LIMELIGHT NETWORKS, INC. EQUITY AWARD AMENDMENT AND GRANT OF RESTRICTED STOCK UNITS UNDER LIMELIGHT NETWORKS, INC.
Exhibit 99.1
EQUITY AWARD AMENDMENT AND
GRANT OF RESTRICTED STOCK UNITS UNDER LIMELIGHT NETWORKS, INC.
This Equity Award Amendment and Grant of Restricted Stock Units Agreement (the “Award
Agreement”) is entered into as of the 25th day of November, 2008 (“Effective Date”) by and between
Limelight Networks, Inc., a Delaware corporation (the “Company”) and Xxxxxxx Xxxxxxxx, an
individual (“Executive”).
RECITALS
| A. | The Company and Executive entered into an employment agreement dated October 16, 2006 (the “Employment Agreement”). Pursuant to sections 3(f)(ii) and 3(f)(iii) of the Employment Agreement, Executive was granted certain options to purchase common stock of the Company. Pursuant to section 3(f)(ii) of the Employment Agreement, Executive was granted (post stock split) options to purchase 750,000 shares of Company common stock, grant number 000182, granted November 20, 2006 (the “F2 Options”). As of the date of this Award Agreement approximately 360,000 of the F2 Options had vested. Pursuant to section 3(f)(iii) of the Employment Agreement, Executive was granted (post stock split) options to purchase 750,000 shares of Company common stock, grant number 000183, granted November 20, 2006 (the “F3 Options”). | ||
| B. | In order to maintain an appropriate, effective and balanced set of compensation incentives for Executive, the Company believes it to be in the best interests of the Company to modify the F2 Options, cancel the F3 Options and issue to Executive certain new restricted stock units on the terms and subject to the conditions set forth in this Award Agreement. | ||
| C. | Unless otherwise defined herein, terms defined in the Company’s 2007 Equity Incentive Plan (the “Plan”) will have the same defined meanings in this Award Agreement. The “Time Vest RSUs” and the “Performance Vest RSUs” may be referred to collectively as the “RSUs” or “Restricted Stock Units” in this Award Agreement. The Restricted Stock Units and the F2 Options may be referred to collectively as “Equity Awards.” |
AGREEMENT
Now, therefore, for valuable consideration the receipt of which is hereby acknowledged, the parties
agree as follows:
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1. Cancellation of the F3 Options. Effective as of the Effective Date, the F3 Options
are cancelled.
2. Modification of the F2 Options. Effective as of the Effective Date, the vesting
schedule for the F2 Options is modified as follows: Any and all F2 Options that had vested prior to
the Effective Date are deemed unvested as of the Effective Date. One twenty-fourth (1/24th) of the
F2 Options will vest and become exercisable on November 20, 2009, and an additional one
twenty-fourth (1/24th) will vest and become exercisable on the 20th of each calendar month
thereafter provided Executive continues to be a Service Provider to the Company on each vesting
date. Except as provided in this section 2, the terms and condition of the F2 Options remain
unmodified and in full force.
3. Grant of Time Vesting Restricted Stock Units. Effective as of the Effective Date,
the Company hereby grants to Executive 100,000 Restricted Stock Units, subject to the terms and
conditions of the Plan and this Award Agreement, grant number (the “Time Vest RSUs”).
Subject to any acceleration provisions contained in the Plan, the Employment Agreement or set forth
below, the Time Vest RSUs will vest fifty percent (50%) 90 days after the Effective Date, and fifty
percent (50%) on the second anniversary of the Effective Date.
4. Grant of Performance Restricted Stock Units. Effective as of the Effective Date,
the Company hereby grants to Executive 400,000 Restricted Stock Units, subject to the terms and
conditions of the Plan and this Award Agreement, grant number (the “Performance RSUs”).
Subject to the terms and conditions set forth in this Award Agreement, the Plan and the Employment
Agreement, including any acceleration provisions contained in the Plan, the Employment Agreement or
set forth herein, the Performance RSUs will vest as follows:
a. Quarterly Financial Targets. Set forth on Exhibit A attached hereto is a schedule
showing the four (4) quarterly financial performance targets (each a “Quarterly Financial Target”
and labeled in Exhibit A as T1, T2, T3 and T4), each Quarterly Financial Target consisting of a
quarterly revenue target (a “Revenue Target”) and a cash gross margin target range (a “CGM
Target”). The CGM Target consists of a range of cash gross margin performance for the applicable
quarter with the bottom of the range constituting the CGM Target Floor and the top of the range
constituting the CGM Target Ceiling.
b. Target Tranches. The Performance RSUs are separated into four tranches of 100,000
Performance RSUs each. Each Performance RSU tranche is associated with a Quarterly Financial
Target.
c. Vesting Window. Vesting of the Performance RSUs will be based upon achievement of
Company Quarterly Financial Targets during fiscal quarters ending after the Effective Date and on
or before March 31, 2010 (the “Vesting Window”). Any Performance RSUs that have not vested based on
achievement of Quarterly Financial Targets with respect to fiscal quarters ending within the
Vesting Window, will expire and be cancelled immediately following the determination of the
Company’s financial performance for the last fiscal quarter in the Vesting Window.
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d. Vesting Eligibility. If, for any fiscal quarter ended during the Vesting Window,
the Revenue Target for one or more Quarterly Financial Targets is met or exceeded then the unvested
Performance RSUs within the Performance RSU tranche(s) associated with that (or those) Quarterly
Financial Target(s) become(s) eligible for vesting (each an “Eligible Tranche”).
e. Vesting. The actual number of Performance RSUs that will vest in any Eligible
Tranche is determined by the percentage achievement of the CGM Target. For purposes of this Award
Agreement, the actual cash gross margin performance for the applicable fiscal quarter will be based
upon the Company’s quarterly financial statements as approved by the Company’s audit committee, and
rounded to the nearest one-tenth (1/10th) of one percent (the “Achieved CGM”). If the Achieved CGM
is below the CGM Target Floor for the Eligible Tranche, then none of the Performance RSUs in that
Eligible Tranche will vest that quarter. If the Achieved CGM is at or above the CGM Target Ceiling,
then all of the unvested Performance RSUs in that Eligible Tranche will vest. If the Achieved CGM
is above the CGM Target Floor and below the CGM Target Ceiling, then only a portion of the Eligible
Tranche will vest that quarter. The number of Performance RSUs in each Eligible Tranche that will
vest will be calculated as follows: (i) the number of Performance RSUs in the Eligible Tranche
(100,000), multiplied by (ii) the quotient of the total number of percentage points between the
Achieved CGM and the CGM Floor expressed as an integer and rounded to the nearest one-tenth
(1/10th) divided by the total number of percentage points between the CGM Floor and the CGM
Ceiling, expressed as an integer and rounded to the nearest one-tenth (1/10th), expressed as a
percentage rounded to the nearest 1/10th of one percent; and (iii) if any portion of the
Performance RSUs in the Eligible Tranche have vested in a prior fiscal quarter, then subtract the
previously vested Performance RSUs. For purposes of this Award Agreement, the number of Performance
RSUs determined, for any particular fiscal quarter ending within the Vesting Window, to vest
pursuant to this section 4(e) will be referred to as the “Vesting RSUs”.
f. Vesting Dates. Fifty percent (50%) of the Vesting RSUs earned with respect to any
particular fiscal quarter will vest on the third business day following the Company’s public
release of its earnings and financial performance with respect to that fiscal quarter, and the
remaining fifty percent (50%) will vest on the one year anniversary of the vesting of the first
fifty percent.
5. Company’s Obligation to Pay. Each Restricted Stock Unit represents the right to
receive a Share on the date it vests. Unless and until the Restricted Stock Units will have vested
in the manner set forth in Section 3 or 4, Executive will have no right to payment of any such
Restricted Stock Units. Prior to actual payment of any vested Restricted Stock Units, such
Restricted Stock Unit will represent an unsecured obligation of the Company, payable (if at all)
only from the general assets of the Company.
6. Forfeiture upon Termination of Status as a Service Provider. Subject to Section
7(b) of the Employment Agreement, Equity Awards scheduled to vest on a certain date or upon the
occurrence of a certain condition will not vest in Executive in accordance with any of the
provisions of this Award Agreement, unless Executive will have been continuously a Service Provider
from the Date of Grant until the date such vesting occurs. The balance of the Equity Awards that
have not vested as of the time of Executive’s termination as a Service Provider for
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any or no reason and Executive’s right to acquire any Shares hereunder will immediately
terminate.
7. Payment after Vesting.
a. Subject to Section 9, any Restricted Stock Units that vest will be paid to the Executive
(or in the event of the Executive’s death, to his estate) in whole Shares. Subject to the
provisions of paragraph 5(b), such vested Restricted Stock Units shall be paid in Shares as soon as
practicable after vesting, but in each such case no later than the date that is two-and-one-half
months from the end of the Company’s tax year that includes the vesting date.
b. Notwithstanding anything in the Plan, the Employment Agreement or this Award Agreement to
the contrary, if the vesting of the balance, or some lesser portion of the balance, of the
Restricted Stock Units is accelerated in connection with Executive’s termination as a Service
Provider (provided that such termination is a “separation from service” within the meaning of
Section 409A, as determined by the Company), other than due to death, and if (x) Executive is a
“specified employee” within the meaning of Section 409A at the time of such termination as a
Service Provider and (y) the payment of such accelerated Restricted Stock Units will result in the
imposition of additional tax under Section 409A if paid to Executive on or within the six (6) month
period following Executive’s termination as a Service Provider, then the payment of such
accelerated Restricted Stock Units will not be made until the date six (6) months and one (1) day
following the date of Executive’s termination as a Service Provider, unless the Executive dies
following his termination as a Service Provider, in which case, the Restricted Stock Units will be
paid in Shares to the Executive’s estate as soon as practicable following his death. It is the
intent of this Agreement to comply with the requirements of Section 409A so that none of the
Restricted Stock Units provided under this Agreement or Shares issuable thereunder will be subject
to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to
so comply. For purposes of this Agreement, “Section 409A” means Section 409A of the Code, and any
proposed, temporary or final Treasury Regulations and Internal Revenue Service guidance thereunder,
as each may be amended from time to time.
c. Change of Control. Notwithstanding any provision of the Employment Agreement or Plan to the
contrary, including but not limited to sections 3(f)(iv) and 7(b)(iii) of the Employment Agreement,
no portion of the RSUs will be subject to accelerated vesting in connection with a Change of
Control (as defined in the Employment Agreement) or Executive’s termination in connection with a
Change of Control if the Change of Controls occurs within 90 days following the Effective Date or
if the Change of Control results from the consummation of a transaction set forth in a definitive
agreement entered into within 90 days following the Effective Date, and the RSUs will be cancelled
upon consummation of such Change of Control. Except as provided in this section 7(c) the RSUs will
remain subject to the Change of Control provisions, including sections 3(f)(iv) and 7(b)(iii) of
the Employment Agreement.
8. Death of Executive. Any distribution or delivery to be made to Executive under
this Award Agreement will, if Executive is then deceased, be made to Executive’s designated
beneficiary, or if no beneficiary survives Executive, the administrator or executor of Executive’s
estate. Any such transferee must furnish the Company with (a) written notice of his status as
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transferee, and (b) evidence satisfactory to the Company to establish the validity of the
transfer and compliance with any laws or regulations pertaining to said transfer.
9. Withholding of Taxes. Notwithstanding any contrary provision of this Award
Agreement, no certificate representing the Shares will be issued to Executive, unless and until
satisfactory arrangements (as determined by the Administrator) will have been made by Executive
with respect to the payment of income, employment and other taxes which the Company determines must
be withheld with respect to such Shares. The Administrator, in its sole discretion and pursuant to
such procedures as it may specify from time to time, may permit Executive to satisfy such tax
withholding obligation, in whole or in part (without limitation) by (a) paying cash, (b) electing
to have the Company withhold otherwise deliverable Shares having a Fair Market Value equal to the
minimum amount required to be withheld, (c) delivering to the Company already vested and owned
Shares having a Fair Market Value equal to the amount required to be withheld, or (d) selling a
sufficient number of such Shares otherwise deliverable to Executive through such means as the
Company may determine in its sole discretion (whether through a broker or otherwise) equal to the
amount required to be withheld. If Executive fails to make arrangements for the payment of any
required tax withholding obligations hereunder at the time any applicable Restricted Stock Units
otherwise are scheduled to vest pursuant to Sections 3 or 4, then the Company shall at its
discretion withhold otherwise deliverable Shares as provided in subsection 9(b) or sell a
sufficient number of Shares otherwise deliverable as provided in subsection 9(d) above.
10. Rights as Stockholder. Neither Executive nor any person claiming under or through
Executive will have any of the rights or privileges of a stockholder of the Company in respect of
any Shares deliverable hereunder unless and until certificates representing such Shares will have
been issued, recorded on the records of the Company or its transfer agents or registrars, and
delivered to Executive. After such issuance, recordation and delivery, Executive will have all the
rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends
and distributions on such Shares.
11. No Guarantee of Continued Service. EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF THE RESTRICTED STOCK UNITS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED THIS AWARD OF RESTRICTED STOCK UNITS OR ACQUIRING SHARES HEREUNDER. EXECUTIVE
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AWARD AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER
AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND
WILL NOT INTERFERE IN ANY WAY WITH EXECUTIVE’S RIGHT OR THE RIGHT OF THE COMPANY TO TERMINATE
EXECUTIVE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE, SUBJECT TO THE
TERMS OF THE EMPLOYMENT AGREEEMENT.
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12. Address for Notices. Any notice to be given to the Company under the terms of
this Award Agreement will be addressed to the Company at Limelight Networks, Inc., 0000 Xxxx
00xx Xxxxxx, Xxxxx, XX 00000, Attention: Chief Legal Officer, or at such other address
as the Company may hereafter designate in writing.
13. Grant is Not Transferable. Except to the limited extent provided in Section 8,
this grant and the rights and privileges conferred hereby will not be transferred, assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be
subject to sale under execution, attachment or similar process.
14. Binding Agreement. Subject to the limitation on the transferability of this grant
contained herein, this Award Agreement will be binding upon and inure to the benefit of the heirs,
legatees, legal representatives, successors and assigns of the parties hereto.
15. Additional Conditions to Issuance of Stock. If at any time the Company will
determine, in its discretion, that the listing, registration or qualification of the Shares upon
any securities exchange or under any state or federal law, or the consent or approval of any
governmental regulatory authority is necessary or desirable as a condition to the issuance of
Shares to Executive (or his estate), such issuance will not occur unless and until such listing,
registration, qualification, consent or approval will have been effected or obtained free of any
conditions not acceptable to the Company. Where the Company determines that the delivery of the
payment of any Shares will violate federal securities laws or other applicable laws, the Company
will defer delivery until the earliest date at which the Company reasonably anticipates that the
delivery of Shares will no longer cause such violation. The Company will make all reasonable
efforts to meet the requirements of any such state or federal law or securities exchange and to
obtain any such consent or approval of any such governmental authority.
16. Priority of Agreements and Entire Agreement. This Award Agreement, the Plan and
the Employment Agreement together constitute the entire agreement between the parties with respect
to the subject matter of this Award Agreement. In the event of a conflict between one or more
provisions of this Award Agreement and one or more provisions of the Plan, and except as may be
expressly provided in this Aware Agreement, the provisions of this Award Agreement will govern, and
in the event of a conflict between one or more provisions of the Employment Agreement and this
Award Agreement or the Plan, the Employment Agreement will govern.
17. Administrator Authority. The Administrator will have the power to interpret the
Plan and this Award Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or revoke any such rules
(including, but not limited to, the determination of whether or not any Restricted Stock Units have
vested). All actions taken and all interpretations and determinations made by the Administrator in
good faith will be final and binding upon Executive, the Company and all other interested persons.
No member of the Administrator will be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this Award Agreement.
18. Electronic Delivery. The Company may, in its sole discretion, decide to deliver
any documents related to Equity Awards awarded under the Plan or future Equity Awards that
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may be awarded under the Plan by electronic means or request Executive’s consent to
participate in the Plan by electronic means. Executive hereby consents to receive such documents
by electronic delivery and agrees to participate in the Plan through any on-line or electronic
system established and maintained by the Company or another third party designated by the Company.
19. Captions. Captions provided herein are for convenience only and are not to serve
as a basis for interpretation or construction of this Award Agreement.
20. Agreement Severable. In the event that any provision in this Award Agreement will
be held invalid or unenforceable, such provision will be severable from, and such invalidity or
unenforceability will not be construed to have any effect on, the remaining provisions of this
Award Agreement.
21. Modifications to the Agreement. Modifications to this Award Agreement or the
Plan can be made only in an express written contract executed by a duly authorized officer of the
Company. Notwithstanding anything to the contrary in the Plan or this Award Agreement, the Company
reserves the right to revise this Award Agreement as it deems necessary or advisable, in its sole
discretion and without the consent of Executive, to comply with Section 409A or to otherwise avoid
imposition of any additional tax or income recognition under Section 409A in connection to this
Award of Restricted Stock Units.
22. Governing Law. This Award Agreement will be governed by the laws of the State of
Arizona, without giving effect to the conflict of law principles thereof. For purposes of
litigating any dispute that arises under this Award of Restricted Stock Units or this Award
Agreement, the parties hereby submit to and consent to the jurisdiction of the State of Arizona,
and agree that such litigation will be conducted in the courts of Maricopa County, Arizona, or the
federal courts for the United States for the District of Arizona, and no other courts, where this
Award of Restricted Stock Units is made and/or to be performed.
In witness whereof, this Award Agreement has been entered into as of the Effective Date, first
above written.
EXECUTIVE
|
LIMELIGHT NETWORKS, INC. | |||||
/s/
Xxxxxxx X. Xxxxxxxx
|
/s/ Xxxxxxx Xxxxxxxx | |||||
Signature
|
By | |||||
Xxxxxxx
X. Xxxxxxxx
|
CFO | |||||
Print Name
|
Title | |||||
Address: [*] |
||||||
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Exhibit A
Quarterly Financial Targets
CGM Targets1
| Number of | ||||||||||||||
| percentage | ||||||||||||||
| points below | ||||||||||||||
| CGM Target | ||||||||||||||
| Floor and GCM | ||||||||||||||
| Target Ceiling | ||||||||||||||
| Quarterly | Performance | CGM | CGM | expressed as an | ||||||||||
| Performance | RSUs | Revenue | Target | Target | integer as used | |||||||||
| Target | Target Tranche | Target | Floor | Ceiling | in § 4(e) | |||||||||
T1
|
100,000 | [*] | [*] | [*] | 4.0 | |||||||||
T2
|
100,000 | [*] | 09B - 5% | 09B + 1% | 6.0 | |||||||||
T3
|
100,000 | [*] | 09B - 5% | 09B + 1% | 6.0 | |||||||||
T4
|
100,000 | [*] | 09B - 5% | 09B + 1% | 6.0 | |||||||||
Subject to the authority and responsibility of the Company’s audit committee to review and approve
the Company’s financial statements, Cash Gross Margin means a) revenues less cost of sales, plus
stock based compensation for network related personnel, plus network depreciation, divided by b)
revenues, and expressed as a percentage.
Example: Assume: (i) the 09B Cash Gross Margin is [*]%, and accordingly the CGM Target Floor is
[*]% and the CGM Target Ceiling is [*]%; (ii) in the first fiscal quarter of 2009 the Company
achieves revenue of [*] with a Cash Gross Margin of [*]%; and (iii) that no Revenue Target was met
in the fourth fiscal quarter of 2008 (and thus no Performance RSUs have yet vested).
The result would be: (A) for Financial Quarterly Target T1, the Revenue Target of $[*] would be met
or exceeded and thus all of the Performance RSUs for the associated Target Tranche, 100,000 RSUs,
are eligible for vesting. The actual Cash Gross Margin equals or exceeds the CGM Ceiling associated
with the T1 Financial Quarterly Target (CGM Target Ceiling of [*]% v. actual CGM of [*]%), thus
100% of the Performance RSUs for the Target Tranche associated with the T1 Financial Quarterly
Target will be Vesting RSUs.
(B) For the Financial Quarterly Target T2, the Revenue Target of $[*] would be met or exceeded and
thus all the Performance RSUs for the associated Target Tranche, 100,000 RSUs, are eligible for
vesting. The total number of percentage points between the Cash Gross Margin Target Floor and
Target Ceiling for Financial Quarterly Target T2, expressed as an integer rounded to the nearest
1/10th is 6.0 ([*] minus [*]), and the total number of percentage points between the
Achieved CGM and the CGM Target Floor expressed as an integer and rounded to the nearest
| 1 | O9B means the Cash Gross Margin to be achieved by December 31, 2009 as shown in the Company’s 2009 Financial Plan as initially approved by the Board of Directors. | |
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Exhibit A
one-tenth (1/10th) is 4 ([*] minus [*]). The quotient of 4 divided by 6 is 0.6667, and is 66.7%
when expressed as a percentage rounded to the nearest 1/10th of one percent. Thus 66.7%
of the Performance RSUs for the Target Tranche associated with the T2 Financial Quarterly Target,
or 66,700 RSUs, will be Vesting RSUs.
Since no RSUs in either the T1 or T2 Target Tranches have previously vested, no RSUs are
subtracted. Thus, the total number of RSUs that become Vesting RSUs in this example is 166,700
Vesting RSUs. Per section 4(f) 50% of the Vesting RSUs will vest on the third business day
following the release of earnings for the applicable fiscal quarter, and 50% on the one year
anniversary thereof provided the Executive continues to be a Service Provider through each vesting
date. The 33,300 RSUs associated with Financial Quarter Target T2 that did not become Vesting RSUs
will remain available to be earned in future fiscal quarters during the Vesting Window if the
financial targets for doing so are met in one of those fiscal quarters.
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