**Exhibit 10.4**

 

EARTHLINK, INC.2006 EQUITY AND CASH INCENTIVE PLAN

 

Restricted Stock Unit Agreement

 

No. of Restricted Stock

Units Awarded Hereunder:  400,000

 

THIS RESTRICTED STOCK UNITAGREEMENT (this “Agreement”) dated as of the 8th day of February, 2008, betweenEarthLink, Inc., a Delaware corporation (the “Company”), and Rolla P. Huff(the “Participant”) is made pursuant and subject to the provisions of theCompany’s 2006 Equity and Cash Incentive Plan (the “Plan”), a copy of which isattached hereto.  All terms used hereinthat are defined in the Plan have the same meaning given them in the Plan,except that the term “Change in Control Event” shall have the meaning given itin the Employment Agreement dated June 25, 2007 between the Participantand the Company (the “Employment Agreement”).

 

# 1.                                       Grant of Restricted Stock Units.  Pursuantto the Plan, the Company, on February 8, 2008 (the “Date of Grant”),granted to the Participant Four Hundred Thousand (400,000) restricted stockunits (the “Restricted Stock Units”), each Restricted Stock Unit correspondingto one share of the Common Stock of the Company (this “Award”).  Subject to the terms and conditions of thePlan, each Restricted Stock Unit represents an unsecured promise of the Companyto deliver, and the right of the Participant to receive, one share of theCommon Stock of the Company at the time and on the terms and conditions setforth herein.  As a holder of RestrictedStock Units, the Participant has only the rights of a general unsecuredcreditor of the Company.

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# 2.                                       Terms and Conditions.  ThisAward is subject to the following terms and conditions:

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## (a)                            ExpirationDate.  This Award shall expire at11:59 p.m. on February 8, 2018 (the “Expiration Date”).  In no event shall the Expiration Date be laterthan 10 years from the Date of Grant.

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## (b)                           Vestingof Award.

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### (i)                                     InGeneral.  The Restricted Stock Unitsshall be considered “Performance-Based” and shall become eligible to be earnedand payable with respect to that number of the Restricted Stock Units thatcorrelates to the level of Free CashFlow of the Company achieved during the calendar year 2008, as theCommittee in its sole discretion shall establish and set forth on the attached Exhibit A,provided there is not a Change in Control Event during 2008.  Notwithstanding the foregoing, if at any timeduring 2008 there is a Change in Control Event, then the outstanding RestrictedStock Units shall become eligible to be earned and payable based on actualperformance from the beginning of 2008 through the date of the Change inControl Event (annualized based on the portion of 2008 preceding the Change inControl Event).  More specifically,assessment of actual performance shall be determined in the following manner:  the number of Restricted Stock Units thatshall become eligible to be earned 

 

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### and payable shall equal the aggregate numberof Restricted Stock Units set forth on Exhibit A****multiplied by a fraction, the numerator ofwhich is the level of Free Cash Flow ofthe Company achieved during 2008 through the date of the Change inControl Event (annualized based on the portion of 2008 preceding the Change inControl Event) and the denominator of which is the level of Free Cash Flow of the Company that theCommittee set forth on the attached Exhibit A for 2008.  The outstanding Restricted Stock Units thatbecome eligible to be earned and payable under either of the precedingsentences shall then become earned and payable as to fifty percent (50%) ofsuch eligible Restricted Stock Units on each of the second and thirdanniversaries of the Date of Grant, provided the Participant has beencontinuously employed by, or providing services to, the Company or an Affiliatefrom the Date of Grant until each such anniversary of the Date of Grant.

 

For purposes of this Award, (A) “EBITDA”means earnings before interest, taxes, depreciation and amortization; (B) “AdjustedEBITDA” means EBITDA excluding facility exit and restructuring costs, equitymethod loss of affiliates, and gain (loss) on investments in other companies;and (C) “Free Cash Flow” means Adjusted EBITDA less capital expendituresand cash used to purchase customer bases (as more specifically set forth on Exhibit A).  In determining if the level of Free Cash Flow of the Company has beenachieved, the performance targets shall be adjusted in the event of anyunbudgeted acquisition, divestiture or other unexpected fundamental change inthe business of the Company that is material taken as whole, as appropriate tofairly and equitably determine the Restricted Stock Units to become eligible tobe earned and payable so as to preclude the enlargement or dilution of theParticipant’s rights hereunder.

 

Notwithstanding any otherprovision of this Agreement, none of the Performance-Based Restricted StockUnits shall be eligible to become earned and payable if the actual performancefor 2008 (or the annualized actual performance for the period through theChange in Control Event) does not at least equal the minimum threshold targetsset forth on the attached Exhibit A.

 

### (ii)                                  Terminationof Employment After a Change in Control Event.  Notwithstanding the foregoing, if inconnection with a Change in Control Event the Participant’s employment isterminated by the Company or an Affiliate for any reason other than Cause andother than on account of “Total Disability” (as such term is defined in theEmployment Agreement) or death or is terminated by the Participant for “GoodReason” (as such term is defined in the Employment Agreement), then, theaggregate number of the Restricted Stock Units described in Section 2(b)(i) abovethat are eligible to become earned and payable shall become earned and payablein full on termination of the Participant’s employment.  For purposes of this Section 2(b)(ii), atermination of employment will be deemed to be in connection with a Change inControl Event if it occurs on or after the Change in Control Event or duringthe three-month period immediately preceding the Change in Control Event.

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### (iii)                               Terminationof Employment before a Change in Control Event.  Notwithstanding the foregoing, if at any timebefore a Change in Control Event but after the end of 2008 the Participant’semployment is terminated by the Company for any reason other than Cause andother than on account of Total Disability or death or is terminated by theParticipant for Good Reason, then, to the extent not vested previously, theaggregate number of outstanding Restricted Stock Units shall become earned andpayable in full on termination of the 

 

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### Participant’s employment with respect to thatnumber of the Restricted Stock Units that correlates to the level of Free Cash Flow of the Company that is achieved during 2008.  Notwithstanding the foregoing, except to theextent provided by the last sentence of Section 2(b)(ii) above, if at anytime before a Change in Control Event and during 2008 the Participant’semployment is terminated by the Company or an Affiliate for any reason otherthan Cause and other than on account of Total Disability or death or isterminated by the Participant for Good Reason, then none of the outstandingRestricted Stock Units shall become earned and payable on termination of theParticipant’s employment unless the following sentence applies.  If the Participant’s employment is terminatedfor any reason other than Cause and other than on account of Total Disabilityor death or is terminated by the Participant for Good Reason during 2008 and aChange in Control Event occurs thereafter and before the end of 2008, then theaggregate number of the outstanding Restricted Stock Units that would havebecome eligible to be earned and payable as a result of the Change in ControlEvent, assuming the Participant had remained employed by, or providing servicesto, the Company or an Affiliate from the Date of Grant until the Change inControl Event, shall become earned and payable in full on the date of theChange in Control Event.  Except to theextent provided by the last sentence of Section 2(b)(ii) above, ifthe Participant’s employment is terminated for any reason other than Cause andother than on account of Total Disability or death or is terminated by theParticipant for Good Reason during 2008 and a Change in Control Event occursafter the end of 2008, then none of the outstanding Restricted Stock Units shallbecome earned and payable.

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### (iv)                              VestingDate.  Outstanding Restricted StockUnits shall be forfeitable until they become earned and payable as describedabove.  Each date upon which RestrictedStock Units become earned and payable shall be referred to as a “Vesting Date”with respect to such number of Restricted Stock Units.

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## (c)                            Settlementof Award.  Subject to the terms ofthis Section 2 and Section 3 below, and except to the extent theParticipant defers receipt of such shares of Common Stock pursuant to Section 8below, the Company shall issue to the Participant one share of Common Stock foreach Restricted Stock Unit that has become earned and payable under Section 2(b) aboveand shall deliver to the Participant certificates representing such shares assoon as practicable after (and within thirty (30) days of) the respectiveVesting Date.  As a condition to thesettlement of the Award, the Participant shall be required to pay any requiredwithholding taxes attributable to the Award in cash or cash equivalentacceptable to the Committee.  However,the Company in its discretion may, but is not required to, allow theParticipant to satisfy any such applicable withholding taxes (i) byallowing the Participant to surrender shares of Common Stock that the Participantalready owns (but only for the minimum required withholding), (ii) througha cashless transaction through a broker, (iii) by such other medium ofpayment as the Committee shall authorize or (iv) by any combination of theallowable methods of payment set forth herein.

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# 3.                                       Termination of Award. Notwithstanding any other provision of this Agreement, outstandingRestricted Stock Units that have not become earned and payable prior to theExpiration Date shall expire and may not become earned and payable after suchtime.  Additionally, any Restricted StockUnits that have not become earned and payable on or before the termination ofthe Participant’s employment with the Company and any Affiliate shall expireand may not become earned and payable after such time, except as described in Section 2(b)(iii) above.

 

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# 4.                                       Shareholder Rights.  Except asset forth in Section 6 below, the Participant shall not have any rights asa shareholder with respect to shares of Common Stock subject to any RestrictedStock Units until issuance of the certificates representing such shares ofCommon Stock.  The Company may include onany certificates representing shares of Common Stock issued pursuant to thisAward such legends referring to any representations, restrictions or any otherapplicable statements as the Company, in its discretion, shall deemappropriate.

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# 5.                                       Transferability.  Except as provided herein, thisAward is nontransferable except by will or the laws of descent anddistribution.  If this Award istransferred by will or the laws of descent and distribution, the Award must betransferred in its entirety to the same person or persons or entity orentities.  Notwithstanding the foregoing,the Participant, at any time prior to the Participant’s death, may transfer allor any portion of this Award to the Participant’s children, grandchildren,spouse, one or more trusts for the benefit of such family members or apartnership in which such family members are the only partners, on such termsand conditions as are appropriate for such transferees to be included in theclass of transferees who may rely on a Form S-8 registration statementunder the Securities Act of 1933 to sell shares received pursuant to theAward.  Any such transfer will bepermitted only if (i) the Participant does not receive any considerationfor the transfer and (ii) the Committee expressly approves thetransfer.  Any transferee to whom thisAward is transferred shall be bound by the same terms and conditions thatgoverned the Award during the time it was held by the Participant (which termsand conditions shall still be read from the perspective of the Participant);provided, however, that such transferee may not transfer the Award except thanby will or the laws of descent and distribution.  Any such transfer shall be evidenced by anappropriate written document that the Participant executes and the Participantshall deliver a copy thereof to the Committee on or before the effective dateof the transfer.  No right or interest ofthe Participant or any transferee in this Award shall be liable for, or subjectto, any lien, liability or obligation of the Participant or transferee.

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# 6.                                       Cash Dividends.  For so long as the Participantholds outstanding Restricted Stock Units under this Award, if the Company paysany cash dividends on its Common Stock, then the Company will pay theParticipant in cash for each outstanding Restricted Stock Unit covered by thisAward as of the record date for such dividend, less any required withholdingtaxes, the per share amount of such dividend that the Participant would havereceived had the Participant owned the underlying shares of Common Stock as ofthe record date of the dividend if, and only if, the Restricted Stock Unitsbecome earned and payable and the related shares of Common Stock are issued tothe Participant.  In that case, theCompany shall pay such cash amounts to the Participant, less any requiredwithholding taxes, at the same time the related shares of Common Stock aredelivered.  The additional payments pursuantto this Section 6 shall be treated as a separate arrangement.

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# 7.                                       Change in Capital Structure.  The termsof this Award shall be adjusted in accordance with the terms and conditions ofthe Plan as the Committee determines is equitably required in the event theCompany effects one or more stock dividends, stock splits, subdivisions orconsolidations of shares or other similar changes in capitalization.

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# 8.                                       Deferral of Common Stock.  If theParticipant is eligible to participate in the Deferred Compensation Program,then the Participant may elect to defer the receipt of Common 

 

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# Stock issuable pursuant to thisAward in accordance with rules the Committee prescribes for the DeferredCompensation Program.  If the Participantelects to defer the receipt of Common Stock hereunder, the shares of CommonStock shall be deferred and credited under the Deferred Compensation Programand shall become payable and issuable pursuant to the terms and at such time ortimes as set forth in the Deferred Compensation Program, but will be paid, ifat all, only in shares of Common Stock. None of the cash dividends that a Participant is eligible to receivepursuant hereto may be deferred or credited under the Deferred Compensation Program.

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# 9.                                       Notice.  Any notice or other communicationgiven pursuant to this Agreement, or in any way with respect to the Award,shall be in writing and shall be personally delivered or mailed by UnitedStates registered or certified mail, postage prepaid, return receipt requested,to the following addresses:

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If to the Company:                                                                                             EarthLink, Inc.1375 Peachtree Street - Level A Atlanta, Georgia 30309Attention:  General Counsel

 

If to the Participant:                                                                                       RollaP. Huff14 Moraine PointVictor, NY  14564

 

# 10.                                 No Right to Continued Employment or Service.  Neitherthe Plan, the granting of this Award nor any other action taken pursuant to thePlan or this Award constitutes or is evidence of any agreement orunderstanding, express or implied, that the Company or any Affiliate willretain the Participant as an employee or other service provider for any periodof time or at any particular rate of compensation.

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# 11.                                 Agreement to Terms of Plan and Agreement.  TheParticipant has received a copy of the Plan, has read and understands the termsof the Plan and this Agreement, and agrees to be bound by their terms andconditions.

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# 12.                                 Tax Consequences.  The Participant acknowledges that(i) there may be adverse tax consequences upon acquisition or dispositionof the shares of Common Stock issued pursuant to this Award or the receipt ofcash dividends hereunder and (ii) Participant should consult a tax adviserprior to such acquisition or disposition or receipt.  Except as provided in Section 18 below,the Participant is solely responsible for determining the tax consequences ofthe Award and for satisfying the Participant’s tax obligations with respect tothe Award.

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# 13.                                 Binding Effect.  Subject to the limitations statedabove and in the Plan, this Agreement shall be binding upon and inure to thebenefit of the distributees, legatees and personal representatives of theParticipant and the successors of the Company.

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# 14.                                 Conflicts.  In the event of any conflictbetween the provisions of the Plan and the provisions of this Agreement, theprovisions of the Plan shall govern.  Allreferences herein to the Plan shall mean the Plan as in effect on the datehereof.

 

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# 15.                                 Counterparts.  This Agreement may be executed ina number of counterparts, each of which shall be deemed an original, but all ofwhich together shall constitute one in the same instrument.

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# 16.                                 Miscellaneous.  The parties agree to execute suchfurther instruments and take such further actions as may be necessary to carryout the intent of the Plan and this Agreement. This Agreement and the Plan shall constitute the entire agreement of theparties with respect to the subject matter hereof.

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# 17.                                 Restrictive Covenants.

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## (a)                            In the event the Participant receives thespecial enhanced vesting set forth in Section 2(b)(iii) above, theParticipant agrees that during Participant’s employment, and for a period ofeighteen (18) calendar months following Participant’s termination ofemployment, that Participant will not, directly or indirectly, (i) solicit,induce, recruit, or cause a “restricted employee” to resign employment with theCompany or its Affiliates, or (ii) participate in making hiring decisions,encourage the hiring of, or aid in the hiring process of a “restricted employee”on behalf of any employer other than the Company and its Affiliates.  As used herein, “restricted employee” meansany employee of the Company or its Affiliates with whom the Participant hadmaterial business-related contact while performing services for the Company andits Affiliates and who is (x) a member of executive management, (y) acorporate officer of the Company or any of its Affiliates, or (z) anyemployee of the Company or any of its Affiliates engaged in product or servicedevelopment or product or service management.

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## (b)                           In the event the Participant receivesthe special enhanced vesting set forth in Section 2(b)(iii) above,the Participant also agrees that during the Participant’s employment, and for aperiod of eighteen (18) calendar months following termination of Participant’semployment, the Participant shall not perform within the fifty (50) states ofthe United States of America any services which are in competition with the “business”of the Company during Participant’s employment, or following Participant’stermination of employment, any services which are in competition with a “material”line of “business” engaged in by the Company at the time of Participant’stermination of employment which are the same as or similar to those servicesParticipant performed for the Company or any Affiliate; provided, however, thatif the other business competitive with the business the Company has multiplelines, divisions, segments, or units, some of which are not competitive withthe business of the Company, nothing herein shall prevent Participant frombeing employed by or providing services to such line, division, segment, orunit that is not competitive with the business of the Company.  For purposes of this Agreement, “material”means a line of business that represents 20% or more of the Company’sconsolidated revenues or adjusted EBITDA for the four fiscal quartersimmediately preceding the Participant’s termination of employment.  As used herein, “business” means the businessof providing integrated communication services and related value added servicesto individual customers and business customers.

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## (c)                            The enhanced vesting pursuant to Section 2(b)(iii) above(along with the related cash dividends under Section 6 above) areconditioned upon the Participant’s compliance with the provisions of this Section 17.  In the event the Participant shall materiallybreach the provisions of this Section 17 and not cure or cease (asappropriate) such material breach within 

 

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## ten (10) days of receiptof notice thereof from the Company, the vesting above shall terminate andParticipant shall return to the Company all of the shares of Common Stock andcash dividends received in connection therewith.  Termination of such vesting and paymentsshall not be the Company’s sole and exclusive remedy for a breach of this Section 17.  In addition, the Company shall be entitled todamages and injunctive relief to enforce this Section 17 in the event of abreach by the Participant.  Additionally,in the event the Participant materially breaches this provision, theParticipant shall be required to repay to the Company all amounts previouslypaid pursuant to Section 2(b)(iii) and the related cash dividendspaid pursuant to Section 6 above.

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# 18.                                 Section 409A.  Notwithstanding any other provision of thisAgreement, it is intended that payments hereunder will not be considereddeferred compensation within the meaning of Section 409A of the Code.  For purposes of this Agreement, all rights topayments hereunder shall be treated as rights to receive a series of separatepayments and benefits to the fullest extent allowed by Section 409A of theCode.  Payments hereunder are intended tosatisfy the exemption from Section 409A of the Code for “short-termdeferrals.”  To the extent that theParticipant incurs liability for excise taxes, penalties or interest under Section 409Aof the Code because this Agreement fails to comply with, or be exempt from, Section 409A,the Company will make a special reimbursement payment to the Participant equalto the sum of (i) the Participant’s liability for excise taxes, penaltiesor interest under Section 409A and (ii) all taxes attributable to thespecial reimbursement payment, such payment to be made on or before the timethe Participant is required to pay such taxes, penalties or interest.

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# 19.                                 Governing Law.  This Agreement shall be governed by the lawsof the State of Delaware, except to the extent federal law applies.

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INWITNESS WHEREOF, the Company has caused this Agreement to be signed by a dulyauthorized officer, and the Participant has affixed his signature hereto.

 
|   | COMPANY:        |
|--------|-----------------|
|   |            |
|   | EARTHLINK, INC. |
|   |            |
|   |            |
|   | By:             |   |
|   | Name:           | Kevin Dotts |
|   | Title:          | Chief Financial Officer |
|   |            |   |
|   |            |   |
|   | PARTICIPANT:    |
|   |            |   |
|   |            |
|   | Rolla P. Huff   |
|        |                 |  |  |  |

 

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