reference to the text of the Consulting and Separation Agreement, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.

 

Appointment of Paul E. Szurek

 

On July 28, 2016, CoreSite announced the appointment of Paul E. Szurek to the position of President and Chief Executive Officer, effective as of the Transition Date.  Mr. Szurek, age 56, has served as a CoreSite director since September 2010. Mr. Szurek has served as Chief Financial Officer of Biltmore Farms, LLC, a residential and commercial real estate development and operating company, from 2003 to the present, but will resign from this position prior to the Transition Date. Prior to joining Biltmore Farms, LLC, Mr. Szurek served as Chief Financial Officer of Security Capital Group Incorporated, a publicly traded real estate investment, development and operating company with extensive REIT engagement. At Security Capital, Mr. Szurek held a variety of roles and achieved a number of significant accomplishments. As Security Capital’s Senior Vice President of Corporate Finance, he oversaw the financing strategy and execution for its affiliated REITs and participated in all of the mergers and acquisitions activity. He was also Co-Managing Director of Security Capital U.S. Realty, a Luxembourg company which made strategic investments in U.S. REITS and helped generate above-market returns by providing strategic guidance. Mr. Szurek was promoted to CFO of Security Capital in 1997, where he supported the company from its IPO, through its acquisition by GE Real Estate in 2002. He managed Security Capital’s financial structure and capital access, participated in its acquisition and disposition activity and led the restructuring and optimization of its shared operations center. The shared operations center was an innovative undertaking, being one of the first in the industry to implement a cloud-based operating and financial system in order to achieve greater controls, more

 

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flexibility and significant efficiencies. Mr. Szurek also previously served as a director of Security Capital U.S. Realty as well as another publicly traded real estate company, Regency Centers.  Mr. Szurek is currently a director and chair of the audit committee of Four Corners Property Trust, a REIT focused on restaurant real estate, and a director of the Charlotte, North Carolina branch of the Federal Reserve Bank of Richmond.  Mr. Szurek received a J.D. with honors from Harvard Law School and a B.A. in Government, magna cum laude, from the University of Texas at Austin.

 

In connection with his appointment, Mr. Szurek entered into an employment agreement (the “Employment Agreement”). The Employment Agreement has an initial one-year term, subject to automatic annual renewal, unless either party elects to terminate the agreement by providing written notice to the other party at least 90 days’ prior to the applicable anniversary date.  The Employment Agreement provides for an initial annual base salary of $580,000 and contains other customary employment terms including eligibility for bonuses and other incentive compensation and other benefits. The Employment Agreement provides for a signing bonus of $250,000 and an initial target annual performance bonus amount of $580,000. Under the Employment Agreement, Mr. Szurek will also receive one or more awards under the Plan having an aggregate value (as of the date of grant of the award) equal to $2,940,000, of which $1,940,000 will be in the form of restricted stock and $1,000,000 in the form of performance-based restricted stock.  CoreSite will also provide Mr. Szurek with corporate housing in the Denver, Colorado metropolitan area for a period of up to six months and, upon Mr. Szurek’s permanent relocation to the Denver, Colorado metropolitan area, CoreSite will reimburse Mr. Szurek for customary relocation expenses.

 

The Employment Agreement also provides for, among other things, severance payments and the continuation of certain benefits following certain terminations of employment by CoreSite under certain circumstances or the termination of employment for “Good Reason” (as defined in the Employment Agreement) by Mr. Szurek.  Under these provisions, if Mr. Szurek’s employment is terminated by CoreSite without “Cause” (as defined in the Employment Agreement), or in connection with CoreSite’s non-renewal of the Employment Agreement, or Mr. Szurek resigns for Good Reason, Mr. Szurek will have the right to receive continued payment of his base salary and the continuation of health benefits (subject to certain restrictions) at CoreSite’s expense for a period of 18 months following termination. In addition, Mr. Szurek would receive a pro-rated lump sum payment upon termination based on his performance bonus amount for the year of termination, which will be equal to his target performance bonus (as pro-rated for the time served during the year of termination). Mr. Szurek would also be entitled to accelerated vesting of any outstanding unvested equity awards that would have vested based on the passage of time had he remained employed for 18 months after termination, and his stock options and other equity awards would remain exercisable for at least a year following termination.

 

The Employment Agreement further provides that if Mr. Szurek is terminated by CoreSite without Cause, or in connection with CoreSite’s non-renewal of the Employment Agreement, or he resigns for Good Reason, in each case within 12 months following a change in control of CoreSite, then in addition to the pro-rated performance bonus and the health benefits described above, he would also receive an additional payment equal to his target performance bonus amount for the year of termination. In addition, Mr. Szurek would receive accelerated vesting of all of his outstanding unvested equity awards, as well as a cash payment equal to one and one-half (1.5) times his annual base salary in effect on the date of termination.  In addition, the salary continuation amount described above would be paid in a lump sum.

 

All of the foregoing severance benefits are conditioned on Mr. Szurek executing a release of claims in favor of us following his termination. Mr. Szurek’s employment agreement also provides that if his employment is terminated by CoreSite due to his death or Disability (as defined in the Employment Agreement), he will receive an amount equal to his target performance bonus amount for the year of termination and accelerated vesting of all of his outstanding unvested equity awards that would have vested based on the passage of time if he had remained employed with us for 12 months following his termination.

 

“Cause” is defined in the Employment Agreement as Mr. Szurek having (i) failed to substantially perform his duties or carry out a lawful and reasonable directive from the Board, (ii) materially breached the Employment Agreement, or (iii) committed a felony, unlawfully used illegal drugs or possessed illegal drugs during the performance of his duties or on CoreSite’s premises, or committed an act of fraud, embezzlement, misappropriation, willful misconduct or breach of any duty owed to CoreSite or any of its affiliates, in each case subject to certain cure rights (other than with respect to clause (iii) in the foregoing). “Good Reason” is defined in the Employment

 

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Agreement as (i) CoreSite’s material breach of the Employment Agreement, (ii) a reduction of Mr. Szurek’s base salary or annual target bonus opportunity, other than a reduction of less than by 10% in connection with a broad-based based reduction for all executives, (iii) a material relocation of CoreSite’s executive offices, (iv) a requirement that Mr. Szurek report to anyone other than the Board, or (v) a material reduction in Mr. Szurek’s position (including title of CEO), duties or responsibilities, in each case subject to certain cure rights.

 

The Employment Agreement also contains a mutual non-disparagement covenant and certain confidentiality covenants prohibiting Mr. Szurek from, among other things, disclosing confidential information relating to CoreSite. The Employment Agreement also contains non-competition and non-solicitation restrictions, pursuant to which Mr. Szurek will not be permitted to compete with CoreSite in certain circumstances for a period of 12 months following his termination of employment for any reason.

 

Following his entering into the Employment Agreement, Mr. Szurek will no longer be an independent director of CoreSite and will cease to serve as Lead Independent Director, as chairman and as a member of the Nominating/Corporate Governance Committee (the “Nominating/Corporate Governance Committee”) of the Board and as a member of the Audit Committee (“Audit Committee”) of the Board.  Mr. Szurek will no longer receive any compensation for his services as a director of CoreSite.

 

The foregoing description of terms of the Employment Agreement is qualified in its entirety by reference to the text of the Employment Agreement, which is attached hereto as Exhibit 10.2 and incorporated herein by reference.

 

Item 8.01                                            Other Events.

 

Based on the recommendation of the Nominating/Corporate Governance Committee, the Board has appointed (i) J. David Thompson, a current member of the Board, to serve as member of the Audit Committee; (ii) J. David Thompson, a current member of the Nominating/Corporate Governance Committee, to serve as chairman of the Nominating/Corporate Governance Committee and David A. Wilson, a current member of the Board, to serve as a member of the Nominating/Corporate Governance Committee; and (iii) David A. Wilson to serve as the Board’s Lead Independent Director, in each case, effective as of July 27, 2016.

 

Section 9 — Financial Statements and Exhibits

 

Item 9.01 Financial Statements and Exhibits.

 

(d) The following exhibits are furnished with this Current Report on Form 8-K.

 

Exhibit No.

 

Description

10.1

 

Consulting and Separation Agreement dated July 27, 2016, among CoreSite Realty Corporation, CoreSite, L.P., CoreSite, L.L.C. and Thomas M. Ray.

 

 

 

10.2

 

Employment Agreement dated July 27, 2016, between CoreSite, L.L.C. and Paul E. Szurek.

 

 

 

99.1

 

Press release, dated July 28, 2016.

 

 

 

99.2

 

Quarter Ended June 30, 2016, Earnings Release and Supplemental Information, dated July 28, 2016.

 

 

 

99.3

 

Press release, dated July 28, 2016, regarding appointment of Paul Szurek as President and Chief Executive Officer to succeed Tom Ray as President and Chief Executive Officer.

 

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SIGNATURES

 

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

 

 

 

CORESITE REALTY CORPORATION

 

 

 

   Date: July 28, 2016

By:

/s/ Jeffrey S. Finnin

 

 

Name: Jeffrey S. Finnin

 

 

 

 

 

 

 

 

Title: Chief Financial Officer

 

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EXHIBIT INDEX

 

Exhibit No.

 

Description

10.1

 

Consulting and Separation Agreement dated July 27, 2016, among CoreSite Realty Corporation, CoreSite, L.P., CoreSite, L.L.C. and Thomas M. Ray.

 

 

 

10.2

 

Employment Agreement dated July 27, 2016, between CoreSite, L.L.C. and Paul E. Szurek.

 

 

 

99.1

 

Press release, dated July 28, 2016.

 

 

 

99.2

 

Quarter Ended June 30, 2016, Earnings Release and Supplemental Information, dated July 28, 2016.

 

 

 

99.3

 

Press release, dated July 28, 2016, regarding appointment of Paul Szurek as President and Chief Executive Officer to succeed Tom Ray as President and Chief Executive Officer.

 

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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; Press Release .  In addition to the Services (and without further compensation), Consultant agrees that, following the Transition Date and for 12 months following the termination of the Consulting Period, Consultant will use commercially reasonable efforts to participate in any depositions, interviews or testimony to the extent reasonably requested by the Company, with respect to any internal investigation or administrative, regulatory or judicial proceeding involving matters that (a) were within the scope of Consultant’s duties and responsibilities to the Company and its affiliates during employment with the Company and (b) other members of management of the Company do not have sufficient information to provide necessary facts.  The Company and Consultant agree to issue a press release regarding Consultant’s termination of employment and transition to a consulting role substantially in the form attached hereto as Exhibit C .

 

9.                                       Mutual Non-Disparagement .  Consultant agrees, during the Consulting Period and through December 31, 2018, to refrain from disparaging the Company and its affiliates, including any of its services, technologies or practices, or any of its directors, officers, agents, representatives or stockholders, either orally or in writing. The Company agrees, during the Consulting Period and through December 31, 2018, the Company and its officers and directors will refrain from disparaging Consultant.  Nothing in this paragraph shall preclude Consultant, the Company or the Company’s directors, officers, employees, agents, representatives or stockholders from making truthful statements that are reasonably necessary to comply with applicable law, regulation or legal process, or to otherwise assert its or his rights under this Agreement or otherwise against each other.

 

10.                                Representations; Warranties; and Covenants .

 

(a)                                  Consultant represents and warrants that Consultant has no outstanding agreement, relationship or obligation that is in conflict with any of the provisions of this Agreement, or that would preclude Consultant from performing hereunder or complying with the provisions hereof, and further agrees that Consultant will not enter into any such conflicting agreement or relationship during the Consulting Period (except as may be permitted pursuant to Section 3(c) hereof).  During the Consulting Period, Consultant agrees to comply with the (i) Amended and Restated CoreSite Realty Corporation Insider Trading Policy, approved December 

 

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4, 2014 (the “ Insider Trading Policy ”), and (ii) any applicable ethics policy and business conduct policy of the Company, but may adopt a Section 10b5-1 trading plan consistent with such obligations.  The Company shall evaluate all trading requests by Consultant under the Insider Trading Policy in good faith and in a manner no less favorable than requests made under the Insider Trading Policy by then-current employees of the Company.  For purposes of the Insider Trading Policy, during the Consulting Period Consultant shall be deemed to be an “officer.”  Consultant agrees that during the Consulting Period Consultant shall own vested common stock, par value $0.01 per share, of the Company in an amount not less than the lesser of (a) 34,000 shares and (b) the number of shares correlating to a market value of not less than $2,900,000.

 

(b)                                  Consultant agrees to not use Proprietary Information (as defined in Section 6 of the Employment Agreement) and Inventions (as defined in Section 7 of the Employment Agreement) during the Consulting Period for personal gain or take advantage of any business opportunities that arise as a result of this Agreement in which the Company has an interest or bona fide expectancy.

 

(c)                                   Consultant hereby acknowledges (i) that Consultant has consulted with or has had the opportunity to consult with independent counsel of Consultant’s own choice concerning this Agreement, and has been advised to do so by the Company, and (ii) that Consultant has read and understands this Agreement, is fully aware of its legal effect, and has entered into it freely based on Consultant’s own judgment.

 

11.                                Independent Contractor .  Consultant expressly acknowledges and agrees that, as of the Transition Date, he is solely an independent contractor and shall not be construed to be an employee of the Company in any matter under any circumstances or for any purposes whatsoever.  Except as expressly contemplated by this Agreement, the Company shall not be obligated to (a) pay on the account of Consultant any unemployment tax or other taxes required under the law to be paid with respect to employees, (b) withhold any monies from the fees of Consultant for income tax purposes or (c) provide Consultant with any benefits, including without limitation, health, welfare, pension, retirement, or any kind of insurance benefits, including workers’ compensation insurance.  Notwithstanding Consultant’s status as an independent contractor of the Company, the Company shall withhold such taxes as are required by law from the amounts payable hereunder, including, without limitation, the Pro-Rated Performance Bonus and the relevant portion of any Company equity award as compensation for service as an employee of the Company prior to the Transition Date.  Consultant acknowledges and agrees that Consultant is obligated to report as income all compensation received by Consultant pursuant to this Agreement, and to pay any applicable income, self-employment and other taxes thereon.  Consultant and the Company hereby acknowledge and agree that this Agreement does not impose any obligation on the Company to offer employment or Board membership to Consultant at any time.  Consultant further represents and warrants that he will in good faith attempt to file or have filed all required forms and necessary payments appropriate to Consultant’s tax status as an independent consultant and shall not claim any other status.  Consultant shall indemnify and hold the Company harmless from all costs which the Company may incur as a result of litigation initiated by Consultant determining a change of status, to the extent that Consultant receives any financial benefit from such determination.  In the event that Consultant initiates a process to change his status for income tax purposes, Consultant agrees to hold the Company harmless from all costs, including legal fees, which the Company may incur as a result of such change in status.  The Company shall indemnify and hold Consultant harmless

 

9



 

from all costs which Consultant may incur as a result of litigation initiated by the Company determining a change of status.  In the event that the Company initiates a process to change Consultant’s status for income tax purposes, the Company agrees to hold Consultant harmless from all costs, including legal fees, which Consultant may incur as a result of such change in status.

 

12.                                Assignment .  This Agreement and the rights and duties hereunder are personal to Consultant and shall not be assigned, delegated, transferred, pledged or sold by Consultant without the prior written consent of the Company.  Consultant hereby acknowledges and agrees that the Company may assign, delegate, transfer, pledge or sell this Agreement and the rights and duties hereunder (a) to an affiliate of the Company, or (b) to any third party (i) that acquires all or substantially all of the assets of the Company or (ii) that is the surviving or acquiring corporation in connection with a merger, conversion, consolidation or other acquisition involving the Company.  This Agreement shall inure to the benefit of and be enforceable by the parties hereto, and their respective heirs, personal representatives, successors and assigns.

 

13.                                Injunctive Relief .

 

(a)                                  It is recognized and acknowledged by Consultant that a breach of the covenants contained in Sections 6(d), 7 and 9 hereof (and any provision of the Employment Agreement referenced therein) will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, Consultant agrees that in the event of a breach of any of the covenants contained in in Sections 6(d), 7 and 9 hereof (and any provision of the Employment Agreement referenced therein), in addition to any other remedy which will be available at law or in equity, the Company will be entitled to seek specific performance and injunctive relief.

 

(b)                                  It is recognized and acknowledged by the Company that a breach of the covenant contained in Section 9 will cause irreparable damage to Consultant, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Company agrees that in the event of a breach of the covenant contained in Section 9, in addition to any other remedy which may be available at law or in equity, Consultant will be entitled to seek specific performance and injunctive relief.

 

14.                                Notices .  All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to Consultant :  at Consultant’s most recent address on the records of the Company with a copy to.

 

Thomas Ray

15348 Spruce Street

Broomfield, CO  80023

 

If to the Company and/or the Operating Partnership :

 

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CoreSite Realty Corporation

1001 17th Street, Suite 500

Denver, CO 80202

Attention: General Counsel

 

with a copy to:

 

Venable LLP

750 E. Pratt Street, Suite 900

Baltimore, MD 21202

Attn:  Michael D. Schiffer

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notice and communications shall be effective when actually received by the addressee.

 

15.                                Section 409A .  This Agreement is intended to comply with or be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and Department of Treasury regulations and other interpretive guidance issued thereunder (“ Section 409A ”), and it shall be interpreted and administered in accordance with such intent.  Notwithstanding any provision of this Agreement to the contrary, if the Company determines that any compensation or benefits payable under this Agreement may be subject to Section 409A, the Company shall work in good faith with Consultant to adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, reasonably necessary or appropriate to avoid the imposition of taxes under Section 409A, including without limitation, actions intended to (a) exempt the compensation and benefits payable under this Agreement from Section 409A, and/or (b) comply with the requirements of Section 409A; provided, however, that this Section 15 shall not create an obligation on the part of the Company to adopt any such amendment, policy or procedure or take any such other action, nor shall the Company have any liability for failing to do so.  Any right to a series of installment payments pursuant to this Agreement is to be treated as a right to a series of separate payments.  To the extent permitted under Section 409A, any separate payment or benefit under this Agreement or otherwise shall not be deemed “nonqualified deferred compensation” subject to Section 409A to the extent provided in the exceptions in Treasury Regulation Section 1.409A-1(b)(4), Section 1.409A-1(b)(9) or any other applicable exception or provision of Section 409A.  The parties intend and agree that Consultant experienced a “separation from service” from the Company within the meaning of Treasury Regulation Section 1.409A-1(b)(h)(2) upon the Transition Date.  If any compensation to be paid to Consultant under Section 6 as a result of the termination of the consultancy, the consulting relationship or the Consulting Period is “nonqualified deferred compensation” subject to Section 409A, such terms in relation to the consultancy shall have the same meaning as a “separation from service” from the Company within the meaning of Treasury Regulations Section 1.409A-1(b)(h)(2).  Any payments or benefits that are “nonqualified deferred compensation” shall not be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, garnishment by creditors, or borrowing, to the extent necessary to avoid tax, penalties and/or interest under Section 409A.

 

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16.                                Withholding .  The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold.  The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

 

17.                                Survival .  Section 6(d) (Return of Property; Inventions), Section 7 (Reaffirmation of Prior Agreements) (incorporating by reference Sections 5, 6 and 7 of the Employment Agreement), Section 8 (Cooperation), Section 9 (Mutual Non-Disparagement) Section 10 (Representations; Warranties; and Covenants), Section 11 (Independent Contractor) and Sections 13-23 hereof shall survive any termination of this Agreement and shall continue in effect.

 

18.                                Governing Law .  This Agreement shall be governed, construed, interpreted and enforced in accordance with its express terms, and otherwise in accordance with the substantive laws of the State of Colorado, without reference to the principles of conflicts of law of the State of Colorado or any other jurisdiction, and where applicable, the laws of the United States.

 

19.                                Entire Agreement; Counterparts .  Effective as of the Transition Date, this Agreement, the Release and any applicable equity award agreements as modified hereby, constitutes the complete and final agreement of the parties and supersede any prior agreements between them, whether written or oral, with respect to the subject matter hereof.  Without limiting the generality of the foregoing, Consultant hereby agrees that as of the Transition Date, the Employment Agreement is hereby terminated and shall be of no further force or effect, except for Sections 5, 6 and 7 thereof (as modified by this Agreement), which shall survive such termination.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. Signatures delivered by facsimile shall be deemed effective for all purposes.

 

20.                                Amendments; Waivers . This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by Consultant and a duly authorized officer of Company. By an instrument in writing similarly executed, Consultant or a duly authorized officer of the Company may waive compliance by the other Party with any specifically identified provision of this Agreement that such other Party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.

 

21.                                Arbitration .  Any controversy, claim or dispute arising out of or relating to this Agreement, shall be settled solely and exclusively by a binding arbitration process administered by JAMS/Endispute in Denver, Colorado. Such arbitration shall be conducted in accordance with the then-existing JAMS/Endispute Rules of Practice and Procedure, with the following exceptions if in conflict: (a) the Company and Consultant shall work together in good faith to together select one arbitrator; provided that, if the Company and Consultant are not able to together select one arbitrator within 10 days after using such good faith efforts, one arbitrator shall be chosen by JAMS/Endispute; (b) each party to the arbitration will pay its pro rata share of the expenses and fees of the arbitrator, together with other expenses of the arbitration incurred or approved by the arbitrator; provided that, in the event that the JAMS/Endispute rules, any express statutory provisions, or controlling case law conflicts with this allocation and requires

 

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the payment of administrative costs of arbitration by the Company, the administrative costs of arbitration will be paid by the Company; and (c) arbitration may proceed in the absence of any Party if written notice (pursuant to the JAMS/Endispute rules and regulations) of the proceedings has been given to such Party. Each Party shall bear its own attorneys’ fees and expenses; provided that, the prevailing party (or substantially prevailing party, as determined by the arbitrator) shall be entitled to recover its reasonable attorneys’ fees and expenses from the other party, and the expenses and fees of the arbitrator and expenses of the arbitration shall be paid by the unsuccessful party (or substantially unsuccessful party, as determined by the arbitrator). The Parties agree to abide by all decisions and awards rendered in such proceedings. Such decisions and awards rendered by the arbitrator shall be final and conclusive. All such controversies, claims or disputes shall be settled in this manner in lieu of any action at law or equity; provided, however, that nothing in this subsection shall be construed as precluding the bringing of an action for injunctive relief or specific performance as provided in this Agreement. This dispute resolution process and any arbitration hereunder shall be confidential and neither any Party nor the neutral arbitrator shall disclose the existence, contents or results of such process without the prior written consent of all Parties. If JAMS/Endispute no longer exists or is otherwise unavailable, the Parties agree that the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (“ AAA ”) shall administer the arbitration in accordance with its then-existing rules. In such event, all references herein to JAMS/Endispute shall mean AAA.  Notwithstanding the foregoing, Consultant and the Company each have the right to resolve any issue or dispute over intellectual property rights or Section 7 of this Agreement (incorporating by reference Sections 5, 6 and 7 of the Employment Agreement) by Court action instead of arbitration.

 

22.                                Construction .  This Agreement shall be deemed drafted equally by both the Parties. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any Party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “and” and “or” are each used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

 

23.                                Severability .  The invalidity or unenforceability of any provision of this Agreement, or any terms thereof, shall not affect the validity of this Agreement as a whole, which shall at all times remain in full force and effect.

 

[ SIGNATURE PAGE FOLLOWS ]

 

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IN WITNESS WHEREOF, Consultant has hereunto set Consultant’s hand and, pursuant to the authorization from the Board, each of the Company and the Operating Partnership, has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

 

 

CORESITE REALTY CORPORATION ,

 

a Maryland corporation

 

 

 

By:

/s/ Jeffrey S. Finnin

 

 

Jeff Finnin

 

 

Chief Financial Officer

 

 

 

CORESITE, L.P. , a Delaware limited partnership

 

 

 

By:

CoreSite Realty Corporation, its general partner

 

 

 

 

 

 

 

By:

/s/ Jeffrey S. Finnin

 

 

Jeff Finnin

 

 

Chief Financial Officer

 

 

 

 

 

CORESITE L.L.C. , a Delaware limited liability company

 

 

 

 

 

By:

/s/ Jeffrey S. Finnin

 

 

Jeff Finnin

 

 

Chief Financial Officer

 

 

 

CONSULTANT

 

 

 

 

/s/Thomas M. Ray

 

 

Thomas M. Ray

 

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EXHIBIT A

 

GENERAL RELEASE

 

FOR VALUABLE CONSIDERATION , the receipt and adequacy of which are hereby acknowledged, the undersigned does hereby agree as follows:

 

1.                                       Release of Claims . The undersigned agrees that the consideration set forth in the Consulting and Separation Agreement (the “ Consulting and Separation Agreement ”; capitalized terms used but not defined in this Release (as defined below) shall have the meanings set forth in the Consulting and Separation Agreement) to which this general release (this “ Release ”) is an Exhibit, represents settlement in full of all outstanding obligations owed to the undersigned by  CoreSite Realty Corporation, a Maryland corporation (the “ Company ”), any of its direct or indirect subsidiaries and affiliates (including, without limitation, the Operating Partnership and CoreSite, L.L.C.), and any of their current and former officers, managers, employees, agents, investors, attorneys, shareholders, administrators, affiliates, benefit plans, plan administrators, insurers, trustees, divisions, and subsidiaries and predecessor and successor corporations and assigns (collectively, the “ Releasees ”).  The undersigned, on his own behalf and on behalf of any of undersigned’s affiliated companies or entities and any of their respective heirs, family members, executors, agents, successors and assigns, hereby and forever releases the Releasees from, and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that undersigned may possess against any of the Releasees arising from any omissions, acts, facts, or damages that have occurred up until and including the Effective Date (as defined in Section 6 below) of this Release, including, without limitation:

 

(a)                                  any and all claims relating to or arising from the undersigned’s employment, service or consulting relationship with the Company or any of its direct or indirect subsidiaries or affiliates and the termination of those relationships;

 

(b)                                  any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; conversion; and disability benefits;

 

(c)                                   any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair Labor Standards Act; the Fair Credit Reporting Act; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974; the Worker Adjustment and Retraining Notification Act; the

 



 

Family and Medical Leave Act; the Sarbanes-Oxley Act of 2002; Dodd—Frank Wall Street Reform and Consumer Protection Act;

 

(d)                                  any and all claims for violation of the federal or any state constitution;

 

(e)                                   any and all claims arising out of any other laws and regulations relating to employment or employment discrimination; and

 

(f)                                    any claim for any loss, cost, damage, or expense arising out of any dispute over the nonwithholding or other tax treatment of any of the proceeds received by the undersigned as a result of the undersigned’s Employment Agreement (as defined in the Consulting and Separation Agreement); and

 

(g)                                   any and all claims for attorneys’ fees and costs.

 

The undersigned agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not release (A) claims that cannot be released as a matter of law, including, but not limited to, the undersigned’s right to file a charge with or participate in a charge by the Equal Employment Opportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, against the Company (with the understanding that the undersigned’s release of claims herein bars the undersigned from recovering such monetary relief from the Company or any Releasee), (B) claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law, (C) claims to continued participation in certain of the Company’s group benefit plans pursuant to the terms and conditions of COBRA, (D) claims to any benefit entitlements vested as of the date of separation of the undersigned’s employment pursuant to any employee benefit plan of the Company or its affiliates, (E) claims arising under the Consulting and Separation Agreement, (F) any and all rights of the undersigned to indemnification, advancement of expenses or reimbursement under applicable law, the Indemnification Agreement, dated as of            , 20  , by and between the Company and the undersigned or the charter and Bylaws of the Company in effect on the date hereof, and (G) any rights of the undersigned under the Company’s or its affiliates’ or successors’ D&O policy(ies).

 

2.                                       Acknowledgment of Waiver of Claims under ADEA.   The undersigned understands and acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (“ ADEA ”), and that this waiver and release is knowing and voluntary. The undersigned understands and agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Release. The undersigned understands and acknowledges that the consideration given for this waiver and release is in addition to anything of value to which the undersigned was already entitled. The undersigned further understands and acknowledges that he has been advised by this writing that: (a) he should consult with an attorney prior to executing this Release; (b) he has 21 days within which to consider this Release; (c) he has 7 days following his execution of this Release to revoke this Release; (d) this Release shall not be effective until after the revocation period has expired; and (e) nothing in this Release prevents or precludes the undersigned from

 



 

challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law. In the event the undersigned signs this Release and returns it to the Company in less than the 21 day period identified above, the undersigned hereby acknowledges that he has freely and voluntarily chosen to waive the time period allotted for considering this Release.

 

3.                                       Severability . In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Release shall continue in full force and effect without said provision or portion of provision.

 

4.                                       No Oral Modification . This Release may only be amended in a writing signed by the undersigned and a duly authorized officer of the Company.

 

5.                                       Governing Law; Dispute Resolution . This Release shall be subject to the provisions of Sections 18 and 21 of the Consulting and Services Agreement.

 

6.                                       Effective Date . The undersigned has seven days after the undersigned signs this Release to revoke it and this Release will become effective on the eighth day after the undersigned signed this Release, so long as it has been signed by the undersigned and has not been revoked by the undersigned before that date (the “ Effective Date ”).

 

7.                                       Voluntary Execution of Agreement . The undersigned understands and agrees that he executed this Release voluntarily, without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of his claims against the Company and any of the other Releasees. The Release acknowledges that: (a) he has read this this Release; (b) he has not relied upon any representations or statements made by the Company that are not specifically set forth in this Release; (c) he has been represented in the preparation, negotiation, and execution of this Release  by legal counsel of his own choice or has elected not to retain legal counsel; (d) he understands the terms and consequences of this Release and of the releases it contains; and (e) he is fully aware of the legal and binding effect of this Release.

 

IN WITNESS WHEREOF, the undersigned executed this Release on the date set forth below.

 

 

 

Dated:

 

 

 

 

 

 

Thomas M. Ray

 

 

 



 

EXHIBIT B

 

Restricted Stock Awards (RSAs)

 

 

 

 

 

Total Unvested

 

# Vesting in

 

Restricted Shares (RSAs)

 

Total Grant

 

RSAs

 

Feb/March 2017

 

2013 RSAs

 

27,778

 

6,945

 

6,945

 

2014 RSAs

 

41,601

 

13,853

 

13,853

 

2015 RSAs

 

27,431

 

18,269

 

9,135

 

2016 RSAs

 

20,497

 

20,497

 

6,826

 

Totals

 

117,307

 

59,564

 

36,759

 

 

Stock Options

 

 

 

Total

 

 

 

# Vesting in

 

Stock Options

 

Outstanding

 

Unvested

 

Feb/March 2017

 

Outstanding Stock Options

 

 

 

 

 

 

 

2012 Grant @ $23.99

 

18,750

 

0

 

0

 

2013 Grant @ $32.40

 

30,090

 

15,045

 

15,045

 

Totals

 

48,840

 

15,045

 

15,045

 

 

Performance Shares Awards (PSAs) 2014-2016 Cycle

 

 

 

 

 

Earned &

 

# Vesting in

 

 

 

Maximum

 

Banked to Date

 

Feb/March 2017

 

2014-2016 Performance Share

 

Award Granted

 

(1)

 

(2)

 

Granted

 

41,601

 

n/a

 

n/a

 

2014 Tranche (20% total)

 

8,320

 

4,837

 

4,837

 

2015 Tranche (20% total)

 

8,320

 

8,320

 

8,320

 

2016 Tranche (20% total)

 

8,320

 

8,320

 

8,320

 

2014-2016 Tranche (40% total)

 

16,640

 

16,640

 

16,640

 

Total

 

41,601

 

38,118

 

38,118

 

 


(1)          2014 and 2015 Tranches are actual amounts earned and banked. 2016 and 2014-2016 are projected at maximum based on performance through June 30, 2016.

 

(2)          Final award to be certified and determined by the Compensation Committee in its sole discretion.

 



 

EXHIBIT C

 

[Press Release]

 


Exhibit 10.2

 

Execution Version

 

Employment Agreement

 

This Employment Agreement, (the “ Agreement ”), is entered into by and between CoreSite, L.L.C., a Delaware limited liability company (“ CoreSite ” and, together with any of its successors or assigns, the “ Company ”), and Paul E. Szurek (the “ Executive ”) (each, a “ Party ” and, collectively referred to herein as the “ Parties ”) on July 27, 2016 and shall become effective on September 10, 2016 (the “ Effective Date ”).

 

RECITALS

 

A.                                     It is the desire of the Company to assure itself of the services of Executive by entering into this Agreement.

 

B.                                     Executive and the Company mutually desire that Executive provide services to the Company and its affiliates, including, without limitation, CoreSite Realty Corporation, a Maryland corporation (the “ REIT ”), and CoreSite, L.P., a Delaware limited partnership (the “ Operating Partnership ”) (collectively, the “ Company Group ”), on the terms herein provided.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the Parties hereto agree as follows:

 

1.                                       Employment .

 

(a)                                  General . The Company shall employ Executive and Executive shall enter the employ of the Company, for the period and in the position set forth in this Section 1 , and upon the other terms and conditions herein provided.

 

(b)                                  Employment Term . The term of employment under this Agreement (the “ Term ”) shall be for the period beginning on the Effective Date and ending on the first anniversary thereof, subject to earlier termination as provided in Section 3. The Term shall automatically renew for additional one (1) year periods unless no later than ninety (90) days prior to the end of the otherwise applicable Term either party gives written notice of non-renewal (“ Notice of Non-Renewal ”) to the other, in which case Executive’s employment will terminate at the end of the then-applicable Term or any other date set by the Company in accordance with Section 3 and subject to earlier termination as provided in Section 3.

 

(c)                                   Position and Duties . Executive shall serve as the President and Chief Executive Officer of the Company Group, with such customary responsibilities, duties and authority as may from time to time be assigned to Executive by the board of directors of the REIT (the “ Board ”). Executive shall report to the Board. Executive shall devote substantially all of Executive’s working time and efforts to the business and affairs of the Company Group.  This is not intended to prohibit Executive from serving on the board of directors of one other publicly traded

 



 

company, as long as such company does not compete with the Company, and the Board, in its reasonable discretion, approves of such service .  Executive agrees to observe and comply with the rules and policies of the Company Group as adopted by the Company Group from time to time.

 

2.                                       Compensation and Related Matters .

 

(a)                                  Base Salary . During the Term, Executive shall receive a base salary at a rate of $580,000 per annum (the “ Base Salary ”), which shall be paid in accordance with the customary payroll practices of the Company.  Such Base Salary shall be reviewed (and may be adjusted upward) from time to time by the Board or the Compensation Committee (the “ Committee ”) of the Board, in each case, in its sole discretion.

 

(b)                                  Bonus .

 

(i)                                      During the Term, Executive shall be eligible to receive an annual performance-based bonus upon the achievement of certain performance goals determined by the Board or the Committee (the “ Performance Bonus ”). Executive’s annual target bonus opportunity shall initially be $580,000, and may be increased in subsequent years in the sole discretion of the Board or the Committee. The actual amount of Executive’s annual Performance Bonus may, in the discretion of the Board or the Committee, be higher or lower than the target amount and shall be based upon the Company’s level of achievement of such performance goals, as determined by the Board or the Committee, in each case, in its discretion, and in accordance with the Company’s annual bonus plan applicable to Executive, as in effect from time to time. Any Performance Bonus payable pursuant to this Section 2(b) shall be paid to Executive in the calendar year following the calendar year to which the Performance Bonus relates and in which it is earned, provided that for calendar year 2016, any Performance Bonus shall be by March 15, 2017.

 

(ii)                                   Within 5 days following the Effective Date, the Company shall pay to Executive a cash bonus in an amount equal to $250,000.

 

(c)                                Equity Incentive Plans . Executive shall be entitled to receive an initial equity award, the details of which are set forth more fully in Exhibit A attached hereto (the “ Initial Equity Award ”). In addition, during the Term, Executive shall be eligible to participate in any equity incentive plan or plans that may be adopted by the Company Group from time to time, and shall be eligible to receive additional awards under such plan, as determined by the Board or the Committee, in each case, in its sole discretion.

 

(d)                                  Benefits . During the Term, Executive shall be eligible to participate in group employee benefit plans, programs and arrangements of the Company, as may be amended from time to time, which are generally applicable to similarly-situated executives of the Company Group. This currently includes, but is not limited to, Company-paid on-site parking for all employees; alternately, employees who commute to work via public transportation are eligible for reimbursement.

 

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(e)                                   Vacation . During the Term, Executive shall be entitled to paid vacation in accordance with Level 3 of the Company’s vacation policy, as it may be amended from time to time, which shall be prorated during Executive’s first year of service based on Executive’s start date. Any vacation shall be taken at the reasonable and mutual convenience of the Company and Executive.

 

(f)                                    Expenses . During the Term, the Company shall reimburse Executive for all reasonable travel and other business expenses incurred by Executive in the performance of Executive’s duties to the Company in accordance with the Company’s expense reimbursement policy, interpreted consistent with Section 11(l)(v) of this Agreement.

 

(g)                                   Key Person Insurance . At any time during the Term, the Company shall have the right to insure the life of Executive for the Company’s sole benefit. The Company shall have the right to determine the amount of insurance and the type of policy. Executive shall reasonably cooperate with the Company in obtaining such insurance by submitting to physical examinations, by supplying all information reasonably required by any insurance carrier, and by executing all necessary documents reasonably required by any insurance carrier. Executive shall incur no financial obligation by executing any required document, and shall have no interest in any such policy. The results of any physical examination of Executive performed pursuant to the terms hereof shall be made available to Executive and shall only be disclosed to the Board with the prior written consent of Executive. Except for the purposes of determining whether a Disability exists, the Company shall not permit the results of any physical examination of Executive performed pursuant to the terms hereof to have any effect on any employment decisions pertaining to Executive, and the Company hereby agrees and acknowledges that such results shall not have any such effect.

 

(h)                                  Housing/Relocation . The Company shall provide Executive with corporate housing in the Denver, Colorado metropolitan area for a period of up to six (6) months. Upon Executive’s permanent relocation to the Denver, Colorado metropolitan area, the Company shall reimburse Executive for all reasonable and customary expenses of relocating, including reasonable packing, moving and storage costs for the relocation of the personal property of Executive and his immediate family, house-hunting travel expenses for Executive and his immediate family and the reasonable closing costs in connection with the sale of Executive’s current primary residence and the purchase of a new primary residence in connection with his relocation to the Denver, Colorado metropolitan area, including typical and customary brokers’ commissions, title fees, attorneys fees, transfer taxes and all other fees and charges related to closing but excluding any taxes on sale and purchase, down-payment, mortgage points or similar costs.

 

3.                                       Termination .

 

Executive’s employment hereunder may be terminated by the Company or Executive, as applicable, without any breach of this Agreement under the following circumstances:

 

(a)                                  Circumstances .

 

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(i)                                      Death . Executive’s employment hereunder shall terminate upon Executive’s death.

 

(ii)                                   Disability . If Executive has incurred a Disability, as defined below, the Company may terminate Executive’s employment.

 

(iii)                                Termination for Cause . The Company may terminate Executive’s employment for Cause, as defined below.

 

(iv)                               Termination without Cause. The Company may terminate Executive’s employment without Cause.

 

(v)                                  Resignation from the Company Without Good Reason. Executive may resign Executive’s employment with the Company without Good Reason, as defined below.

 

(vi)                               Resignation from the Company With Good Reason. Executive may resign Executive’s employment with the Company with Good Reason within 90 days following the occurrence of a Good Reason event.

 

(vii)                            Non-extension of Term by the Company. The Company may give notice of non-extension to Executive pursuant to Section 1.

 

(viii)                         Non-extension of Term by Executive. Executive may give notice of non-extension to the Company pursuant to Section 1.

 

(b)                                  Notice of Termination . Any termination of Executive’s employment by the Company or by Executive under this Section 3 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other party hereto (i) indicating the specific termination provision in this Agreement relied upon, (ii) setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, and (iii) specifying a Date of Termination which, if submitted by Executive, shall be at least sixty (60) days following the date of such notice (a “ Notice of Termination ”); provided, however, that in the event that Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of Company’s receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination. A Notice of Termination submitted by the Company may provide for a Date of Termination on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion.  The failure by the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Company hereunder or preclude the Company from asserting such fact or circumstance in enforcing the Company’s rights hereunder. The failure by Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of Executive hereunder or preclude Executive from asserting such fact or circumstance in enforcing Executive’s rights hereunder.

 

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(c)                                   Company Obligations upon Termination . Upon termination of Executive’s employment pursuant to any of the circumstances listed in Section 3, Executive (or Executive’s estate) shall be entitled to receive the sum of: (i) the portion of Executive’s Base Salary earned through the Date of Termination, but not yet paid to Executive; (ii) the entire amount of any Performance Bonus that relates to the prior calendar year, but has not yet been paid to Executive; (iii) any expenses owed to Executive pursuant to Section 2(f); (iv) any amount accrued and arising from Executive’s participation in, or benefits accrued under any employee benefit plans, equity incentive plans, programs or arrangements, which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, equity incentive plans, programs or arrangements, including but not limited to accrued but unused vacation (collectively, the “ Company Arrangements ”); and (v) any equity interests or awards that vested on or before the Date of Termination. Except as otherwise expressly required by law ( e.g ., COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts hereunder (if any) shall cease upon the termination of Executive’s employment hereunder. In the event that Executive’s employment is terminated by the Company for any reason, Executive’s sole and exclusive remedy under this Agreement shall be to receive the severance payments and benefits described in this Section 3(c) and/or Section 4, as applicable.

 

(d)                                  Deemed Resignation . Upon termination of Executive’s employment for any reason, Executive shall be deemed to have resigned from all offices and directorships, if any, then held with the Company Group. The Company hereby agrees that, upon termination of Executive’s employment for any reason, it shall not terminate, amend, waive or otherwise modify any rights Executive has with respect to indemnification, reimbursement, and subrogation pursuant to the Company Group’s organizational documents, the Company Group’s directors’ and officers’ insurance policy, or otherwise, without Executive’s prior written consent, unless the Company provides equivalent or more favorable rights under substantially similar arrangements or agreements.

 

4.                                       Severance Payments .

 

(a)                                  Termination Upon Death or Disability . If Executive’s employment shall terminate as a result of Executive’s death pursuant to Section 3(a)(i) or Disability pursuant to Section 3(a)(ii), Executive shall receive, in addition to the payments provided for in Section 3(c), the following:

 

(i)                                      An amount equal to Executive’s target Performance Bonus amount for the calendar year in which such termination occurs, multiplied by a fraction, the numerator of which is the number of months in such year during which Executive was employed prior to termination and the denominator of which is twelve (12), which amount shall be paid on the First Pay Date (defined below);

 

(ii)                                   Accelerated vesting, effective as of immediately prior to Executive’s Separation from Service (defined below), of all outstanding equity awards Executive holds that would have vested solely based on the passage of time ( e.g. , equity awards with vesting based on performance will not vest) through the end of the twelve

 

5



 

(12) month anniversary from the date of death or the Date of Termination as a result of a determination that Executive has a Disability pursuant to Section 3(a)(ii); and

 

(iii)                                any equity awards held by Executive as of the Date of Termination shall, subject to earlier termination upon a Change of Control or other extraordinary corporate transaction in accordance with the terms of the applicable equity plan, remain outstanding until at least one (1) year following the Date of Termination (subject to a maximum term of ten years from the date of grant), and shall otherwise remain subject to all of the terms and conditions applicable to such equity awards.

 

(b)                                  Termination for Cause, Resignation from the Company Without Good Reason, or Non-extension of Term by Executive . If Executive’s employment shall terminate pursuant to Section 3(a)(iii) for Cause, pursuant to Section 3(a)(v) for Executive’s resignation from the Company without Good Reason, or pursuant to Section 3(a)(viii) due to non-extension of the Term by Executive, Executive shall not be entitled to any severance payments or benefits, except as provided in Section 3(c).

 

(c)                                   Termination without Cause, Resignation from the Company With Good Reason or Non-extension of the Term by the Company . If Executive’s employment shall terminate without Cause pursuant to Section 3(a)(iv), with Good Reason pursuant to Section 3(a)(vi) or due to non-extension of the Term by the Company pursuant to Section 3(a)(vii), then, subject to Executive signing on or before the 21st day following Executive’s Separation from Service (as defined below), and not revoking, a release of claims in the form attached as Exhibit B to this Agreement (the “ Release ”), and Executive’s continued compliance with Sections 5 and 6 and the interpretation rules set forth in Section 11(l), Executive shall receive, in addition to payments and benefits set forth in Section 3(c), the following:

 

(i)                                      Continued payment of Executive’s Base Salary in effect on the Date of Termination (unless prior to such Date of Termination Executive’s Base Salary was reduced by more than 10% of the Base Salary in effect prior to such reduction, in which case Base Salary shall be determined based upon the rate in effect prior to such reduction less 10% if such reduction is implemented in connection with a contemporaneous reduction in base salaries affecting other senior executive officers of the Company), payable in the form of salary continuation in regular installments over the eighteen (18) month period following the date of Executive’s Separation from Service (the “ Severance Period ”) in accordance with the Company’s normal payroll practices;

 

(ii)                                   if Executive elects to receive continued healthcare coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), the Company shall directly pay, or reimburse (within 10 days of the end of each month for which reimbursement is claimed) Executive for, the COBRA premiums for Executive and Executive’s covered dependents during the period commencing on Executive’s Separation from Service and ending upon the earliest of (A) the last day of the Severance Period, (B) the date that Executive and/or Executive’s covered dependents become no longer eligible for COBRA or (C) the date Executive and Executive’s covered dependents become eligible to receive healthcare coverage from Executive’s subsequent

 

6



 

employer (such healthcare continuation premiums shall be provided in the form of taxable reimbursements to Executive if necessary to avoid inclusion in taxable income by Executive of the value of in-kind benefits, in which event Company shall pay to Executive, with each monthly reimbursement, an additional amount of cash equal to A/(1-R)-A, where A is the amount of the reimbursement for the month, and R is the sum of the maximum federal individual income tax rate then applicable to ordinary income and the maximum individual Colorado income tax rate then applicable to ordinary income);

 

(iii)                                a lump sum payment in cash on the First Pay Date of an amount equal to Executive’s target Performance Bonus amount for the calendar year in which such termination occurs, multiplied by a fraction, the numerator of which is the number of months in such year during which Executive was employed prior to termination and the denominator of which is twelve (12);

 

(iv)                               accelerated vesting, effective as of immediately prior to Executive’s Separation from Service, of all outstanding equity awards that would have vested solely based on the passage of time ( e.g. , equity awards with vesting based on performance will not vest) if Executive had remained employed with the Company or any of its affiliates through the end of the Severance Period; and

 

(v)                                  any equity awards held by Executive as of the Date of Termination shall, subject to earlier termination upon a Change of Control or other extraordinary corporate transaction in accordance with the terms of the applicable equity plan, remain outstanding until at least one (1) year following the Date of Termination (subject to a maximum term of ten years from the date of grant), and shall otherwise remain subject to all of the terms and conditions applicable to such equity awards.

 

(d)                                  Termination following Change in Control . If Executive’s employment shall terminate without Cause pursuant to Section 3(a)(iv), with Good Reason pursuant to Section 3(a)(vi) or pursuant to Section 3(a)(vii) due to non-extension of the Term by the Company, in each case, within twelve (12) months following a Change in Control, then, subject to Executive signing on or before the 21st day following Executive’s Separation from Service, and not revoking, a Release, and Executive’s continued compliance with Sections 5 and 6, Executive shall receive, without duplication of any of the payments or benefits set forth in Section 4(c):

 

(i)                                      the payments and benefits set forth in Section 3(c);

 

(ii)                                   a cash payment equal to one and one-half (1.5) times Executive’s annual Base Salary in effect on the Date of Termination (unless prior to such Date of Termination Executive’s Base Salary was reduced by more than 10% of the Base Salary in effect prior to such reduction, in which case Base Salary shall be determined based upon the rate in effect prior to such reduction less 10% if such reduction is implemented in connection with a contemporaneous reduction in base salaries affecting other senior executive officers of the Company), paid in a lump sum on the First Pay Date;

 

7



 

(iii)                                a cash payment in an amount equal to Executive’s target Performance Bonus for the calendar year in which the termination occurs, paid on the First Pay Date;

 

(iv)                               a cash payment in an amount equal to Executive’s target Performance Bonus amount for the calendar year in which such termination occurs, multiplied by a fraction, the numerator of which is the number of months in such year during which Executive was employed prior to termination and the denominator of which is twelve (12), paid on the First Pay Date;

 

(v)                                  the payments and benefits set forth in Section 4(c)(ii);

 

(vi)                               instead of the accelerated vesting specified in Section 4(c)(iv), Executive shall receive accelerated vesting, effective as of immediately prior to Executive’s Separation from Service, of 100% of all outstanding equity awards Executive holds that are eligible to vest (including any equity awards that would fully vest upon achievement of any time-based or performance-based goals or targets); and

 

(vii)                            any equity awards held by Executive as of the Date of Termination shall, subject to earlier termination upon a Change in Control or other extraordinary corporate transaction in accordance with the terms of the applicable equity plan, remain outstanding until at least one (1) year following the Date of Termination (subject to a maximum term of ten years from the date of grant), and shall otherwise remain subject to all of the terms and conditions applicable to such equity awards.

 

(e)                                   Survival . Notwithstanding anything to the contrary in this Agreement, the provisions of Sections 3 through 9 and Section 11 will survive the termination of Executive’s employment and the expiration or termination of the Term.

 

5.                                       Competition .

 

(a)                                  Executive shall not, at any time during the Restriction Period, directly or indirectly engage in, have any equity interest in, enter into a discussion of which the primary purpose and intention of Executive is to interview for a potential executive or managerial employment or consulting relationship with, or manage or operate any person, firm, corporation, partnership or business (whether as director, officer, employee, agent, representative, partner, security holder, consultant or otherwise) that competes with the Business (as defined below) of the Company anywhere in the United States. Notwithstanding anything to the contrary, nothing shall prohibit Executive from (i) retaining any ownership interest in the Company or (ii) being a passive owner of not more than 2% of the outstanding equity interest in any entity that is publicly traded, so long as Executive has no active participation in the business of such entity.

 

(b)                                  Executive shall not, at any time during the Restriction Period, directly or indirectly, recruit or otherwise solicit or induce any customer, subscriber or supplier of the Company (i) to terminate its arrangement with the Company, or (ii) to otherwise change its relationship with the Company. Executive shall not, at any time during the Restriction Period, directly or indirectly, either for Executive or for any other person or entity, (A) solicit any

 

8



 

employee of the Company to terminate his or her employment with the Company (other than solicitations of the general public that are not directed only towards employees of the Company), (B) employ any such individual during his or her employment with the Company and for a period of six months after such individual terminates his or her employment with the Company or (C) solicit any vendor or business affiliate of the Company to cease to do business with the Company.

 

(c)                                   In the event the terms of this Section 5 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.

 

(d)                                  As used in this Section 5, (i) the term “ Company ” means the Company Group, (ii) the term “ Business ” shall mean buying, developing and operating data centers and colocation facilities, and any other material lines of business into which the Company may expand during the Term; and (iii) the term “ Restriction Period ” shall mean the period beginning on the Effective Date and ending on the date that is twelve (12) months following the Date of Termination.

 

(e)                                   Executive agrees, during the Term and following the Date of Termination, to refrain from disparaging the Company Group, including any of its services, technologies or practices, or any of its directors, officers, agents, representatives or stockholders, either orally or in writing. The Company agrees, during the Term and following the Date of Termination, that the Company’s directors will refrain from disparaging Executive. Nothing in this paragraph shall preclude Executive, the Company or the Company’s directors, officers, employees, agents, representatives or stockholders from making truthful statements that are reasonably necessary to comply with applicable law, regulation or legal process, or to otherwise assert its rights under this Agreement or otherwise against each other.

 

(f)                                    Executive represents that Executive’s employment by the Company does not and will not breach any agreement with any former employer, including any non-compete agreement or any agreement to keep in confidence or refrain from using information acquired by Executive prior to Executive’s employment by the Company. During Executive’s employment by the Company, Executive agrees that Executive will not violate any non-solicitation agreements Executive entered into with any former employer or improperly make use of, or disclose, any information or trade secrets of any former employer or other third party, nor will Executive bring onto the premises of the Company or use any unpublished documents or any property belonging to any former employer or other third party, in violation of any lawful agreements with that former employer or third party.

 

6.                                       Nondisclosure of Proprietary Information.

 

(a)                                  Except in connection with the performance of Executive’s duties hereunder or pursuant to Section 6(c) and (e), Executive shall, in perpetuity, maintain in confidence and shall

 

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not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for Executive’s benefit or the benefit of any person, firm, corporation or other entity any confidential or proprietary information or trade secrets of or relating to the Company (including, without limitation, business plans, business strategies and methods, acquisition targets, intellectual property in the form of patents, trademarks and copyrights and applications therefor, ideas, inventions, works, discoveries, improvements, information, documents, formulae, practices, processes, methods, developments, source code, modifications, technology, techniques, data, programs, other know-how or materials, owned, developed or possessed by the Company, whether in tangible or intangible form, information with respect to the Company’s operations, processes, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, prospects and compensation paid to employees or other terms of employment) (collectively, the “ Confidential Information ”), or deliver to any person, firm, corporation or other entity any document, record, notebook, computer program or similar repository of or containing any such Confidential Information. The Parties hereby stipulate and agree that, as between them, any item of Confidential Information is important, material and confidential and affects the successful conduct of the businesses of the Company (and any successor or assignee of the Company). Notwithstanding the foregoing, Confidential Information shall not include any information that has been published in a form generally available to the public prior to the date Executive proposes to disclose or use such information, provided, that such publishing of the Confidential Information shall not have resulted from Executive directly or indirectly breaching Executive’s obligations under this Section 6(a) or any other similar provision by which Executive is bound, or from any third-party breaching its confidentiality obligations to the Company (to the extent Executive knows of the breach).  For the purposes of the previous sentence, Confidential Information will not be deemed to have been published or otherwise disclosed merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.

 

(b)                                  Upon termination of Executive’s employment with the Company for any reason, Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents or property concerning the Company’s customers, business plans, marketing strategies, products, property or processes.

 

(c)                                   Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company prompt notice thereof, and shall, as much in advance of the return date as practicable, make available to the Company and its counsel the documents and other information sought and shall assist (to the extent reasonably requested by the Company) such counsel at Company’s expense in resisting or otherwise responding to such process. Nothing herein shall preclude or restrict Executive from responding to a lawful and valid subpoena or other legal process in a manner in which Executive determines in his best interests in accordance with privileged and confidential legal advice that Executive obtains separate from the Company and its counsel.

 

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(d)                                  As used in this Section 6 and Section 7, the term “ Company ” shall mean the Company Group.

 

(e)                                   Nothing in this Agreement shall prohibit Executive from (i) disclosing information and documents when required by law, subpoena or court order (subject to the requirements of Section 6(c) above), (ii) disclosing information and documents to Executive’s attorney or tax adviser for the purpose of securing legal or tax advice, (iii) disclosing Executive’s post-employment restrictions in this Agreement in confidence to any potential new employer, or (iv) retaining, at any time, Executive’s personal correspondence, Executive’s personal contacts and documents related to Executive’s own personal benefits, entitlements and obligations.  Executive 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.

 

7.                                       Inventions.

 

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 Executive may discover, invent or originate during the Term, 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. Executive 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. Executive hereby appoints the Company as Executive’s attorney-in-fact to execute on Executive’s behalf any assignments or other documents reasonably deemed necessary by the Company to protect or perfect its rights to any Inventions.

 

8.                                       Injunctive Relief.

 

(a)                                  It is recognized and acknowledged by Executive that a breach of the covenants contained in Sections 5, 6 and 7 will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, Executive agrees that in the event of a breach of any of the covenants contained in Sections 5, 6 and 7, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to seek specific performance and injunctive relief.

 

(b)                                  It is recognized and acknowledged by the Company that a breach of the covenant contained in Section 5(e) will cause irreparable damage to Executive, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will

 

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be inadequate. Accordingly, the Company agrees that in the event of a breach of the covenant contained in Section 5(e), in addition to any other remedy which may be available at law or in equity, Executive will be entitled to seek specific performance and injunctive relief.

 

9.                                       Assignment and Successors.

 

The Company shall not assign its rights and obligations under this Agreement to any party without the prior written consent of Executive, except that the Company may assign its rights and obligations under this Agreement to any successor to all or substantially all of the business or the assets of the Company (by merger or otherwise) or to any affiliate within the Company Group, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company Group without the prior written consent of Executive. This Agreement shall be binding upon and inure to the benefit of the Company, Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable. None of Executive’s rights or obligations may be assigned or transferred by Executive, other than Executive’s rights to payments hereunder, which may be transferred only by will or operation of law. Notwithstanding the foregoing, Executive shall be entitled, to the extent permitted under applicable law and applicable Company Arrangements, to select and change a beneficiary or beneficiaries to receive compensation hereunder following Executive’s death by giving written notice thereof to the Company.

 

10.                                Certain Definitions.

 

(a)                                  Affiliate . For purposes of this Agreement, “affiliate” shall mean, with respect to any person or entity, any person or entity that, directly or indirectly controls, is controlled by, or is under common control with such person or entity.

 

(b)                                  Cause . The Company shall have “Cause” to terminate Executive’s employment hereunder upon:

 

(i)                                      Executive’s failure to substantially perform Executive’s duties as an employee of the Company (other than any such failure resulting from Executive’s Disability);

 

(ii)                                   Executive’s failure in any material respect to carry out or comply with any lawful and reasonable directive of the Board consistent with the terms of this Agreement;

 

(iii)                                Executive’s material breach of this Agreement;

 

(iv)                               Executive’s commission of a felony whether or not related to the business or property of the Company Group;

 

(v)                                  Executive’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 Executive’s duties and responsibilities under this Agreement; or

 

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(vi)                               Executive’s commission of an act of fraud, embezzlement, misappropriation, willful misconduct, or breach of any duty owed to the Company or any of its affiliates; provided that no act or failure to act on the part of Executive shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of the Company. Any act or failure to act, based upon specific authority given pursuant to a resolution duly adopted by the Board or a committee thereof or based on the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company.

 

Notwithstanding the foregoing, in the case of clauses (i), (ii) and (iii) above, no Cause will have occurred unless and until the Company has: (a) provided Executive, within sixty (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 Executive with an opportunity to cure the same within thirty (30) days after the receipt of such notice; provided, however, that Executive shall be provided only one cure opportunity per category of Cause event in any rolling twelve (12) month period. If Executive fails to cure the same within such thirty (30) days, then “Cause” shall be deemed to have occurred as of the expiration of the thirty (30)-day cure period. For the avoidance of doubt, Executive’s death or Disability shall not constitute “Cause” hereunder.

 

(c)                                   Change in Control . For purposes of this Agreement, “ Change in Control ” shall mean the following:

 

(i)                                      a transaction or series of related transactions whereby any “person” or related “group” of “persons” (as such terms are used in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) (other than the Company, the REIT or any of their affiliates, an employee benefit plan maintained by the Company, the REIT or any of their affiliates or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company or the REIT) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the REIT possessing more than 50% of the total combined voting power of the REIT’s securities outstanding immediately after such acquisition; or

 

(ii)                                   the consummation by the Company, the REIT or any of their affiliates’ (whether directly involving the Company, the REIT or any of their affiliates, or indirectly involving the Company, the REIT or any of their affiliates through one or more intermediaries) of (A) a merger, consolidation, reorganization, or business combination; (B) a sale or other disposition of all or substantially all of the REIT’s assets in any single transaction or series of related transactions; or (C) the acquisition of assets or stock of another entity, in each case, other than a transaction which results in the REIT’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the REIT or the person that, as a result of the transaction, controls, directly or indirectly, the REIT or

 

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owns, directly or indirectly, all or substantially all of the REIT’s assets or otherwise succeeds to the business of the REIT (the REIT or such person, the “ Successor Entity ”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction.

 

(iii)                                Notwithstanding the foregoing, a transaction or event shall not constitute a Change in Control for purposes of this Agreement unless such transaction or event also qualifies as a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation, within the meaning of Treas. Reg. § 1.409A-3(i)(5).

 

(d)                                  Date of Termination . “Date of Termination” shall mean (i) if Executive’s employment is terminated by Executive’s death, the date of Executive’s death; (ii) if Executive’s employment is terminated pursuant to Section 3(a)(ii) — (vi) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 3(b), whichever is earlier; (iii) if Executive’s employment is terminated pursuant to Section 3(a)(vii) or Section 3(a)(viii), the expiration of the then-applicable Term.

 

(e)                                   Disability . “Disability” shall mean, at any time the Company or any of its affiliates sponsors a long-term disability plan for the Company’s employees, “disability” as defined in such long-term disability plan for the purpose of determining a participant’s eligibility for benefits, provided, however, if the long-term disability plan contains multiple definitions of disability, “Disability” shall refer to that definition of disability which, if Executive qualified for such disability benefits, would provide coverage for the longest period of time. The determination of whether Executive has a Disability shall be made by the person or persons required to make disability determinations under the long-term disability plan. At any time the Company does not sponsor a long-term disability plan for its employees, Disability shall mean Executive’s inability to perform, with or without reasonable accommodation, the essential functions of Executive’s position hereunder for a total of three months 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 Executive or Executive’s legal representative, with such agreement as to acceptability not to be unreasonably withheld or delayed. Any refusal by Executive to submit to a medical examination for the purpose of determining Disability shall be deemed to constitute conclusive evidence of Executive’s Disability.

 

(f)                                    Good Reason . “Good Reason” shall mean the occurrence of any of the following events without Executive’s express written consent:

 

(i)                                      the Company’s material breach of this Agreement;

 

(ii)                                   a reduction in Executive’s Base Salary or Executive’s annual target bonus opportunity, other than a reduction in Base Salary or annual target bonus opportunity of less than 10% that is implemented in connection with a contemporaneous reduction in base salaries affecting other senior executive officers of the Company;

 

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(iii)                                a relocation of Executive’s principal place of employment to a location more than 20 miles outside of the Denver, Colorado metropolitan area;

 

(iv)                               a requirement that Executive report to anyone other than the Board; or

 

(v)                                  a material reduction or material diminution of Executive’s position (including title of CEO), duties, responsibilities or authorities, including without limitation, any situation under which Executive is not the sole Chief Executive Officer of the Company.

 

Notwithstanding the foregoing, no Good Reason will have occurred unless and until Executive has: (a) provided the Company, within sixty (60) days of Executive’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 thirty (30) days after the receipt of such notice; provided, however, that the Company shall be provided only one cure period per category of Good Reason event in any rolling twelve (12) month period. If the Company fails to cure the same within such thirty (30) days, then the termination shall be deemed to occur as of the expiration of the thirty (30)-day cure period.

 

11.                                Miscellaneous Provisions.

 

(a)                                  Governing Law . This Agreement shall be governed, construed, interpreted and enforced in accordance with its express terms, and otherwise in accordance with the substantive laws of the State of Colorado, without reference to the principles of conflicts of law of the State of Colorado or any other jurisdiction, and where applicable, the laws of the United States.

 

(b)                                  Validity . The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

(c)                                   Notices . Any notice, request, claim, demand, document and other communication hereunder to any Party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by facsimile or certified or registered mail, postage prepaid, as follows:

 

(i)                                      If to the Company:

 

CoreSite Realty Corporation

1001 17th Street, Suite 500

Denver, CO 80202

Attention: General Counsel

 

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with a copy to:

 

Venable LLP

750 E. Pratt Street, Suite 900

Baltimore, MD 21202

Attn:  Michael D. Schiffer

 

(ii)                                   If to Executive, at the last address that the Company has in its personnel records for Executive.

 

or at any other address as any Party shall have specified by notice in writing to the other Party.

 

(d)                                  Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. Signatures delivered by facsimile shall be deemed effective for all purposes.

 

(e)                                   Entire Agreement . The terms of this Agreement are intended by the Parties to be the final expression of their agreement with respect to the employment of Executive by the Company and supersede all prior understandings and agreements, whether written or oral. The Parties further intend that this Agreement shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

 

(f)                                    Amendments; Waivers . This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by Executive and a duly authorized officer of Company. By an instrument in writing similarly executed, Executive or a duly authorized officer of the Company may waive compliance by the other Party with any specifically identified provision of this Agreement that such other Party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.

 

(g)                                   No Inconsistent Actions . It is the intent of the Parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

 

(h)                                  Construction . This Agreement shall be deemed drafted equally by both the Parties. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any Party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “and” and “or” are each used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all,” and “each and

 

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every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

 

(i)                                      Arbitration . Any controversy, claim or dispute arising out of or relating to this Agreement, shall be settled solely and exclusively by a binding arbitration process administered by JAMS/Endispute in Denver, Colorado. Such arbitration shall be conducted in accordance with the then-existing JAMS/Endispute Rules of Practice and Procedure, with the following exceptions if in conflict: (a) the Company and Executive shall work together in good faith to together select one arbitrator; provided that, if the Company and Executive are not able to together select one arbitrator within ten (10) days after using such good faith efforts, one arbitrator shall be chosen by JAMS/Endispute; (b) each party to the arbitration will pay its pro rata share of the expenses and fees of the arbitrator, together with other expenses of the arbitration incurred or approved by the arbitrator; provided that, in the event that the JAMS/Endispute rules, any express statutory provisions, or controlling case law conflicts with this allocation and requires the payment of administrative costs of arbitration by the Company, the administrative costs of arbitration will be paid by the Company; and (c) arbitration may proceed in the absence of any Party if written notice (pursuant to the JAMS/Endispute rules and regulations) of the proceedings has been given to such Party. Each Party shall bear its own attorneys’ fees and expenses; provided that the prevailing party (or substantially prevailing party, as determined by the arbitrator) shall be entitled to recover its reasonable attorneys’ fees and expenses from the other party, and the expenses and fees of the arbitrator and expenses of the arbitration shall be paid by the unsuccessful party (or substantially unsuccessful party, as determined by the arbitrator). The Parties agree to abide by all decisions and awards rendered in such proceedings. Such decisions and awards rendered by the arbitrator shall be final and conclusive. All such controversies, claims or disputes shall be settled in this manner in lieu of any action at law or equity; provided, however, that nothing in this subsection shall be construed as precluding the bringing an action for injunctive relief or specific performance as provided in this Agreement. This dispute resolution process and any arbitration hereunder shall be confidential and neither any Party nor the neutral arbitrator shall disclose the existence, contents or results of such process without the prior written consent of all Parties. If JAMS/Endispute no longer exists or is otherwise unavailable, the Parties agree that the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (“ AAA ”) shall administer the arbitration in accordance with its then-existing rules. In such event, all references herein to JAMS/Endispute shall mean AAA. Notwithstanding the foregoing, Executive and the Company each have the right to resolve any issue or dispute over intellectual property rights by Court action instead of arbitration.

 

(j)                                     Enforcement . If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this

 

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Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

 

(k)                                  Withholding . The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

 

(l)                                      Section 409A .

 

(i)                                      General. The intent of the Parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the regulations and guidance promulgated thereunder (collectively, “ Section 409A ”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. If Executive notifies the Company that Executive has received advice of tax counsel with expertise in Section 409A that any provision of this Agreement would cause Executive to incur any additional tax or interest under Section 409A (with specificity as to the reason therefor) or the Company independently makes such determination, the Company and Executive shall take commercially reasonable efforts to reform such provision to try to comply with or be exempt from Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Section 409A, provided that any such modifications shall not materially increase the cost or liability to the Company. To the extent that any provision hereof is modified in order to comply with or be exempt from Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to Executive and the Company of the applicable provision without violating the provisions of Section 409A.

 

(ii)                                   Payments . For purposes of this Agreement, each payment is intended to be excepted from Section 409A to the maximum extent provided under Section 409A as follows: (i) each payment that is scheduled to be made following Executive’s Date of Termination and within the applicable 2 1/2 month period specified in Treas. Reg. § 1.409A-1(b)(4) is intended to be excepted under the short-term deferral exception as specified in Treas. Reg. § 1.409A-1(b)(4); (ii) post-termination medical benefits are intended to be excepted under the medical benefits exception as specified in Treas. Reg. § 1.409A-1(b)(9)(v)(B), and (iii) each payment that is not otherwise excepted under the short-term deferral exception or medical benefits exception is intended to be excepted under the involuntary separation pay exception as specified in Treas. Reg. § 1.409A-1(b)(9)(iii).  Executive shall have no right to designate the date of any payment hereunder.

 

(iii)                                Separation from Service. Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under this Agreement that is designated under this Agreement as payable upon Executive’s termination of

 

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employment shall be payable only upon Executive’s “separation from service” with the Company within the meaning of Section 409A (a “ Separation from Service ”) and, except as provided below, any such compensation or benefits shall not be paid, or, in the case of installments, shall not commence payment, until the thirtieth (30th) day following Executive’s Separation from Service (the “ First Pay Date”) . Any installment payments that would have been made to Executive during the thirty (30) day period immediately following Executive’s Separation from Service but for the preceding sentence shall be paid to Executive on the First Pay Date and the remaining payments shall be made as provided in this Agreement.

 

(iv)                               Specified Employee. Notwithstanding anything in this Agreement to the contrary, if Executive is deemed by the Company at the time of Executive’s Separation from Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A, such portion of Executive’s benefits shall not be provided to Executive prior to the earlier of (x) one day following the expiration of the six-month period measured from the date of Executive’s Separation from Service with the Company or (y) the date of Executive’s death. Upon the first business day following the expiration of the applicable Section 409A period, all payments deferred pursuant to the preceding sentence shall be paid in a lump sum to Executive (or Executive’s estate or beneficiaries), and any remaining payments due to Executive under this Agreement shall be paid as otherwise provided herein,

 

(v)                                  Expense Reimbursements. To the extent that any reimbursements under this Agreement are subject to Section 409A, any such reimbursements payable to Executive shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred; provided, that Executive submits Executive’s reimbursement request promptly following the date the expense is incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of the Code, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.

 

(vi)                               Installments. Executive’s right to receive any installment payments under this Agreement, including without limitation any continuation salary payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Section 409A.

 

(m)                              280G Optimization .

 

(i)                                      If it is determined that any payment or benefit provided by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including, by example and not by way of limitation, acceleration by the Company or otherwise of the date of vesting or

 

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payment under any plan, program, arrangement or agreement of the Company would be subject to the excise tax imposed by Code section 4999 or any interest or penalties with respect to such excise tax (such excise tax together with any such interest and penalties, shall be referred to as the “ Excise Tax ”), then the Company shall first make a calculation under which such payments or benefits provided to Employee are reduced to the extent necessary so that no portion thereof shall be subject to the Excise Tax (the “ 4999 Limit ”). The Company shall then compare (A) Executive’s Net After-Tax Benefit (as defined below) assuming application of the 4999 Limit with (B) Executive’s Net After-Tax Benefit without application of the 4999 Limit. Executive shall be entitled to the greater of (A) or (B). “ Net After-Tax Benefit ” shall mean the sum of (x) all payments that Executive receives or is entitled to receive from the Company that are contingent on a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company within the meaning of Code section 280G(b)(2) (either, a “ Section 280G Transaction ”), less (y) the amount of federal, state, local, employment, and Excise Tax (if any) imposed with respect to such payments. If Executive is required to reduce payments to which he is otherwise entitled such that no portion thereof is subject to the Excise Tax, in order to comply with Code Section 409A, (I) payment or acceleration with respect to Executive’s equity awards shall be reduced first, in proportion to the amount of each such payment or amount of each such acceleration for purposes of Code Section 280G; and (II) if any remaining payments are required to be reduced, cash payments shall be reduced, beginning with payments that would be received last in time.

 

(ii)                                   In connection with a Section 280G Transaction, if the Company then constitutes a small business corporation within the meaning of Code Section 280G(b)(5), at the request of Executive, the Company shall submit to the shareholders of the Company (the “ Shareholders ”) for approval (in a manner reasonably satisfactory to Executive), by such number of Shareholders as is required by the terms of Code Section 280G(b)(5)(B), any payments and/or benefits that may separately or in the aggregate, constitute the payment of any amount that may be deemed a “parachute payment” under Code Section 280G with respect to Executive (“ Section 280G Payments ”), such that such payments and benefits shall not be deemed to be Section 280G Payments, provided that Executive executes, prior to the Shareholder vote, an appropriate waiver of the 280G Payments that would take effect if the Shareholder vote does not approve the Section 280G Payments.

 

12.                                Employee Acknowledgement.

 

Executive acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on Executive’s own judgment.

 

[ Signature Page Follows ]

 

20



 

IN WITNESS WHEREOF, the Parties have executed this Agreement on the date and year first above written.

 

 

CORESITE, L.L.C. , a Delaware limited liability company

 

 

 

 

By:

/s/ Jeffrey S. Finnin

 

 

Name:

Jeff Finnin

 

 

Title:

Chief Financial Officer

 

 

 

 

EXECUTIVE

 

 

 

 

By:

/s/ Paul E. Szurek

 

 

Paul E. Szurek

 

[Signature Page to Paul E. Szurek Employment Agreement]

 

21



 

EXHIBIT A

 

Details of Initial Equity Award

 

The Company agrees to offer Executive participation in an equity incentive program as an additional component to his compensation package, subject to the conditions described herein and such terms and conditions as may be set forth in the Plan and the Award Agreement (each as defined below). Capitalized terms not defined herein shall have the meanings assigned to them in the Employment Agreement to which this Exhibit A is attached (the “ Employment Agreement ”).

 

Pursuant to the terms of the Amended and Restated 2010 Incentive Award Plan (the “ Plan ”) of the REIT and the Operating Partnership, the Board or the Committee may from time to time make various incentive equity or equity-based awards to the Company’s employees and other service providers. In accordance with the Plan, Executive will receive one or more awards under the Plan having an aggregate value (as of the date of grant of the Award) equal to $2,940,000, of which $1,940,000 shall be provided in the form of restricted stock in the REIT (the “ Restricted Shares ”) and $1,000,000 in the form of performance-based restricted stock in the REIT (“ PSAs ” and, together with the Restricted Shares, each, an “ Award ” and, collectively, the “ Awards ”).  The number of Restricted Shares to be granted will be determined by dividing $1,940,000 by the closing price of the Company’s common stock on the date of grant. Subject to the performance goals, terms and conditions established by the Committee, the number of PSAs to be granted will be determined by dividing $1,000,000 by the 10-day average closing prices preceding the date of grant.  The Awards will be issued within sixty (60) days following the Effective Date.

 

The terms and conditions applicable to the Award will be set forth in separate agreements governing the Award (the “ Award Agreements ”); provided that the Restricted Shares will vest in three (3) equal annual installments of the first, second and third anniversaries of the date of grant, subject to Executive’s continued employment with the Company on each applicable vesting date; provided further that the number of PSAs will be adjusted in light of, and in accordance with, the performance goals, terms and conditions established by the Committee and/or the Board, such PSAs to vest at the end of the performance period in accordance with the Award Agreement. Nothing in this Exhibit or the Award Agreements is or will be a guarantee of employment or future employment and nothing in this Exhibit or the Award Agreement does or will affect the ability of the Company to terminate Executive’s employment with or without Cause for any reason at any time.

 



 

EXHIBIT B

 

Form of Release

 

This Agreement and Release (“ Agreemen t”) is made by and between Paul E. Szurek (“ Employee ”) and              (the “ Company ”), (collectively, referred to as the “Parties” or individually referred to as a “ Party ”). Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the Employment Agreement (as defined below).

 

WHEREAS, the Parties have previously entered into that certain Employment Agreement, dated as of                     , 2016 (the “ Employment Agreement ”); and

 

WHEREAS, in connection with the Employee’s termination of employment with the Company effective                     , 20   , the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands that the Employee may have against the Company and any of the Releasees (as defined below) arising out of Employee’s employment with or separation from the Company.

 

NOW, THEREFORE, in consideration of the Severance Payments described in Sections 4(c) or 4(d), as applicable, of the Employment Agreement, which, pursuant to the Employment Agreement, are conditioned on the Employee’s execution and non-revocation of this Agreement, and in consideration of the mutual promises made herein, the Company and Employee hereby agree as follows:

 

1.                                       Severance Payments; Salary and Benefits . The Company agrees to provide Employee with the severance payments and benefits described in Section 4(c) and 4(d) of the Employment Agreement, as applicable, payable at the times set forth in, and subject to the terms and conditions of, the Employment Agreement. In addition, to the extent not already paid, and subject to the terms and conditions of the Employment Agreement, the Company shall pay or provide to the Employee all other payments or benefits described in Section 3(c) of the Employment Agreement, subject to and in accordance with the terms thereof.

 

2.                                       Release of Claims . Employee agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Employee by the Company, any of its direct or indirect subsidiaries and affiliates (including, without limitation, the REIT and the Operating Partnership), and any of their current and former officers, managers, employees, agents, investors, attorneys, shareholders, administrators, affiliates, benefit plans, plan administrators, insurers, trustees, divisions, and subsidiaries and predecessor and successor corporations and assigns (collectively, the “ Releasees ”). Except as to the obligations of the Company arising under this Agreement, Employee, on his own behalf and on behalf of any of Employee’s affiliated companies or entities and any of their respective heirs, family members, executors, agents, successors and assigns, hereby and forever releases the Releasees from, and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may possess against any of the Releasees arising from any omissions, acts, facts, or damages that have

 



 

occurred up until and including the Effective Date (as defined in Section 7 below) of this Agreement, including, without limitation:

 

(a)                                  any and all claims relating to or arising from Employee’s employment or service relationship with the Company or any of its direct or indirect subsidiaries or affiliates and the termination of that relationship;

 

(b)                                  any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; conversion; and disability benefits;

 

(c)                                   any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair Labor Standards Act; the Fair Credit Reporting Act; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act; the Sarbanes-Oxley Act of 2002; Dodd-Frank Wall Street Reform and Consumer Protection Act;

 

(d)                                  any and all claims for violation of the federal or any state constitution;

 

(e)                                   any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;

 

(f)                                    any claim for any loss, cost, damage, or expense arising out of any dispute over the nonwithholding or other tax treatment of any of the proceeds received by Employee as a result of this Agreement; and

 

(g)                                   any and all claims for attorneys’ fees and costs.

 

Employee agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not release (A) claims that cannot be released as a matter of law, including, but not limited to, Employee’s right to file a charge with or participate in a charge by the Equal Employment Opportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, against the Company (with the understanding that Employee’s release of claims herein bars Employee from recovering such monetary relief from the Company or any Releasee), (B) claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law, (C) claims to continued participation in certain of the Company’s group benefit plans pursuant to the terms and conditions of COBRA, (D)   any and all rights of the undersigned to indemnification, advancement of expenses or reimbursement under applicable law, the Indemnification Agreement by and between the REIT and the undersigned or the charter and

 



 

Bylaws of the REIT in effect on the date hereof , and (F) any rights of Employee under the Company’s or its affiliates’ or successors’ D&O policy(ies).

 

3.                                       Acknowledgment of Waiver of Claims under ADEA. Employee understands and acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (“ ADEA ”), and that this waiver and release is knowing and voluntary. Employee understands and agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement. Employee understands and acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Employee was already entitled. Employee further understands and acknowledges that he has been advised by this writing that: (a) he should consult with an attorney prior to executing this Agreement; (b) he has 21 days within which to consider this Agreement; (c) he has 7 days following his execution of this Agreement to revoke this Agreement; (d) this Agreement shall not be effective until after the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law. In the event Employee signs this Agreement and returns it to the Company in less than the 21 day period identified above, Employee hereby acknowledges that he has freely and voluntarily chosen to waive the time period allotted for considering this Agreement.

 

4.                                       Severability . In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement shall continue in full force and effect without said provision or portion of provision.

 

5.                                       No Oral Modification . This Agreement may only be amended in a writing signed by Employee and a duly authorized officer of the Company.

 

6.                                       Governing Law; Dispute Resolution . This Agreement shall be subject to the provisions of Sections 11(a) and 11(i) of the Employment Agreement.

 

7.                                       Effective Date . If the Employee has attained or is over the age of 40 as of the date of Employee’s termination of employment, then Employee has 7 days after Employee signs this Agreement to revoke it and this Agreement will become effective on the 8th day after Employee signed this Agreement, so long as it has been signed by the Parties and has not been revoked by Employee before that date (the “ Effective Date ”).

 

8.                                       Voluntary Execution of Agreement . Employee understands and agrees that he executed this Agreement voluntarily, without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of his claims against the Company and any of the other Releasees. Employee acknowledges that: (a) he has read this Agreement; (b) he has not relied upon any representations or statements made by the Company that are not specifically set forth in this Agreement; (c) he has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of his own choice or has elected not to retain legal counsel; (d) he understands the terms and consequences of this

 



 

Agreement and of the releases it contains; and (e) he is fully aware of the legal and binding effect of this Agreement.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

 

Dated:

 

 

 

 

 

 

Paul E. Szurek

 

 

 

 

 

 

 

[COMPANY]

 

 

 

 

Dated:

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

Title:

 


Exhibit 99.1

 

 

CoreSite Reports Second-Quarter Revenue and FFO per Share Growth
of 18% and 31% Year over Year, Respectively

 

Second-quarter net income per share of $0.37 increased 68% year over year

 

DENVER, CO — July 28, 2016 — CoreSite Realty Corporation (NYSE:COR), a premier provider of secure, reliable, high-performance data center and interconnection solutions across the U.S., today announced financial results for the second quarter ended June 30, 2016.

 

Quarterly Highlights

 

·                   Reported second-quarter net income per diluted share of $0.37, representing 68.2% growth year over year

·                   Reported second-quarter funds from operations (“FFO”) of $0.89 per diluted share and unit, representing 30.9% growth year over year

·                   Reported second-quarter total operating revenues of $96.1 million, representing an 18.1% increase year over year

·                   Executed a record 171 new and expansion data center leases comprising 48,147 net rentable square feet (NRSF), representing $7.7 million of annualized GAAP rent at a rate of $159 per square foot

·                   Commenced 157,642 net rentable square feet of new and expansion leases representing $8.7 million of annualized GAAP rent at a rate of $55 per square foot, including the 136,580 square foot powered-shell build-to-suit in Santa Clara

·                   Realized rent growth on signed renewals of 5.2% on a cash basis and 9.4% on a GAAP basis and recorded rental churn of 2.1%

 

Tom Ray, CoreSite’s Chief Executive Officer, commented, “We are pleased that our focused efforts and consistent execution resulted in another quarter of solid financial and operational performance.” Mr. Ray continued, “We made strong progress against our goal of increasing transaction volume, with a record 171 new and expansion leases signed in Q2, as well as further diversifying our customer base with 31 net new logos added across our platform. Our core colocation and interconnection-solutions business produced strong results and we believe we continue to drive differentiated value in our portfolio with the launch of new cloud on-ramps in our platform. We believe that CoreSite remains well-positioned to strengthen the value of its communities of interest within its network-rich, cloud-enabled data center platform.”

 

Financial Results

 

CoreSite reported FFO per diluted share and unit of $0.89 for the three months ended June 30, 2016, an increase of 30.9% compared to $0.68 per diluted share and unit for the three months ended June 30, 2015. On a sequential-quarter basis, FFO per diluted share and unit increased 3.5%.

 

Total operating revenues for the three months ended June 30, 2016, were $96.1 million, an 18.1% increase year over year and an increase of 3.9% on a sequential-quarter basis. CoreSite reported second-quarter net income attributable to common shares of $12.0 million, or $0.37 per diluted share.

 

Sales Activity

 

CoreSite executed 171 new and expansion data center leases representing $7.7 million of annualized GAAP rent during the second quarter, comprised of 48,147 NRSF at a weighted-average GAAP rental rate of $159 per NRSF.

 

1



 

CoreSite’s second-quarter data center lease commencements totaled 157,642 NRSF at a weighted average GAAP rental rate of $55 per NRSF, which represents $8.7 million of annualized GAAP rent.  CoreSite’s second-quarter lease commencements include the 136,580 square foot powered-shell build-to-suit at SV6 in Santa Clara, which commenced on May 1, 2016.

 

CoreSite’s renewal leases signed in the second quarter totaled $8.5 million in annualized GAAP rent, comprised of 70,028 NRSF at a weighted-average GAAP rental rate of $122 per NRSF, reflecting a 5.2% increase in rent on a cash basis and a 9.4% increase on a GAAP basis. The second-quarter rental churn rate was 2.1%, and included 100 basis points of churn related to CoreSite’s original full-building customer at SV3, as previously disclosed.

 

Development Activity

 

Denver — Subsequent to the end of the second quarter, CoreSite executed a lease providing for expansion at its DE1 facility. The 10-year lease — with renewal rights for four, 5-year extensions at fixed rental rates — is for 23,000 square feet of shell capacity to support CoreSite’s build out of turn-key data center capacity in two or more phases. CoreSite expects to substantially complete construction of the initial phase of 8,000 square feet in the first quarter of 2017, at a cost of approximately $14 million.

 

Santa Clara — During the second quarter, CoreSite placed into service 136,580 square feet at SV6, a powered-shell build-to-suit for a strategic customer; this capacity was 100% leased and occupied at June 30, 2016. Additionally, as of the end of the second quarter, CoreSite had 230,000 square feet of turn-key data center capacity under construction at SV7. As of June 30, 2016, CoreSite had incurred $151.6 million of the estimated $190.0 million required to complete this development and expects to substantially complete construction in the third quarter of 2016. SV7 was 58.5% pre-leased as of the end of the second quarter.

 

Northern Virginia — During the second quarter, CoreSite placed into service 48,137 square feet of turn-key data center space at Phase 4 at VA2. CoreSite’s Reston campus is now fully built out and was 79.4% occupied as of June 30, 2016.

 

Los Angeles — During the second quarter, CoreSite placed into service 43,345 square feet of turn-key data center space at LA2. As of June 30, 2016, this space was 21.2% leased and 7.1% occupied.

 

Balance Sheet and Liquidity

 

As of June 30, 2016, CoreSite had net principal debt of $497.8 million, correlating to 2.4 times second-quarter annualized adjusted EBITDA, and net principal debt and preferred stock outstanding of $612.8 million, correlating to 3.0 times second-quarter annualized adjusted EBITDA.

 

At quarter end, CoreSite had $2.2 million of cash available on its balance sheet and $345.5 million of capacity available under its revolving credit facility.

 

Dividend

 

On May 20, 2016, CoreSite announced a dividend of $0.53 per share of common stock and common stock equivalents for the second quarter of 2016. The dividend was paid on July 15, 2016, to shareholders of record on June 30, 2016.

 

2



 

CoreSite also announced on May 20, 2016, a dividend of $0.4531 per share of Series A preferred stock for the period April 15, 2016, to July 14, 2016. The preferred dividend was paid on July 15, 2016, to shareholders of record on June 30, 2016.

 

2016 Guidance

 

CoreSite is increasing its 2016 guidance of FFO per diluted share and unit to a range of $3.56 to $3.64 from the previous range of $3.52 to $3.60. In addition, CoreSite is increasing its 2016 guidance for net income attributable to common shares to a range of $1.41 to $1.49 from the previous range of $1.28 to $1.36, with the difference between FFO and net income being real estate depreciation and amortization.

 

This outlook is predicated on current economic conditions, internal assumptions about CoreSite’s customer base, and the supply and demand dynamics of the markets in which CoreSite operates. The guidance does not include the impact of any future financing, investment or disposition activities, beyond what has already been disclosed.

 

Upcoming Conferences and Events

 

CoreSite will participate in the Cowen and Company Communications Infrastructure Summit on August 9 th  in Boulder, Colorado and the Bank of America Merrill Lynch 2016 Global Real Estate Conference on September 13 th  in New York, New York.

 

Conference Call Details

 

CoreSite will host a conference call on July 28, 2016, at 12:00 p.m., Eastern Time (10:00 a.m., Mountain Time), to discuss its financial results, current business trends and market conditions.

 

The call can be accessed live over the phone by dialing 877-407-3982 for domestic callers or 201-493-6780 for international callers. A replay will be available shortly after the call and can be accessed by dialing 877-870-5176 for domestic callers or 858-384-5517 for international callers. The passcode for the replay is 13639460. The replay will be available until August 11, 2016.

 

Interested parties may also listen to a simultaneous webcast of the conference call by logging on to CoreSite’s website at www.CoreSite.com and clicking on the “Investors” link. The on-line replay will be available for a limited time beginning immediately following the call.

 

About CoreSite

 

CoreSite Realty Corporation (NYSE:COR) delivers secure, reliable, high-performance data center and interconnection solutions to a growing customer ecosystem across eight key North American markets. More than 900 of the world’s leading enterprises, network operators, cloud providers, and supporting service providers choose CoreSite to connect, protect and optimize their performance-sensitive data, applications and computing workloads. Our scalable, flexible solutions and 350+ dedicated employees consistently deliver unmatched data center options — all of which leads to a best-in-class customer experience and lasting relationships. For more information, visit www.CoreSite.com.

 

CoreSite Contact

Greer Aviv | Vice President of Investor Relations and Media/Public Relations
+1 303.405.1012 | +1 303.222.7276
Greer.Aviv@CoreSite.com

 

3



 

Forward Looking Statements

 

This earnings release and accompanying supplemental information may contain 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 “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond CoreSite’s control that may cause actual results to differ significantly from those expressed in any forward-looking statement. These risks include, without limitation: the geographic concentration of the company’s data centers in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets; fluctuations in interest rates and increased operating costs; difficulties in identifying properties to acquire and completing acquisitions; significant industry competition; the company’s failure to obtain necessary outside financing; the company’s failure to qualify or maintain its status as a REIT; financial market fluctuations; changes in real estate and zoning laws and increases in real property tax rates; and other factors affecting the real estate industry generally. All forward-looking statements reflect the company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, 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 most recent annual report on Form 10-K, and other risks described in documents subsequently filed by the company from time to time with the Securities and Exchange Commission.

 

4



 

Consolidated Balance Sheets

(in thousands)

 

 

 

June 30,
2016

 

December 31,
2015

 

Assets:

 

 

 

 

 

Investments in real estate:

 

 

 

 

 

Land

 

$

82,463

 

$

74,819

 

Buildings and improvements

 

1,174,099

 

1,037,127

 

 

 

1,256,562

 

1,111,946

 

Less: Accumulated depreciation and amortization

 

(323,919

)

(284,219

)

Net investment in operating properties

 

932,643

 

827,727

 

Construction in progress

 

210,415

 

183,189

 

Net investments in real estate

 

1,143,058

 

1,010,916

 

Cash and cash equivalents

 

2,243

 

6,854

 

Accounts and other receivables, net

 

13,802

 

12,235

 

Lease intangibles, net

 

3,707

 

4,714

 

Goodwill

 

41,191

 

41,191

 

Other assets, net

 

92,329

 

86,633

 

Total assets

 

$

1,296,330

 

$

1,162,543

 

 

 

 

 

 

 

Liabilities and equity:

 

 

 

 

 

Liabilities

 

 

 

 

 

Debt, net

 

$

496,199

 

$

391,007

 

Accounts payable and accrued expenses

 

115,533

 

75,783

 

Accrued dividends and distributions

 

28,326

 

28,104

 

Deferred rent payable

 

7,442

 

7,934

 

Acquired below-market lease contracts, net

 

4,267

 

4,693

 

Unearned revenue, prepaid rent and other liabilities

 

31,232

 

28,717

 

Total liabilities

 

682,999

 

536,238

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Series A cumulative preferred stock

 

115,000

 

115,000

 

Common stock, par value $0.01

 

334

 

301

 

Additional paid-in capital

 

433,637

 

390,200

 

Accumulated other comprehensive loss

 

(3,029

)

(493

)

Distributions in excess of net income

 

(99,942

)

(88,891

)

Total stockholders’ equity

 

446,000

 

416,117

 

Noncontrolling interests

 

167,331

 

210,188

 

Total equity

 

613,331

 

626,305

 

 

 

 

 

 

 

Total liabilities and equity

 

$

1,296,330

 

$

1,162,543

 

 

5



 

Consolidated Statements of Operations

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

Data center revenue:

 

 

 

 

 

 

 

 

 

 

 

Rental revenue

 

$

52,364

 

$

50,371

 

$

44,824

 

$

102,735

 

$

86,147

 

Power revenue

 

26,401

 

25,574

 

21,672

 

51,975

 

41,239

 

Interconnection revenue

 

12,977

 

12,742

 

10,595

 

25,719

 

20,810

 

Tenant reimbursement and other

 

2,326

 

1,830

 

2,276

 

4,156

 

3,692

 

Total data center revenue

 

94,068

 

90,517

 

79,367

 

184,585

 

151,888

 

Office, light-industrial and other revenue

 

2,022

 

1,963

 

1,969

 

3,985

 

4,103

 

Total operating revenues

 

96,090

 

92,480

 

81,336

 

188,570

 

155,991

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Property operating and maintenance

 

25,576

 

24,663

 

22,084

 

50,239

 

41,762

 

Real estate taxes and insurance

 

3,070

 

3,065

 

3,270

 

6,135

 

5,205

 

Depreciation and amortization

 

26,227

 

24,770

 

24,046

 

50,997

 

46,862

 

Sales and marketing

 

4,501

 

4,221

 

4,256

 

8,722

 

8,038

 

General and administrative

 

8,818

 

8,720

 

7,952

 

17,538

 

15,817

 

Rent

 

5,334

 

5,417

 

5,007

 

10,751

 

10,250

 

Transaction costs

 

6

 

3

 

45

 

9

 

45

 

Total operating expenses

 

73,532

 

70,859

 

66,660

 

144,391

 

127,979

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

22,558

 

21,621

 

14,676

 

44,179

 

28,012

 

Gain on real estate disposal

 

 

 

 

 

36

 

Interest income

 

 

1

 

2

 

1

 

4

 

Interest expense

 

(2,680

)

(2,012

)

(1,730

)

(4,692

)

(2,995

)

Income before income taxes

 

19,878

 

19,610

 

12,948

 

39,488

 

25,057

 

Income tax expense

 

(43

)

(4

)

(66

)

(47

)

(115

)

Net income

 

19,835

 

19,606

 

12,882

 

39,441

 

24,942

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interests

 

5,715

 

6,261

 

5,259

 

11,976

 

10,667

 

Net income attributable to CoreSite Realty Corporation

 

14,120

 

13,345

 

7,623

 

27,465

 

14,275

 

Preferred stock dividends

 

(2,085

)

(2,084

)

(2,085

)

(4,169

)

(4,169

)

Net income attributable to common shares

 

$

12,035

 

$

11,261

 

$

5,538

 

$

23,296

 

$

10,106

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to common shares:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.38

 

$

0.37

 

$

0.23

 

$

0.75

 

$

0.44

 

Diluted

 

$

0.37

 

$

0.37

 

$

0.22

 

$

0.74

 

$

0.43

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

32,022,845

 

30,252,693

 

24,536,583

 

31,137,769

 

22,963,111

 

Diluted

 

32,435,606

 

30,694,747

 

25,055,195

 

31,554,157

 

23,525,316

 

 

6



 

Reconciliations of Net Income to FFO

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

Net income

 

$

19,835

 

$

19,606

 

$

12,882

 

$

39,441

 

$

24,942

 

Real estate depreciation and amortization

 

24,864

 

23,385

 

21,343

 

48,249

 

41,596

 

Gain on real estate disposal

 

 

 

 

 

(36

)

FFO

 

$

44,699

 

$

42,991

 

$

34,225

 

$

87,690

 

$

66,502

 

Preferred stock dividends

 

(2,085

)

(2,084

)

(2,085

)

(4,169

)

(4,169

)

FFO available to common shareholders and OP unit holders

 

$

42,614

 

$

40,907

 

$

32,140

 

$

83,521

 

$

62,333

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

32,436

 

30,695

 

25,055

 

31,554

 

23,525

 

Weighted average OP units outstanding - diluted

 

15,239

 

16,856

 

22,344

 

16,047

 

23,844

 

Total weighted average shares and units outstanding - diluted

 

47,675

 

47,551

 

47,399

 

47,601

 

47,369

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per common share and OP unit - diluted

 

$

0.89

 

$

0.86

 

$

0.68

 

$

1.75

 

$

1.32

 

 

Funds From Operations “FFO” is a supplemental measure of our performance which should be considered along with, but not as an alternative to, net income and cash provided by operating activities as a measure of operating performance and liquidity. We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property and undepreciated land and impairment write-downs of depreciable real estate, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. FFO attributable to common shares and units represents FFO less preferred stock dividends declared during the period.

 

Our management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs.

 

We offer this measure because we recognize that FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our financial condition and results from operations, the utility of FFO as a measure of our performance is limited. FFO is a non-GAAP measure and should not be considered a measure of liquidity, an alternative to net income, cash provided by operating activities or any other performance measure determined in accordance with GAAP, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. In addition, our calculations of FFO are not necessarily comparable to FFO as calculated by other REITs that do not use the same definition or implementation guidelines or interpret the standards differently from us. Investors in our securities should not rely on these measures as a substitute for any GAAP measure, including net income.

 

7



 

Reconciliations of earnings before interest, taxes, depreciation and amortization (EBITDA):

(in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,
2016

 

March 31,
2016

 

June 30,
2015

 

June 30,
2016

 

June 30,
2015

 

Net income

 

$

19,835

 

$

19,606

 

$

12,882

 

$

39,441

 

$

24,942

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

2,680

 

2,011

 

1,728

 

4,691

 

2,991

 

Income taxes

 

43

 

4

 

66

 

47

 

115

 

Depreciation and amortization

 

26,227

 

24,770

 

24,046

 

50,997

 

46,862

 

EBITDA

 

$

48,785

 

$

46,391

 

$

38,722

 

$

95,176

 

$

74,910

 

Non-cash compensation

 

2,311

 

2,093

 

1,792

 

4,404

 

3,361

 

Gain on real estate disposal

 

 

 

 

 

(36

)

Transaction costs / litigation

 

26

 

3

 

45

 

29

 

275

 

Adjusted EBITDA

 

$

51,122

 

$

48,487

 

$

40,559

 

$

99,609

 

$

78,510

 

 

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. We calculate adjusted EBITDA by adding our non-cash compensation expense, transaction costs and litigation expense as well as adjusting for the impact of impairment charges, gains or losses from sales of property and undepreciated land and gains or losses on early extinguishment of debt. Management uses EBITDA and adjusted EBITDA as indicators of our ability to incur and service debt. In addition, we consider EBITDA and adjusted EBITDA to be appropriate supplemental measures of our performance because they eliminate depreciation and interest, which permits investors to view income from operations without the impact of non-cash depreciation or the cost of debt. However, because EBITDA and adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes, and are not adjusted for capital expenditures or other recurring cash requirements of our business, their utilization as a cash flow measurement is limited.

 

8


Exhibit 99.2

Earnings Release and Supplemental Information Quarter ended JUNE 30, 2016 ®2016 CoreSite Realty Corporation, All Rights Reserved. Rendering of SV7 - Santa Clara, California

 


Overview Earnings Release 3 Company Profile 8 Summary of Financial Data 10 Financial Statements Consolidated Balance Sheets 11 Consolidated Statements of Operations 12 Reconciliations of Net Income to FFO, AFFO, EBITDA and Adjusted EBITDA 13 Operating Portfolio Operating Properties 14 Leasing Statistics 15 Geographic and Vertical Diversification 17 10 Largest Customers 18 Development Capital Expenditures and Completed Pre-Stabilized Projects 19 Development Summary 20 Capital Structure Market Capitalization and Debt Summary 22 Interest Summary and Debt Covenants 23 Components of Net Asset Value 24 2016 Guidance 25 Appendix 26 Table of Contents 2

 


Second-quarter net income per share of $0.37 increased 68% year over year DENVER, CO – JULY 28, 2016 CoreSite Realty Corporation (NYSE:COR), a premier provider of secure, reliable, high-performance data center and interconnection solutions across the U.S., today announced financial results for the second quarter ended June 30, 2016. Quarterly Highlights Reported second-quarter net income per diluted share of $0.37, representing 68.2% growth year over year Reported second-quarter funds from operations (“FFO”) of $0.89 per diluted share and unit, representing 30.9% growth year over year Reported second-quarter total operating revenues of $96.1 million, representing an 18.1% increase year over year Executed a record 171 new and expansion data center leases comprising 48,147 net rentable square feet (NRSF), representing $7.7 million of annualized GAAP rent at a rate of $159 per square foot Commenced 157,642 net rentable square feet of new and expansion leases representing $8.7 million of annualized GAAP rent at a rate of $55 per square foot, including the 136,580 square foot powered-shell build-to-suit in Santa Clara Realized rent growth on signed renewals of 5.2% on a cash basis and 9.4% on a GAAP basis and recorded rental churn of 2.1% Tom Ray, CoreSite’s Chief Executive Officer, commented, “We are pleased that our focused efforts and consistent execution resulted in another quarter of solid financial and operational performance.” Mr. Ray continued, “We made strong progress against our goal of increasing transaction volume, with a record 171 new and expansion leases signed in Q2, as well as further diversifying our customer base with 31 net new logos added across our platform. Our core colocation and interconnection-solutions business produced strong results and we believe we continue to drive differentiated value in our portfolio with the launch of new cloud on-ramps in our platform. We believe that CoreSite remains well-positioned to strengthen the value of its communities of interest within its network-rich, cloud-enabled data center platform.” Financial Results CoreSite reported FFO per diluted share and unit of $0.89 for the three months ended June 30, 2016, an increase of 30.9% compared to $0.68 per diluted share and unit for the three months ended June 30, 2015. On a sequential-quarter basis, FFO per diluted share and unit increased 3.5%. Total operating revenues for the three months ended June 30, 2016, were $96.1 million, an 18.1% increase year over year and an increase of 3.9% on a sequential-quarter basis. CoreSite reported second-quarter net income attributable to common shares of $12.0 million, or $0.37 per diluted share. CoreSite Reports Second-Quarter Revenue and FFO per Share Growth of 18% and 31% Year over Year, Respectively 3 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX

 


Sales Activity CoreSite executed 171 new and expansion data center leases representing $7.7 million of annualized GAAP rent during the second quarter, comprised of 48,147 NRSF at a weighted-average GAAP rental rate of $159 per NRSF. CoreSite’s second-quarter data center lease commencements totaled 157,642 NRSF at a weighted average GAAP rental rate of $55 per NRSF, which represents $8.7 million of annualized GAAP rent. CoreSite’s second-quarter lease commencements include the 136,580 square foot powered-shell build-to-suit at SV6 in Santa Clara, which commenced on May 1, 2016. CoreSite’s renewal leases signed in the second quarter totaled $8.5 million in annualized GAAP rent, comprised of 70,028 NRSF at a weighted-average GAAP rental rate of $122 per NRSF, reflecting a 5.2% increase in rent on a cash basis and a 9.4% increase on a GAAP basis. The second-quarter rental churn rate was 2.1%, and included 100 basis points of churn related to CoreSite’s original full-building customer at SV3, as previously disclosed. Development Activity Denver – Subsequent to the end of the second quarter, CoreSite executed a lease providing for expansion at its DE1 facility. The 10-year lease – with renewal rights for four, 5-year extensions at fixed rental rates – is for 23,000 square feet of shell capacity to support CoreSite’s build out of turn-key data center capacity in two or more phases. CoreSite expects to substantially complete construction of the initial phase of 8,000 square feet in the first quarter of 2017, at a cost of approximately $14 million. Santa Clara – During the second quarter, CoreSite placed into service 136,580 square feet at SV6, a powered-shell build-to-suit for a strategic customer; this capacity was 100% leased and occupied at June 30, 2016. Additionally, as of the end of the second quarter, CoreSite had 230,000 square feet of turn-key data center capacity under construction at SV7. As of June 30, 2016, CoreSite had incurred $151.6 million of the estimated $190.0 million required to complete this development and expects to substantially complete construction in the third quarter of 2016. SV7 was 58.5% pre-leased as of the end of the second quarter. Northern Virginia – During the second quarter, CoreSite placed into service 48,137 square feet of turn-key data center space at Phase 4 at VA2. CoreSite’s Reston campus is now fully built out and was 79.4% occupied as of June 30, 2016. Los Angeles – During the second quarter, CoreSite placed into service 43,345 square feet of turn-key data center space at LA2. As of June 30, 2016, this space was 21.2% leased and 7.1% occupied. Quarter Ended June 30, 2016 4 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX

 


Balance Sheet and Liquidity As of June 30, 2016, CoreSite had net principal debt of $497.8 million, correlating to 2.4 times second-quarter annualized adjusted EBITDA, and net principal debt and preferred stock outstanding of $612.8 million, correlating to 3.0 times second-quarter annualized adjusted EBITDA. At quarter end, CoreSite had $2.2 million of cash available on its balance sheet and $345.5 million of capacity available under its revolving credit facility. Dividend On May 20, 2016, CoreSite announced a dividend of $0.53 per share of common stock and common stock equivalents for the second quarter of 2016. The dividend was paid on July 15, 2016, to shareholders of record on June 30, 2016. CoreSite also announced on May 20, 2016, a dividend of $0.4531 per share of Series A preferred stock for the period April 15, 2016, to July 14, 2016. The preferred dividend was paid on July 15, 2016, to shareholders of record on June 30, 2016. 2016 Guidance CoreSite is increasing its 2016 guidance of FFO per diluted share and unit to a range of $3.56 to $3.64 from the previous range of $3.52 to $3.60. In addition, CoreSite is increasing its 2016 guidance for net income attributable to common shares to a range of $1.41 to $1.49 from the previous range of $1.28 to $1.36, with the difference between FFO and net income being real estate depreciation and amortization. This outlook is predicated on current economic conditions, internal assumptions about CoreSite’s customer base, and the supply and demand dynamics of the markets in which CoreSite operates. The guidance does not include the impact of any future financing, investment or disposition activities, beyond what has already been disclosed. Upcoming Conferences and Events CoreSite will participate in the Cowen and Company Communications Infrastructure Summit on August 9th in Boulder, Colorado and the Bank of America Merrill Lynch 2016 Global Real Estate Conference on September 13th in New York, New York. Quarter Ended June 30, 2016 5 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX

 


Conference Call Details CoreSite will host a conference call on July 28, 2016, at 12:00 p.m., Eastern Time (10:00 a.m., Mountain Time), to discuss its financial results, current business trends and market conditions. The call can be accessed live over the phone by dialing 877-407-3982 for domestic callers or 201-493-6780 for international callers. A replay will be available shortly after the call and can be accessed by dialing 877-870-5176 for domestic callers or 858-384-5517 for international callers. The passcode for the replay is 13639460. The replay will be available until August 11, 2016. Interested parties may also listen to a simultaneous webcast of the conference call by logging on to CoreSite’s website at www.CoreSite.com and clicking on the “Investors” link. The on-line replay will be available for a limited time beginning immediately following the call. About CoreSite CoreSite Realty Corporation (NYSE:COR) delivers secure, reliable, high-performance data center and interconnection solutions to a growing customer ecosystem across eight key North American markets. More than 900 of the world’s leading enterprises, network operators, cloud providers, and supporting service providers choose CoreSite to connect, protect and optimize their performance-sensitive data, applications and computing workloads. Our scalable, flexible solutions and 350+ dedicated employees consistently deliver unmatched data center options — all of which leads to a best-in-class customer experience and lasting relationships. For more information, visit www.CoreSite.com. CoreSite Contact Greer Aviv Vice President of Investor Relations and Media/Public Relations +1 303.405.1012 +1 303.222.7276 Greer.Aviv@CoreSite.com Quarter Ended June 30, 2016 6 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX

 


Forward Looking Statements This earnings release and accompanying supplemental information may contain 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 “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond CoreSite’s control, that may cause actual results to differ significantly from those expressed in any forward-looking statement. These risks include, without limitation: the geographic concentration of the company’s data centers in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets; fluctuations in interest rates and increased operating costs; difficulties in identifying properties to acquire and completing acquisitions; significant industry competition; the company’s failure to obtain necessary outside financing; the company’s failure to qualify or maintain its status as a REIT; financial market fluctuations; changes in real estate and zoning laws and increases in real property tax rates; and other factors affecting the real estate industry generally. All forward-looking statements reflect the company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, 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 most recent annual report on Form 10-K, and other risks described in documents subsequently filed by the company from time to time with the Securities and Exchange Commission. Quarter Ended June 30, 2016 7 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX

 


Company Profile CoreSite delivers secure, reliable, high-performance data center and interconnection solutions to a growing customer ecosystem across eight key North American markets. NY2 SILICON VALLEY SV1 SV2 SV3 SV4 SV5 SV6 SV7 LOS ANGELES LA1 LA2 DENVER HQ DE1 DE2 CHICAGO CH1 N VIRGINIA/DC VA1 DC1 VA2 BOSTON BO1 MIAMI MI1 NEW YORK NY1 NY2 8 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX VA2 - Reston, Virginia

 


Company Profile Secure, Reliable and Compliant Six 9s uptime for five consecutive years Physical security standards and rigorous internal security training enable regulatory compliance requirements Operational excellence in security and environmental controls Consistent compliance across all properties SOC 1 & SOC 2 Type 2 reviews ISO 27001 certified Payment Card Industry Data Security Standard compliant Scalable Serving customer requirements from half cabinet to full buildings 18 operating data centers in eight of the largest commercial and data center markets in the United States Delivering SV7 on the Santa Clara campus in the second half of 2016 Ability to increase occupied data center footprint on land and buildings currently owned, including current space unoccupied, under construction and held for development by approximately 50% High-Performance Cloud-enabled, network-rich data center campuses Over 300 network service providers supported by robust IX services to key public clouds 20,000+ interconnections Enabling enterprise with support ecosystems Best-in-Class Customer Experience 350+ professionals with dedicated industry expertise supporting over 900 customers Experienced and committed operations, facilities and security personnel Dedicated implementation resources to ensure a seamless onboarding process 24/7 customer support and remote hands 9 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX

 


Summary of Financial Data (in thousands, except per share, NRSF and MRR data) 10 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX   Three Months Ended  Six Months Ended Summary of Results  June 30, 2016  March 31, 2016  June 30, 2015  June 30, 2016  June 30, 2015 Operating revenues $ 96,090 $ 92,480 $ 81,336 $ 188,570 $ 155,991  Net income 19,835 19,606 12,882 39,441 24,942  Net income attributable to common shares 12,035 11,261 5,538 23,296 10,106  Funds from operations (FFO)  to shares and units 42,614 40,907 32,140 83,521 62,333  Adjusted funds from operations (AFFO) 40,299 35,581 26,116 75,880 51,270  EBITDA 48,785 46,391 38,722 95,176 74,910  Adjusted EBITDA 51,122 48,487 40,559 99,609 78,510  Per share - diluted:   Net income attributable to common shares $ 0.37 $ 0.37 $ 0.22 $ 0.74 $ 0.43   FFO per common share and OP unit $ 0.89 $ 0.86 $ 0.68 $ 1.75 $ 1.32 

 


Consolidated Balance Sheets (in thousands) 11 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX  June 30, 2016 December 31, 2015 Assets: Investments in real estate: Land $ 82,463 $74,819 Buildings and improvements 1,174,099 1,037,127 1,256,562 1,111,946 Less: Accumulated depreciation and amortization(323,919) (284,219) Net investment in operating properties 932,643 827,727 Construction in progress 210,415 183,189 Net investments in real estate 1,143,058 1,010,916 Cash and cash equivalents 2,243 6,854 Accounts and other receivables, net 13,802 12,235 Lease intangibles, net 3,707 4,714 Goodwill 41,191 41,191 Other assets, net 92,329 86,633 Total assets $ 1,296,330 $ 1,162,543 Liabilities and equity: Liabilities Debt, net $ 496,199 $ 391,007 Accounts payable and accrued expenses 115,533 75,783 Accrued dividends and distributions 28,326 28,104 Deferred rent payable 7,442 7,934 Acquired below-market lease contracts, net 4,267 4,693 Unearned revenue, prepaid rent and other liabilities 31,232 28,717 Total liabilities 682,999 536,238 Stockholders' equity Series A cumulative preferred stock 115,000 115,000 Common stock, par value $0.01334 301 Additional paid-in capital 433,637 390,200 Accumulated other comprehensive loss (3,029) (493) Distributions in excess of net income (99,942) (88,891) Total stockholders' equity 446,000 416,117 Noncontrolling interests 167,331 210,188 Total equity 613,331 626,305 Total liabilities and equity $ 1,296,330 $ 1,162,543

 


Consolidated Statements of Operations (in thousands, except share and per share data) 12 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX  Three Months Ended Six Months Ended June 30, 2016 March 31, 2016 December 31, 2015 September 30, 2015 June 30, 2015 June 30, 2016 June 30, 2015 Operating revenues: Data center revenue: Rental revenue $ 52,364 $ 50,371 $ 50,018 $ 47,135 $ 44,824 $ 102,735 $ 86,147 Power revenue 26,401 25,574 24,713 23,543 21,672 51,975 41,239 Interconnection revenue 12,977 12,742 12,024 11,400 10,595 25,719 20,810 Tenant reimbursement and other 2,326 1,830 2,246 2,357 2,276 4,156 3,692 Total data center revenue 94,068 90,517 89,001 84,435 79,367 184,585 151,888 Office, light-industrial and other revenue 2,022 1,963 1,918 1,947 1,969 3,985 4,103 Total operating revenues 96,090 92,480 90,919 86,382 81,336 188,570 155,991 Operating expenses: Property operating and maintenance 25,576 24,663 23,840 24,203 22,084 50,239 41,762 Real estate taxes and insurance 3,070 3,065 3,723 3,216 3,270 6,135 5,205 Depreciation and amortization 26,227 24,770 24,493 24,347 24,046 50,997 46,862 Sales and marketing 4,501 4,221 4,117 3,775 4,256 8,722 8,038 General and administrative 8,818 8,720 9,718 8,644 7,952 17,538 15,817 Rent 5,334 5,417 5,385 5,440 5,007 10,751 10,250 Transaction costs 6 3 - 6 45 9 45 Total operating expenses 73,532 70,859 71,598 69,631 66,660 144,391 127,979 Operating income 22,558 21,621 19,321 16,751 14,676 44,179 28,012 Gain on real estate disposal - - - - - - 36 Interest income - 1 1 1 2 1 4 Interest expense (2,680) (2,012) (1,921) (2,188) (1,730) (4,692) (2,995) Income before income taxes 19,878 19,610 17,401 14,564 12,948 39,488 25,057 Income tax expense (43) (4) (14) (34) (66) (47) (115) Net income 19,835 19,606 17,387 14,530 12,882 39,441 24,942 Net income attributable to noncontrolling interests 5,715 6,261 5,960 5,526 5,259 11,976 10,667 Net income attributable to CoreSite Realty Corporation 14,120 13,345 11,427 9,004 7,623 27,465 14,275 Preferred stock dividends (2,085) (2,084) (2,085) (2,084) (2,085) (4,169) (4,169) Net income attributable to common shares $ 12,035 $ 11,261 $ 9,342 $ 6,920 $ 5,538 $ 23,296 $ 10,106 Net income per share attributable to common shares: Basic $ 0.38 $ 0.37 $ 0.32 $ 0.26 $ 0.23 $ 0.75 $ 0.44 Diluted $ 0.37 $ 0.37 $ 0.32 $ 0.26 $ 0.22 $ 0.74 $ 0.43 Weighted average common shares outstanding: Basic 32,022,845 30,252,693 28,747,900 26,126,332 24,536,583 31,137,769 22,963,111 Diluted 32,435,606 30,694,747 29,183,879 26,549,537 25,055,195 31,554,157 23,525,316

 


Reconciliations of Net Income to FFO, AFFO, EBITDA and Adjusted EBITDA (in thousands, except per share data) Reconciliation of Net Income to FFO Reconciliation of FFO to AFFO Reconciliation of Net Income to EBITDA and Adjusted EBITDA 13 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX  Three Months Ended Six Months Ended June 30, 2016 March 31, 2016 June 30, 2015 June 30, 2016 June 30, 2015 Net income $ 19,835 $ 19,606 $ 12,882 $ 39,441 $ 24,942 Real estate depreciation and amortization 24,864 23,385 21,343 48,249 41,596 Gain on real estate disposal - - - - (36) FFO $ 44,699 $ 42,991 $ 34,225 $ 87,690 $ 66,502 Preferred stock dividends (2,085) (2,084) (2,085) (4,169) (4,169) FFO available to common shareholders and OP unit holders $ 42,614 $ 40,907 $ 32,140 $ 83,521 $ 62,333 Weighted average common shares outstanding - diluted 32,436 30,695 25,055 31,554 23,525 Weighted average OP units outstanding - diluted 15,239 16,856 22,344 16,047 23,844 Total weighted average shares and units outstanding - diluted 47,675 47,551 47,399 47,601 47,369 FFO per common share and OP unit - diluted $ 0.89 $ 0.86 $ 0.68 $ 1.75 $ 1.32 Reconciliations of FFO to adjusted funds from operations (AFFO): Three Months Ended Six Months Ended June 30, 2016 March 31, 2016 June 30, 2015 June 30, 2016 June 30, 2015 FFO available to common shareholders and unit holders $ 42,614 $ 40,907 $ 32,140 $ 83,521 $ 62,333 Adjustments: Amortization of deferred financing costs 311 283 292 594 586 Non-cash compensation 2,311 2,093 1,792 4,404 3,361 Non-real estate depreciation 1,363 1,385 2,703 2,748 5,266 Straight-line rent adjustment (1,002) (1,594) (2,755) (2,596) (3,819) Amortization of above and below market leases (143) (133) (130) (276) (258) Recurring capital expenditures (1,217) (1,700) (852) (2,917) (2,833) Tenant improvements (901) (1,289) (2,282) (2,190) (4,479) Capitalized leasing costs (3,037) (4,371) (4,792) (7,408) (8,887) AFFO available to common shareholders and OP unit holders $ 40,299 $ 35,581 $ 26,116 $ 75,880 $ 51,270 Reconciliations of earnings before interest, taxes, depreciation and amortization (EBITDA): (in thousands) Three Months Ended Six Months Ended June 30, 2016 March 31, 2016 June 30, 2015 June 30, 2016 June 30, 2015 Net income $ 19,835 $ 19,606 $ 12,882 $ 39,441 $ 24,942 Adjustments: Interest expense, net of interest income 2,680 2,011 1,728 4,691 2,991 Income taxes 43 4 66 47 115 Depreciation and amortization 26,227 24,770 24,046 50,997 46,862 EBITDA $ 48,785 $ 46,391 $ 38,722 $ 95,176 $ 74,910 Non-cash compensation 2,311 2,093 1,792 4,404 3,361 Gain on real estate disposal - - - - (36) Transaction costs / litigation 26 3 45 29 275 Adjusted EBITDA $ 51,122 $ 48,487 $ 40,559 $ 99,609 $ 78,510

 


Operating Properties 14 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX See Appendix for definitions.  Data Center Operating NRSF Annualized Stabilized Pre-Stabilized Total Held for Rent Percent Percent Percent NRSF Under Development Market/Facilities ($000)(1) Total Occupied(2) Total Occupied(2) Total Occupied(2) Construction NRSF Total NRSF Los Angeles One Wilshire campus LA1* $ 27,953 139,053 88.7 % - - % 139,053 88.7 % - 10,352 149,405 LA2 27,157 254,343 87.5 43,345 3.6 297,688 75.3 - 127,202 424,890 Los Angeles Total 55,110 393,396 87.9 43,345 3.6 436,741 79.6 - 137,554 574,295 San Francisco Bay may need to flip SV and LA for Q2'16 SV1 6,350 85,932 81.5 - - 85,932 81.5 - - 85,932 SV2 7,090 76,676 71.9 - - 76,676 71.9 - - 76,676 Santa Clara campus(3) 36,804 388,589 98.4 - - 388,589 98.4 230,000 - 618,589 San Francisco Bay Total 50,244 551,197 92.1 - - 551,197 92.1 230,000 - 781,197 Northern Virginia VA1 30,096 201,719 96.1 - - 201,719 96.1 - - 201,719 VA2 9,870 115,336 100.0 73,111 1.0 188,447 61.6 - - 188,447 DC1* 3,277 22,137 88.3 - - 22,137 88.3 - - 22,137 Northern Virginia Total 43,243 339,192 96.9 73,111 1.0 412,303 79.9 - - 412,303 - Chicago CH1 18,051 166,776 92.1 11,631 80.2 178,407 91.3 - - 178,407 - Boston BO1 16,348 166,026 98.6 14,031 34.2 180,057 93.6 - 73,619 253,676 New York NY1* 5,009 48,404 70.7 - - 48,404 70.7 - - 48,404 NY2 8,588 68,822 94.1 32,920 27.8 101,742 72.6 - 134,508 236,250 New York Total 13,597 117,226 84.4 32,920 27.8 150,146 72.0 - 134,508 284,654 - Miami MI1 1,843 30,176 81.6 - - 30,176 81.6 - 13,154 43,330 - Denver DE1* 1,333 5,878 100.0 - - 5,878 100.0 - - 5,878 DE2* 391 5,140 86.6 - - 5,140 86.6 - - 5,140 Denver Total 1,724 11,018 93.8 - - 11,018 93.8 - - 11,018 Total Data Center Facilities $ 200,160 1,775,007 92.0 % 175,038 14.6 % 1,950,045 85.1 % 230,000 358,835 2,538,880 Office & Light-Industrial 7,230 354,721 76.7 - - 354,721 76.7 - - 354,721 Total Portfolio $ 207,390 2,129,728 89.5 % 175,038 14.6 % 2,304,766 83.8 % 230,000 358,835 2,893,601 * Indicates properties in which we hold a leasehold interest. (1) On a gross basis, our total portfolio annualized rent was approximately $213.1 million as of June 30, 2016, which reflects the addition of $5.7 million in operating expense reimbursements to contractual net rent under modified gross and triple-net leases. (2) Includes customer leases that have commenced and are occupied as of June 30, 2016. If all leases signed during the current and prior periods had commenced, the percent occupied would have been as follows:  Percent Leased Stabilized Pre-Stabilized Total Total Data Center Facilities 92.9% 21.2% 86.5% Total Portfolio 90.2% 21.2% 85.0% (3) The annualized rent for the Santa Clara campus includes amounts associated with a restructured lease agreement involving a customer that has vacated its leased space and is paying discounted rent payments that may be applied to new lease arrangements elsewhere in our portfolio on a dollar-for-dollar basis until the original lease term expires in Q2 2017. 

 


Leasing Statistics Data Center Leasing Activity MRR per Cabinet Equivalent (TKD Same Store) 15 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX 6.6% y-o-y 6.0% y-o-y 2.9% y-o-y 3.0% y-o-y 2.2% y-o-y $1,387 $1,412 $1,422 $1,461 $1,478 $1,300 $1,350 $1,400 $1,450 $1,500 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Leasing Statistics  Data Center Leasing Activity GAAP GAAP Leasing Number Annualized Total Annualized Rental Cash GAAP Activity of Rent Leased Rent per Churn Rent Rent Period Leases(1) (000's) NRSF Leased NRSF Rate Growth Growth New/expansion leases commenced YTD 2016 285 $ 16,248 203,607 $ 80 (3) Q2 2016 152 8,699 157,642 55 (3) Q1 2016 133 7,549 45,965 164 Q4 2015 142 9,335 54,329 172 Q3 2015 150 9,250 66,330 139 Q2 2015 107 15,117 122,872 123 (2) New/expansion leases signed YTD 2016 290 $ 30,134 150,825 $ 200 Q2 2016 171 7,656 48,147 159 Q1 2016 119 22,478 102,678 219 Q4 2015 155 8,901 42,089 211 Q3 2015 149 8,825 64,087 138 Q2 2015 122 19,624 243,477 81 (3) Renewal leases signed YTD 2016 344 $ 18,244 126,361 $ 144 3.8 % 4.4 % 9.3 % Q2 2016 173 8,512 70,028 122 2.1 5.2 9.4 Q1 2016 171 9,732 56,333 173 1.6 3.7 9.2 Q4 2015 211 10,089 49,561 204 2.3 3.8 6.7 Q3 2015 165 10,460 72,031 145 1.4 4.2 9.7 Q2 2015 135 6,517 35,272 185 1.6 5.7 9.1 (1) Number of leases represents each agreement with a customer; a lease agreement could include multiple spaces and a customer could have multiple leases. (2) During Q4 2014, we signed a 44,036 NRSF lease with a single customer for the entire VA2 Phase 1 facility. The lease commenced during Q2 2015. (3) During Q2 2015, we signed a 136,580 NRSF build-to-suit powered shell lease at our SV6 facility which was completed and commenced during Q2 2016.

 


Leasing Statistics Lease Expirations (total portfolio, including total data center and office and light-industrial “OLI”) Lease Distribution (total portfolio, including total data center and office and light-industrial “OLI”) 16 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX  Total Percentage Percentage Number Percentage Operating of Total Annualized of Total of of All NRSF of Operating Rent Annualized NRSF Under Lease Leases Leases Leases NRSF ($000) Rent Unoccupied data center - - % 290,992 12.6 % $ - - % Unoccupied OLI - - 82,485 3.6 - Data center NRSF: 5,000 or less 1,775 91.1 631,592 27.4 102,465 49.4 5,001 - 10,000 32 1.6 215,375 9.4 32,369 15.6 10,001 - 25,000 18 0.9 272,294 11.8 33,183 16.0 Greater than 25,000 3 0.2 105,532 4.6 12,798 6.2 Powered shell and other(1) 16 0.8 434,260 18.8 19,345 9.3 OLI 105 5.4 272,236 11.8 7,230 3.5 Portfolio Total 1,949 100.0 % 2,304,766 100.0 % $ 207,390 100.0 % (1) The annualized rent for powered shell and other includes $4.2 million associated with a restructured lease agreement involving a customer at the Santa Clara campus that has vacated its leased space and is paying discounted rent payments that may be applied to new lease arrangements elsewhere in our portfolio on a dollar-for-dollar basis until the original lease term expires in Q2 2017.

 


Geographic and Vertical Diversification Geographic Diversification Vertical Diversification 17 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX Los Angeles 27.5% San Francisco Bay 25.1% Northern Virginia 21.6% Chicago 9.0% Boston 8.2% New York 6.8% Miami 0.9% Denver 0.9% Digital Content & Multimedia 23.7% SI & MSP 9.9% Other Enterprise 18.8%  Networks & Mobility 23.2% Cloud 24.4%  Percentage of Total Data Metropolitan Market Center Annualized Rent Los Angeles 27.5 % San Francisco Bay 25.1 Northern Virginia 21.6 Chicago 9.0 Boston 8.2 New York 6.8 Miami 0.9 Denver 0.9 Total 100.0 %

 


10 Largest Customers 10 Largest Customers (total portfolio, including data center and office and light-industrial) 18 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX  Weighted Percentage Percentage Average Number Total of Total Annualized of Total Remaining of Occupied Operating Rent Annualized Lease Term in Customer Industry CoreSite Vertical Locations NRSF NRSF(1) ($000) Rent(2) Months(3) 1 Technology Cloud 10 282,629 12.3 % $ 14,369 6.9 % 76 2 Technology Enterprise - SI & MSP 3 63,859 2.8 8,597 4.2 32 3 Technology Cloud 2 95,225 4.1 7,339 3.5 74 4 Technology(4) Enterprise - Digital Content 10 68,492 3.0 6,493 3.1 12 5 Technology Enterprise - Digital Content 2 31,848 1.4 5,669 2.7 22 6 Technology Enterprise - Other 3 15,055 0.6 4,865 2.4 29 7 Technology Network 5 27,935 1.2 4,848 2.3 34 8 Technology Enterprise - Other 2 26,337 1.1 4,568 2.2 12 9 Technology Cloud 1 31,283 1.4 4,230 2.1 28 10 Government* Enterprise - Other 1 136,420 5.9 3,895 1.9 79 Total/Weighted Average(5) 779,083 33.8 % $ 64,873 31.3 % 45 * Denotes customer using space for general office purposes. (1) Represents the customer’s total occupied square feet divided by the total operating NRSF in the portfolio as of June 30, 2016. (2) Represents the customer’s total annualized rent divided by the total annualized rent in the portfolio as of June 30, 2016. (3) Weighted average based on percentage of total annualized rent expiring calculated as of June 30, 2016. (4) During the second quarter of 2016 we successfully renewed and extended portions of the customer's deployments. We are currently negotiating renewal leases for the remaining locations. We anticipate that the lease negotiations will be finalized at some of the locations during 2016 and that other locations will be vacated. (5) In addition to the ten largest customers, total annualized rent includes $4.2 million associated with a restructured lease agreement involving a customer at the Santa Clara campus that has vacated its leased space and is paying discounted rent payments that may be applied to new lease arrangements elsewhere in our portfolio on a dollar-for-dollar basis until the original lease term expires in Q2 2017.

 


Capital Expenditures and Completed Pre-Stabilized Projects (in thousands, except NRSF and cost per NRSF data) Completed Pre-Stabilized Projects Capital Expenditures and Repairs and Maintenance 19 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX Capital Expenditures Three Months Ended June 30, March 31, December 31, September 30, June 30, 2016 2016 2015 2015 2015 Data center expansion(1) $ 100,990 $ 64,088 $ 64,816 $ 25,762 $ 21,130 Non-recurring investments(2) 3,091 3,765 1,968 1,263 2,868 Tenant improvements 901 1,289 1,866 1,692 2,282 Recurring capital expenditures(3) 1,217 1,700 2,328 667 852 Total capital expenditures $ 106,199 $ 70,842 $ 70,978 $ 29,384 $ 27,132 Repairs and maintenance expense(4) $ 3,042 $ 3,073 $ 2,715 $ 3,011 $ 2,485 (1) Data center expansion capital expenditures include new data center construction, development projects adding capacity to existing data centers and other revenue generating investments. Data center expansion also includes investment of Deferred Expansion Capital, as defined in the Appendix. (2) Non-recurring investments include upgrades to existing data center or office space and company-wide improvements that are ancillary to revenue generation such as internal system development and system-wide security upgrades, which have a future economic benefit. (3) Recurring capital expenditures include required equipment upgrades within our operating portfolio, which have a future economic benefit. (4) Repairs and maintenance expense is classified within property operating and maintenance expense in the consolidated statement of operations. These expenditures represent recurring maintenance contracts and repairs to operating equipment necessary to maintain current operations.

 


Development Summary (in thousands, except NRSF and cost per NRSF data) Data Center Projects Under Construction 20 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX  Costs Metropolitan Estimated Incurred to- Estimated Percent Projects/Facilities Market Completion NRSF date Total Per NRSF Leased TKD(1) SV7 San Francisco Bay Q3 2016 230,000 $ 151,558 $ 190,000 826 58.5 % Total TKD 230,000 $ 151,558 $ 190,000 58.5 % Deferred Expansion Capital(2) SV4 San Francisco Bay Q3 2016 - $ 2,699 $ 2,700 NY2 New York Q4 2016 - 3,341 6,100 CH1 Chicago Q1 2017 - 861 10,000 Total Deferred Expansion Capital - $ 6,901 $ 18,800 Total 230,000 $ 158,459 $ 208,800 (1) TKD estimated development costs includes two components: 1) general construction to ready the NRSF as data center space and 2) power, cooling and other infrastructure to provide the designed amount of power capacity for the project. Following development completion, incremental capital, referred to as Deferred Expansion Capital, may be invested to support existing or anticipated future customer utilization of NRSF within our operating data centers. (2) See Appendix for Deferred Expansion Capital definition.

 


Development Summary (in thousands, except NRSF and power data) Held for Development 21 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX Held for Development Estimated Estimated Estimated Metropolitan Estimated Incremental Sellable Power Incremental Project / Building Market NRSF Costs (Megawatts) Cost per MW Incremental capacity in existing core and shell buildings(1) LA1 Los Angeles 10,352 $ 1,250 0.5 $ 2,500 LA2 Los Angeles 127,202 55,000 9.0 6,111 BO1 Boston 73,619 40,000 6.0 6,667 NY2 Phases 3-4 New York 87,297 57,000 8.5 6,706 NY2 Phase 5 New York 47,211 35,000 5.0 7,000 MI1 Miami 13,154 7,500 1.0 7,500 Total incremental capacity 358,835 $ 195,750 30.0 $ 6,525 Deferred Expansion Capital(2) - 25,000 Total(3) 358,835 $ 220,750 (1) Represents incremental data center capacity that may be constructed within existing facilities when the core and shell building have been developed and certain amounts of the existing space is not yet built out into data center space. (2) As we construct data center capacity, we work to optimize both the amount of the capital we deploy on power and cooling infrastructure and the timing of that capital deployment; as such, we generally construct our power and cooling infrastructure supporting our data center NRSF based on our estimate of customer utilization. This practice can result in our investment at a later time in Deferred Expansion Capital. We define Deferred Expansion Capital as our estimate of the incremental capital we may invest in the future to add power or cooling infrastructure to support existing or anticipated future customer utilization of NRSF within our operating data centers. From time to time, we may revise our estimate of Deferred Expansion Capital as well as the potential time period during which we may invest it. We estimate a range of $20 - $30 million of future capital investment. (3) In addition to new construction and incremental capacity in existing core and shell buildings, we have available acreage which represents entitled and unentitled land we own adjacent to our existing buildings, in the form of existing parking lots. By utilizing existing parking lots, we believe we can build approximately 100,000 NRSF and 200,000 NRSF buildings on our available acreage at NY2 and LA2, respectively.

 


Market Capitalization and Debt Summary (in thousands, except per share data) Market Capitalization Debt Maturities Debt Summary (1) 22 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX  Market Capitalization Shares or Market Price / Equivalents Liquidation Value as of Market Value Outstanding June 30, 2016 Equivalents Common shares 33,927 $88.69 $ 3,008,963 Operating partnership units 13,851 $88.69 1,228,476 Liquidation value of preferred stock 4,600 $25.00 115,000 Total equity 4,352,439 Total principal debt outstanding 500,000 Total enterprise value $ 4,852,439 Net principal debt to enterprise value 10.3% Net principal debt and preferred stock to enterprise value 12.6%

 


Interest Summary and Debt Covenants (in thousands) Interest Expense Components Debt Covenants 23 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX GAAP Interest Calculation Three Months Ended Six Months Ended June 30, 2016 March 31, 2016 June 30, 2015 June 30, 2016 June 30, 2015 Interest expense and fees $ 3,245 $ 2,814 $ 2,466 $ 6,059 $ 4,692 Amortization of deferred financing costs 311 283 292 594 586 Capitalized interest (876) (1,085) (1,028) (1,961) (2,283) Total interest expense $ 2,680 $ 2,012 $ 1,730 $ 4,692 $ 2,995 Percent capitalized 24.6% 35.0% 37.3% 29.5% 43.3% 18.2% 6.3%

 


Components of Net Asset Value (NAV) (in thousands) 24 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX Cash Net Operating Income Development Projects Other Assets and Liabilities  Reconciliation of Net Operating Income (NOI) Q2 2016 Annualized Operating Income $ 22,558 $ 90,232 Adjustments: Depreciation and amortization 26,227 104,908 General and administrative (includes litigation) 8,818 35,272 Net Operating Income $ 57,603 $ 230,412 Cash Net Operating Income (Cash NOI) Net Operating Income $ 57,603 $ 230,412 Adjustments: Straight-line rent (1,002) (4,008) Amortization of above and below-market leases (143) (572) Cash NOI $ 56,458 $ 225,832 Cash NOI with backlog (85.0% leased)(1) $ 59,059 $ 236,236 Cash stabilized NOI (93% leased) $ 64,617 $ 258,468 Data Center Projects Under Construction TKD construction in progress(2) $ 151,558 Remaining spend(2) 38,442 Total $ 190,000 Targeted annual yields 12% - 16% Annualized pro forma NOI range $22,800 - $30,400 Deferred Expansion Capital in progress $ 6,901 Remaining spend(3) 11,899 Total $ 18,800 Other Assets Remaining construction in progress(4) $ 51,956 Cash and cash equivalents 2,243 Accounts and other receivables 13,802 Other tangible assets 24,579 Total other assets $ 92,580 Liabilities Debt Principal debt $ 500,000 Accounts payable, accrued and other liabilities 146,765 Accrued dividends and distributions 28,326 Preferred equity 115,000 Total liabilities $ 790,091 Weighted average common shares and units - diluted 47,675 (1) Cash NOI with backlog is adjusted to include one quarter of the cash backlog as of June 30, 2016, less any leasing of currently occupied NRSF and data center projects under development. (2) Does not include spend associated with leasing commissions. See page 20 for further breakdown of data center projects under construction. (3) Does not include spend associated with future Deferred Expansion Capital. (4) Represents the book value of in progress capital projects, including land and shell building, of future data center expansion, non-recurring investments, tenant improvements and recurring capital expenditures.

 


2016 Guidance (in thousands, except per share amounts) 25 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX The annual guidance provided below represents forward-looking projections, which are based on current economic conditions, internal assumptions about our existing customer base and the supply and demand dynamics of the markets in which we operate. Please refer to the press release for additional information on forward-looking statements. Projected per share and OP unit information: 2016 Implied Low High Mid 2015 Growth(1) Net income attributable to common shares $ 1.41 $ 1.49 $ 1.45 $ 1.03 40.8% Real estate depreciation and amortization 2.15 2.15 2.15 1.83 FFO $ 3.56 $ 3.64 $ 3.60 $ 2.86 25.9% Projected operating results: Total operating revenues $ 292,500 $ 402,500 $ 397,500 $ 333,292 19.3% General and administrative expenses 35,000 37,000 36,000 34,179 5.3% Adjusted EBITDA 205,000 213,000 209,000 169,903 23.0% Guidance drivers: Annual rental churn rate 6.0% 8.0% 7.0% 7.5% Cash rent growth on data center renewals 3.0% 5.0% 4.0% 4.6% Capital expenditures: Data center expansion $ 225,000 $ 240,000 $ 232,500 $ 132,786 Non-recurring investments 15,000 20,000 17,500 9,971 Tenant improvements 5,000 10,000 7,500 8,037 Recurring capital expenditures 5,000 10,000 7,500 5,828 Total capital expenditures $ 250,000 $ 280,000 $ 265,000 $ 156,622 (1) Implied growth is based on the midpoint of 2016 guidance.

 


Appendix Definitions This document includes certain non-GAAP financial measures that management believes are helpful in understanding our business, as further described below. Our definition and calculation of non-GAAP financial measures may differ from those of other REITs and therefore may not be comparable. The non-GAAP measures should not be considered an alternative to net income as an indicator of our performance and should be considered only a supplement to net income, cash flows from operating, investing or financing activities as a measure of profitability and/or liquidity, computed in accordance with GAAP. Adjusted Funds From Operations “AFFO” is a non-GAAP measure that is used as a supplemental operating measure specifically for comparing year over year ability to fund dividend distribution from operating activities. We use AFFO as a basis to address our ability to fund our dividend payments. AFFO is calculated by adding to or subtracting from FFO: Plus: Amortization of deferred financing costs Plus: Non-cash compensation Plus: Non-real estate depreciation Plus: Impairment charges Plus: Below market debt amortization Less: Straight line rents adjustment Less: Amortization of above and below market leases Less: Recurring capital expenditures Less: Tenant improvements Less: Capitalized leasing costs Capitalized leasing costs consist of commissions payable to third parties, including brokers, leasing agents, referral agents, and internal sales commissions payable to employees. Capitalized leasing costs are accrued and deducted from AFFO generally in the period the lease is executed. Leasing costs are generally paid a) to third party brokers and internal sales employees 50% at customer lease signing and 50% at lease commencement and b) to referral and leasing agents monthly over the lease term as and to the extent we receive payment from the end customer. AFFO is not intended to represent cash flow from operations for the period, and is only intended to provide an additional measure of performance by adjusting the effect of certain items noted above included in FFO. Other REITs widely report AFFO, however, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to other REITs. Annualized Rent Monthly contractual rent under existing commenced customer leases as of quarter-end, multiplied by 12. This amount reflects total annualized base rent before any one-time or non-recurring rent abatements and excludes power revenue, interconnection revenue and operating expense reimbursement. 26 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX

 


Appendix Data Center Leasing Metrics Rental Churn Rate – represents data center leases which are not renewed or are terminated during the period. Rental churn is calculated based on the annualized rent of data center expired leases terminated in the period, compared with total portfolio annualized rent at the beginning of the period. Cash and GAAP Rent Growth – represents the increase in rental rates on renewed data center leases signed during the period, as compared with the previous rental rates for the same space. Cash and GAAP rent growth is calculated based on annualized rent from the renewed data center license compared to annualized rent from the expired data center license. Data Center Net Rentable Square Feet (“NRSF”) Both occupied and available data center NRSF includes a factor based on management’s estimate of space to account for a customer’s proportionate share of required data center support space (such as the mechanical, telecommunications and utility rooms) and building common areas, which may be updated on a periodic basis to reflect the most current build-out of our properties. Deferred Expansion Capital As we construct data center capacity, we work to optimize both the amount of the capital we deploy on power and cooling infrastructure and the timing of that capital deployment; as such, we generally construct our power and cooling infrastructure supporting our data center NRSF based on our estimate of customer utilization. This practice can result in our investment at a later time in Deferred Expansion Capital. We define Deferred Expansion Capital as our estimate of the incremental capital we may invest in the future to add power or cooling infrastructure to support existing or anticipated future customer utilization of NRSF within our operating data centers. From time to time, we may revise our estimate of Deferred Expansion Capital as well as the potential time period during which we may invest it. See the Data Center Projects Under Construction and Held for Development tables on pages 20 and 21, respectively, for more detail. Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA - EBITDA is defined as earnings before interest, taxes, depreciation and amortization. We calculate adjusted EBITDA by adding our non-cash compensation expense, transaction costs and litigation expense to EBITDA as well as adjusting for the impact of impairment charges, gains or losses from sales of property and undepreciated land and gains or losses on early extinguishment of debt. Management uses EBITDA and adjusted EBITDA as indicators of our ability to incur and service debt. In addition, we consider EBITDA and adjusted EBITDA to be appropriate supplemental measures of our performance because they eliminate depreciation and interest, which permits investors to view income from operations without the impact of non-cash depreciation or the cost of debt. However, because EBITDA and adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes, and are not adjusted for capital expenditures or other recurring cash requirements of our business, their utilization as a cash flow measurement is limited. 27 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX

 


Appendix Funds From Operations (“FFO”) is a supplemental measure of our performance which should be considered along with, but not as an alternative to, net income and cash provided by operating activities as a measure of operating performance and liquidity. We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property and undepreciated land and impairment write-downs of depreciable real estate, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. FFO attributable to common shares and units represents FFO less preferred stock dividends declared during the period. Our management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We offer this measure because we recognize that investors use FFO as a basis to compare our operating performance with that of other REITs. However, the utility of FFO as a measure of our performance is limited because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our financial condition and results from operations. FFO is a non-GAAP measure and should not be considered a measure of liquidity, an alternative to net income, cash provided by operating activities or any other performance measure determined in accordance with GAAP, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. In addition, our calculations of FFO are not necessarily comparable to FFO as calculated by other REITs that do not use the same definition or implementation guidelines or interpret the standards differently from us. Investors in our securities should not rely on these measures as a substitute for any GAAP measure, including net income. Monthly Recurring Revenue per Cabinet Equivalent Represents the turn-key monthly recurring colocation revenue (“MRR”) per cabinet equivalent billed. We define MRR as recurring contractual revenue under existing commenced customer leases. MRR per cabinet equivalent is calculated as (current quarter MRR/3) divided by ((quarter-end cabinet equivalents billed plus prior quarter-end cabinet equivalents billed)/2). Cabinet equivalents are calculated as cage-usable square feet (turn-key leased NRSF/NRSF factor) divided by 25. 28 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX

 


Appendix Net Operating Income (“NOI”) and Cash NOI – NOI, and cash NOI are supplemental measures for the operating performance of the company’s portfolio. NOI is operating revenues less operating expenses and adjusted for items such as depreciation and amortization, general and administrative expenses, transaction costs and litigation expenses. Cash NOI is NOI less straight-line rents and above and below market rent amortization. NRSF Held for Development Represents incremental data center capacity that may be constructed in existing facilities that requires significant capital investment in order to develop new data center facilities. The data represents management's best estimate of incremental costs based on estimated NRSF and power design and are subject to market conditions and build-out specifications and may vary. NRSF Under Construction Represents NRSF for which substantial activities are ongoing to prepare the property for its intended use following development. The NRSF reflects managements estimate of engineering drawings and required support space and is subject to change based on final demising of space. Estimated costs of completion are based on actual costs at quarter-end and management’s estimate of remaining projects costs. Turn-Key Same Store Includes turn-key data center space that was leased or available to be leased to our colocation customers as of December 31, 2014, at each of our properties, and excludes powered shell data center space, SV3 data center space, office and light-industrial space and space for which development was completed and became available to be leased after December 31, 2014. The turn-key same store space as of December 31, 2014, is 1,149,119 NRSF. We track same store on a computer room basis within each data center facility. Stabilized and Pre-Stabilized NRSF Data center projects and facilities that recently have been developed and are in the initial lease-up phase are classified as pre-stabilized NRSF until they reach 85% occupancy or have been in service for 24 months. Pre-stabilized projects and facilities become stabilized operating properties at the earlier of achievement of 85% occupancy or 24 months after development completion and are included in the stabilized operating NRSF. 29 OVERVIEW FINANCIAL STATEMENTS OPERATING PORTFOLIO DEVELOPMENT CAPITAL STRUCTURE Components of NAV GUIDANCE APPENDIX

 

Exhibit 99.3

 

 

CoreSite Realty Corporation Announces Executive Leadership Transition

 

Tom Ray to Retire Effective September 10, 2016

 

Paul Szurek, Lead Independent Director, to Succeed Tom Ray as President and CEO

 

Denver, CO — July 28, 2016 — CoreSite Realty Corporation (NYSE:COR), a premier provider of secure, reliable, high-performance data center and interconnection solutions across the U.S., today announced that Tom Ray is retiring from the Company and that its Board of Directors has appointed Paul Szurek as President and Chief Executive Officer.  Mr. Szurek, who has been CoreSite’s lead independent director since September 2010, will assume the role on September 10, 2016, and Mr. Ray will step down from his role as CoreSite’s President, CEO and Board Director and will continue to serve as a consultant to the Company to assist with the transition through June 30, 2017.

 

“Paul, an active and valuable contributor to the CoreSite Board, has been instrumental in providing oversight of the Company’s growth and strategic direction,” said Robert Stuckey, Chairman of CoreSite’s Board of Directors. “He is an accomplished executive with a deep understanding of our business, operations and the strategies we are implementing. Paul’s private company development and operations experience at Biltmore and his extensive public company experience with Security Capital Group, where he was actively involved in almost every aspect of governance, strategy and execution, provide the right skill set to continue CoreSite’s growth and progress. I am confident that he will be a great addition to our excellent management team as we pursue our ongoing goals of sustainable profitable growth over the near and long term and value creation for all shareholders. As a Board, we understand the importance of continuity and succession planning, and we are pleased that Paul and Tom are collaborating closely for a smooth transition.”

 

Mr. Stuckey continued, “On behalf of the Board and the Company, I want to thank Tom for his many contributions to CoreSite. Tom has been instrumental in crafting, implementing and overseeing the execution of the vision of CoreSite since its inception and we are grateful for his long-sighted leadership. He is leaving an admirable legacy.”

 

“It is an honor to be appointed President and Chief Executive Officer of CoreSite,” said Mr. Szurek. “I have worked very closely with Tom and the CoreSite team over the years and have gained profound knowledge and respect for what the entire team has built. With the support of our talented team, we will continue to execute on our strategy, support our customers, provide growth opportunities for our employees and deliver value to our shareholders.”

 

Mr. Ray said, “It has been a privilege to have served CoreSite over the past 15 years. We have a strong team in place, and now is the right time for new leadership to continue to build upon what we have assembled. I am humbled by what the team has accomplished, and honored to have worked alongside such talented and committed professionals. I look forward to supporting a seamless transition with Paul and am confident in leaving the Company in his hands and under his capable leadership, along with the deep bench of talent we have built over the years.”

 

Paul E. Szurek has served as a CoreSite director since September 2010. Mr. Szurek has been Chief Financial Officer of Biltmore Farms, LLC, a residential and commercial real estate development and operating company, since 2003. Prior to joining Biltmore Farms, LLC, Mr. Szurek served as Chief Financial Officer of Security Capital Group Incorporated, a publicly traded real estate investment, development and operating company with extensive REIT engagement. At Security Capital, Mr. Szurek held a variety of roles and achieved a number of significant accomplishments. As Security Capital’s Senior Vice President of Corporate Finance, he oversaw the financing strategy and execution for its affiliated REITs and

 

 

© 2015, CoreSite, L.L.C. All Rights Reserved.

 



 

participated in all of the mergers and acquisitions activity. He was also Co-Managing Director of Security Capital U.S. Realty, a Luxembourg company which made strategic investments in U.S. REITS and helped generate above-market returns by providing strategic guidance. Mr. Szurek was promoted to CFO of Security Capital in 1997, where he supported the company from its IPO, through its acquisition by GE Real Estate in 2002. He managed Security Capital’s financial structure and capital access, participated in its acquisition and disposition activity and led the restructuring and optimization of its shared operations center. The shared operations center was an innovative undertaking, being one of the first in the industry to implement a cloud-based operating and financial system in order to achieve greater controls, more flexibility and significant efficiencies. Mr. Szurek received a J.D. with honors from Harvard Law School and a B.A. in Government, magna cum laude, from the University of Texas at Austin.

 

About CoreSite

 

CoreSite Realty Corporation (NYSE:COR) delivers secure, reliable, high-performance data center and interconnection solutions to a growing customer ecosystem across eight key North American markets. More than 900 of the world’s leading enterprises, network operators, cloud providers, and supporting service providers choose CoreSite to connect, protect and optimize their performance-sensitive data, applications and computing workloads. Our scalable, flexible solutions and 350+ dedicated employees consistently deliver unmatched data center options — all of which leads to a best-in-class customer experience and lasting relationships. For more information, visit www.CoreSite.com.

 

CoreSite Contact

Greer Aviv

VP of Investor Relations and Media/Public Relations

303-405-1012

Greer.Aviv@CoreSite.com

 

Forward-Looking Statements

 

This press release and accompanying supplemental information may contain 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 “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond CoreSite’s control that may cause actual results to differ significantly from those expressed in any forward-looking statement. These risks include, without limitation: the geographic concentration of the company’s data centers in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets; fluctuations in interest rates and increased operating costs; difficulties in identifying properties to acquire and completing acquisitions; significant industry competition; the company’s failure to obtain necessary outside financing; the company’s failure to qualify or maintain its status as a REIT; financial market fluctuations; changes in real estate and zoning laws and increases in real property tax rates; and other factors affecting the real estate industry generally. All forward-looking statements reflect the company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, 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 most recent annual report on Form 10-K, and other

 



 

risks described in documents subsequently filed by the company from time to time with the Securities and Exchange Commission.