UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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): September 18, 2015

 

 

Endurance International Group Holdings, Inc.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   001- 36131   46-3044956

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

10 Corporate Drive, Suite 300

Burlington, MA

  01803
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (781) 852-3200

(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 (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


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

On September 18, 2015, the Board of Directors (the “ Board ”) and the Compensation Committee of the Board (the “ Committee ”) of Endurance International Group Holdings, Inc. (“ Endurance ” or the “ Company ”) approved the grant of a performance-based restricted stock award (the “ Performance-Based Restricted Stock Award ”) to Hari Ravichandran, the Company’s Chief Executive Officer. In connection with the Performance-Based Restricted Stock Award, and in order to better align Mr. Ravichandran’s compensation with corporate performance, Mr. Ravichandran and the Company have amended his employment agreement with the Company to reduce his base salary from $750,000 to $200,000 and to reduce his annual cash bonus with respect to calendar years 2015, 2016 and 2017 to zero unless otherwise determined by the Board or the Committee.

The Performance-Based Restricted Stock Award provides an opportunity for Mr. Ravichandran to earn a fully vested right to up to 3,693,754 shares of Endurance common stock (collectively, the “ Award Shares ”) over a three year period beginning on July 1, 2015 and ending on June 30, 2018 (the “ Performance Period ”). Award Shares may be earned based on the Company achieving pre-established threshold, target and maximum levels of free cash flow per share, which is defined in the award agreement as Unlevered Free Cash Flow (as reported), as defined in the Company’s Form 8-K filed on August 4, 2015, less interest paid, divided by the number of outstanding shares of Endurance common stock (excluding the Award Shares) at the end of the applicable Performance Quarter or Performance Year, each as defined below.

Award Shares may be earned during each calendar quarter during the Performance Period (each, a “ Performance Quarter ”) if Endurance achieves a threshold, target or maximum level of free cash flow per share for the Performance Quarter. If free cash flow per share is less than the threshold level for a Performance Quarter, no Award Shares will be earned during that Performance Quarter. Award Shares that were not earned during a Performance Quarter may be earned later during the then current twelve month period from July 1 st to June 30 th during the Performance Period (each, a “ Performance Year ”) at a threshold, target or maximum level of free cash flow per share for the Performance Year.

Only one-third of the Award Shares are generally eligible to be earned in any Performance Year while Mr. Ravichandran is employed by the Company. In order to account for the potential concentration of growth capital expenditures in a particular Performance Year, in certain instances free cash flow per share that exceeds the threshold level for a later Performance Year (in the event that the threshold level for the immediately preceding Performance Year was not met) or that exceeds the maximum level for a later Performance Year can be applied to earn Award Shares that were not earned in the immediately preceding Performance Year. However, free cash flow per share may not be applied to more than one Performance Year.

If free cash flow per share for the Performance Period is at the target level throughout the entire Performance Period, Mr. Ravichandran would earn 2,350,571 of the Award Shares for the Performance Period. If free cash flow per share is above the threshold level but below the target level for the Performance Period, he would earn fewer Award Shares, and if it is above the target level for the Performance Period, he would earn up to the maximum number of the Award Shares. The award structure is specifically designed to incentivize performance in excess of the target level by accelerating the number of Award Shares Mr. Ravichandran would receive for results above target. The Board and the Committee believe that achieving target level performance over the Performance Period would represent meaningful free cash flow per share growth from current levels and would create significant shareholder value, and that achieving the maximum level would represent exceptional performance.

If there is a Change in Control (as defined in Mr. Ravichandran’s employment agreement) while Mr. Ravichandran is employed by the Company or Mr. Ravichandran’s employment is terminated due to death or disability (as defined in Mr. Ravichandran’s employment agreement) during a given Performance Quarter, Mr. Ravichandran will be entitled to any Award Shares earned for previous Performance Quarters, together with a number of Award Shares equal to the target level of Award Shares for that Performance Quarter and for any additional remaining Performance Quarters during the Performance Period.


If the Company terminates Mr. Ravichandran’s employment without cause or he resigns for good reason (as such terms are defined in his employment agreement), Mr. Ravichandran will be entitled to any Award Shares earned for previous Performance Quarters, together with the number of Award Shares that are earned for the Performance Quarter in which his employment ends (but no less than the target number of Award Shares for such Performance Quarter).

Except as described above, Mr. Ravichandran must be employed at the end of the Performance Period (June 30, 2018) in order to become vested in any Award Shares that have been earned under the Performance-Based Restricted Stock Award. Award Shares that have been earned based on free cash flow per share performance as described above will be forfeited if, prior to a Change in Control, Mr. Ravichandran resigns without good reason or his employment is terminated by the Company for cause before the end of the Performance Period.

The amendment to the employment agreement reduces Mr. Ravichandran’s rate of annual base salary to $200,000 per annum effective as of October 1, 2015 and reduces his annual cash bonus with respect to calendar years 2015, 2016 and 2017 to zero unless otherwise determined by the Board or the Committee. Mr. Ravichandran’s base salary will be reviewed for increase no later than the end of the Performance Period.

The Board and the Committee determined to grant the Performance-Based Restricted Stock Award at this time based on their assessment of the importance of retaining and motivating Mr. Ravichandran, whose leadership is valued by the Board, the Committee, employees, investors and business partners, and his contributions to the Company since its initial public offering in 2013. In determining the appropriateness of granting the Performance-Based Restricted Stock Award, the Board and the Committee received relevant information and benchmarking data from the Committee’s independent compensation consultant. The Board and the Committee believe it is in the best interests of stockholders to retain Mr. Ravichandran and keep him engaged and motivated and that making this award at this time achieves this purpose. Further, the Board and the Committee believe that making the vast majority of Mr. Ravichandran’s compensation both performance-based and in the form of restricted stock (as opposed to cash) better aligns Mr. Ravichandran’s interest with those of other stockholders.

The foregoing description of the Performance-Based Restricted Stock Award and the amendment to Mr. Ravichandran’s employment agreement is qualified in its entirety by reference to the form of award agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K, and the employment agreement amendment, which is filed as Exhibit 10.2 to this Current Report on Form 8-K, each of which is incorporated by reference.

 

Item 9.01. Financial Statements and Exhibits

 

(d) Exhibits

 

10.1    Performance-Based Restricted Stock Award dated September 18, 2015.
10.2    Second Amendment to Employment Agreement, dated September 18, 2015, by and between Endurance International Group Holdings, Inc. and Hari Ravichandran.


SIGNATURE

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.

 

    ENDURANCE INTERNATIONAL GROUP HOLDINGS, INC.
Date: September 21, 2015     /s/ David C. Bryson
    (Signature)
   

Name: David C. Bryson

Title: Chief Legal Officer

Exhibit 10.1

ENDURANCE INTERNATIONAL GROUP HOLDINGS, INC.

Performance-Based Restricted Stock Agreement

This Restricted Stock Agreement (this “ Agreement ”) is made as of the Agreement Date between Endurance International Group Holdings, Inc. and the Recipient.

NOTICE OF GRANT

 

I. Agreement Date

 

Date:    September 18, 2015

 

II. Recipient Information

 

Recipient:    Hari Ravichandran

 

III. Grant Information

 

Number of Award Shares    3,693,754 Shares

 

IV. Earned Shares

 

Earned Shares    Award Shares earned under Exhibit C – Performance Goals

 

V. Scheduled Vesting Date

 

Vesting Date    June 30, 2018

This Agreement includes this Notice of Grant and the following Exhibits, which are expressly incorporated by reference in their entirety herein:

Exhibit A – General Terms and Conditions

Exhibit B – Definitions

Exhibit C – Performance Goals

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Agreement Date.

 

ENDURANCE INTERNATIONAL GROUP HOLDINGS, INC.

 

/s/ David C. Bryson

Name: David C. Bryson

Title: Chief Legal Officer

 

RECIPIENT

 

/s/ Hari Ravichandran

Name: Hari Ravichandran


Restricted Stock Agreement

EXHIBIT A

GENERAL TERMS AND CONDITIONS

The terms and conditions of the Award Shares granted as Restricted Stock as set forth on the cover page of this Agreement are as follows. This Performance-Based Restricted Stock Agreement shall be granted under and subject to the terms and conditions of the 2013 Stock Incentive Plan (the “ Plan ”), provided that, to the extent that there is an inconsistency between the Plan and this Agreement, the Plan shall prevail.

1. Award of Restricted Stock .

(a) The Company hereby grants to the Recipient, effective as of the Agreement Date (as set forth on the Notice of Grant), an Award of Restricted Stock for the number of Shares set forth on the Notice of Grant (the “Award Shares”), on the terms and conditions set forth in this Agreement and the Plan.

(b) The Recipient agrees that the Award Shares of Restricted Stock shall be subject to the forfeiture provisions set forth in Section 3 of this Agreement and the restrictions on transfer set forth in Section 4 of this Agreement

2. Earned Shares; Vesting .

(a) The Recipient shall earn a non-forfeitable right to Award Shares as provided in this Section 2. Except as provided below under Section 2(b), 2(c), 2(d) or 2(e) below, the Recipient shall only have a non-forfeitable right to Award Shares to the extent that (i) the Award Shares have become Earned Shares by meeting one or more performance goals set forth in Exhibit C – Performance Goals and (ii) the Recipient is employed by the Company on the Vesting Date. An Award Share that the Recipient has earned a non-forfeitable right to under any provision of this Section 2 is hereinafter referred to as a “Vested Earned Share”.

(b) If the Recipient’s employment with the Company is terminated due to death or Disability during the Performance Period, then the number of Award Shares that become Earned Shares shall equal (i) the number of Earned Shares as determined under Exhibit C – Performance Goals with respect to the Performance Quarters completed prior to such termination of employment plus (ii) the target number of Award Shares eligible to be earned for the Performance Quarter in which such employment termination occurs and any remaining Performance Quarters in the Performance Period.

(c) If the Recipient’s employment is terminated by the Company without Cause or by the Recipient for Good Reason during the Performance Period, the number of Award Shares that become Earned Shares shall be equal to (i) the number of Earned Shares as determined under Exhibit C – Performance Goals with respect to the Performance Quarters completed prior to such termination of employment plus (ii) the greater of: (A) the target number of Award Shares eligible to be earned for the Performance Quarter in which such employment termination occurs and (B) the number of Award Shares that would have been earned for the


Performance Quarter in which such employment termination occurs based on actual performance as determined under Exhibit C – Performance Goals as if the Recipient had remained employment with the Company through the end of such Performance Quarter.

(d) If the Recipient is employed by the Company upon a Change in Control that occurs during the Performance Period, the number of Award Shares that become Earned Shares shall equal the sum of (i) the number of Earned Shares as determined under Exhibit C – Performance Goals with respect to the Performance Quarters completed prior to the quarter in which the Change in Control occurs, plus (ii) the target number of Award Shares eligible to be earned for the Performance Quarter in which the Change in Control occurs and any remaining Performance Quarters during the Performance Period.

(e) The requirement for the Recipient to be employed by the Company on the Vesting Date is waived if (i) the Recipient’s employment is terminated by the Company due to death or Disability, (ii) the Company terminates the Recipient’s employment without Cause, (iii) the Recipient terminates employment with the Company for Good Reason or (iv) the Recipient is employed by the Company on the date of a Change in Control; such that, any Award Shares that become Earned Shares pursuant to this Section 2 in the event of the Recipient’s death or Disability, upon the termination of his employment without Cause or for Good Reason or upon a Change in Control, shall immediately, upon the occurrence of such event, become Vested Earned Shares.

(f) For purposes of this Agreement, the Recipient does not terminate employment unless he terminates employment with the Company (as such term is defined in the Plan) and the employment with the Company shall include any employment of the Recipient as Executive Chairman of the Board of Directors of Endurance International Group Holdings, Inc.

3. Forfeiture

Except as provided below in this Section 3, Award Shares that have not become Vested Earned Shares under Section 2 above upon the Recipient’s termination of employment during the Performance Period shall be forfeited immediately and automatically to the Company. In addition, an Award Share that has not become a Vested Earned Share as of the end of the Performance Period or, if earlier, a Change in Control (after applying Section 2(d) above), shall be forfeited immediately and automatically to the Company. Any Award Shares that are forfeited under this Section 3 shall revert to the Company without payment of any consideration to the Recipient, effective as of such event that results in the forfeiture. The Recipient shall have no further rights with respect to any forfeited Award Shares. Notwithstanding the foregoing, in the event of the termination of Recipient’s employment without Cause or for Good Reason, the Award Shares that have not become Vested Earned Shares upon such termination shall not be forfeited immediately and automatically to the Company upon such termination but shall remain outstanding until actual performance as determined under Exhibit C – Performance Goals for the Performance Quarter in which such termination occurs can be determined as required under Section 2(c) above.


4. Restrictions on Transfer . The Recipient shall not sell, assign, transfer, pledge, hypothecate or otherwise encumber, by operation of law or otherwise an Award Share or any interest therein until it has become a Vested Earned Share.

5. Issuance and Custody of Certificates .

(a) The Company shall cause Award Shares to be issued in the Recipient’s name in such a manner as the Committee, in its sole discretion, deems appropriate, including by book-entry or direct registration (including transaction advices) or the issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Secretary of the Company or a custodian designated by the Secretary for the Recipient’s benefit until such time as the Award Shares are forfeited to the Company or the restrictions applicable to the Award Shares lapse (i.e., an Award Share becomes a Vested Earned Share). The Award Shares shall be restricted from transfer and shall be subject to an appropriate stop-transfer order. If any certificate is issued, the certificate shall bear a legend that complies with applicable law and makes appropriate reference to the restrictions applicable to the Award Shares. To the extent that ownership of the Award Shares is evidenced by a book-entry registration or direct registration (including transaction advices), such registration shall be notated to evidence the restrictions imposed on such Award Shares.

(b) After any Award Shares become Vested Earned Shares, and following payment of the applicable withholding taxes pursuant to Section 7 hereof, the Company shall promptly cause such Vested Earned Shares (less any shares withheld to pay taxes), free of the restrictions and/or legend described in this Section 5, to be in the form of a certificate or certificates evidencing ownership of such Shares, registered in the Recipient’s name or in the name of the Recipient’s beneficiary or estate, as the case may be.

6. Distributions and Adjustments .

(a) If any Award Shares vest subsequent to any change in the number or character of the shares of Common Stock (through any stock dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger consolidation, split-up, spin-off, combination, repurchase or exchange of shares or otherwise) occurring after the Agreement Date, the Recipient shall then receive upon such vesting the number and type of securities or other consideration which the Recipient would have received if such Award Shares had been Vested Earned Shares prior to the event changing the number or character of the outstanding shares of Common Stock.

(b) Any additional shares of Common Stock, any other securities of the Company and any other property (except for cash dividends or other cash distributions) distributed with respect to the Award Shares prior to the date or dates the Award Shares became Vested Earned Shares shall be subject to the same restrictions, terms and conditions as the Award Shares to which they relate and shall be promptly deposited with the Secretary of the Company or a custodian designated by the Secretary. To the extent that the Award Shares are forfeited under Section 3 above, prior to vesting, the right to receive such distributions shall also be forfeited.


(c) Any cash dividends or other cash distributions payable with respect to the Award Shares prior to becoming Vested Earned Shares shall be reinvested in shares of Common Stock, which shall be subject to the same restrictions, terms and conditions as the Award Shares to which they relate and shall be promptly deposited with the Secretary of the Company or a custodian designated by the Secretary. To the extent that the Award Shares are forfeited prior to becoming Vested Earned Shares, the right to receive such Award Shares shall also be forfeited. After Award Shares become Vested Earned Shares, any subsequent cash dividends or other cash distributions payable in respect of those Vested Earned Shares shall be distributed to the Recipient at the same time cash dividends or other cash distributions are distributed to shareholders of the Company generally.

7. Tax Matters .

(a) Acknowledgements . The Recipient acknowledges that he is responsible for obtaining the advice of his own tax advisors with respect to the Award Shares and is relying solely on such advisors and not on any statements or representations of the Company or any of its agents with respect to the tax consequences relating to the Award Shares. The Recipient understands that the Recipient (and not the Company) shall be responsible for the Recipient’s tax liability that may arise in connection with the acquisition, vesting and/or disposition of the Award Shares.

(b) Withholding . The Recipient may satisfy any applicable tax withholding obligation arising for Award Shares becoming Vested Earned Shares by one of the following methods, with the specific method to be selected by the Company after consultation with the Recipient: (i) delivering cash (including check, draft, money order or wire transfer made payable to the order of the Company, (ii) having the Company withhold a portion of the Vested Earned Shares or cash otherwise to be delivered having a Fair Market Value equal to the amount of such taxes, or (iii) delivering to the Company shares of Common Stock having a Fair Market Value equal to the amount of such taxes. The Recipient acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Recipient the amount of any withholding taxes required to be withheld with respect to any Award Share that become a Vested Earned Share in any manner permitted by the Plan.

8. Miscellaneous .

(a) Authority of Board . In making any decisions or taking any actions with respect to the matters covered by this Agreement, the Board of Directors (the “ Board ”) or any one or more of the committees or subcommittees of the Board to which the Board delegates its powers in accordance with the terms of the Plan shall have all of the authority and discretion, and shall be subject to all of the protections, provided for in the Plan. All decisions and actions by the Board or any one or more of its committees or subcommittees to which its powers have been delegated with respect to this Agreement shall be made in its discretion and shall be final and binding on the Recipient.

(b) No Right to Continued Service . The Recipient acknowledges and agrees that, notwithstanding the fact that the vesting of the Award Shares is contingent upon continued employment with the Company (except as otherwise provided in this Agreement), this Agreement does not constitute an express or implied promise of continued service or confer upon the Recipient any rights with respect to continued service by the Company.


(c) Governing Law . This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware, without regard to any applicable conflicts of law provisions.

(d) Recipient’s Acknowledgments . The Recipient acknowledges that he or she has read this Agreement, has received and read the Plan, and understands the terms and conditions of this Agreement and the Plan.


EXHIBIT B

DEFINITIONS

Any capitalized term not defined in this Exhibit B shall have the same meaning as is ascribed thereto in the Plan.

Award Shares ” shall have the meaning set forth on the Notice of Grant to this Agreement.

Cause ” shall have the meaning set forth in the Employment Agreement.

Change in Control Event ” shall have the meaning set forth in the Employment Agreement.

Disability ” shall have the meaning set forth in the Employment Agreement.

Earned Shares ” shall be the number of Award Shares that have become earned during the Performance Period.

Employment Agreement ” means the employment agreement between the Company and Recipient dated September 30, 2013, as may be amended from time to time.

Good Reason ” shall have the meaning set forth in the Employment Agreement.

Performance Period ” shall mean July 1, 2015 to June 30, 2018.

Performance Quarter ” shall any calendar quarter within the Performance Period.

Performance Year ” shall mean each 12-month period ending June 30, 2016, June 30, 2017 and June 30, 2018.

Vested Earned Shares ” shall have the meaning set forth in Section 2(a) of this Agreement.


EXHIBIT C

 

[Intentionally Omitted]

Exhibit 10.2

AMENDMENT NO. 2

TO

RAVICHANDRAN EMPLOYMENT AGREEMENT

This Amendment No. 2 (this “ Amendment ”), dated as of September 18, 2015, is made by and between Endurance International Group Holdings, Inc., a Delaware corporation (the “ Company ”), and Hari Ravichandran (the “ Executive ”).

WHEREAS, the Company and the Executive are parties to an employment agreement dated as of September 30, 2013, as amended on October 11, 2013, (the “ Employment Agreement ”);

WHEREAS , the Company and the Executive desire to amend the Employment Agreement; and

WHEREAS , the Employment Agreement may be amended by written consent of the Company and the Executive.

NOW, THEREFORE, in consideration of the promises and mutual agreements herein contained and the Company’s grant of a Performance-Based Restricted Stock Award to the Executive, the Company and the Executive hereby agree as follows:

 

  1. Section 4 of the Employment Agreement is replaced in its entirety with the following effective as of October 1, 2015:

Base Salary . During the Term of Employment, the Executive shall be paid an annualized gross Base Salary, payable in accordance with the regular payroll practices of the Company of $200,000. The Base Salary shall be reviewed for increase (but not decrease) in the sole discretion of the Board not later than June 30, 2018, and annually thereafter.”

 

  2. Section 5(b) of the Employment Agreement is replaced in its entirety with the following effective as of October 1, 2015:

Discretionary Annual Bonus . With respect to the 2015, 2016 and 2017 calendar years, the Executive shall not be eligible for an Annual Bonus. Whether or not the Executive shall receive an Annual Bonus shall be determined in the sole discretion of the Board or its compensation committee. The Executive shall be considered for a discretionary bonus for the 2018 calendar year and annually thereafter.”

 

  3. Section 9(d)(ii) of the Employment Agreement is replaced in its entirety with the following:

“(ii) a material decrease in the Executive’s Base Salary; or”


  4. Section 11(a)(iii) is deleted in its entirety, the word “and” is added after Section 11(a)(ii) and Section 11(a)(iv) is renumbered Section 11(a)(iii).

 

  5. Section 11(c)(i)(C)(2) of the Employment Agreement is replaced in its entirety with the following:

“(2) payment of two (2) times the prior year’s Annual Bonus payable over a period of twenty-four (24) months following the Termination Date in accordance with the Company’s usual and customary payroll practices,”

 

  6. The Executive agrees that the reduction of his Base Salary and Annual Bonus does not constitute Good Reason under the Employment Agreement.

 

  7. Except as provided herein, all other terms and conditions in the Employment Agreement remain in full force and effect.

IN WITNESS WHEREOF , the Company has caused this Amendment to be executed by its duly authorized officer and Executive has executed this Amendment, each as of the day and year first above written.

 

ENDURANCE INTERNATIONAL GROUP HOLDINGS, INC.
By:   /s/ David C. Bryson

Name:

Title:

 

David C. Bryson

Chief Legal Officer

 

/s/ Hari Ravichandran

  Hari Ravichandran