<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 27, 1999
REGISTRATION NO. 333-85679
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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AKAMAI TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7389 04-3432319
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
201 BROADWAY
CAMBRIDGE, MASSACHUSETTS 02139
(617) 250-3000
(ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT O. BALL III
VICE PRESIDENT AND GENERAL COUNSEL
AKAMAI TECHNOLOGIES, INC.
201 BROADWAY
CAMBRIDGE, MASSACHUSETTS 02139
(617) 250-3000
(NAME, ADDRESS INCLUDING ZIP CODE AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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<S> <C>
JOHN H. CHORY, ESQ. KEITH F. HIGGINS, ESQ.
SUSAN W. MURLEY, ESQ. DAVID B. WALEK, ESQ.
HALE AND DORR LLP ROPES & GRAY
60 STATE STREET ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02109 BOSTON, MASSACHUSETTS 02110
TELEPHONE: (617) 526-6000 TELEPHONE: (617) 951-7000
TELECOPY: (617) 526-5000 TELECOPY: (617) 951-7050
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
- ---------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
- ---------
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share...... 6,900,000 18 $124,200,000 $34,528
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</TABLE>
(1) Includes 900,000 shares of Common Stock that the underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933,
as amended.
(3) Includes $23,978.00 previously paid in connection with the initial filing of
this Registration Statement.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS (Subject to Completion)
Issued , 1999
6,000,000 Shares
[AKAMAI LOGO]
COMMON STOCK
------------------------
AKAMAI TECHNOLOGIES, INC. IS OFFERING 6,000,000 SHARES OF COMMON STOCK. THIS IS
OUR INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR
SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $16
AND $18 PER SHARE.
------------------------
WE HAVE APPLIED TO LIST OUR COMMON STOCK ON THE NASDAQ NATIONAL MARKET UNDER THE
SYMBOL "AKAM."
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 6.
------------------------
PRICE $ A SHARE
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS AKAMAI
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Per Share.................... $ $ $
Total........................ $ $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Akamai has granted the underwriters the right to purchase up to an additional
900,000 shares to cover over-allotments. Morgan Stanley & Co. Incorporated
expects to deliver the shares of common stock to purchasers on , 1999.
------------------------
MORGAN STANLEY DEAN WITTER
DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY
THOMAS WEISEL PARTNERS LLC
, 1999
<PAGE> 3
[GATEFOLD ARTWORK]
[Narrative description of graphic material omitted in electronically filed
document
The following text is at the top of the page and spans the front cover foldout:
AKAMAI's GLOBAL INTERNET CONTENT DELIVERY SERVICE
Web Users Receive Rich Content Faster and More Reliably, Even in Times of Peak
Demand
The following text appears on the left hand side of the inside front cover
foldout above the first graphic:
Internet Content Delivery Without FreeFlow Service
The left hand side of the inside front cover contains a graphic that consists
of a map of the United States with a Web user on the far right and a Web site on
the far left with routers, network access points, an exchange point and a local
internet service provider and arrows depicting the flow of information in the
center.
Below this graphic the following text appears:
Without FreeFlow Service
- Delivery of Rich content (such as graphics, advertisements and streaming
media) may be delayed or lost at numerous points across the Internet
- Content often is not delivered via optimal route
- Web site may not be designed to handle periods of peak demand
The following text appears on the right hand side of the inside front cover
above a second graphic:
Internet Content Delivery With FreeFlow Service.
The right hand side of the front cover contains a graphic that consists of a
map of the United States with a Web user on the far right and a Web site on the
far left with routers, network access points, an exchange point, a local
internet service provider and an Akamai server in the center. Arrows depict the
flow of information between the Web user and the local internet service provider
and between the local internet service provider and the Akamai server.
Below this graphic the following text appears:
With FreeFlow Service
- Speeds delivery of rich content by intelligently routing it from nearby
Akamai server
- Improves reliability of delivery and comes with Akamai's proof-of-performance
guarantee
- Always serves up-to-date content
- Handles periods of peak demand
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUMMARY..................... 3
RISK FACTORS........................... 6
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS........................... 16
USE OF PROCEEDS........................ 17
DIVIDEND POLICY........................ 17
CAPITALIZATION......................... 18
DILUTION............................... 19
SELECTED FINANCIAL DATA................ 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................... 21
</TABLE>
<TABLE>
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PAGE
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<S> <C>
BUSINESS............................... 25
MANAGEMENT............................. 37
RELATED PARTY TRANSACTIONS............. 42
PRINCIPAL STOCKHOLDERS................. 45
DESCRIPTION OF CAPITAL STOCK........... 47
SHARES ELIGIBLE FOR FUTURE SALE........ 49
UNDERWRITERS........................... 51
LEGAL MATTERS.......................... 52
EXPERTS................................ 53
WHERE YOU CAN FIND MORE INFORMATION.... 53
INDEX TO FINANCIAL STATEMENTS.......... F-1
</TABLE>
------------------------
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS THAT BUY, SELL OR TRADE THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2
<PAGE> 5
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information about Akamai and the common stock being sold in this offering and
our financial statements and accompanying notes appearing elsewhere in this
prospectus.
AKAMAI TECHNOLOGIES, INC.
We provide a global delivery service for Internet content that improves Web
site speed and reliability and protects against Web site crashes due to demand
overloads. Our FreeFlow service, which we market to large businesses and other
businesses with an Internet focus, delivers our customers' Web content through a
worldwide server network by locating the content geographically closer to their
users. Using software that is based on our proprietary mathematical formulas, or
algorithms, we monitor Internet traffic patterns and deliver our customers'
content by the most efficient route available. Our service is easy to implement
and does not require our customers or their Web site visitors to make any
hardware or software modifications. Using our FreeFlow service, our customers
have been able to more than double the speed at which they deliver content to
their users and, in some instances, have been able to improve speeds by ten
times or more.
The ability of a Web site to attract users is in part based on the richness
of its content. Increasingly, Web site owners want to enhance their content by
adding graphics, such as photographs, images and logos, as well as deploying
newer technologies, such as video and audio streaming, animation and software
downloads. While richer content attracts more visitors, it also places
increasing demands on the Web site to deliver the content quickly and reliably.
As a result, Web site owners frequently elect to constrain the amount of rich
content on their Web sites, thus sacrificing the quality of the user experience
to maintain minimally acceptable performance levels.
To use our service, customers identify and tag portions of their Web site
content that require significant amounts of bandwidth, such as advertising
banners, icons, graphics and software downloads. These tagged items are
delivered over our server network. When users request this content, which we
call "Akamaized" content, our FreeFlow service routes the request to the server
that is best able to deliver the content most quickly based on the geographic
proximity, performance and congestion of all available servers on our network.
Our technology originated from research that our founders began developing
at the Massachusetts Institute of Technology in 1995. We introduced our FreeFlow
service commercially in April 1999. As of July 31, 1999, we had 900 Akamai
servers deployed in 15 countries across 25 telecommunications networks,
providing our customers with a guaranteed global Internet content delivery
service. Our customers, which operate many highly trafficked Web sites, include
Apple Computer, CNN Interactive, Discovery Channel Online, Infoseek Corp., J.
Crew.com, The Motley Fool and Yahoo!.
We currently sell our service primarily through a direct sales force. Our
plan is to continue to pursue heavily trafficked Web sites through our direct
sales force and to penetrate other markets through indirect distribution
channels. Currently our sales force is actively targeting primarily domestic
companies, focusing on the 300 Web sites that have the greatest number of
visitors, Fortune 100 companies and other companies with large operations in the
United States.
RECENT DEVELOPMENTS
In August 1999 we entered into a strategic alliance with Cisco Systems to
enhance and jointly develop new content routing, switching and caching
technologies to improve the performance of Web content delivery. Cisco purchased
shares of our Series E convertible preferred stock for an aggregate purchase
price of approximately $49.0 million in August 1999.
In September 1999, we entered into a strategic alliance with Microsoft
Corporation to integrate Microsoft technologies into the Akamai network. As part
of the agreement, we intend to integrate Microsoft Windows Media(TM)
technologies with our global Internet content delivery service, and we will
create a version of our software to support our FreeFlow service that works on
Microsoft Windows Server operating systems. In addition, Microsoft's Streaming
Media Division has agreed to become one of our Internet content delivery service
customers. Microsoft purchased shares of our Series F convertible preferred
stock for an aggregate purchase price of approximately $15.0 million in
September 1999. For more detailed information about our strategic alliances with
Cisco and Microsoft, see "Business -- Strategic Alliances" on page 30.
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3
<PAGE> 6
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THE OFFERING
Common stock offered................ 6,000,000 shares
Common stock to be outstanding after
this offering....................... 88,318,428 shares
Use of proceeds..................... For working capital and general
corporate purposes. For more detailed
information, see "Use of Proceeds" on
page 17.
Proposed Nasdaq National Market
symbol.............................. AKAM
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(AUGUST 20, 1998) THROUGH SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
------------------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................................... $ -- $ 404
Total operating expenses.............................. 900 10,043
Operating loss........................................ (900) (9,639)
Net loss.............................................. (890) (9,783)
Net loss attributable to common stockholders.......... (890) (10,078)
Basic and diluted net loss per share.................. $ (0.06) $ (0.53)
Weighted average common shares outstanding............ 15,015 18,891
Pro forma basic and diluted net loss per share
(unaudited)......................................... $ (0.05) $ (0.23)
Pro forma weighted average common shares outstanding
(unaudited)......................................... 19,262 42,413
</TABLE>
Weighted average shares used in computing the pro forma basic and diluted
net loss per share have been calculated assuming the conversion of all shares of
convertible preferred stock outstanding as of June 30, 1999 into common stock as
if the shares had converted immediately upon issuance. Accordingly, accrued
dividends and accretion to redemption value are not included in the calculation
of pro forma basic and diluted loss per share. The pro forma as adjusted column
in the balance sheet data below gives effect to the conversion of all shares of
convertible preferred stock outstanding as of June 30, 1999 into common stock
upon the closing of this offering and the sale of the 6,000,000 shares of common
stock in this offering at an assumed initial public offering price of $17.00,
after deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by us.
Pro forma and as adjusted shares have not been adjusted for the issuance of
1,867,480 shares of Series E convertible preferred stock on August 6, 1999 and
985,545 shares of Series F convertible preferred stock on September 20, 1999.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $44,829 $138,539
Working capital............................................. 41,602 135,312
Total assets................................................ 52,627 146,337
Long-term liabilities....................................... 12,128 12,128
Convertible preferred stock................................. 40,929 --
Total stockholders' equity (deficit)........................ $(4,693) $129,946
</TABLE>
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4
<PAGE> 7
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Except as set forth in our financial statements or as otherwise indicated,
all information in this prospectus:
- Assumes no exercise of the underwriters' over-allotment option;
- Reflects the conversion of all shares of our convertible preferred stock
outstanding as of September 22, 1999 into an aggregate of 37,485,618
shares of common stock;
- Reflects a 3-for-1 stock split of our common stock effected on January
28, 1999, a 3-for-1 stock split of our common stock effected on May 25,
1999 and a 2-for-1 stock split of our common stock effected on September
8, 1999; and
- Reflects the filing, as of the closing of the offering, of our amended
and restated certificate of incorporation and the adoption of our amended
and restated by-laws implementing provisions described below under
"Description of Capital Stock -- Delaware Law and Our Charter and By-Law
Provisions; Anti-Takeover Effects" on page 46.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell shares of common stock and
seeking offers to buy shares of common stock only in jurisdictions where offers
and sales are permitted.
Our principal executive offices are located at 201 Broadway, Cambridge,
Massachusetts 02139 and our telephone number is (617) 250-3000. Our World Wide
Web site address is www.akamai.com. The information in our Web site is not
incorporated by reference into this prospectus.
Akamai, the Akamai logo and FreeFlow are our trademarks. This prospectus
also contains trademarks and trade names of other companies.
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5
<PAGE> 8
RISK FACTORS
You should consider carefully the risks described below before you decide
to buy our common stock. If any of the following risks actually occur, our
business, financial condition or results of operations would likely suffer. In
such case, the trading price of our common stock could fall, and you may lose
all or part of the money you paid to buy our common stock.
RISKS RELATED TO OUR BUSINESS
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY.
We were founded in August 1998 and began offering our FreeFlow service in
April 1999. We have limited meaningful historical financial data upon which to
base planned operating expenses and upon which investors may evaluate us and our
prospects. In addition, our operating expenses are largely based on anticipated
revenue trends and a high percentage of our expenses are and will continue to be
fixed in the short-term. You should consider the risks and difficulties
frequently encountered by companies like ourselves in a new and rapidly evolving
market. Our ability to sell our service and the level of success we achieve,
depends, among other things, on the level of demand for Internet content
delivery services, which is a new and rapidly evolving market. Our business
strategy may be unsuccessful, and we may not successfully address the risks we
face.
WE ARE ENTIRELY DEPENDENT ON OUR INTERNET CONTENT DELIVERY SERVICE AND OUR
FUTURE REVENUE DEPENDS ON ITS COMMERCIAL SUCCESS.
Our future growth depends on the commercial success of our Internet content
delivery service. Our FreeFlow service or other services under development may
not achieve widespread market acceptance. We have recently begun to commercially
introduce our service for the delivery of streaming audio and video, and our
future revenue growth will depend, in part, on customer acceptance of this
service. Failure of our current and planned services to operate as expected
could delay or prevent their adoption. If our target customers do not adopt,
purchase and successfully deploy our current and planned services, our revenue
will not grow significantly and our business, results of operations and
financial condition will be seriously harmed.
THE INTERNET CONTENT DELIVERY MARKET IS NEW AND OUR BUSINESS WILL SUFFER IF IT
DOES NOT DEVELOP AS WE EXPECT.
The market for Internet content delivery services is new. We cannot be
certain that a viable market for our service will emerge or be sustainable. If
this market does not develop, or develops more slowly than we expect, our
business, results of operations and financial condition will be seriously
harmed.
ANY FAILURE OF OUR NETWORK INFRASTRUCTURE COULD LEAD TO SIGNIFICANT COSTS AND
DISRUPTIONS WHICH COULD REDUCE OUR REVENUE AND HARM OUR BUSINESS, FINANCIAL
RESULTS AND REPUTATION.
Our business is dependent on providing our customers with fast, efficient
and reliable Internet content delivery. To meet these customer requirements we
must protect our network infrastructure against damage from:
- Human error;
- Physical or electronic security breaches;
- Fire, earthquake, flood and other natural disasters;
- Power loss;
- Sabotage and vandalism; and
- Similar events.
Despite precautions we have taken, the occurrence of a natural disaster or
other unanticipated problems at one or more of our servers could result in
service interruptions or significant damage to equipment. We
6
<PAGE> 9
provide a FreeFlow service guarantee that our networks will deliver Internet
content 24 hours a day, seven days a week, 365 days a year. If we do not provide
this service, the customer does not pay for our services on that day. Any
widespread loss of services would reduce our revenue, and could harm our
business, financial results and reputation.
BECAUSE OUR INTERNET CONTENT DELIVERY SERVICE IS COMPLEX AND IS DEPLOYED IN
COMPLEX ENVIRONMENTS, IT MAY HAVE ERRORS OR DEFECTS THAT COULD SERIOUSLY HARM
OUR BUSINESS.
Our Internet content delivery service is highly complex and is designed to
be deployed in very large and complex networks. Because of the nature of our
service, we can only fully test it when it is fully deployed in very large
networks with high traffic. As of July 31, 1999, our network consisted of 900
servers. We and our customers have from time to time discovered errors and
defects in our software. In the future, there may be additional errors and
defects in our software that may adversely affect our service. If we are unable
to efficiently fix errors or other problems that may be identified, we could
experience:
- Loss of or delay in revenue and loss of market share;
- Loss of customers;
- Failure to attract new customers or achieve market acceptance;
- Diversion of development resources;
- Loss of credibility;
- Increased service costs; and
- Legal actions by our customers.
ANY FAILURE OF OUR TELECOMMUNICATIONS PROVIDERS TO PROVIDE REQUIRED
TRANSMISSION CAPACITY TO US COULD RESULT IN INTERRUPTIONS IN OUR SERVICE.
Our operations are dependent upon transmission capacity provided by
third-party telecommunications providers. Any failure of such telecommunications
providers to provide the capacity we require may result in a reduction in, or
termination of, service to our customers. This failure may be a result of the
telecommunications providers or Internet service providers choosing services
that are competitive with our service, failing to comply with or terminating
their existing agreements with us or otherwise not entering into relationships
with us at all or on terms commercially acceptable to us. If we do not have
access to third-party transmission capacity, we could lose customers or fees
charged to such customers, and our business and financial results could suffer.
THE MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE AND WE MAY BE UNABLE TO
COMPETE SUCCESSFULLY AGAINST NEW ENTRANTS AND ESTABLISHED COMPANIES WITH GREATER
RESOURCES.
We compete in markets that are new, intensely competitive, highly
fragmented and rapidly changing. We have experienced and expect to continue to
experience increased competition. Many of our current competitors, as well as a
number of our potential competitors, have longer operating histories, greater
name recognition and substantially greater financial, technical and marketing
resources than we do. Some of our current or potential competitors have the
financial resources to withstand substantial price competition. Moreover, many
of our competitors have more extensive customer bases, broader customer
relationships and broader industry alliances that they could use to their
advantage in competitive situations, including relationships with many of our
current and potential customers. Our competitors may be able to respond more
quickly than we can to new or emerging technologies and changes in customer
requirements. Some of our current or potential competitors may bundle their
services with other software or hardware in a manner that may discourage Web
site owners from purchasing any service we offer or Internet service providers
from installing our servers.
7
<PAGE> 10
As competition in the Internet content delivery market continues to
intensify, new solutions will come to market. We are aware of at least one
company that is focusing significant resources on developing and marketing
products and services that will compete with Akamai. We also believe that we may
face competition from other providers of competing Internet content delivery
services, including networking hardware and software manufacturers, content
distribution providers, traditional hardware manufacturers, telecommunications
providers, software database companies, and large diversified software and
technology companies.
Increased competition could result in:
- Price and revenue reductions and lower profit margins;
- Increased cost of service from telecommunications providers;
- Loss of customers; and
- Loss of market share.
Any one of these could materially and adversely affect our business, financial
condition and results of operations.
A SIGNIFICANT DECLINE IN SALES TO APPLE COMPUTER COULD REDUCE OUR REVENUE AND
CAUSE OUR BUSINESS AND FINANCIAL RESULTS TO SUFFER.
Sales of our service to Apple Computer represented approximately 75% of our
revenue for the six-month period ended June 30, 1999 and we expect that sales to
Apple Computer will represent a significant portion of our revenue for the year
ending December 31, 1999. Apple Computer has the right to terminate our
agreement on short notice if we materially breach our agreement. A significant
decline in sales to Apple Computer could reduce our revenue and cause our
business and financial results to suffer.
IF ANY OF OUR STRATEGIC ALLIANCES TERMINATE, THEN OUR BUSINESS COULD BE
ADVERSELY AFFECTED.
We entered into a strategic alliance with Apple Computer in June 1999, with
Cisco Systems in August 1999 and with Microsoft Corporation in September 1999.
Under each of these agreements, we are seeking to jointly develop technology,
services and/or products with our strategic alliance partners and we may not be
successful. The strategic alliance with Cisco may be terminated by Cisco or us
on short notice for any reason. The strategic alliance with Apple may be
terminated by Apple or us if the other party materially breaches the agreement
and the strategic alliance with Microsoft may be terminated by Microsoft or us
if the other party materially breaches the agreement. A termination of, or
significant adverse change in, our relationship with Apple Computer, Cisco
Systems or Microsoft could have a material adverse effect on our business.
OUR BUSINESS WILL SUFFER IF WE ARE NOT ABLE TO SCALE OUR NETWORK AS DEMAND
INCREASES.
We have had only limited deployment of our Internet content delivery
service to date, and we cannot be certain that our network can connect and
manage a substantially larger number of customers at high transmission speeds.
Our network may not be scalable to expected customer levels while maintaining
superior performance. In addition, as customers' usage of bandwidth increases,
we will need to make additional investments in our infrastructure to maintain
adequate downstream data transmission speeds. We cannot assure you that we will
be able to make these investments successfully or at an acceptable cost.
Upgrading our infrastructure may cause delays or failures in our network. As a
result, in the future our network may be unable to achieve or maintain a
sufficiently high transmission capacity. Our failure to achieve or maintain high
capacity data transmission could significantly reduce demand for our service,
reducing our revenue and causing our business and financial results to suffer.
8
<PAGE> 11
OUR BUSINESS WILL SUFFER IF WE DO NOT RESPOND RAPIDLY TO TECHNOLOGICAL
CHANGES.
The market for Internet content delivery services is likely to be
characterized by rapid technological change, frequent new product introductions
and changes in customer requirements. We may be unable to respond quickly or
effectively to these developments. If competitors introduce products, services
or technologies that are better than ours or that gain greater market
acceptance, or if new industry standards emerge, our service may become
obsolete, which would materially and adversely affect our business, results of
operations and financial condition.
In developing our service, we have made, and will continue to make,
assumptions about the standards that our customers and competitors may adopt. If
the standards adopted are different from those which we have chosen to support,
market acceptance of our service may be significantly reduced or delayed and our
business will be seriously harmed. In addition, the introduction of services or
products incorporating new technologies and the emergence of new industry
standards could render our existing service obsolete.
IF OUR LICENSE AGREEMENT WITH MIT TERMINATES, THEN OUR BUSINESS COULD BE
ADVERSELY AFFECTED.
We have licensed from MIT technology covered by various patent applications
and copyrights relating to Internet content delivery technology. Some of our
technology is based in part on the technology covered by these patent
applications and copyrights. MIT may terminate the license agreement if we cease
our business due to insolvency or if we materially breach the terms of the
license agreement. A termination of our license agreement with MIT could have a
material adverse effect on our business.
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS FROM THIRD-PARTY CHALLENGES.
We rely on a combination of patent, copyright, trademark and trade secret
laws and restrictions on disclosure to protect our intellectual property rights.
These legal protections afford only limited protection; competitors may gain
access to our intellectual property which may result in the loss of our
customers.
Although we have licensed technology covered by patent applications filed
with the United States Patent and Trademark Office with respect to Internet
content delivery services, we have no patents or patent applications with
respect to our Internet content delivery service. Accordingly, neither our
technology nor technology licensed by us is covered by patents that would
preclude or inhibit competitors from entering our market. Our future patents, if
any, and patents licensed by us may be successfully challenged or may not
provide us with any competitive advantages. Moreover, although we have licensed
technology covered by international patent applications, none of our technology
is patented abroad, nor do we currently have any international patent
applications pending. We cannot be certain that any pending or future patent
applications will be granted, that any future patent will not be challenged,
invalidated or circumvented, or that rights granted under any patent that may be
issued will provide competitive advantages to us. Monitoring unauthorized use of
our service is difficult and we cannot be certain that the steps we have taken
will prevent unauthorized use of our technology, particularly in foreign
countries where the laws may not protect our proprietary rights as fully as in
the United States.
OUR FAILURE TO INCREASE OUR REVENUE WOULD PREVENT US FROM ACHIEVING AND
MAINTAINING PROFITABILITY.
We have never been profitable. We have incurred significant losses since
inception and expect to continue to incur losses in the future. As of June 30,
1999, we had an accumulated deficit of $10.8 million. We cannot be certain that
our revenue will grow or that we will achieve sufficient revenue to achieve
profitability. Our failure to significantly increase our revenue would seriously
harm our business and operating results. We have large fixed expenses, and we
expect to continue to incur significant and increasing sales and marketing,
product development, administrative and other expenses, including fees to obtain
access to bandwidth for the transport of data over our network. As a result, we
will need to generate significantly higher revenues to achieve and maintain
profitability. If our revenue grows more slowly than we anticipate or if our
operating expenses increase more than we expect or cannot be reduced in the
event of lower revenue, our business will be materially and adversely affected.
9
<PAGE> 12
THE LONG AND VARIABLE SALES CYCLES FOR OUR SERVICE MAY CAUSE REVENUE AND
OPERATING RESULTS TO VARY SIGNIFICANTLY FROM QUARTER TO QUARTER WHICH COULD
ADVERSELY AFFECT OUR STOCK PRICE.
A customer's decision to purchase our Internet content delivery service
involves a lengthy evaluation and testing process. As a result, our sales cycle
is likely to be lengthy. Throughout the sales cycle, we spend considerable time
and expense educating and providing information to prospective customers about
the use and benefits of our service. Because of our limited operating history
and the nature of our business, we cannot predict these sales and deployment
cycles. The long sales cycles may cause our revenue and results of operations to
vary significantly and unexpectedly from quarter to quarter. If our operating
results fall below the expectations of securities analysts or investors in some
future quarter or quarters, the market price of our common stock could be
adversely affected.
THE RATES WE CHARGE FOR OUR SERVICE MAY DECLINE OVER TIME WHICH WOULD REDUCE
OUR REVENUE AND COULD CAUSE OUR BUSINESS AND FINANCIAL RESULTS TO SUFFER.
We expect that our cost to obtain bandwidth capacity for the transport of
data over our network will decline over time as a result of, among other things,
the large amount of capital currently being invested to build infrastructure
providing additional bandwidth. We expect the prices we charge for data
transported over our network will also decline over time as a result of, among
other things, the lower cost of obtaining bandwidth and existing and new
competition in the markets we address. As a result, our historical revenue rates
are not indicative of future revenue based on comparable traffic volumes. If we
fail to accurately predict the decline in costs of bandwidth or, in any event,
if we are unable to sell our service at acceptable prices relative to our
bandwidth costs, or if we fail to offer additional services from which we can
derive additional revenue, our revenue will decrease and our business and
financial results will suffer.
OUR BUSINESS AND PROSPECTS DEPEND ON DEMAND FOR AND MARKET ACCEPTANCE OF THE
INTERNET AND ITS INFRASTRUCTURE DEVELOPMENT.
The increased use of the Internet for retrieving, sharing and transferring
information among businesses, consumers, suppliers and partners has only begun
to develop in recent years, and our success will depend in large part on
continued growth in the use of the Internet. Critical issues concerning the
commercial use of the Internet, including security, reliability, cost, ease of
access, quality of service, regulatory initiatives and necessary increases in
bandwidth availability, remain unresolved and are likely to affect the
development of the market for our service. The adoption of the Internet for
information retrieval and exchange, commerce and communications generally will
require the acceptance of a new medium of conducting business and exchanging
information. Demand for and market acceptance of the Internet are subject to a
high level of uncertainty and are dependent on a number of factors, including:
- The growth in consumer access to and acceptance of new interactive
technologies;
- The development of technologies that facilitate interactive communication
between organizations; and
- Increases in user bandwidth.
If the Internet as a commercial or business medium fails to develop or
develops more slowly than expected, our business and prospects will suffer.
OUR BUSINESS WILL SUFFER IF WE DO NOT ANTICIPATE AND MEET SPECIFIC CUSTOMER
REQUIREMENTS.
Our current and prospective customers may require features and capabilities
that our current service offering does not have. To achieve market acceptance
for our service, we must effectively and timely anticipate and adapt to customer
requirements and offer services that meet customer demands. Our failure to offer
services that satisfy customer requirements would seriously harm our business,
results of operations and financial condition.
We intend to continue to invest in technology development. The development
of new or enhanced services is a complex and uncertain process that requires the
accurate anticipation of technological and market
10
<PAGE> 13
trends. We may experience design, manufacturing, marketing and other
difficulties that could delay or prevent the development, introduction or
marketing of new services as well as enhancements. The introduction of new or
enhanced services also requires that we manage the transition from older
services in order to minimize disruption in customer ordering patterns and
ensure that we can deliver services to meet anticipated customer demand. Our
inability to effectively manage this transition would materially adversely
affect our business, results of operations and financial condition.
WE HAVE LIMITED SALES AND MARKETING EXPERIENCE; OUR BUSINESS WILL SUFFER IF WE
DO NOT EXPAND OUR DIRECT AND INDIRECT SALES ORGANIZATIONS AND OUR CUSTOMER
SERVICE AND SUPPORT OPERATIONS.
We currently have limited sales and marketing experience. Our limited
experience may restrict our success in commercializing our service. Our service
requires a sophisticated sales effort targeted at a limited number of key people
within our prospective customers' organizations. This sales effort requires the
efforts of trained sales personnel. We need to expand our marketing and sales
organization in order to increase market awareness of our service to a greater
number of organizations and generate increased revenue. We are in the process of
developing our direct sales force and plan to hire additional qualified sales
personnel. Competition for these individuals is intense, and we might not be
able to hire the kind and number of sales personnel we need. In addition, we
believe that our future success is dependent upon our ability to establish
successful relationships with a variety of distribution partners. If we are
unable to expand our direct and indirect sales operations, we may not be able to
increase market awareness or sales of our service, which may prevent us from
achieving and maintaining profitability.
Hiring personnel is very competitive in our industry because there is a
limited number of people available with the necessary technical skills and
understanding of our market. Once we hire them, they require extensive training
in our Internet content delivery service. If we are unable to expand our
customer service and support organization and train them as rapidly as
necessary, we may not be able to increase sales of our service, which would
seriously harm our business.
OUR BUSINESS WILL SUFFER IF WE FAIL TO MANAGE OUR GROWTH PROPERLY.
We have expanded our operations rapidly since our inception. We continue to
increase the scope of our operations and have grown our headcount substantially.
Our total number of employees grew from 35 on February 1, 1999 to 143 on August
11, 1999. In addition, we plan to continue to hire a significant number of
employees this year. This growth has placed, and our anticipated growth in
future operations will continue to place, a significant strain on our management
systems and resources. Our ability to successfully offer our service and
implement our business plan in a rapidly evolving market requires an effective
planning and management process. We expect that we will need to continue to
improve our financial and managerial controls, reporting systems and procedures,
and will need to continue to expand, train and manage our work force worldwide.
Competition for highly skilled personnel is intense, especially in the New
England area. We may fail to attract, assimilate or retain qualified personnel
to fulfill our current or future needs. Our planned rapid growth places a
significant demand on management and financial and operational resources. In
order to grow and achieve future success, we must:
- Retain existing personnel;
- Hire, train, manage and retain additional qualified personnel; and
- Effectively manage multiple relationships with our customers, suppliers
and other third parties.
Failure to do so would have a materially adverse effect on our business, results
of operations and financial condition.
We have recently hired and plan to hire in the near future a number of key
employees and officers. To integrate into our company, these individuals must
spend a significant amount of time learning our business model and management
system, in addition to performing their regular duties. Accordingly, the
integration of new personnel has resulted and will continue to result in some
disruption to our ongoing operations. If we fail to complete this integration in
an efficient manner, our business and financial results will suffer.
11
<PAGE> 14
WE DEPEND ON OUR KEY PERSONNEL TO MANAGE OUR BUSINESS EFFECTIVELY IN A RAPIDLY
CHANGING MARKET AND IF WE ARE UNABLE TO RETAIN OUR KEY EMPLOYEES, OUR ABILITY TO
COMPETE COULD BE HARMED.
Our future success depends upon the continued services of our executive
officers and other key technology, sales, marketing and support personnel, who
have critical industry experience and relationships that we rely on in
implementing our business plan. None of our officers or key employees is bound
by an employment agreement for any specific term. We have "key person" life
insurance policies covering only the lives of F. Thomson Leighton and Daniel M.
Lewin. The loss of the services of any of our key employees could delay the
development and introduction of and negatively impact our ability to sell our
service. We face intense competition for qualified personnel, including research
and development, service and support and sales and marketing personnel.
WE FACE RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS THAT COULD HARM OUR
BUSINESS.
To be successful, we believe we must expand our international operations.
Therefore, we expect to commit significant resources to expand our international
sales and marketing activities. However, we may not be able to maintain or
increase market demand for our service which may harm our business. We are
increasingly subject to a number of risks associated with international business
activities which may increase our costs, lengthen our sales cycle and require
significant management attention. These risks include:
- Increased expenses associated with marketing services in foreign
countries;
- General economic conditions in international markets;
- Currency exchange rate fluctuations;
- Unexpected changes in regulatory requirements resulting in unanticipated
costs and delays;
- Tariffs, export controls and other trade barriers;
- Longer accounts receivable payment cycles and difficulties in collecting
accounts receivable;
- Potentially adverse tax consequences, including restrictions on the
repatriation of earnings; and
- The risks related to the recent global economic turbulence and adverse
economic circumstances in Asia.
WE FACE A NUMBER OF UNKNOWN RISKS ASSOCIATED WITH YEAR 2000 PROBLEMS.
The year 2000 computer issue creates a variety of risks for us. The year
2000 computer problem refers to the potential for system and processing failures
of date-related data as a result of computer-controlled systems using two digits
rather than four to define the applicable year. For example, computer programs
that have time-sensitive software may recognize a date represented as "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities. The risks involve:
- Potential warranty or other claims by our customers;
- Errors in systems we use to run our business;
- Errors in systems used by our suppliers;
- Errors in systems used by our customers; and
- Potential reduced spending by other companies on Internet content
delivery services as a result of significant spending on year 2000
remediation.
We have designed our service for use in the year 2000 and beyond and
believe it will be year 2000 ready. However, our service is used in conjunction
with larger networks involving sophisticated hardware and software products
supplied by other vendors. Each of our customers' networks involves different
combinations
12
<PAGE> 15
of third-party products. We cannot evaluate whether all of their products are
year 2000 ready. We may face claims based on year 2000 problems in other
companies' products or based on issues arising from the integration of multiple
products within the overall network. Although no claims of this kind have been
made, we may in the future be required to defend our service in legal
proceedings which could be expensive regardless of the merits of these claims.
If our suppliers, vendors, major distributors, partners, customers and
service providers fail to correct their year 2000 problems, these failures could
result in an interruption in, or a failure of, our normal business activities or
operations. If a year 2000 problem occurs, it may be difficult to determine
which party's products have caused the problem. These failures could interrupt
our operations and damage our relationships with our customers. Due to the
general uncertainty inherent in the year 2000 problem resulting from the
readiness of third-party suppliers and vendors, we are unable to determine at
this time whether year 2000 failures could harm our business and our financial
results.
Our customers' purchasing plans could be affected by year 2000 issues if
they need to expend significant resources to fix their existing systems to
become year 2000 ready. This situation may reduce funds available to purchase
our service. In addition, some customers may wait to purchase our service until
after the year 2000, which may reduce our revenue.
RISKS RELATED TO LEGAL UNCERTAINTY
WE COULD INCUR SUBSTANTIAL COSTS DEFENDING OUR INTELLECTUAL PROPERTY FROM
INFRINGEMENT OR A CLAIM OF INFRINGEMENT.
Other companies, including our competitors, may obtain patents or other
proprietary rights that would prevent, limit or interfere with our ability to
make, use or sell our service. As a result, we may be found to infringe on the
proprietary rights of others. In the event of a successful claim of infringement
against us and our failure or inability to license the infringed technology, our
business and operating results would be significantly harmed. Companies in the
Internet market are increasingly bringing suits alleging infringement of their
proprietary rights, particularly patent rights. Any litigation or claims,
whether or not valid, could result in substantial costs and diversion of
resources. Intellectual property litigation or claims could force us to do one
or more of the following:
- Cease selling, incorporating or using products or services that
incorporate the challenged intellectual property;
- Obtain a license from the holder of the infringed intellectual property
right, which license may not be available on reasonable terms; and
- Redesign products or services.
If we are forced to take any of the foregoing actions, our business may be
seriously harmed. Although we carry general liability insurance, our insurance
may not cover potential claims of this type or may not be adequate to indemnify
us for all liability that may be imposed.
INTERNET-RELATED LAWS COULD ADVERSELY AFFECT OUR BUSINESS.
Laws and regulations which apply to communications and commerce over the
Internet are becoming more prevalent. The most recent session of the United
States Congress resulted in Internet laws regarding children's privacy,
copyrights, taxation and the transmission of sexually explicit material. The
European Union recently enacted its own privacy regulations, and is currently
considering copyright legislation that may extend the right of reproduction held
by copyright holders to include the right to make temporary copies for any
reason. The law of the Internet, however, remains largely unsettled, even in
areas where there has been some legislative action. It may take years to
determine whether and how existing laws such as those governing intellectual
property, privacy, libel and taxation apply to the Internet. In addition, the
growth and development of the market for online commerce may prompt calls for
more stringent consumer protection laws, both in the United States and abroad,
that may impose additional burdens on companies conducting business online. The
13
<PAGE> 16
adoption or modification of laws or regulations relating to the Internet, or
interpretations of existing law, could adversely affect our business.
WE MAY BE SUBJECT TO REGULATION, TAXATION, ENFORCEMENT OR OTHER LIABILITIES IN
UNEXPECTED JURISDICTIONS.
We provide our Internet content delivery service to customers located
throughout the United States and in several foreign countries. As a result, we
may be required to qualify to do business, or be subject to tax or other laws
and regulations, in these jurisdictions even if we do not have a physical
presence or employees or property in these jurisdictions. The application of
these multiple sets of laws and regulations is uncertain, but we could find we
are subject to regulation, taxation, enforcement or other liability in
unexpected ways, which could materially adversely affect our business, financial
condition and results of operations.
RISKS RELATED TO THE SECURITIES MARKETS AND THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE WHICH COULD RESULT IN SUBSTANTIAL LOSSES FOR
INVESTORS PURCHASING SHARES IN THIS OFFERING.
Prior to this offering, you could not buy or sell our common stock
publicly. An active public market for our common stock may not develop or be
sustained after this offering. The market for technology stocks has been
extremely volatile. The following factors could cause the market price of our
common stock to fluctuate significantly from the price paid by investors in this
offering:
- The addition or departure of key Akamai personnel;
- Variations in our quarterly operating results;
- Announcements by us or our competitors of significant contracts, new
products or services offerings or enhancements, acquisitions,
distribution partnerships, joint ventures or capital commitments;
- Changes in financial estimates by securities analysts;
- Our sales of common stock or other securities in the future;
- Changes in market valuations of networking, Internet and
telecommunications companies; and
- Fluctuations in stock market prices and volumes.
MANAGEMENT MAY APPLY THE PROCEEDS OF THIS OFFERING TO USES THAT DO NOT
INCREASE OUR PROFITS OR MARKET VALUE.
Our management will have considerable discretion in the application of the
net proceeds of this offering, and you will not have the opportunity, as part of
your investment decision, to assess whether the proceeds are being used
appropriately. The net proceeds may be used for corporate purposes that do not
increase our profitability or our market value. Pending application of the
proceeds, they may be placed in investments that do not produce income or that
lose value.
INSIDERS WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL OVER AKAMAI AFTER THIS
OFFERING AND COULD LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME OF KEY
TRANSACTIONS, INCLUDING CHANGES OF CONTROL.
We anticipate that the executive officers, directors and entities
affiliated with them will, in the aggregate, beneficially own approximately
70.2% of our outstanding common stock following the completion of this offering.
These stockholders, if acting together, would be able to influence significantly
all matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business combination
transactions.
PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD
PREVENT A CHANGE IN CONTROL EVEN IF THE CHANGE IN CONTROL WOULD BE BENEFICIAL TO
OUR STOCKHOLDERS.
Provisions of our amended and restated certificate of incorporation,
by-laws, and Delaware law could make it more difficult for a third party to
acquire us, even if doing so would be beneficial to our stockholders.
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<PAGE> 17
THERE MAY BE SALES OF A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK AFTER THIS
OFFERING THAT COULD CAUSE OUR STOCK PRICE TO FALL.
Our current stockholders hold a substantial number of shares, which they
will be able to sell in the public market in the near future. Sales of a
substantial number of shares of our common stock within a short period of time
after this offering could cause our stock price to fall. In addition, the sale
of these shares could impair our ability to raise capital through the sale of
additional stock.
THE UNPREDICTABILITY OF OUR QUARTERLY RESULTS MAY ADVERSELY AFFECT THE TRADING
PRICE OF OUR COMMON STOCK.
Our revenue and operating results will vary significantly from quarter to
quarter due to a number of factors, many of which are outside of our control and
any of which may cause our stock price to fluctuate. The primary factors that
may affect us include the following:
- Demand for Internet content delivery services;
- The timing and size of sales of our services;
- The timing of recognizing revenue and deferred revenue;
- New product and service introductions and enhancements by our competitors
and ourselves;
- Changes in our pricing policies or the pricing policies of our
competitors;
- Our ability to develop, introduce and ship new products, services and
enhancements that meet customer requirements in a timely manner;
- The length of the sales cycle for our services;
- Increases in the prices of, and availability of, the products, services,
components or raw materials we purchase, including bandwidth;
- Our ability to attain and maintain quality levels for our services;
- Expenses related to testing of our services;
- Costs related to acquisitions of technology or businesses; and
- General economic conditions as well as those specific to the Internet and
related industries.
We plan to increase significantly our operating expenses to fund greater
levels of engineering and development, expand our sales and marketing
operations, broaden our customer support capabilities and develop new
distribution channels. We also plan to expand our general and administrative
functions to address the increased reporting and other administrative demands,
which will result from this offering and the increasing size of our business.
Our operating expenses are largely based on anticipated revenue trends and a
high percentage of our expenses are, and will continue to be, fixed in the short
term. As a result, a delay in generating or recognizing revenue for the reasons
set forth above, or for any other reason, could cause significant variations in
our operating results from quarter to quarter and could result in substantial
operating losses.
Due to the above factors, we believe that quarter-to-quarter comparisons of
our operating results are not a good indication of our future performance. It is
likely that in some future quarters, our operating results may be below the
expectations of public market analysts and investors. In this event, the price
of our common stock will probably fall.
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<PAGE> 18
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve
substantial risks and uncertainties. You can identify these statements by
forward-looking words such as "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "should," "will" and "would" or similar words. You
should read statements that contain these words carefully because they discuss
our future expectations, contain projections of our future results of operations
or of our financial position or state other "forward-looking" information. We
believe that it is important to communicate our future expectations to our
investors. However, there may be events in the future that we are not able to
accurately predict or control. The factors listed above in the section captioned
"Risk Factors," as well as any cautionary language in this prospectus, provide
examples of risks, uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. Before you invest in our common stock, you should be aware that the
occurrence of the events described in these risk factors and elsewhere in this
prospectus could have a material adverse effect on our business, results of
operations and financial position.
16
<PAGE> 19
USE OF PROCEEDS
We estimate that the net proceeds from our sale of the 6,000,000 shares of
common stock will be approximately $93.7 million, assuming an initial public
offering price of $17.00 per share and after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us. If the
over-allotment option is exercised in full, we estimate that the net proceeds
will be approximately $107.9 million.
The principal purposes of this offering are to establish a public market
for our common stock, to increase our visibility in the marketplace, to
facilitate future access to public capital markets, to provide liquidity to
existing stockholders and to obtain additional working capital.
We expect to use the net proceeds for anticipated working capital and
general corporate purposes. Although we may use a portion of the net proceeds to
acquire businesses, products or technologies that are complementary to our
business, we have no specific acquisitions planned. Pending such uses, we plan
to invest the net proceeds in investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never paid or declared any cash dividends on our common stock or
other securities and do not anticipate paying cash dividends in the foreseeable
future. We currently intend to retain all future earnings, if any, for use in
the operation of our business.
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<PAGE> 20
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999. The
pro forma information gives effect to the conversion of all of our outstanding
convertible preferred stock outstanding as of June 30, 1999. The pro forma as
adjusted information reflects the issuance and sale of the 6,000,000 shares of
common stock offered by us in this offering at an assumed initial public
offering price of $17.00 per share. The outstanding share information excludes:
- 11,191,100 shares of common stock issuable upon exercise of options and
warrants outstanding as of June 30, 1999;
- 13,639,600 shares of common stock reserved for future issuance under our
1998 Stock Incentive Plan as of June 30, 1999;
- 145,195 shares of Series C convertible preferred stock issuable upon
exercise of an outstanding option as of June 30, 1999, which are
convertible into 908,339 shares of common stock;
- 1,867,480 shares of Series E convertible preferred stock issued in
August 1999, which are convertible into 3,734,960 shares of common
stock; and
- 985,545 shares of Series F convertible preferred stock issued in
September 1999, which are convertible into 985,545 shares of common
stock.
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and accompanying notes and other financial data included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-----------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
-------- -------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C>
Long-term liabilities....................................... $ 12,128 $ 12,128 $ 12,128
Convertible preferred stock, $0.01 par value; 10,000,000
shares authorized:
Series A convertible preferred stock, $0.01 par value;
1,100,000 shares authorized, issued and outstanding
actual; none authorized, issued and outstanding pro forma
and pro forma as adjusted................................. 8,291 -- --
Series B convertible preferred stock, $0.01 par value;
1,327,500 shares authorized, issued and outstanding
actual; none authorized, issued and outstanding pro forma
and pro forma as adjusted................................. 20,138 -- --
Series C convertible preferred stock, $0.01 par value;
145,195 shares authorized, none issued and outstanding
actual; none authorized, issued and outstanding pro forma
and pro forma as adjusted................................. -- -- --
Series D convertible preferred stock, $0.01 par value;
685,194 shares authorized, issued and outstanding actual;
none authorized, issued and outstanding pro forma and pro
forma as adjusted......................................... 12,500 -- --
Stockholders' equity (deficit):
Common stock, $0.01 par value; 300,000,000 shares
authorized, 43,085,310 shares issued and outstanding,
actual; 75,301,004 shares issued and outstanding, on a pro
forma basis; 81,301,004 shares issued and outstanding, on
a pro forma as adjusted basis............................. 431 753 813
Additional paid-in capital.................................. 16,163 56,770 150,420
Note receivable from officers for stock..................... (2,480) (2,480) (2,480)
Deferred compensation....................................... (8,002) (8,002) (8,002)
Accumulated deficit......................................... (10,805) (10,805) (10,805)
-------- -------- --------
Total stockholders' equity (deficit)............... (4,693) 36,236 129,946
-------- -------- --------
Total capitalization............................... $ 48,364 $ 48,364 $142,074
======== ======== ========
</TABLE>
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<PAGE> 21
DILUTION
Akamai's pro forma net tangible book value as of June 30, 1999, giving
effect to the conversion of all shares of convertible preferred stock
outstanding as of June 30, 1999 into common stock on the closing of this
offering, was approximately $35.8 million, or $0.48 per share of common stock.
Pro forma net tangible book value per share represents our tangible net worth
(tangible assets less total liabilities) divided by the 75,301,004 shares of
common stock outstanding after giving effect to the conversion of all
outstanding shares of convertible preferred stock into common stock. After
giving effect to the issuance and sale of the shares of common stock offered by
Akamai in this offering at an assumed initial public offering price of $17.00
per share. Akamai's pro forma net tangible book value at June 30, 1999 would
have been $129.5 million, or $1.59 per share. The initial public offering price
per share will significantly exceed the net tangible book value per share.
Accordingly, new investors who purchase common stock in this offering will
suffer an immediate dilution of their investment of $15.41 per share. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $17.00
Pro forma net tangible book value per share before this
offering............................................... $0.48
Increase in pro forma net tangible book value per share
attributable to new investors.......................... 1.11
-----
Pro forma net tangible book value per share after this
offering.................................................. 1.59
------
Dilution per share to new investors......................... $15.41
======
</TABLE>
The following table summarizes on a pro forma basis as of June 30, 1999,
giving effect to the conversion of all shares of convertible preferred stock
outstanding as of June 30, 1999 into common stock, the difference between the
number of shares of common stock purchased from Akamai, the total consideration
paid to Akamai, and the average price per share paid by existing stockholders
and by new investors. The calculation below is based on an assumed initial
public offering price of $17.00 per share, before deduction of estimated
underwriting discounts and commissions and estimated offering expenses payable
by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ 75,301,004 92.6% $ 44,169,165 30.2% $ 0.59
New investors........................ 6,000,000 7.4 102,000,000 69.8 17.00
---------- ----- ------------ -----
Total...................... 81,301,004 100.0% $146,169,165 100.0%
========== ===== ============ =====
</TABLE>
The tables above assume no exercise of stock options and warrants
outstanding at June 30, 1999. As of June 30, 1999, there were options and
warrants outstanding to purchase 12,099,439 shares of common stock, including
908,339 shares of common stock issuable upon conversion of shares of Series C
convertible preferred stock, at a weighted average exercise price of $0.98 per
share and 12,731,261 shares reserved for future grant or award under Akamai's
stock plans. To the extent any of these options and warrants are exercised,
there will be further dilution to new investors. To the extent all of such
outstanding options and warrants had been exercised as of June 30, 1999, net
tangible book value per share after this offering would be $1.51 and total
dilution per share to new investors would be $15.49. If the underwriters'
over-allotment option is exercised in full, the number of shares held by new
investors will increase to 6,900,000 shares, or 8.4% of the total number of
shares of common stock outstanding after this offering.
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<PAGE> 22
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
Akamai's financial statements and related notes and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other financial data included elsewhere in this prospectus. The statement of
operations data for the period from inception (August 20, 1998) to December 31,
1998 and the six-month period ended June 30, 1999 and the balance sheet data as
of June 30, 1999 are derived from audited financial statements included
elsewhere in this prospectus. Operating results for the six-month period ended
June 30, 1999 are not necessarily indicative of the results that may be expected
for any other period or the entire year ending December 31, 1999.
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(AUGUST 20, 1998) TO SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
--------------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................................... $ -- $ 404
Operating expenses:
Cost of service......................................... 31 1,408
Engineering and development............................. 228 2,053
Sales, general and administrative....................... 435 5,243
Equity related compensation............................. 206 1,339
------ --------
Total operating expenses........................ 900 10,043
------ --------
Operating loss............................................ (900) (9,639)
Interest income (expense), net............................ 10 (144)
------ --------
Net loss.................................................. (890) (9,783)
Dividends and accretion to preferred stock redemption
value................................................... -- 295
------ --------
Net loss attributable to common stockholders.............. $ (890) $(10,078)
====== ========
Basic and diluted net loss per share...................... $(0.06) $ (0.53)
Weighted average common shares outstanding................ 15,015 18,891
Pro forma basic and diluted net loss per share
(unaudited)............................................. $(0.05) $ (0.23)
Pro forma weighted average common shares outstanding
(unaudited)............................................. 19,262 42,413
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------------- ----------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $44,829 $138,539
Working capital............................................. 41,602 135,312
Total assets................................................ 52,627 146,337
Long-term liabilities....................................... 12,128 12,128
Convertible preferred stock................................. 40,929 --
Total stockholders' equity (deficit)........................ $(4,693) $129,446
</TABLE>
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<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read together with our financial
statements and accompanying notes appearing elsewhere in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results may differ from those indicated in forward-looking
statements.
OVERVIEW
We provide a global delivery service for Internet content that improves Web
site speed and reliability and protects against Web site crashes due to demand
overloads. Our FreeFlow service, which we market to large businesses and other
businesses with an Internet focus, delivers our customers' Web content through a
worldwide server network by locating the content geographically closer to their
users.
Since our inception, we have incurred significant losses, and as of June
30, 1999, we had an accumulated deficit of $10.8 million. We have not achieved
profitability on a quarterly or an annual basis, and anticipate that we will
continue to incur net losses. We expect to incur significant engineering and
development and sales, general and administrative expenses and, as a result, we
will need to generate significant revenue to achieve and maintain profitability.
We derive our revenue from the sale of our FreeFlow service under contracts
with terms typically ranging from three to 12 months. We recognize revenue based
on fees for the amount of Internet content delivered through our service. These
contracts also provide for minimum monthly fees. In the future, we may also
derive revenue from one-time implementation fees which would be recognized
ratably over the period of the related contracts.
To date, substantially all of our revenue has been derived from customers
based in the United States. We expect that revenue from customers based outside
the United States will increase in future periods. To date, all of our revenue
has been derived from direct sales and we expect that revenue through indirect
distribution channels will increase in future periods. For the six-month period
ended June 30, 1999, Apple Computer accounted for 75% of our revenue and Yahoo!
accounted for 14% of our revenue.
Cost of services consists of depreciation of network equipment used in
providing our FreeFlow service, fees paid to network providers for bandwidth and
monthly fees paid to third-party network data centers for housing our servers.
We enter into contracts for bandwidth with third-party network providers with
terms typically ranging from six months to three years. These contracts commit
us to minimum monthly fees plus additional fees for bandwidth usage above our
contracted level. Under our FreeFlow ISP program, we provide use of our servers
to smaller Internet service providers which, in turn, provide us with rack space
for our servers and access to their bandwidth. We do not recognize as revenue
any value to the Internet service providers associated with the use of our
servers and do not expense the value of the rack space and bandwidth we receive.
We believe that to date the values provided under this program have been
insignificant.
Engineering and development expenses consist primarily of salaries and
related personnel costs and costs related to the design, development, testing,
deployment and enhancement of our service and our network. We have to date
expensed our engineering and development costs as they were incurred. We believe
that research and development is critical to our strategic product development
objectives and intend to enhance our technology to meet the changing
requirements of the market demand. As a result, we expect our engineering and
development expenses to increase in the future.
Sales, general and administrative expenses consist primarily of salaries
and related costs of sales and marketing, operations and finance personnel and
recruiting expenses, professional fees and legal and accounting services. We
expect that sales, general and administrative expenses will increase in the
future as we hire additional personnel, expand our operations domestically,
initiate additional marketing programs, establish sales offices in new locations
and incur additional costs related to the growth of our business and our
operations as a public company.
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<PAGE> 24
RESULTS OF OPERATIONS
PERIOD FROM INCEPTION (AUGUST 20, 1998) THROUGH DECEMBER 31, 1998 AND THE
SIX-MONTH PERIOD ENDED JUNE 30, 1999
Revenue. We recorded no revenue for the period from inception (August 20,
1998) to December 31, 1998. Revenue was $403,900 for the six months ended June
30, 1999. The increase in revenue was due to sales of our FreeFlow service,
which was commercially introduced in April 1999.
Cost of Service. Cost of service expenses were $30,600 for the period from
inception (August 20, 1998) to December 31, 1998 and represented 3.4% of total
operating expenses in fiscal 1998. Cost of service expenses were $1.4 million
for the six months ended June 30, 1999 and represented 14.0% of total operating
expenses for the six months ended June 30, 1999. The increase in cost of service
expenses was due to the commencement of testing of our FreeFlow service in early
1999 and commercial introduction of our FreeFlow service in April 1999.
Engineering and Development. Engineering and development expenses were
$228,600 for the period from inception (August 20, 1998) to December 31, 1998
and represented 25.4% of total operating expenses in fiscal 1998. Engineering
and development expenses for the six months ended June 30, 1999 were $2.1
million and represented 20.4% of total operating expenses for the six months
ended June 30, 1999. Approximately $1.5 million of the period-to-period increase
was attributable to personnel and payroll related expenses.
Sales, General and Administrative. Sales, general and administrative
expenses were $435,300 for the period from inception (August 20, 1998) to
December 31, 1998 and represented 48.4% of total operating expenses in fiscal
1998. Sales, general and administrative expenses for the six months ended June
30, 1999 were $5.2 million and represented 52.2% of total operating expenses for
the period. Approximately $1.8 million of the period-to-period increase was due
to sales, general and administrative personnel and payroll related expenses.
Approximately $1.5 million of the increase was attributable to an advertising
campaign.
Equity Related Compensation. Equity related compensation expenses consist
of the amortization of deferred stock compensation resulting from the grant of
stock options or shares of restricted stock at exercise or sale prices
subsequently deemed to be less than the fair value of the common stock on the
grant date. At June 30, 1999, deferred stock compensation, which is a component
of stockholders' equity, was $8.0 million. This amount is being amortized
ratably over the vesting periods of the applicable stock options and restricted
shares, typically four years, with 25% vesting on the first anniversary of the
grant date and the balance vesting 6.25% quarterly thereafter. We expect to
incur equity related compensation expense of at least $3.3 million in 1999, $2.9
million in 2000 and $2.6 million in 2001.
Interest Income (Expense), Net. Interest income (expense), net was $9,600
and ($144,000) for the period from inception (August 20, 1998) through December
31, 1998 and the six months ended June 30, 1999, respectively. Interest income
(expense), net consists of interest earned on our cash equivalent balances and
short-term investments, net of interest expense, and decreased during the six
months ended June 30, 1999 due to the issuance of the senior subordinated notes
and borrowings for the purchase of equipment.
NET OPERATING LOSSES AND TAX CREDIT CARRYFORWARDS.
As of June 30, 1999, we had approximately $7.0 million of state and federal
net operating loss carryforwards for tax reporting purposes available to offset
future taxable income. Such net operating loss carryforwards begin to expire in
2019, to the extent that they are not utilized. We have not recognized any
benefit from the future use of loss carryforwards since inception. Management's
evaluation of all the available evidence in assessing realizability of the tax
benefits of such loss carryforwards indicates that the underlying assumptions of
future profitable operations contain risks that do not provide sufficient
assurance to recognize the tax benefits currently. The net operating loss
carryforwards could be limited in future years if there is a significant change
in our ownership.
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<PAGE> 25
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through private
sales of our capital stock and issuance of senior subordinated notes totaling
approximately $55.9 million in net proceeds through June 30, 1999. We have also
financed our operations through borrowings on long-term debt agreements for the
purchase of capital equipment in the amount of $1.5 million. At June 30, 1999,
cash, cash equivalents and short-term investments totaled $45.1 million.
Cash provided by (used in) operating activities was $1,600 for the period
from inception (August 20, 1998) to December 31, 1998 and $(5.4) million for the
six months ended June 30, 1999. Net cash flows from operating activities in each
period reflect increasing net losses and to a lesser extent receivables and
prepaid expenses offset in part by increased accounts payable and accrued
expenses.
Cash used in investing activities was $1.7 million for the period from
inception (August 20, 1998) to December 31, 1998 and $5.3 million for the six
months ended June 30, 1999. Net cash used for investing activities in each
period reflect purchases of property and equipment, primarily computers and
servers for deployment and expansion of our network.
Cash provided by financing activities was $8.3 million for the period from
inception (August 20, 1998) through December 31, 1998 and $48.9 million for the
six months ended June 30, 1999. Cash provided by financing activities for these
periods was derived primarily from private sales of convertible preferred stock
and the issuance of 15% senior subordinated notes. We have an equipment line of
credit aggregating $1.5 million, collateralized by the property and equipment
which bears interest at the current 36 month treasury yield plus 275 basis
points, with a minimum interest rate of 7.0%. At June 30, 1999, approximately
$1.5 million was outstanding under this line of credit.
We believe that the net proceeds from this offering, together with our
current cash, cash equivalents and marketable securities, will be sufficient to
meet our anticipated cash needs for working capital and capital expenditures for
at least the next 12 months. If cash generated from operations is insufficient
to satisfy our liquidity requirements, we may seek to sell additional equity or
debt securities. If additional funds are raised through the issuance of debt
securities, these securities could have rights, preferences and privileges
senior to those accruing to holders of common stock, and the term of this debt
could impose restrictions on our operations. The sale of additional equity or
convertible debt securities could result in additional dilution to our
stockholders, and we cannot be certain that additional financing will be
available in amounts or on terms acceptable to us, if at all. If we are unable
to obtain this additional financing, we may be required to reduce the scope of
our planned technology, services or product development and sales and marketing
efforts, which could harm our business, financial condition and operating
results.
YEAR 2000 READINESS
Impact of Year 2000 Computer Problem. The year 2000 computer problem
refers to the potential for system and processing failures of date-related data
as a result of computer-controlled systems using two digits rather than four to
define the applicable year. For example, computer programs that have
time-sensitive software may recognize a date represented as "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculation causing disruptions of operations, including among other things,
a temporary inability to process transactions, send invoices or engage in
similar normal business activities.
State of Readiness of our Service. We have designed our network and our
service for use in the year 2000 and beyond and believe our network and service
are year 2000 ready. We are in the process of testing our network and our
service for year 2000 compliance and plan to complete this testing before
November 1999. To date, our tests of our service and our networks have not
revealed any significant year 2000 problems. Our network is generally integrated
into larger networks involving sophisticated hardware and software products
supplied by other vendors. Each of our customers' networks involves different
combinations of third party products. We cannot fully evaluate whether all of
their products are year 2000 ready. We may face claims based on year 2000
problems in other companies' products or based on issues arising from the
integration of multiple products within the overall network. Although no such
claims have been made against us, we may in
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<PAGE> 26
the future be required to defend our service in legal proceedings which could be
expensive regardless of the merits of such claims.
State of Readiness of our Internal Systems. Our business may be affected
by year 2000 issues related to noncompliant internal systems developed by us or
by third-party vendors. Our material third-party vendors have stated that they
are, or expect to be, year 2000 ready in a timely manner. We are not currently
aware of any material year 2000 problem relating to any of our material internal
systems. We are in the process of testing all such systems for year 2000
readiness and plan to complete this testing before November 1999. We are not
aware of any significant systems that contain embedded chips that are not year
2000 compliant. Our internal operations and business are also dependent upon the
computer-controlled systems of third parties such as our suppliers, customers
and other service providers. We believe that, absent a systemic failure outside
our control, such as a prolonged loss of electrical or telecommunications
service, year 2000 problems at third parties such as manufacturers, suppliers,
customers and service providers will not have a material impact on our
operations. If our manufacturers, suppliers, vendors, partners, customers and
service providers fail to correct their year 2000 problems, these failures could
result in an interruption in, or a failure of, our normal business activities
and services. If a year 2000 problem occurs, it may be difficult to determine
which party's products have caused the problem. These failures could interrupt
our operations and damage our relationships with our customers. Due to the
general uncertainly inherent in the year 2000 problem resulting from the
readiness of third-party manufacturers, suppliers and vendors, we are unable to
determine at this time whether year 2000 failures could harm our business and
our financial results. Our customers' purchasing plans could be affected by year
2000 issues if they need to expend significant resources of fix their existing
systems to become year 2000 ready. This situation may reduce funds available to
purchase our service.
Risks. The failure of our internal systems to be year 2000 ready could
temporarily prevent us from providing service to our customers, issuing invoices
and developing products and services and could require us to devote significant
resources to correct such problems. Due to the general uncertainty inherent in
the year 2000 computer problem, which results from the uncertainty of the year
2000 readiness of third-party suppliers and vendors, we are unable to determine
at this time whether the consequences of year 2000 failures will have a material
impact on our business, results of operations or financial condition.
Contingency Plan. We have not yet fully developed a contingency plan to
address all situations that may result if we experience significant year 2000
problems. We expect to complete this contingency plan later this year. As part
of our contingency plan, we intend to maintain a fully operational back-up site
and conduct network monitoring 24 hours per day during the transition period
from 1999 to 2000. Our back-up site will be located at one of our server sites
and be equipped with power generation and communication alternatives.
To date, we have incurred expenses of approximately $250,000 in connection
with our efforts to become year 2000 ready. We believe that our total expenses
for year 2000 readiness will be approximately $350,000.
MARKET RISK
Akamai does not use derivative financial instruments. We generally place
our marketable security investments in high credit quality instruments,
primarily U.S. Government obligations and corporate obligations with contractual
maturities of less than one year. We do not expect any material loss from our
marketable security investments and therefore believe that our potential
interest rate exposure is not material.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging activities.
We will adopt SFAS No. 133 as required by SFAS No. 137, "Deferral of the
Effective Date of the FASB Statement No. 133," in fiscal year 2001. We do not
expect the adoption of SFAS No. 133 to have an impact on our financial condition
or results of operations.
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BUSINESS
OVERVIEW
We provide a global delivery service for Internet content that improves Web
site speed and reliability and protects against Web site crashes due to demand
overloads. Our FreeFlow service, which we market to large businesses and other
businesses with an Internet focus, delivers our customers' Web content through a
worldwide server network by locating the content geographically closer to their
users. Using software that is based on our proprietary mathematical formulas, or
algorithms, we monitor Internet traffic patterns and deliver our customers'
content by the most efficient route available. Our service is easy to implement
and does not require our customers or their Web site visitors to make any
hardware or software modifications. Using our FreeFlow service, our customers
have been able to more than double the speed at which they deliver content to
their users and, in some instances, have been able to improve speeds by ten
times or more.
Our technology originated from research that our founders began developing
at the Massachusetts Institute of Technology in 1995. We introduced our FreeFlow
service commercially in April 1999. As of July 31, 1999, we had 900 Akamai
servers deployed in 15 countries across 25 telecommunications networks,
providing our customers with a guaranteed global Internet content delivery
service. Our customers, which operate many highly trafficked Web sites, include
Apple Computer, CNN Interactive, Discovery Channel Online, Infoseek Corp., J.
Crew.com, The Motley Fool and Yahoo!.
INDUSTRY BACKGROUND
The Internet has emerged as a global medium for commerce and
communications. International Data Corporation estimates that there were
approximately 142 million users of the Internet at the end of 1998 and that the
number of users will grow to 502 million by the end of 2002. The growth in the
number of users, together with the wealth of content and information available
on the Internet, have led to sharp increases in the daily traffic volume of Web
sites. Media Metrix estimated that the number of unique visitors to the top 25
Web sites increased from 224 million in June 1998 to 330 million in June 1999.
The ability of a Web site to attract users is in part based on the richness
of its content. Increasingly, Web site owners want to enhance their content by
adding graphics, such as photographs, images and logos, as well as deploying
newer technologies, such as video and audio streaming, animation and software
downloads. While richer content attracts more visitors, it also places
increasing demands on the Web site to deliver the content quickly and reliably.
As a result, Web site owners frequently elect to constrain the amount of rich
content on their Web sites, thus sacrificing the quality of the user experience
to maintain minimally acceptable performance levels.
The Internet was not originally designed to provide a rich multimedia
environment for individual Web site visitors. Since its origins as a United
States Department of Defense research project, the Internet has evolved into an
aggregation of many networks, each developed and managed by different
telecommunications service providers. As a result, the Internet, unaided, lacks
the ability to manage traffic between disparate networks to find the optimal
route to deliver content. Congestion or transmission blockages significantly
delay the information reaching the user. The storage of Web site information in
central locations further complicates Internet content delivery. As the volume
of information requested on a Web site increases, large quantities of repetitive
data traverse the Internet from that central location.
The combination of richer content and increasing volumes of Web site
visitors can lengthen significantly the time required for a user to download
information from a site and may cause the site to crash. These performance
problems are exacerbated during peak demand times, such as a breaking news
event, the release of an on-line movie trailer, the first day of ticket sales
for a hit film, an on-line special event or sudden demand for a new software
release. Because it is typically not cost-effective for a Web site to design its
infrastructure to handle relatively infrequent periods of "flash" or sudden
demand, periods of peak network traffic and surges in traffic volumes often
overwhelm the capacity of the site, causing long delays or complete site
outages. Delays and site crashes often cause user frustration and
disappointment. Jupiter Communications found that in
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June 1999, if response times at a particular Web site did not meet Internet
users' expectations, 37% of those users visited a substitute Web site to meet
their needs.
While various products and services have been developed to address
performance problems, they generally do not address the fundamental
architectural limitations of the Internet. For example, caching is a hardware
and/or software solution sold to Internet service providers to help them improve
network performance by placing electronic copies of selected Internet content on
geographically distributed servers on their own network. Caching is not,
however, designed to address the needs of Web site owners, and in particular to
deliver their content with high performance and reliability across the multiple
networks that comprise the Internet. Outsourcing Web server management to
hosting companies enables Web sites to add server capacity as needed and
increase server reliability. However, hosting does not address the transmission
disruption problems that can arise as data leave the hosting company's servers
and traverse the public network to the user. Broadband services are being
deployed to increase the speed of a user's connection to the Internet,
addressing the problems that occur in what is commonly known as the "last mile."
While these services increase bandwidth in the last mile, they do not address
the content delivery problems that occur when congestion overwhelms a Web site
or specific points across the Internet.
To serve the increasing volumes of traffic on the Internet and, at the same
time, enhance the user experience with increased graphic, video and audio
content, Web sites require content delivery services that can provide rich
content to users, enhance Web site response times and avoid delays and outages
caused by peak demand and public network congestion. These services must be not
only fast, reliable and easy to implement, but also capable of delivering rich
content that is continually updated. In addition, these services may be
cost-effective to the customer only if they do not require significant capital
or labor expenditures and can be implemented at a cost that is based on actual
usage.
THE AKAMAI SOLUTION
Akamai provides a content delivery service that allows Web sites to
accelerate the delivery of rich content to Internet users, improve reliability
and handle peak crowds. To use our service, customers identify and tag portions
of their Web site content that require significant amounts of bandwidth, such as
advertising banners, icons, graphics and software downloads. These tagged items
are delivered over our server network. When users request this content, which we
call "Akamaized" content, our FreeFlow service routes the request to the server
that is best able to deliver the content most quickly based on the geographic
proximity, performance and congestion of all available servers on our network.
Our network has the following capabilities:
- Real-time Internet monitoring, which enables our servers to monitor in
real-time the performance of our network and communicate the information
to other servers in our network;
- Dynamic server load management, which enables each server to react to
Internet and server congestion, overloads and outages and respond by
rerouting traffic around problems; and
- Internet user connection management, which enables each server to map the
geographic location of users so that content is delivered to each user
from our most efficient server.
These capabilities enable our global network to provide delivery of Web content
through the optimal route without relying on any central point of control.
The key benefits of our solution include:
Faster Content Delivery. FreeFlow can more than double the speed at which
Web sites can deliver Web content to Internet users and, in some cases, has
improved speeds by ten times or more. In addition, by using our service,
customers can deliver more graphics, video, audio, animation, software downloads
and other rich content without compromising the performance of their Web sites.
The ability to improve the speed of a Web site and increase the use of rich
content can result in an enhanced user experience and longer Web site visits,
which can translate into greater advertising and e-commerce revenue for our
customers.
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Superior Reliability. The underlying technology in our FreeFlow service
enables us to monitor the performance of our global network 24 hours a day,
seven days a week, 365 days a year. We route traffic around network bottlenecks
or outages, delivering content in an optimal manner while avoiding delays and
downtime.
Peak Demand Protection. Traditional Web site architectures support a
finite number of users. It is costly to upgrade Web sites to accommodate
sporadic peak demand. Our service enables a customer to use the extensive
capacity of our global server network and thus eliminate the need for a Web site
to incur significant capital or labor expenditures to design an infrastructure
to handle peak demand.
Global Reach. We have implemented our service on our global network of
over 900 servers deployed in 15 countries across 25 telecommunications networks.
Compelling Cost Proposition. Our customers can use our service without any
up-front investment in hardware or software. We offer our service under
pay-for-use contracts based on the amount of Internet content delivered. To
further reduce costs, our customers receive volume discounts as their usage
increases. We thus provide our customers with a scalable approach to content
delivery without the capital investment and increasing cost per user typically
associated with equipment-based alternatives.
Ease of Implementation. Our service forms a transparent layer on the
Internet between our customer's Web site and visitors accessing that site.
Through our easy-to-use FreeFlow Launcher software, our customers can quickly
tag the objects to be delivered over our network and begin to implement our
service. Customers can continuously update or modify their Web site content
without affecting site performance. Moreover, our service does not require that
the customer modify its computer hardware or software.
STRATEGY
Our goal is to capitalize on our proprietary technology and leading market
position to establish a new industry standard for the delivery of Web content to
Internet users. To accomplish this goal, we are pursuing a strategy built on the
following initiatives:
Target Leading Web Sites Across a Broad Spectrum of Internet
Categories. We commercially introduced our FreeFlow service in April 1999 and
have attracted as customers three of the world's top six most heavily trafficked
Web sites, as reported by Media Metrix for June 1999. We are seeking to further
extend our penetration into leading Web sites across a broad spectrum of
Internet categories, including media, entertainment, financial services and
e-commerce. We are expanding our direct sales force to target Web sites in these
categories. We are also developing partner programs with companies that have
influence with Web site owners, such as Web design firms and systems integrators
who can promote our service to their customers.
Further Expand Our Worldwide Network. We plan to continue to expand our
network to increase capacity and improve performance. By adding servers, we can
increase the number of routes through which we can deliver Web content and thus
shorten the distance between our servers and Internet users. We have a
three-part strategy for expanding our network. First, we are placing our servers
in secure data centers served by Internet service providers that provide us with
bandwidth to deliver content from our servers to Internet users. Second, through
our FreeFlow ISP program, we provide use of our servers to smaller Internet
service providers who, in turn, provide us with rack space for our servers and
bandwidth to deliver content. Finally, we are planning to expand our network by
integrating our technology with network infrastructure products such as routers,
switches and caches, to facilitate implementation of our service by Internet
service providers.
Establish Akamai as a Leading Brand for Content Delivery. We plan to
establish Akamai as the industry standard for providing Internet content
delivery. We intend to promote our brand to create strong penetration among all
top Internet content providers. We believe that this strong brand awareness,
combined with our existing global network of servers and customer base of
leading Internet-centric companies, will help to create a competitive advantage
in our market.
Extend Our World-Class Technology Leadership. We believe that Akamai has
established a reputation as a technological leader in Internet content delivery.
We plan to continue to enhance our current technologies, and develop new
technologies, that can improve the performance and reliability of our network
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and expand the features and benefits that we can offer through our service. We
intend to leverage our technology to introduce innovative services and products
that take advantage of our worldwide network and our distributed computing
services capacity. To maintain our technological leadership, we plan to continue
to invest significant time and resources in recruiting computer scientists,
engineers and software developers with expertise in the areas of mathematics,
computer science and networking.
Leverage Our Services Model. We are creating a business model that will
generate a stream of recurring revenues, while maintaining relatively low
capital and bandwidth costs. We believe that we can maintain relatively low
capital costs because our service is based on software that runs on low cost,
off-the-shelf servers and we use the existing network infrastructure of
telecommunications providers instead of building our own fiber- or
satellite-based network infrastructure. In addition, we believe that we can
maintain relatively low bandwidth costs because we buy in large volumes and our
costs are based primarily on usage levels. Our recurring revenue model is based
on offering services to our customers that provide for payment based on the
amount of Internet content delivered through our service. As a result, our
revenue base has the potential to grow as the number of Internet users
increases, as these users access the Internet more often and for longer periods,
and as more Web sites incorporate richer content. We believe that the relatively
low capital costs required to build and maintain our network, together with the
relatively low costs that we are required to pay for bandwidth used on our
network, should enable us to leverage this recurring revenue base.
Build Strategic Alliances to Strengthen Market Position. We intend to
continue to develop strategic alliances with other Internet-related companies to
accelerate market acceptance of our services. To date, we have entered into
three major strategic alliances. In June 1999, we entered into a strategic
alliance with Apple Computer to integrate Apple's QuickTime TV network,
QuickTime 4 Player and QuickTime Streaming Server with our global Internet
content delivery service. In August 1999, we entered into a strategic alliance
with Cisco Systems to, among other things, integrate Akamai technology with
Cisco's networking products. In September 1999, we entered into a strategic
alliance with Microsoft Corporation to, among other things, integrate
Microsoft's streaming media and Windows Server operating systems technologies
into the Akamai network. We will continue to pursue select relationships with
other Internet technology providers, Internet hosting companies, Internet
service providers, Web site developers and systems integrators. We believe these
relationships will accelerate the proliferation of our technology and services,
increase our brand recognition and improve access to our target customer base.
FREEFLOW SERVICE
SERVICE
Our FreeFlow service provides for the delivery of Web site content to
Internet users. When implementing our FreeFlow service, our customers select
bandwidth intensive portions of their Web sites, such as complex graphics,
advertisements, logos, software downloads and pictures, which are delivered to
users over our network. We have recently begun to introduce commercially a
service that enables the delivery of streaming audio and video over our network.
FreeFlow customers pay only for the Internet content delivered through our
service. Monthly usage charges are based on megabits per second of content
delivered. Customers commit to pay for a minimum usage level over a fixed
contract term, and pay additional fees when usage exceeds this commitment.
Monthly prices currently begin at $1,995 per megabit per second, with discounts
available for volume usage.
Our FreeFlow service is backed by Akamai's 100% proof-of-performance
guarantee. Through our guarantee we promise that:
- Our service will be available to deliver content 24 hours a day, seven
days a week, 365 days a year;
- Our service will deliver content faster than the customer can do it
without our service;
- If we fail to deliver on either of these two promises on any day, the
customer does not pay for the service for that day.
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TECHNOLOGY
The FreeFlow service incorporates the following Akamai technologies:
Akamaized URLs. Akamai's technology changes the way in which content on a
Web page is delivered to an Internet user without interrupting the normal data
flow. Normally, when a user clicks on any Web page, the Web site returns a
Hypertext Markup Language, or HTML, text file containing text and formatting
instructions which the browser uses to display the page. This text file also
contains the Universal Resource Locators, or URLs, of non-text objects on the
page, such as photographs, banner advertisements, graphics and software
downloads.
Akamai's customers identify which of their Web objects are to be delivered
over Akamai's network. The customer then runs a software utility provided by
Akamai, called FreeFlow Launcher, which searches for the URLs of the selected
objects and tags them with a special code. We refer to this tagged content as
"Akamaized" content. This modification transforms each URL for Akamaized content
into an "ARL," or Akamai Resource Locator. The result is that when a user's
browser downloads an HTML file containing ARLs of Web objects for that page, the
browser is automatically pointed to Akamai's network to retrieve those objects.
Our process does not require any modification to the browser or other personal
computer configuration changes. While Akamai can serve the HTML as well as the
objects embedded in it, our customers typically choose to serve the HTML
themselves to maintain direct contact with the user. Thus, even while users are
receiving Akamaized content from our servers, our customers can continue to
count Web site visitors, track user demographics and dynamically assemble Web
page content, including the insertion of targeted advertising and other
personalized content.
Domain Name Servers. The Internet relies on a distributed hierarchical
database, called the Domain Name System, or DNS, to translate Web site names
into numerical Internet Protocol, or IP, addresses. Akamai employs tiers of DNS,
or name, servers that interact seamlessly with the Internet's standard DNS
servers and intelligently direct a user's request for Web site content toward
the most efficient Akamai server to deliver the requested content. When an
Internet user requests a page containing Akamaized content, the user's browser
asks a Domain Name Server to find an IP address for the Akamai network. The DNS
automatically directs the query to one of Akamai's top-level DNS servers rather
than to the central Web site. The Akamai top-level DNS servers use proprietary
mapping software to determine the approximate location of the user in the
Internet. The top-level DNS server then refers the user's request to an Akamai
low-level DNS server that is responsible for traffic near the user. The
low-level DNS server then answers with the IP addresses of a group, or "region,"
of Akamai servers that can deliver the desired content to the user most quickly
and reliably based on the geographic proximity, load and availability of all
servers on the network. The low-level DNS servers use up-to-the-second
information about Internet and server conditions to make the best routing
decision for each user.
Server Load Management. Once Akamai's servers determine the optimal region
for serving content to a user at a given moment, a simple process for selecting
an individual server for such delivery would be to "round-robin" all requests to
each content server in that region. However, such an approach would require that
all objects reside on every content server, resulting in poor use of system
resources and poor load balancing. Instead, Akamai uses proprietary algorithms
to balance the loads of all servers within each region and ensure that objects
reside in the minimum number of servers required to deliver optimal performance.
Real-Time Monitoring. Akamai's FreeFlow service performs real-time
monitoring of its own servers and of the Internet to make certain that content
is delivered to users with the best performance and reliability. A key design
principle of Akamai's system is the use of distributed control. Therefore, if
any computer, data center or portion of the Internet fails, the FreeFlow service
will continue operating.
FreeFlow constantly monitors the performance of connections between various
locations around the Internet and our regions. We use numerous types of network
information to determine the performance of these connections. The result is a
"map" of the optimal Akamai region for each location at that point in time.
Akamai rebuilds this map periodically to reflect changing conditions.
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<PAGE> 32
Real-time monitoring also ensures reliability. A region is suspended if the
data center in which Akamai's servers are located fails or is performing poorly.
However, even when this disruption occurs, the FreeFlow service continues to
function. To ensure fault tolerance, Akamai deploys back-up low-level DNS
servers in each region that physically reside in separate data centers. These
back-up DNS servers automatically direct users to servers in alternate regions
unaffected by the remote outage.
To ensure reliability against the failure of an individual server, each
server is assigned a "buddy" server within a region. Buddy servers query one
another every second to sense all failures. If a server's buddy does not respond
to a query, that server takes over its buddy's IP address and serves all content
requested of the buddy.
STRATEGIC ALLIANCES
We have strategic alliances with Apple Computer, Cisco Systems and
Microsoft Corporation and intend to enter into additional strategic alliances
with leading technology companies to accelerate market acceptance of our
services. We believe strategic alliances can accelerate market acceptance of our
technology and services, increase our brand recognition and improve access to
our target customer base.
APPLE COMPUTER
In June 1999, we entered into a strategic alliance with Apple Computer to
improve the delivery of streaming media over the Internet. Under the agreement,
we will integrate our global Internet content delivery service and Apple's
QuickTime TV network, QuickTime 4 Player and QuickTime Streaming Server. The
combined technologies are designed to give Apple Macintosh and Microsoft Windows
users worldwide access to fast, reliable, high-resolution streaming services
through e-commerce, media and other Web sites.
Under the terms of the strategic alliance, Apple has purchased our FreeFlow
service and we have agreed to be the exclusive network provider to Apple for
QuickTime TV. We have also agreed to cause our network to meet minimum capacity
levels to support streaming media. Apple has also designated us as the preferred
network provider to Apple customers developing streaming QuickTime content.
Apple purchased shares of our Series D convertible preferred stock for an
aggregate purchase price of approximately $12.5 million in June 1999.
CISCO SYSTEMS
In August 1999, we entered into a strategic alliance with Cisco Systems to
enhance and jointly develop new content routing, switching and caching
technologies to improve the performance of Internet content delivery. Under the
strategic alliance, Cisco and Akamai have agreed to jointly develop protocols
and algorithms designed to enhance content-based routing and switching
technologies within Cisco's infrastructure to optimize our Internet content
delivery service. In addition, Cisco has agreed to integrate our Internet
content delivery technology into its networking technology. We have also agreed
to explore new technologies to enable next-generation switching designed to
dynamically adapt to changing network conditions. Under the agreement, each of
Akamai and Cisco has also agreed to joint marketing arrangements, including the
promotion to its customers of the use of the other's products and services,
whenever commercially reasonable.
Cisco purchased shares of our Series E convertible preferred stock for an
aggregate purchase price of approximately $49.0 million in August 1999.
MICROSOFT CORPORATION
In September 1999, we entered into a strategic alliance with Microsoft
Corporation to integrate Microsoft technologies into the Akamai network. As part
of the agreement, we intend to integrate Microsoft Windows Media(TM)
Technologies with our global Internet content delivery service, and we will
create a version of our software to support our FreeFlow service that works on
Microsoft Windows Server operating systems. In addition, Microsoft's Streaming
Media Division has agreed to become one of our Internet content delivery service
customers.
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<PAGE> 33
Under the terms of our agreement with Microsoft, we have agreed to modify
our server software to operate on the Microsoft Windows Server operating systems
platform and to support Microsoft's streaming media format. In addition, we will
explore with Microsoft other possible integration and support opportunities.
Microsoft purchased shares of our Series F convertible preferred stock for
an aggregate purchase price of approximately $15.0 million in September 1999.
CUSTOMERS
We introduced our FreeFlow service commercially in April 1999. Our customer
base spans a broad spectrum of Internet categories. The following is a
representative list of our customers.
<TABLE>
<S> <C>
INTERNET-CENTRIC
About.com
GO Network and Infoseek Corp.
Looksmart
Monster.com
Yahoo!
MEDIA, ENTERTAINMENT & TECHNOLOGY
Apple Computer
Artisan Entertainment
CNN Interactive
Discovery Channel Online
Hard Rock Hotel
E-COMMERCE
Gomez.com
HomePortfolio.com
J.Crew.com
Wrenchead.com
FINANCIAL SERVICES
CCBN
The Motley Fool
</TABLE>
Sales to these customers represented more than 90% of our revenue for the
six months ended June 30, 1999.
The following case studies illustrate how some of our customers are using
our service.
APPLE COMPUTER
Apple chose Akamai as its exclusive network provider for the launch of
Quicktime TV (QTV) to build a global network that delivers high quality
streaming video and audio over the Internet. Apple has also used Akamai's global
network to deliver copies of QuickTime and Mac(R) OS 8.6 software upgrades as
well as the Star Wars: Episode I The Phantom Menace movie trailer to Apple
customers around the world.
YAHOO!
Yahoo! is one of the most visited Web sites on the Internet. In the second
quarter of 1999, Yahoo! began broad use of our FreeFlow service for fast and
reliable delivery of various images and Web site content, including banner
advertisements and logos. Yahoo! moved the majority of its advertising banners
onto our network after tests conducted using diagnostics from Keynote Systems
indicated our service improved Yahoo!'s performance by more than 50%.
LOOKSMART
As a leading Web directory, LookSmart provides search results across more
than 1 million unique URLs and over 70,000 individual categories. Looksmart is
dedicated to improving Web site performance and views Akamai as a major
contributor in this area. Since June 1999, the average download time for a
typical LookSmart Web page has been cut in half. LookSmart, which has now
implemented Akamai's service, relies on us as a key component for maintaining
Web site speed and reliability for its growing end user base.
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THE MOTLEY FOOL
The Motley Fool is a leading online forum designed to give to readers
financial advice that they can understand and to discuss ways to make investment
and personal financial decisions. The Motley Fool has been using our service
since 1999 and has experienced faster Web download times for its customers based
on a report by Keynote Systems. The Motley Fool is aimed at educating, amusing
and enriching the individual investor, has been able to off load approximately
90% of its site's content to the servers from Akamai's network. In the month of
August 1999, Akamai served 260 million hits for The Motley Fool's Web site
enabling the Web site to decrease its bandwith requirements on servers,
switches, load balancers and routers.
SALES, SERVICE AND MARKETING
We currently sell our service primarily through a direct sales force. Our
plan is to continue to pursue heavily trafficked Web sites through our direct
sales force and to penetrate other markets through indirect distribution
channels. As of August 11, 1999, we had 12 employees in our sales and
distribution organization. Currently our sales force is actively targeting
primarily domestic companies, focusing on the 300 Web sites that have the
greatest number of visitors, Fortune 100 companies and other companies with
large operations in the United States.
In addition to our direct sales efforts, we are developing our partner
program with design and system integration firms and consultants. We encourage
these partners to recommend the Akamai solution to their customers as part of
their design, integration and consulting work for those customers. As of August
11, 1999, we had three employees in our partner program group.
Our technical consulting group directly supports our sales and distribution
efforts by providing technical consulting and integration assistance to our
current and prospective customers. As of August 11, 1999, we had 12 employees in
our technical consulting group.
We believe that a high level of customer service and support is critical to
the successful marketing and sale of our products and services. We are building
a comprehensive service and support organization to meet the needs of our
customers. As of August 11, 1999, we had six employees in our customer service
and support organization. We are seeking to hire additional customer service and
support personnel as our customer base grows and as we introduce new products
and services.
To support our sales efforts and actively promote the Akamai brand name, we
conduct comprehensive marketing programs. Our marketing strategies include an
active public relations campaign, print advertisements, online advertisements,
trade shows, strategic partnerships and on-going customer communications
programs. We focus our marketing efforts on business and trade publications,
online media outlets, industry events and sponsored activities. We participate
in a variety of Internet, computer and financial industry conferences and
encourage our officers and employees to pursue speaking engagements at these
conferences. As of August 11, 1999, we had 10 employees in our marketing
organization.
NETWORK DEPLOYMENT
As of July 31, 1999, our network was comprised of 900 servers in 15
countries across 25 telecommunication networks. Some of the telecommunications
networks across which Akamai servers are deployed include: AboveNet
Communications, AT&T, Digex, Exodus Communications, GTE Internetworking,
interNode networks, Korea Telecom, Level 3 Communications, OzEmail Limited,
Pacific Internet, PSINet, UUNET Technologies, Verio, VisiNet and WonderNet.
Most of our servers are currently deployed in secure data centers served by
major domestic and international Internet service providers. These Internet
service providers provide bandwidth to deliver content from our servers to
Internet users.
We also deploy our servers at smaller and medium-sized domestic and
international Internet service providers through our FreeFlow ISP program. Under
this program, we offer use of our servers to Internet service providers. In
exchange, we do not pay for rack space to house our servers or bandwidth to
deliver
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content from our servers to Internet users. By hosting Akamai servers, Internet
service providers obtain access to popular content from the Internet that is
served from the Akamai network. As a result, when this content is requested by a
user, the Internet service provider does not need to pay for the bandwidth
otherwise necessary to retrieve the content from the originating Web site.
We are planning to expand our network by integrating our technology with
networking and other network infrastructure products, such as routers and
switches, to facilitate implementation of our service by Internet service
providers.
RESEARCH AND DEVELOPMENT
Akamai's beginnings trace to a challenge that Tim Berners-Lee, the inventor
of the World Wide Web, posed to his colleagues at MIT in early 1995 to invent a
fundamentally new and better way to deliver Internet content to users. F.
Thomson Leighton, an MIT Professor of Applied Mathematics and founder of Akamai,
recognized that a solution to Web congestion could be found in applied
mathematics and algorithms. Dr. Leighton believed that algorithms could be used
to create a network of distributed servers that could communicate as a system
and could deliver content without depending on a centralized controlling core.
Dr. Leighton, together with Daniel Lewin, one of his graduate students at MIT,
and several other researchers with expertise in computer science and data
networking, undertook the development of the mathematical algorithms necessary
to handle the dynamic routing of content.
We believe that strong product and service development capabilities are
essential to enhancing our core technologies, developing new applications for
our technology and maintaining our competitiveness. We have invested and intend
to continue to invest a significant amount of human and financial resources in
Akamai's research and development organization.
As of August 11, 1999, we had 47 employees devoted to our research and
development efforts. Our research and development organization is comprised of
the following groups:
- The server group, which develops and maintains the server software used
in our FreeFlow service;
- The mapping group, which develops techniques for monitoring and routing
Internet traffic;
- The performance analysis group, which develops tools to test and monitor
the performance of systems;
- The graphic user interface group, which builds programs that allow our
customers and network operations center personnel to graphically view the
status and performance of our network in real time; and
- The algorithm design and implementation groups, which design and
implement the algorithms that operate our FreeFlow service and its
derivative technologies.
We are focusing our research and development efforts on enhancing our
FreeFlow service and building on our technology for our new services under
development, including streaming media. From our inception in August 1998
through June 30, 1999, our engineering and development expenses were
approximately $2.3 million. We expect to continue to commit significant
resources to research and development in the future. To date, all engineering
and development expenses have been expensed as incurred.
COMPETITION
The market for Internet content delivery services is new, rapidly evolving
and intensely competitive. We expect competition to increase both from existing
competitors and new market entrants for various components of our service. We
compete primarily on the basis of:
- Performance of our service, including speed of delivery, reliability,
peak crowd protection, and global content delivery capabilities;
- Ease of implementation and use of our service;
- Types of content delivered; and
- Price.
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We compete primarily with companies offering products and services that
address Internet performance problems, including companies that provide Internet
content delivery services, streaming content delivery services and
equipment-based solutions to Internet performance problems, such as load
balancers and server switches.
Our competitors may be able to respond more quickly than we can to new or
emerging technologies and changes in customer requirements. Some of our current
or potential competitors may bundle their products with other software or
hardware in a manner that may discourage Web site owners from purchasing
products we offer or Internet service providers from being willing to install
our servers.
Increased competition could result in price reductions, fewer customer
orders, reduced gross margins and loss of market share, any of which could
materially and adversely affect our business, financial condition and
operations.
PROPRIETARY RIGHTS AND LICENSING
Our success and ability to compete are dependent on our ability to develop
and maintain the proprietary aspects of our technology and operate without
infringing on the proprietary rights of others. We rely on a combination of
patent, trademark, trade secret and copyright laws and contractual restrictions
to protect the proprietary aspects of our technology. These legal protections
afford only limited protection for our technology. We have no patents and we
have not filed any patent applications with the United States Patent and
Trademark Office with respect to our Internet content delivery service. We seek
to limit disclosure of our intellectual property by requiring employees and
consultants with access to our proprietary information to execute
confidentiality agreements with us and by restricting access to our source code.
Due to rapid technological change, we believe that factors such as the
technological and creative skills of our personnel, new product developments and
enhancements to existing products are more important than the various legal
protections of our technology to establishing and maintaining a technology
leadership position.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. The laws of many countries do not protect our
proprietary rights to as great an extent as do the laws of the United States.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. Any such resulting litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on our business,
operating results and financial condition. There can be no assurance that our
means of protecting our proprietary rights will be adequate or that our
competitors will not independently develop similar technology. Any failure by us
to meaningfully protect our property could have a material adverse effect on our
business, operating results and financial condition.
In October 1998, we entered into a license agreement with MIT under which
we were granted a royalty-free, worldwide right to use and sublicense the
intellectual property rights of MIT under various patent applications and
copyrights relating to Internet content delivery technology. We cannot predict
whether any of these applications will result in any issued patents or, if
patents are issued, any meaningful protection. Some of our technology is based
on technology licensed from MIT. The license has been granted to us on an
exclusive basis, but is subject to the rights of the U.S. government to use the
licensed intellectual property in government-funded inventions. As part of the
license agreement, MIT retained the right to use the licensed intellectual
property for non-commercial, teaching and educational purposes. In connection
with the license agreement, we issued 682,110 shares of our common stock to MIT
in October 1998. The license agreement is irrevocable, but MIT may terminate the
agreement if we cease our business due to insolvency or if we materially breach
the terms of the license agreement.
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EMPLOYEES
As of August 11, 1999, we had a total of 130 full-time employees and 13
part-time employees. We expect to hire additional employees through 1999.
Our future success will depend in part on our ability to attract, retain
and motivate highly qualified technical and management personnel, for whom
competition is intense. Our employees are not represented by any collective
bargaining unit. We believe our relations with our employees are good.
BOARD OF ADVISORS
Our board of advisors consists of individuals with recognized expertise in
the Internet, networking, science and entertainment fields. Members of our board
of advisors provide guidance to our management and board of directors about
technology standards and marketplace needs to assist us with our business and
strategy. We intend to hold one or two meetings a year of our board of advisors.
In addition, we consult with members of our board of advisors from time to time
by telephone.
Tim Berners-Lee holds the 3Com Founders chair at the Laboratory for
Computer Science at MIT. He directs the World Wide Web Consortium, an open forum
of companies and organizations with the mission to lead the Web to its full
potential. In 1989, Dr. Berners-Lee invented the World Wide Web.
Gil Friesen is a director of the Digital Entertainment Network. Previously,
Mr. Friesen served as president of A&M Records. Mr. Friesen co-founded Classic
Sports Network, a cable network sold to ESPN in 1997.
Sam Gassel is chief systems engineer for CNN Internet Technologies. He has
been the architect of CNN's Internet systems since the launch of CNN.com in
1995. Before joining CNN/Turner Broadcasting in 1994, Mr. Gassel worked in
Academic Computing at the University of Chicago.
Ron Graham is a professor of Computer and Information Sciences at the
University of California, San Diego. Dr. Graham is also a chief scientist
emeritus for AT&T Labs and was president of the American Mathematical Society
from 1993 to 1995.
Amos Hostetter is the former chief executive officer of MediaOne. Mr.
Hostetter co-founded Continental Cablevision in 1963 and served as its chairman
and chief executive officer prior to its merger with MediaOne Group in 1996. Mr.
Hostetter is currently chairman of Pilot House Associates, LLC.
Jan Hier-King is the head of enterprise technology of Charles Schwab &
Co.'s electronic brokerage unit. Ms. Hier-King led the start-up of the
technology organization supporting the institutional business at Charles Schwab.
Daniel Smith is president and chief executive officer of Sycamore Networks,
Inc. Prior to joining Sycamore, Mr. Smith was president and chief executive
officer of Cascade Communications and a member of its board of directors.
Cascade Communications was acquired by Ascend Communications in June 1997.
Peter Solvik is senior vice president and chief information officer of
Cisco Systems. At Cisco Systems, Mr. Solvik is responsible for the company's
worldwide use of information technology, including Internet-based customer
service and electronic commerce tools. He is also responsible for the Internet
Business Solutions Group at Cisco Systems.
Ralph Terkowitz is chief information officer of The Washington Post
Company. Mr. Terkowitz founded and in 1996 became chief executive officer of
Digital Ink Co., the electronic publishing subsidiary of The Washington Post
Company.
Members of the board of advisors generally receive options to purchase our
common stock under our 1998 stock incentive plan.
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FACILITIES
Our headquarters are currently located in approximately 15,988 square feet
of leased office space located in Cambridge, Massachusetts. The lease for
portions of this space terminates at various times from April 2003 to May 2004.
We have also entered into a lease for 12,168 square feet of office space in San
Mateo, California for sales and research and development personnel.
We have entered into a lease for approximately 107,088 square feet of space
in a second office building in Cambridge, Massachusetts. We plan to relocate our
entire office and operations to the new location. The lease is for a seven-year
term commencing on January 1, 2000, with certain expansion options.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of Akamai, and their ages and
positions as of September 22, 1999 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
George H. Conrades(1)...................... 60 Chairman of the Board of Directors and
Chief Executive Officer
Paul Sagan................................. 40 President and Chief Operating Officer
F. Thomson Leighton(2)..................... 42 Chief Scientist and Director
Daniel M. Lewin............................ 29 Chief Technology Officer and Director
Timothy Weller............................. 34 Chief Financial Officer and Treasurer
Robert O. Ball III......................... 41 Vice President, General Counsel and
Secretary
Earl P. Galleher III....................... 39 Vice President of Sales and Distribution
David Goodtree............................. 37 Vice President of Marketing
Steven P. Heinrich......................... 55 Vice President of Human Resources
Bruce M. Maggs............................. 36 Vice President of Research and Development
Jonathan Seelig............................ 27 Vice President of Strategy and Corporate
Development
Peter Danzig............................... 39 Vice President of Technology
Arthur H. Bilger(2)........................ 46 Vice Chairman of the Board of Directors
Todd A. Dagres(1).......................... 39 Director
Terrance G. McGuire(1)..................... 43 Director
Edward W. Scott(1)(2)...................... 36 Director
</TABLE>
- ------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Set forth below is certain information regarding the professional
experience for each of the above-named persons.
George H. Conrades has served as Chairman and Chief Executive Officer of
Akamai since April 1999 and as a director since December 1998. Mr. Conrades has
also been a venture partner of Polaris Venture Partners, Inc., an early stage
investment company, since August 1998. From August 1997 to July 1998, Mr.
Conrades served as Executive Vice President of GTE and President of GTE
Internetworking, an integrated telecommunication services firm. Mr. Conrades
served as Chairman of the Board of Directors and Chief Executive Officer of BBN
Corporation, a national Internet services provider and Internet technology
research and development company, from January 1994 until its acquisition by GTE
Internetworking in July 1997. Prior to joining BBN Corporation, Mr. Conrades was
an IBM Senior Vice President and a Member of IBM's Corporate Management Board.
Mr. Conrades is currently a director of CBS and Infinity Broadcasting, a media
company. He is also an interim member of the board of ICANN, the Internet
Corporation for the Assignment of Names and Numbers, a non-profit organization
established by the United States government to oversee the administration of
Internet names and addresses.
Paul Sagan joined Akamai in October 1998 as Vice President and Chief
Operating Officer and has served as President and Chief Operating Officer since
May 1999. Mr. Sagan was the Senior Advisor to the World Economic Forum, a
Geneva, Switzerland-based organization, from July 1997 to August 1998. From
December 1995 to December 1996, Mr. Sagan was the President and Editor of Time
Inc. New Media, an affiliate of Time Warner, Inc., a global media and
entertainment company. From September 1992 to December 1995, Mr. Sagan served as
a vice president and senior vice president of Time Warner Cable, a division of
Time Warner, Inc.
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F. Thomson Leighton co-founded Akamai and has served as Chief Scientist and
a director since August 1998. Dr. Leighton has been a professor of Mathematics
at MIT since 1982 and has served as the Head of the Algorithms Group in MIT's
Laboratory for Computer Science since its inception in 1996. Dr. Leighton is
currently on sabbatical from MIT. Dr. Leighton is a former two-term chair of the
2,000-member Association of Computing Machinery Special Interest Group on
Algorithms and Complexity Theory, and a former two-term Editor-in-Chief of the
Journal of the ACM, one of the nation's premier journals for computer science
research.
Daniel M. Lewin co-founded Akamai and has served as a director since August
1998. Mr. Lewin served as President of Akamai from August 1998 to May 1999 and
as Chief Technology Officer since May 1999. Since July 1996, Mr. Lewin has been
a Ph.D. candidate in the Algorithms Group at MIT's Laboratory for Computer
Science. From May 1994 to May 1996, Mr. Lewin worked at IBM's research
laboratory in Haifa, Israel as a full-time Research Fellow and Project Leader
responsible for the development and support of IBM's Genesys system.
Timothy Weller joined Akamai in August 1999 as Chief Financial Officer.
From July 1993 until August 1999, Mr. Weller was an equity research analyst at
Donaldson, Lufkin & Jenrette, an investment banking firm.
Robert O. Ball III has served as Vice President and General Counsel of
Akamai since July 1999 and has served as Secretary since August 1999. From June
1996 until August 1999, Mr. Ball was a Partner and Chair of the Electronic
Commerce Practice Team at Alston & Bird LLP, a law firm. From 1991 until May
1996, Mr. Ball was a Partner at Cashin, Morton & Mullins, a law firm.
Earl P. Galleher III has served as Vice President of Sales and Distribution
of Akamai since March 1999. From March 1996 until August 1998, Mr. Galleher was
employed with Digex, Inc., a national Internet carrier, where he served as Vice
President and General Manager from March 1996 to January 1997 and as the
President of the Web Site Management Division from January 1997 to August 1998.
From November 1991 to February 1996, Mr. Galleher served as Director of
Marketing at American Mobile Satellite Corporation, a mobile voice and data
service provider.
David Goodtree has served as the Vice President of Marketing since March
1999. From October 1994 to March 1999, Mr. Goodtree served as Group Director at
Forrester Research, Inc., an independent technology research firm. Prior to
joining Forrester Research, Inc., from October 1990 to September 1994, Mr.
Goodtree managed product development for MCI Communications Corporation, now
known as MCI WorldCom, Inc., a telecommunications company.
Steven P. Heinrich has served as Vice President of Human Resources of
Akamai since March 1999. Prior to joining Akamai, Mr. Heinrich established
Constellation Consulting, Inc., a human resources consulting firm specializing
in early stage, high technology businesses. From November 1979 to October 1997,
Mr. Heinrich served as the Vice President of Human Resources for BBN
Corporation.
Bruce M. Maggs joined Akamai in October 1998 as a Senior Research Scientist
and has served as Vice President of Research and Development since April 1999.
From September 1998 to January 1999, Dr. Maggs was a Visiting Associate
Professor of Computer Science at MIT. Dr. Maggs is currently on leave from his
appointment as Associate Professor of Computer Science at Carnegie Mellon
University, a position he has held since July 1997. From January 1994 until his
appointment as Associate Professor, Dr. Maggs was an Assistant Professor at
Carnegie Mellon. From September 1990 to December 1993, Dr. Maggs was a Research
Scientist at the NEC Research Institute, Inc., an institute which conducts
research in computer and physical sciences.
Jonathan Seelig co-founded Akamai in August 1998 and has served as Vice
President of Strategy and Corporate Development since that time. From January
1995 to September 1997, Mr. Seelig worked for ECI Telecom, Ltd., a provider of
digital telecommunications and data transmission systems to network service
providers. Mr. Seelig is presently on a leave of absence as an M.B.A. candidate
at MIT's Sloan School of Management.
38
<PAGE> 41
Peter Danzig joined Akamai in September 1999 as Vice President of
Technology. Prior to joining Akamai, from March 1997 to August 1999, Mr. Danzig
served as Chief Technology Officer for Network Appliance, Inc., a provider of
network data solutions. Mr. Danzig founded Internet Middleware Corporation, a
provider of web caching solutions, in May 1996 and served as its Chief
Technology Officer until it was acquired by Network Appliance in March 1997.
From January 1990 to May 1996, Mr. Danzig was an Assistant Professor of Computer
Science at the University of Southern California.
Arthur H. Bilger has served as a director of Akamai since November 1998 and
has served as Vice Chairman of the Board of Directors since August 1999. From
December 1994 until March 1997, Mr. Bilger was president, chief operating
officer and a member of the board of directors of New World Communications Group
Incorporated, an entity engaged in television broadcasting and production. From
August 1990 until December 1994, Mr. Bilger was a founding principal of Apollo
Advisors, L.P. and Lion Advisors, L.P., entities engaged in the management of
securities investments. Mr. Bilger is currently a director of Mandalay Resort
Group, an owner and operator of hotel casino facilities.
Todd A. Dagres has served as a director of Akamai since November 1998.
Since February 1996, Mr. Dagres has been a general partner of Battery Ventures,
a venture capital firm. From February 1994 to February 1996, Mr. Dagres was a
Principal and Senior Technology Analyst at Montgomery Securities, now known as
Banc of America Securities LLC, an investment bank and brokerage firm.
Terrance G. McGuire has served as a director of Akamai since April 1999.
Mr. McGuire is a founder and has been a general partner of Polaris Venture
Partners, Inc. since June 1996. Since 1992, Mr. McGuire has also been a general
partner of Burr, Egan, Deleage & Co., a venture capital firm.
Edward W. Scott has served as a director of Akamai since April 1999. Mr.
Scott is a founder and general partner of the Baker Communications Fund, a
communications private equity fund. He has been a general partner of that firm
since March 1996. From December 1990 until March 1996, Mr. Scott was a private
equity investor with the Apollo Investment Fund, L.P.
Each executive officer serves at the discretion of the board of directors
and holds office until his successor is elected and qualified or until his
earlier resignation or removal. There are no family relationships among any of
the directors or executive officers of Akamai. Each of the directors serve on
the board of directors pursuant to the terms of an agreement that will terminate
upon the closing of this offering.
ELECTION OF DIRECTORS
Following this offering, the board of directors will be divided into three
classes, each of whose members will serve for a staggered three-year term.
Messrs. Conrades and McGuire will serve in the class whose term expires in 2000;
Messrs. Leighton and Scott will serve in the class whose term expires in 2001;
and Messrs. Bilger, Dagres and Lewin will serve in the class whose term expires
in 2002. Upon the expiration of the term of a class of directors, directors in
such class will be elected for three-year terms at the annual meeting of
stockholders in the year in which such term expires.
COMPENSATION OF DIRECTORS
We reimburse directors for reasonable out-of-pocket expenses incurred in
attending meetings of the board of directors. We may, in our discretion, grant
stock options and other equity awards to our non-employee directors from time to
time pursuant to our 1998 stock incentive plan. We have not yet determined the
amount and timing of such grants or awards.
BOARD COMMITTEES
The board of directors has established a compensation committee and an
audit committee. The compensation committee, which consists of Messrs. Conrades,
Dagres, McGuire and Scott, reviews executive salaries, administers our bonus,
incentive compensation and stock plans, and approves the salaries and other
benefits of our executive officers. In addition, the compensation committee
consults with our management regarding our pension and other benefit plans and
compensation policies and practices.
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<PAGE> 42
The audit committee, which consists of Messrs. Bilger, Leighton and Scott,
reviews the professional services provided by our independent accountants, the
independence of such accountants from our management, our annual financial
statements and our system of internal accounting controls. The audit committee
also reviews such other matters with respect to our accounting, auditing and
financial reporting practices and procedures as it may find appropriate or may
be brought to its attention.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us, for services
rendered for the period from August 20, 1998, the date of our inception, to
December 31, 1998, to the person who acted in the capacity of chief executive
officer during that period. None of our other executive officers who held office
as of December 31, 1998 met the definition of "highly compensated" within the
meaning of the Securities and Exchange Commission's executive compensation
disclosure rules. In the table below, columns required by the regulations of the
Securities and Exchange Commission have been omitted where no information was
required to be disclosed under those columns.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND PRINCIPAL POSITION SALARY($)
- --------------------------- -------------------
<S> <C>
Daniel M. Lewin............................................. $ 30,000
President(1)
</TABLE>
- ------------
(1) Daniel M. Lewin resigned as President of Akamai and became our Chief
Technology Officer on May 18, 1999.
On September 2, 1998, we sold 11,391,750 shares of common stock to Mr.
Lewin for an aggregate purchase price of $63,285 pursuant to the terms of a
stock restriction agreement. The stock restriction agreement gives us the right
to repurchase a portion of these shares at the original purchase price if Mr.
Lewin ceases to provide services to us prior to August 31, 2002. However, our
right to repurchase shares held by Mr. Lewin terminates upon a change in control
of Akamai.
STOCK OPTIONS
We did not grant any stock options to Mr. Lewin during the period from our
inception to December 31, 1998.
BENEFIT PLANS
1998 Stock Incentive Plan. Our 1998 stock incentive plan provides for the
grant of restricted stock and other stock-based awards and stock options. A
maximum of 28,755,600 shares of common stock are authorized to be issued
pursuant to the 1998 stock incentive plan. Our officers, employees, directors,
consultants and advisors are eligible to receive awards under the 1998 stock
incentive plan.
The compensation committee of our board of directors administers the 1998
stock incentive plan. The compensation committee with the assistance of
management selects the recipients of awards and determines:
- The number of shares of common stock covered by options and the dates
upon which such options become exercisable;
- The exercise price of options;
- The duration of options; and
- The number of shares of common stock subject to any restricted stock or
other stock-based awards and the terms and conditions of such awards,
including the conditions for repurchase, issue price and repurchase
price.
40
<PAGE> 43
In the event of a merger or other acquisition event, our board of directors
is authorized to provide for outstanding awards to be assumed or substituted for
by the acquiror. If the acquiror does not assume or substitute for outstanding
awards, our board of directors may provide that all unexercised options will
become exercisable in full prior to the completion of such event and that these
options will terminate upon the completion of the event if not previously
exercised. In addition, immediately prior to the consummation of an acquisition
event, the vesting schedule of each outstanding option and stock-based award
will be accelerated.
1999 Employee Stock Purchase Plan. Our 1999 employee stock purchase plan
provides for the issuance of up to 600,000 shares of our common stock to
participating employees.
The 1999 employee stock purchase plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, contains consecutive, overlapping,
twenty-four month offering periods. Each offering period includes four six-month
purchase periods. The offering periods generally start on the first trading day
on or after June 1 and December 1 of each year. However, the first such offering
period will commence on the first trading day after the effective date of this
offering and end on the last trading day on or before November 30, 2001.
All of our employees, including directors who are employees, and all
employees of any participating subsidiaries:
- Whose customary employment is more than 20 hours per week for more than
five months in a calendar year;
- Who were employed by us prior to , 1999 for the first
offering period or for subsequent offering periods, who have been
employed by us for at least days prior to enrolling; and
- Who are employed on the first day of a designated payroll purchase period
are eligible to participate in the 1999 employee stock purchase plan. Employees
who would immediately after the grant own five percent or more of the total
combined voting power or value of our stock or any subsidiary are not eligible
to participate.
To participate in the 1999 employee stock purchase plan, an employee must
authorize us to deduct from one to ten percent of his or her base pay during the
offering period. Amounts deducted and accumulated by the participant are used to
purchase shares of common stock at the end of each purchase period. The price of
stock purchased under the 1999 employee stock purchase plan is 85% of the lower
of the fair market value of the common stock (i) at the beginning of the
offering period, or (ii) at the end of the purchase period; provided, however,
that under certain circumstances, the purchase price may be adjusted to a price
not less than 85% of the lower of the fair market value on the common stock on
(i) the date our stockholders approve an increase in shares reserved for
issuance under the 1999 employee stock purchase plan or (ii) at the end of the
purchase period. In the event the fair market value at the end of a purchase
period is less than the fair market value at the beginning of the offering
period, the participants will be withdrawn from the current offering period
following exercise and automatically re-enrolled in a new offering period. The
new offering period will use the lower fair market value as of the first date of
the new offering period to determine the purchase price for future purchase
periods. Participants may end their participation at any time during an offering
period, and they will be paid their payroll deductions to date. Participation
ends automatically upon termination of employment.
401(k) Plan. Our employee savings and retirement plan is qualified under
Section 401 of the Internal Revenue Code. Our employees may elect to reduce
their current compensation by up to the statutorily prescribed annual limit and
have the amount of such reduction contributed to the 401(k) plan. We may make
matching or additional contributions to the 401(k) plan in amounts to be
determined annually by our board of directors.
41
<PAGE> 44
RELATED PARTY TRANSACTIONS
ISSUANCES OF PREFERRED STOCK AND 15% SENIOR SUBORDINATED NOTES
Since our inception in August 1998, we have issued and sold preferred stock
and 15% senior subordinated notes coupled with warrants to purchase common stock
at an exercise price of approximately $2.50 per share to the following persons
and entities who are our executive officers, directors or 5% or greater
stockholders. For more detail on shares of stock held by these purchasers, see
"Principal Stockholders" on page 44.
<TABLE>
<CAPTION>
WARRANTS TO
PURCHASE THE
FOLLOWING
SERIES A SERIES B 15% SENIOR SHARES OF AGGREGATE
PREFERRED PREFERRED SUBORDINATED COMMON PURCHASE
NAME STOCK STOCK NOTES STOCK PRICE
- ---- --------- --------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Arthur H. Bilger(1).................. 32,894 9,610 $ 100,000 13,350 $ 494,779
Baker Communications Fund, L.P. ..... -- 929,244 $7,000,000 934,668 $20,999,990
Battery Ventures IV, L.P.(2)......... 513,165 63,056 -- -- $ 4,850,056
George H. Conrades(3)................ 29,605 8,649 $ 65,154 8,694 $ 420,458
Earl P. Galleher III................. 3,289 961 $ 48,333 6,450 $ 87,808
Jonathan Seelig...................... 14,473 4,228 $ 31,852 4,248 $ 205,546
Entities affiliated with Polaris
Venture Management Co. II,
L.L.C.(4).......................... 263,163 237,318 $1,000,000 133,524 $ 6,575,472
Paul Sagan........................... 6,578 1,922 $ 14,477 1,932 $ 93,427
</TABLE>
- ------------
(1) Excludes securities held by Baker Communications Fund, L.P., of which Mr.
Bilger is a limited partner. Mr. Bilger is the managing member of the
general partner of ADASE Partners, L.P. and the managing member of AT
Investors LLC. Mr. Bilger's shares of Series A preferred stock represent
holdings of ADASE Partners, L.P. in Akamai. Mr. Bilger's shares of Series B
convertible preferred stock and his notes and warrants are held by AT
Investors LLC. Mr. Bilger disclaims beneficial ownership of the securities
held by ADASE Partners, L.P. and AT Investors LLC except to the extent of
his pecuniary interest in those entities.
(2) Includes 7,895 shares of Series A convertible preferred stock and 969 shares
of Series B convertible preferred stock held by Battery Investment Partners
IV, LLC, of which Battery Ventures IV, L.P. is a managing member.
(3) Excludes securities held by entities affiliated with Polaris Venture
Management Co. II, L.L.C., of which Mr. Conrades is a general partner.
(4) Represents 257,119 shares of Series A convertible preferred stock, 231,687
shares of Series B convertible preferred stock, 15% senior subordinated
notes in the principal amount of $976,271 and 7,242 warrants held by Polaris
Venture Partners II L.P. and 6,044 shares of Series A convertible preferred
stock, 5,631 shares of Series B convertible preferred stock, 15% senior
subordinated notes in the principal amount of $23,729 and 176 warrants held
by Polaris Venture Partners Founders Fund II L.P.
Series A Financing. On November 23, 1998, November 30, 1998 and December
14, 1998 we issued an aggregate of 1,100,000 shares of Series A preferred stock
to 22 investors, including Arthur H. Bilger, Battery Ventures IV, L.P., Battery
Investment Partners IV, LLC, George H. Conrades, Earl P. Galleher III, Jonathan
Seelig, Polaris Venture Partners II L.P., Polaris Venture Partners Founders Fund
II L.P. and Paul Sagan. The per share purchase price for our Series A
convertible preferred stock was $7.60. As of September 22, 1999, each share of
our Series A convertible preferred stock was convertible into approximately 18.8
shares of our common stock.
Series B Financing. On April 16, 1999 and April 30, 1999 we issued an
aggregate of 1,327,500 shares of Series B convertible preferred stock to 24
investors, including Arthur H. Bilger, Baker Communications Fund, L.P., Battery
Ventures IV, L.P., Battery Investment Partners IV, LLC, George H. Conrades, Earl
P. Galleher III, Jonathan Seelig, Polaris Venture Partners II L.P., Polaris
Venture Partners Founders Fund II
42
<PAGE> 45
L.P. and Paul Sagan. The per share purchase price for our Series B convertible
preferred stock was $15.07. As part of our Series B financing, we granted Baker
Communications Fund, L.P. an option to purchase up to 145,195 shares of our
Series C convertible preferred stock which are convertible into an aggregate of
908,339 shares of common stock. As of September 22, 1999, each share of our
Series B convertible preferred stock was convertible into six shares of our
common stock. As of September 22, 1999, each share of our Series C convertible
preferred stock was convertible into approximately 6.3 shares of our common
stock.
15% Senior Subordinated Note Financing. On May 7, 1999 we issued 15%
senior subordinated notes in the aggregate principal amount of $15,000,000
coupled with warrants to purchase an aggregate of 2,002,836 shares of common
stock for an exercise price of approximately $2.50 per share to 20 investors,
including Arthur H. Bilger, Baker Communications Fund, L.P., George H. Conrades,
Earl P. Galleher III, Jonathan Seelig, Polaris Venture Partners II L.P., Polaris
Venture Partners Founders Fund II L.P. and Paul Sagan. The 15% senior
subordinated notes have a term of five years and bear interest at the rate of
15% per year, compounded annually.
ISSUANCES OF COMMON STOCK
The following table presents selected information regarding our issuances
of common stock to our executive officers and directors. We issued the shares of
common stock set forth in the table below pursuant to stock restriction
agreements with each of the executive officers and directors which give us
rights to repurchase all or a portion of the shares at their purchase price in
the event that the person ceases to provide services to us. Some of these stock
restriction agreements prohibit us from repurchasing shares following a change
in control of Akamai.
<TABLE>
<CAPTION>
DATE OF NUMBER AGGREGATE
NAME ISSUANCE OF SHARES PURCHASE PRICE
- ---- -------- ---------- --------------
<S> <C> <C> <C>
Robert O. Ball III.................................... 7/23/99 250,000 $ 625,000
Arthur H. Bilger...................................... 11/19/98 594,000 $ 8,250
3/26/99 600,000 $ 200,000
George H. Conrades.................................... 3/26/99 5,940,000 $1,980,000
Earl P. Galleher III.................................. 3/15/99 1,260,000 $ 52,500
F. Thomson Leighton................................... 9/2/98 11,391,750 $ 63,288
Daniel M. Lewin....................................... 9/2/98 11,391,750 $ 63,288
Paul Sagan............................................ 10/28/98 2,383,200 $ 33,100
5/18/99 600,000 $ 500,000
Jonathan Seelig....................................... 9/2/98 2,376,000 $ 13,200
Timothy Weller........................................ 7/23/99 1,050,000 $2,625,000
</TABLE>
------------------------
We believe that all of the securities issuances set forth above were made
on terms no less favorable to us than could have been obtained from unaffiliated
third parties. Akamai agreed to the material terms of each of the preferred
stock issuances described above after arms'-length negotiations with previously
unaffiliated persons. All future transactions, including loans between us and
our officers, directors, principal stockholders and their affiliates will be
approved by a majority of our board of directors, including a majority of the
independent and disinterested directors on our board of directors, and will
continue to be on terms no less favorable to us than could be obtained from
unaffiliated third parties.
AGREEMENTS WITH EXECUTIVE OFFICERS
On March 26, 1999, in connection with the issuance of restricted common
stock, we loaned $1,980,000 to George H. Conrades, our Chief Executive Officer
and Chairman of the Board of Directors. The loan bears interest at a rate of
5.3% per year, compounded annually until paid in full. The loan must be paid in
full by March 26, 2009 or earlier to the extent of proceeds, net of taxes,
received by Mr. Conrades upon his sale of capital stock of Akamai. On March 26,
1999 we entered into a severance agreement with Mr. Conrades. The severance
agreement requires us to pay Mr. Conrades a lump-sum cash payment equal to 299%
of his average
43
<PAGE> 46
annual salary and bonus for the most recent three years if his employment is
terminated by us other than for cause within two years following a change in
control of Akamai.
On May 18, 1999, in connection with the issuance of restricted common
stock, we loaned $500,000 to Paul Sagan, our President and Chief Operating
Officer. The loan bears interest at a rate of 5.3% per year, compounded annually
until paid in full. The loan must be paid in full by May 18, 2009 or earlier to
the extent of proceeds, net of taxes, received by Mr. Sagan upon his sale of
capital stock of Akamai.
On July 23, 1999, in connection with the issuance of restricted common
stock, we loaned $623,750 to Robert O. Ball III, our Vice President and General
Counsel. The loan bears interest at a rate of 6.1% per year, compounded annually
until paid in full. The loan must be paid in full by July 23, 2009 or earlier to
the extent of proceeds, net of taxes, received by Mr. Ball upon his sale of
capital stock of Akamai.
On July 23, 1999, in connection with the issuance of restricted common
stock, we loaned $2,619,750 to Timothy Weller, our Chief Financial Officer. The
loan bears interest at a rate of 6.1% per year, compounded annually until paid
in full. The loan must be paid in full by July 23, 2009 or earlier to the extent
of proceeds, net of taxes, received by Mr. Weller upon his sale of capital stock
of Akamai.
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<PAGE> 47
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of our common stock as of September 22, 1999, and as adjusted to reflect the
sale of the shares of common stock in this offering, by:
- Each person who owns beneficially more than 5% of the outstanding shares
of our common stock;
- Each of our directors;
- The executive officer named in the Summary Compensation Table under
"Management -- Executive Compensation" on page 39; and
- All of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes voting and investment power
with respect to shares. Unless otherwise indicated below, to our knowledge, all
persons named in the table have sole voting and investment power with respect to
their shares of common stock, except to the extent authority is shared by
spouses under applicable law. Unless otherwise indicated, the address of each
person owning more than 5% of the outstanding shares of common stock is c/o
Akamai Technologies, Inc., 201 Broadway, Cambridge, Massachusetts 02139.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
OUTSTANDING
--------------------
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
- ------------------------------------ ------------------ -------- --------
<S> <C> <C> <C>
Battery Ventures IV, L.P.(1)............................ 10,030,012 12.2% 11.4%
20 William Street
Wellesley, MA 02481
F. Thomson Leighton..................................... 9,609,750 11.7% 10.9%
Daniel M. Lewin......................................... 9,556,750 11.6% 10.8%
Baker Communications Fund, L.P.(2)...................... 7,418,471 8.9% 8.2%
c/o Baker Capital Partners, LLC
540 Madison Avenue
New York, NY 10022
George H. Conrades(3)................................... 6,557,402 8.0% 7.4%
Entities affiliated with Polaris Venture Management Co.
II, L.L.C.(4)......................................... 6,507,037 7.9% 7.4%
1000 Winter Street
Suite 3350
Waltham, MA 02451
Arthur H. Bilger(5)..................................... 1,883,684 2.3% 2.1%
Todd A. Dagres(6)....................................... 10,030,012 12.2% 11.4%
c/o Battery Ventures IV, L.P.
20 William Street
Wellesley, MA 02481
Terrance G. McGuire(7).................................. 6,507,037 7.9% 7.4%
c/o Polaris Venture Management Co. II, L.L.C.
1000 Winter Street
Suite 3350
Waltham, MA 02451
Edward W. Scott(8)...................................... 7,418,471 8.9% 8.2%
c/o Baker Capital Partners, LLC
540 Madison Avenue
New York, NY 10022
All executive officers and directors as a group (15
persons)(9)........................................... 59,281,399 70.2% 66.5%
</TABLE>
- ------------
(1) Includes 154,304 shares held by Battery Investment Partners IV, LLC.
Battery Ventures IV, L.P. is the managing member of Battery Investment
Partners IV, LLC.
45
<PAGE> 48
(2) Includes 1,843,007 shares issuable upon the exercise of options and
warrants exercisable within 60 days after September 22, 1999.
(3) Includes 1,485,000 shares held by Lawrence T. Warble, Trustee Under
Agreement Dated August 10, 1999, and 8,694 shares issuable upon the
exercise of warrants exercisable within 60 days after September 22, 1999.
Excludes shares held by entities affiliated with Polaris Venture Management
Co. II, L.L.C., of which Mr. Conrades is a general partner.
(4) Represents 6,226,051 shares held by Polaris Venture Partners II L.P.,
147,462 shares held by Polaris Venture Partners Founders' Fund II L.P.,
130,356 shares issuable upon exercise of warrants held by Polaris Venture
Partners II L.P. and exercisable within 60 days after September 22, 1999
and 3,168 shares issuable upon the exercise of warrants held by Polaris
Venture Partners Founders' Fund II L.P. and exercisable within 60 days
after September 22, 1999. Polaris Venture Management Co. II, L.L.C. is the
general partner of Polaris Venture Partners and Polaris Venture Founders'
Fund II L.P.
(5) Represents 594,000 shares held by the Arthur H. Bilger 1996 Family Trust,
1,218,674 shares held by ADASE Partners, L.P., 57,660 shares held by AT
Investors LLC and 13,350 shares issuable upon the exercise of warrants held
by AT Investors LLC and exercisable within 60 days after September 22,
1999. Mr. Bilger, a director of Akamai, is the managing member of the
general partner of ADASE Partners, L.P. and managing member of AT Investors
LLC. Mr. Bilger disclaims beneficial ownership of the shares held by the
Arthur H. Bilger 1996 Family Trust, ADASE Partners, L.P. and AT Investors
LLC except to the extent of his pecuniary interest in those entities.
Excludes shares held by Baker Communications Fund, L.P., of which Mr.
Bilger is a limited partner.
(6) Represents 9,875,708 shares held by Battery Ventures IV, L.P. and 154,304
shares held by Battery Investment Partners IV, LLC. Battery Ventures IV,
L.P. is the managing member of Battery Investment Partners IV, LLC. Todd A.
Dagres, a director of Akamai, is a general partner of Battery Ventures IV,
L.P. Mr. Dagres disclaims beneficial ownership of the shares held by
Battery Ventures IV, L.P. and Battery Investment Partners IV, LLC except to
the extent of his pecuniary interest in those entities.
(7) Represents 6,226,051 shares held by Polaris Venture Partners II L.P.,
147,462 shares held by Polaris Venture Partners Founders' Fund II L.P.,
130,356 shares issuable upon exercise of warrants held by Polaris Venture
Partners II L.P. and exercisable within 60 days after September 22, 1999
and 3,168 shares issuable upon the exercise of warrants held by Polaris
Venture Partners Founders' Fund II L.P. and exercisable within 60 days
after September 22, 1999. Polaris Venture Management Co. II, L.L.C. is the
general partner of Polaris Venture Partners II L.P. and Polaris Venture
Partners Founders' Fund II L.P. Terrance G. McGuire, a director of Akamai,
is a general partner of Polaris Venture Management Co. II, L.L.C. Mr.
McGuire disclaims beneficial ownership of the shares held by Polaris
Venture Partners II L.P. and Polaris Venture Partners Founders' Fund II
L.P. except to the extent of his pecuniary interest in those entities.
(8) Represents 5,575,464 shares held by Baker Communications Fund, L.P. and
1,843,007 shares issuable upon the exercise of options and warrants held by
Baker Communications Fund, L.P. and exercisable within 60 days after
September 22, 1999. Baker Capital Partners, LLC is general partner of Baker
Communications Fund, L.P. Edward W. Scott, a director of Akamai, is a
general partner of Baker Communications Fund, L.P. Mr. Scott disclaims
beneficial ownership of the shares held by Baker Communications Fund, L.P.
except to the extent of his pecuniary interest in Baker Communications Fund,
L.P.
(9) Includes 2,006,957 shares issuable upon the exercise of options and warrants
exercisable within 60 days after September 22, 1999.
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<PAGE> 49
DESCRIPTION OF CAPITAL STOCK
After this offering, the authorized capital stock of Akamai will consist of
300,000,000 shares of common stock, $0.01 par value per share, and 5,000,000
shares of preferred stock, $0.01 par value per share. As of September 22, 1999,
there were outstanding:
- 44,832,810 shares of common stock held by 101 stockholders of record; and
- options and warrants to purchase an aggregate of 14,195,561 shares of
common stock.
Upon completion of this offering and the conversion of all outstanding
shares of preferred stock into common stock, there will be 88,318,428 shares of
common stock outstanding.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share held on
matters submitted to a vote of stockholders. Holders of our common stock do not
have cumulative voting rights. Accordingly, holders of a majority of the shares
of common stock entitled to vote in any election of directors may elect all of
the directors standing for election. Holders of common stock are entitled to
receive their proportionate share of any dividends declared by the Board of
Directors, subject to any preferential dividend rights of outstanding preferred
stock. Upon the liquidation, dissolution or winding up of Akamai, the holders of
common stock are entitled to receive ratably the net assets of Akamai available
after the payment of all debts and other liabilities and subject to the
preferential rights of any outstanding preferred stock. The common stock has no
preemptive, subscription, redemption or conversion rights. All outstanding
shares of common stock are fully paid and nonassessable. The rights, preferences
and privileges of the common stock are subject to the rights of the holders of
shares of any series of preferred stock which Akamai may designate and issue in
the future.
PREFERRED STOCK
Our Board of Directors will be authorized to issue shares of preferred
stock in one or more series without stockholder approval. The Board will have
discretion to determine the rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences of each series of preferred stock.
The purpose of authorizing the Board of Directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The Board's ability to issue preferred
stock will provide desirable flexibility in connection with possible
acquisitions and other corporate purposes and could make it more difficult for a
third party to acquire, or could discourage a third party from acquiring, a
majority of our outstanding voting stock. The issuance of preferred stock with
voting and conversion rights may adversely affect the voting power of the
holders of common stock. We have no present plans to issue any shares of
preferred stock.
DELAWARE LAW AND OUR CHARTER AND BY-LAW PROVISIONS; ANTI-TAKEOVER EFFECTS
Akamai is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for three years after the date of the transaction in which the
person became an interested stockholder, unless the business combination is
approved in a prescribed manner. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder. An "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years did own, 15% or more
of the corporation's voting stock.
Akamai's certificate of incorporation and by-laws to be effective on the
closing of this offering provide:
- That the Board of Directors be divided into three classes, as nearly
equal in size as possible, with no class having more than one director
more than any other class, with staggered three-year terms;
- That directors may be removed only for cause by the vote of the holders
of at least 66% of the shares of our capital stock entitled to vote; and
47
<PAGE> 50
- That any vacancy on the Board of Directors, however occurring, including
a vacancy resulting from an enlargement of the Board, may only be filled
by vote of a majority of the directors then in office.
The classification of the Board of Directors and the limitations on the
removal of directors and filling of vacancies could make it more difficult for a
third party to acquire, or discourage a third party from acquiring, Akamai.
The certificate of incorporation and by-laws to be effective on the closing
of this offering also provide that, after the closing of this offering:
- Any action required or permitted to be taken by the stockholders at an
annual meeting or special meeting of stockholders may only be taken if it
is properly brought before such meeting and may not be taken by written
action in lieu of a meeting; and
- Special meetings of the stockholders may only be called by the Chairman
of the Board of Directors, the President, or by the Board of Directors.
Our by-laws will also provide that, in order for any matter to be
considered "properly brought" before a meeting, a stockholder must comply
with requirements regarding advance notice to us.
These provisions could delay until the next stockholders' meeting
stockholder actions which are favored by the holders of a majority of our
outstanding voting securities. These provisions may also discourage another
person or entity from making a tender offer for our common stock, because such
person or entity, even if it acquired a majority of our outstanding voting
securities, would be able to take action as a stockholder only at a duly called
stockholders meeting, and not by written consent.
Delaware law provides that the vote of a majority of the shares entitled to
vote on any matter is required to amend a corporation's certificate of
incorporation or by-laws, unless a corporation's certificate of incorporation or
by-laws, as the case may be, requires a greater percentage. Our certificate of
incorporation requires the vote of the holders of at least 75% of the shares of
our capital stock entitled to vote to amend or repeal any of the foregoing
provisions of our certificate of incorporation. Generally, our by-laws may be
amended or repealed by a majority vote of the Board of Directors or the holders
of a majority of the shares of our capital stock issued and outstanding and
entitled to vote. Changes to our by-laws regarding special meetings of
stockholders, written actions of stockholders in lieu of a meeting, and the
election, removal and classification of members of the Board of Directors
require the vote of the holders of at least 75% of the shares of our capital
stock entitled to vote. The stockholder vote would be in addition to any
separate class vote that might in the future be required pursuant to the terms
of any series preferred stock that might be then outstanding.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our certificate of incorporation provides that our directors and officers
shall be indemnified by us except to the extent prohibited by Delaware law. This
indemnification covers all expenses and liabilities reasonably incurred in
connection with their services for or on behalf of us. In addition, our
certificate of incorporation provides that our directors will not be personally
liable for monetary damages to us or to our stockholders for breaches of their
fiduciary duty as directors, unless they violated their duty of loyalty to us or
our stockholders, acted in bad faith, knowingly or intentionally violated the
law, authorized illegal dividends or redemptions or derived an improper personal
benefit from their action as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is BankBoston, N.A.
48
<PAGE> 51
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, based on the number of shares outstanding
at September 22, 1999, we will have 88,318,428 shares of common stock
outstanding, assuming no exercise of outstanding options. Of these shares, the
shares to be sold in this offering will be freely tradable without restriction
or further registration under the Securities Act, except that any shares
purchased by our affiliates, as that term is defined in Rule 144 under the
Securities Act, may generally only be sold in compliance with the limitations of
Rule 144 described below. The remaining 82,318,428 shares of common stock are
"restricted securities" under Rule 144. Generally, restricted securities that
have been owned for at least two years may be sold immediately after the
completion of this offering and restricted securities that have been owned for
at least one year may be sold 90 days after the completion of this offering.
SALES OF RESTRICTED SHARES
In general, under Rule 144, stockholders, including our affiliates, who
have beneficially owned shares for at least one year are entitled to sell,
within any three-month period, a number of these shares that does not exceed the
greater of one percent of the then outstanding shares of common stock and the
average weekly trading volume in the common stock in the over-the-counter market
during the four calendar weeks preceding the date on which notice of such sale
is filed, provided requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. In addition, our affiliates
must comply with the restrictions and requirements of Rule 144, other than the
one-year holding period requirement, in order to sell shares of common stock
which are not restricted securities.
Under Rule 144(k), a stockholder who is not an affiliate and has not been
an affiliate for at least three months prior to the sale and who has
beneficially owned shares for at least two years may sell these shares without
compliance with the foregoing requirements. In meeting the holding periods
described above, a stockholder can include the holding periods of a prior owner
who was not an affiliate. The holding periods described above do not begin until
the stockholder pays the full purchase price or other consideration. Rule 701
provides that currently outstanding shares of common stock acquired under our
employee compensation plans may be sold beginning 90 days after the date of this
prospectus by stockholder other than affiliates subject only to the manner of
sale provisions of Rule 144 and by affiliates under Rule 144 without compliance
with its one-year holding period requirement.
STOCK OPTIONS
At September 22, 1999, approximately 12,000 shares of common stock were
issuable pursuant to vested options granted under our 1998 Stock Incentive Plan,
none of which shares are subject to lock-up agreements with the underwriters.
We intend to file a registration statement on Form S-8 under the Securities
Act within 180 days after the date of this prospectus, to register up to
28,755,600 shares of common stock issuable under our 1998 Stock Incentive Plan,
including the 11,210,150 shares of common stock subject to outstanding options
as of September 22, 1999. We expect this registration statement to become
effective upon filing.
LOCK-UP AGREEMENTS
Akamai and our executive officers, directors and other securityholders have
entered into lock-up agreements with the underwriters. Without the prior written
consent of Morgan Stanley & Co. Incorporated, none of us will, during the period
ending 180 days after the date of this prospectus, (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of common
stock or any securities convertible into or exchangeable for common stock, or
(2) enter into any swap or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of the common stock,
regardless of whether any such transactions described in clause (1) or (2) of
this paragraph is to be settled by delivery of such common stock or such other
securities, in cash or otherwise. In addition, for a period of 180 days from the
date of this prospectus, except as required by law, we have
49
<PAGE> 52
agreed not to consent to any offer for sale, sale or other disposition, or any
transaction which is designed or could be expected, to result in, the
disposition by any person, directly or indirectly, of any shares of common stock
without the prior written consent of Morgan Stanley & Co. Incorporated except
that we may, without consent, grant options and sell shares pursuant to our
stock plans.
REGISTRATION RIGHTS
After this offering, the holders of approximately 68,463,019 shares of
common stock and the holders of warrants to purchase approximately 2,077,072
shares of common stock will be entitled to rights with respect to the
registration of these shares under the Securities Act. If we propose to register
any of our securities under the Securities Act, either for our own account or
for the account of other security holders exercising registration rights, these
holders are entitled to notice of such registration and are entitled to include
shares of common stock. Additionally, they are entitled to demand registration
rights pursuant to which they may require us on up to five occasions to file a
registration statement under the Securities Act at our expense. We are required
to use our best efforts to effect any such registration. These registration
rights are subject to the right of the underwriters of an offering to limit the
number of shares included in such registration and our right not to effect a
requested registration within 180 days following an offering of our securities
pursuant to a registration statement in connection with an underwritten public
offering, including this offering. Further, holders may require us to file
registration statements on Form S-3 at our expense. These registration rights
are subject to our right not to effect, no more than once during any 12-month
period, a requested registration if the registration would interfere with an
unforeseen securities or business transaction.
50
<PAGE> 53
UNDERWRITERS
Under the terms and subject to the conditions contained in the underwriting
agreement dated the date hereof, the underwriters named below, for whom Morgan
Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation,
Salomon Smith Barney Inc. and Thomas Weisel Partners LLC are acting as
representatives, have severally agreed to purchase, and we have agreed to sell
to them, the respective number of shares of common stock set forth opposite the
names of the underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Salomon Smith Barney Inc....................................
Thomas Weisel Partners LLC..................................
---------
Total............................................. 6,000,000
=========
</TABLE>
The underwriters are offering the shares subject to their acceptance of the
shares from us and subject to prior sale. The underwriting agreement provides
that the obligations of the several underwriters to pay for and accept delivery
of the shares of common stock offered in this offering are subject to customary
closing conditions. The underwriters are obligated to take and pay for all of
the shares of common stock offered in this offering, other than those covered by
the over-allotment option described below, if any such shares are taken.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the initial public offering price set forth on
the cover page of this prospectus and part to dealers at a price that represents
a concession not in excess of $ per share under the initial public
offering price. Any underwriters may allow, and the dealers may reallow, a
concession not in excess of $ per share to other underwriters or to
other dealers. After the initial offering of the shares of common stock, the
offering price and other selling terms may from time to time be varied by the
representatives of the underwriters.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of 900,000
additional shares of common stock at the initial public offering price set forth
on the cover page hereof, less underwriting discounts and commissions. The
underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with this offering of common stock.
To the extent this over-allotment option is exercised, each underwriter will
become obligated, subject to other conditions, to purchase approximately the
same percentage of additional shares of common stock as the number set forth
next to such underwriter's name in the preceding table bears to the total number
of shares of common stock set forth next to the names of all underwriters in the
preceding table.
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
At our request, the underwriters have reserved for sale up to percent of
the shares of common stock to be issued by us and offered in this offering for
sale, at the price per share in this offering, to directors, officers,
employees, business associates and related persons of Akamai. The underwriters
have also reserved for sale, at the initial public offering price, up to 300,000
shares of common stock offered in this offering for Baker Communications Fund,
L.P., one of our stockholders. The number of shares of common stock available
for sale to the general public will be reduced to the extent such individuals or
entities purchase such reserved shares. Any reserved shares which are not so
purchased will be offered by the underwriters to the general public on the same
basis as the other shares of common stock offered by the Prospectus for this
offering.
We have filed an application for our common stock to be quoted on the
Nasdaq National Market under the symbol "AKAM."
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<PAGE> 54
Akamai, our directors and executive officers and substantially all other
stockholders are expected to agree that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the underwriters, during the
period ending 180 days after the date of this prospectus, he, she or it will
not, directly or indirectly:
- Offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
- Enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock,
whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering if the syndicate repurchases previously distributed
shares of common stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the common stock above independent market
levels. The underwriters are not required to engage in these activities and may
end any of these activities at any time.
We and the underwriters have agreed to indemnify each other against
liabilities in connection with this offering, including liabilities under the
Securities Act.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners has been named as a lead or co-manager on 56 filed
public offerings of equity securities, of which 31 have been completed, and has
acted as a syndicate member in an additional 27 public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
us or any of our officers, directors or other controlling persons, except with
respect to its contractual relationship with us pursuant to the underwriting
agreement entered into in connection with this offering.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the shares of
common stock. Consequently, the public offering price for the shares of common
stock will be determined by negotiations between Akamai and the representatives
of the underwriters. Among the factors to be considered in determining the
public offering price will be:
- Our record of operations, our current financial position and future
prospects;
- The experience of our management;
- Sales, earnings and other financial and operating information in recent
periods; and
- The price-earnings ratios, price-sales ratios, market prices of
securities and financial and operating information of companies engaged
in activities similar to ours.
The estimated public offering price range set forth on the cover page of
this preliminary prospectus is subject to change as a result of market
conditions and other factors.
52
<PAGE> 55
LEGAL MATTERS
The validity of the shares of common stock we are offering will be passed
upon for us by Hale and Dorr LLP, Boston, Massachusetts. Legal matters in
connection with this offering will be passed upon for the underwriters by Ropes
& Gray, Boston, Massachusetts.
EXPERTS
The financial statements as of December 31, 1998 and June 30, 1999 and for
the period from inception (August 20, 1998) to December 31, 1998 and the
six-month period ended June 30, 1999 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
we propose to sell in this offering. This prospectus, which constitutes part of
the registration statement, does not contain all of the information set forth in
the registration statement. For further information about us and the common
stock we propose to sell in this offering, we refer you to the registration
statement and the exhibits and schedules filed as a part of the registration
statement. Statements contained in this prospectus as to the contents of any
contract or other document filed as an exhibit to the registration statement are
not necessarily complete. If a contract or document has been filed as an exhibit
to the registration statement, we refer you to the copy of the contract or
document that we have filed. You may inspect the registration statement,
including exhibits, without charge at the principal office of the Securities and
Exchange Commission in Washington, D.C. You may inspect and copy the same at the
public reference facilities maintained by the Securities and Exchange Commission
at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549,
and at the Commission's regional offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, Suite 1300, New York, New York 10048. You can also obtain copies of this
material at prescribed rates by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the
Securities and Exchange Commission maintains a website at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Securities and Exchange
Commission.
53
<PAGE> 56
AKAMAI TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements:
Report of Independent Accountants......................... F-2
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statements of Convertible Preferred Stock and
Stockholders' Deficit.................................. F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-7
</TABLE>
F-1
<PAGE> 57
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Akamai Technologies, Inc.:
In our opinion, the accompanying balance sheets and the related statements
of operations, cash flows and convertible preferred stock and stockholders'
deficit present fairly in all material respects, the financial position of
Akamai Technologies, Inc. as of December 31, 1998 and June 30, 1999, and the
results of its operations and its cash flows for the period from inception
(August 20, 1998) to December 31, 1998 and for the six-month period ended June
30, 1999, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
August 10, 1999, except as to the stock
split described in Note 8 which is as of
September 8, 1999
F-2
<PAGE> 58
AKAMAI TECHNOLOGIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, JUNE 30, JUNE 30,
1998 1999 1999
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 6,579,909 $ 44,829,375 $ 44,829,375
Short-term investments.................................... 224,880 224,880 224,880
Accounts receivable....................................... -- 394,819 394,819
Prepaid expenses and other current assets................. 56,589 415,626 415,626
----------- ------------ ------------
Total current assets............................... 6,861,378 45,864,700 45,864,700
Property and equipment, net (Note 4)........................ 1,522,980 6,274,556 6,274,556
Other assets................................................ -- 29,077 29,077
Intangible assets, net...................................... 481,282 458,646 458,646
----------- ------------ ------------
Total assets....................................... $ 8,865,640 $ 52,626,979 $ 52,626,979
=========== ============ ============
LIABILITIES, CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses..................... $ 665,483 $ 2,967,937 $ 2,967,937
Accrued payroll and benefits.............................. 27,514 502,809 502,809
Accrued interest.......................................... -- 341,610 341,610
Current portion of obligations under capital lease and
equipment loan.......................................... 12,350 450,685 450,685
----------- ------------ ------------
Total current liabilities.......................... 705,347 4,263,041 4,263,041
Obligations under capital leases and equipment loan, net of
current portion........................................... 24,859 905,502 905,502
Senior subordinated notes (Note 5).......................... -- 11,222,738 11,222,738
----------- ------------ ------------
Total long-term liabilities........................ 24,859 12,128,240 12,128,240
----------- ------------ ------------
Total liabilities.................................. 730,206 16,391,281 16,391,281
Series A convertible preferred stock; $0.01 par value;
1,100,000 shares authorized, 1,100,000 issued and
outstanding at December 31, 1998 and June 30, 1999,
respectively, no shares issued and outstanding pro forma
June 30, 1999 (liquidation preference $8,360,000 at June
30, 1999)................................................. 8,283,758 8,290,958 --
Series B convertible preferred stock; $0.01 par value;
1,327,500 shares authorized, 1,327,500 issued and
outstanding at June 30, 1999, no shares issued and
outstanding pro forma June 30, 1999 (liquidation
preference $20,263,130 at June 30, 1999).................. -- 20,138,130 --
Series C convertible preferred stock; $0.01 par value;
145,195 shares authorized, none issued and outstanding at
June 30, 1999, no shares issued and outstanding pro forma
June 30, 1999............................................. -- -- --
Series D convertible preferred stock; $0.01 par value;
685,194 shares authorized, 685,194 issued and outstanding
at June 30, 1999, no shares issued and outstanding pro
forma June 30, 1999 (liquidation preference $12,524,657 at
June 30, 1999)............................................ -- 12,499,657 --
----------- ------------ ------------
Total convertible preferred stock (Note 7)......... 8,283,758 40,928,745 --
Commitments and contingencies (Note 6)
Stockholders' equity (deficit) (Note 8):
Common stock, $0.01 par value; 300,000,000 shares
authorized; 34,565,310 issued and outstanding at
December 31, 1998; 43,085,310 issued and outstanding at
June 30, 1999, 75,301,004 shares issued and outstanding
pro forma at June 30, 1999.............................. 345,653 430,853 753,010
Additional paid-in capital................................ 2,034,248 16,163,600 56,770,188
Notes receivable from officers for stock.................. -- (2,480,000) (2,480,000)
Deferred compensation..................................... (1,505,975) (8,002,463) (8,002,463)
Accumulated deficit....................................... (1,022,250) (10,805,037) (10,805,037)
----------- ------------ ------------
Total stockholders' equity (deficit)............... (148,324) (4,693,047) 36,235,698
----------- ------------ ------------
Total liabilities and stockholders' equity
(deficit)........................................ $ 8,865,640 $ 52,626,979 $ 52,626,979
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 59
AKAMAI TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 20, 1998) SIX-MONTH
THROUGH PERIOD ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
<S> <C> <C>
Revenue..................................................... $ -- $ 403,949
Operating expenses:
Cost of service........................................... 30,623 1,408,119
Engineering and development............................... 228,553 2,053,446
Sales, general and administrative......................... 435,283 5,242,547
Equity related compensation............................... 205,617 1,338,608
----------- ------------
Total operating expenses.......................... 900,076 10,042,720
----------- ------------
Operating loss.............................................. (900,076) (9,638,771)
Interest income (expense), net:
Interest income........................................... 19,993 397,536
Interest expense.......................................... (10,407) (541,552)
----------- ------------
Total interest income (expense), net.............. 9,586 (144,016)
----------- ------------
Net loss.................................................... (890,490) (9,782,787)
Dividends and accretion to preferred stock redemption
value..................................................... -- 294,872
----------- ------------
Net loss attributable to common stockholders................ $ (890,490) $(10,077,659)
=========== ============
Basic and diluted net loss per share........................ $ (0.06) $ (0.53)
Weighted average common shares outstanding.................. 15,014,868 18,891,436
Pro forma basic and diluted net loss per share
(unaudited)............................................... $ (0.05) $ (0.23)
Pro forma weighted average common shares outstanding
(unaudited)............................................... 19,262,156 42,413,486
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 60
AKAMAI TECHNOLOGIES, INC.
STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM INCEPTION (AUGUST 20, 1998) TO DECEMBER 31, 1998
AND THE SIX-MONTH PERIOD ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE SERIES B CONVERTIBLE SERIES D CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK
---------------------- ----------------------- --------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ---------- --------- ----------- ------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock to founders.... 29,646,000 $ 296,460
Issuance of common
stock for technology
license.............. 682,110 6,821
Sales of restricted
common stock......... 4,237,200 42,372
Sale of Series A
convertible preferred
stock................ 1,100,000 $8,283,758
Amortization of
deferred
compensation.........
Net loss...............
--------- ---------- ---------- ----------
Balance at December 31,
1998................. 1,100,000 8,283,758 34,565,310 345,653
Sale of restricted
common stock......... 1,980,000 19,800
Sale of restricted
common stock in
exchange for notes... 6,540,000 65,400
Sale of Series B
convertible preferred
stock................ 1,327,500 $19,875,115
Sale of Series D
convertible preferred
stock................ 685,194 $12,475,000
Dividends and accretion
to preferred stock
redemption value..... 7,200 263,015 24,657
Issuance of warrants...
Deferred compensation
related to grant of
stock options........
Amortization of
deferred
compensation.........
Net loss...............
--------- ---------- --------- ----------- ------- ----------- ---------- ----------
Balance at June 30,
1999................. 1,100,000 $8,290,958 1,327,500 $20,138,130 685,194 $12,499,657 43,085,310 $ 430,853
========= ========== ========= =========== ======= =========== ========== ==========
<CAPTION>
ADDITIONAL TOTAL
PAID-IN DEFERRED NOTES ACCUMULATED SHAREHOLDERS'
CAPITAL COMPENSATION RECEIVABLE DEFICIT DEFICIT
----------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Issuance of common
stock to founders.... $ (131,760) $ 164,700
Issuance of common
stock for technology
license.............. $ 281,179 288,000
Sales of restricted
common stock......... 1,753,069 $(1,711,591) 83,850
Sale of Series A
convertible preferred
stock................
Amortization of
deferred
compensation......... 205,616 205,616
Net loss............... (890,490) (890,490)
----------- ----------- ------------ -----------
Balance at December 31,
1998................. 2,034,248 (1,505,975) (1,022,250) (148,324)
Sale of restricted
common stock......... 895,200 (622,500) 292,500
Sale of restricted
common stock in
exchange for notes... 3,948,590 (1,533,990) $(2,480,000) --
Sale of Series B
convertible preferred
stock................
Sale of Series D
convertible preferred
stock................
Dividends and accretion
to preferred stock
redemption value..... (294,872) (294,872)
Issuance of warrants... 3,901,828 3,901,828
Deferred compensation
related to grant of
stock options........ 5,678,606 (5,678,606) --
Amortization of
deferred
compensation......... 1,338,608 1,338,608
Net loss............... (9,782,787) (9,782,787)
----------- ----------- ----------- ------------ -----------
Balance at June 30,
1999................. $16,163,600 $(8,002,463) $(2,480,000) $(10,805,037) $(4,693,047)
=========== =========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 61
AKAMAI TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(AUGUST 20, 1998) SIX-MONTH PERIOD
THROUGH DECEMBER 31, ENDED JUNE 30,
1998 1999
--------------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................ $ (890,490) $(9,782,787)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation and amortization........................ 50,069 570,923
Amortization of discount on senior subordinated notes
and equipment loan................................. -- 133,440
Amortization of deferred compensation................ 205,617 1,338,608
Loss on disposal of fixed asset...................... -- 22,353
Changes in operating assets and liabilities:
Accounts receivable................................ -- (394,819)
Prepaid expenses and other assets.................. (56,588) (388,114)
Accounts payable and accrued expenses.............. 692,997 3,119,359
----------- -----------
Net cash provided by (used in) operating activities....... 1,605 (5,381,037)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment..................... (1,522,981) (5,307,821)
Purchases of short-term investments..................... (224,880) --
----------- -----------
Net cash used in investing activities..................... (1,747,861) (5,307,821)
----------- -----------
Cash flows from financing activities:
Payments on capital lease obligations................... (3,943) (7,124)
Proceeds from equipment financing loan.................. -- 1,500,000
Payment on equipment financing loan..................... -- (167,167)
Proceeds from the issuance of senior subordinated notes,
net.................................................. -- 14,970,000
Proceeds from issuance of Series A convertible preferred
stock, net........................................... 8,283,758 --
Proceeds from issuance of Series B convertible preferred
stock, net........................................... -- 19,875,115
Proceeds from issuance of Series D convertible preferred
stock, net........................................... -- 12,475,000
Proceeds from issuance of restricted common stock....... 46,350 292,500
----------- -----------
Net cash provided by financing activities................. 8,326,165 48,938,324
----------- -----------
Net increase in cash and equivalents...................... 6,579,909 38,249,466
Cash and cash equivalents, beginning of the period........ -- 6,579,909
----------- -----------
Cash and cash equivalents, end of the period.............. $ 6,579,909 $44,829,375
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 62
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS:
Akamai Technologies, Inc. ("Akamai" or the "Company") provides a global
delivery service for Internet content that improves Web site speed and
reliability and protects against Web site crashes due to demand overloads. The
Company's FreeFlow service, which is marketed to large businesses and to other
businesses with an internet focus, delivers customers' web content through a
worldwide server network by locating the content geographically closer to their
users.
The Company has experienced substantial net losses since its inception and,
as of June 30, 1999, had an accumulated deficit of $10,805,037. Such losses and
accumulated deficit resulted from the Company's lack of substantial revenue and
costs incurred in the development of the Company's service and in the
establishment of the Company's network. For the foreseeable future, the Company
expects to continue to experience significant growth in its operating expenses
in order to execute its current business plan, particularly engineering and
development and sales, general and administrative expenses.
The Company has a single operating segment, Internet content delivery
service. The Company has no organizational structure dictated by product lines,
geography or customer type. All revenue earned to date have been generated from
U.S. based customers.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
Cash equivalents consist of cash held in bank deposit accounts and
short-term investments with remaining maturities of three months or less at the
date of purchase.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, net of accumulated depreciation.
Depreciation is computed on a straight-line basis over estimated useful lives of
three to five years. Leasehold improvements are depreciated over the shorter of
related lease terms or the estimated useful lives. Property and equipment
acquired under capital lease is depreciated over the shorter of related lease
terms or the useful life of the asset. Upon retirement or sale, the costs of the
assets disposed and the related accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in the determination of
income. Repairs and maintenance costs are expensed as incurred.
INTANGIBLE ASSETS
Intangible assets consist primarily of the cost of acquired license rights
to content delivery technology. Intangible assets are amortized using the
straight-line method over ten years, based on the estimated useful life. The
carrying value of the intangible assets is reviewed on a quarterly basis for the
existence of facts or circumstances both internally and externally that may
suggest impairment. To date, no such impairment has occurred. The Company
determines whether an impairment has occurred based on gross expected future
cash flows and measures the amount of the impairment based on the related future
estimated discounted cash flows. The cash flow estimates used to determine the
impairment, if any, contain management's best estimates, using appropriate and
customary assumptions and projections at that time.
REVENUE RECOGNITION
The Company derives revenue from the sale of its FreeFlow service under
contracts with terms typically ranging from three to 12 months. The Company
recognizes revenue based on fees for the amount of Internet content delivered
through the Company's service. These contracts also provide for minimum monthly
fees. Revenue may also be derived from one-time implementation fees which are
recognized ratably over the period of the related contracts.
F-7
<PAGE> 63
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COSTS OF SERVICE
Cost of service consists of depreciation of network equipment used in
providing the Company's FreeFlow service, fees paid to network providers for
bandwidth and monthly fees for housing the Company's servers in third-party
network data centers. The Company enters into contracts for bandwidth with
third-party network providers with terms typically ranging from six months to
three years. These contracts commit the Company to minimum monthly fees plus
additional fees for bandwidth usage above the contracted level. Under the
Company's FreeFlow ISP program, the Company provides FreeFlow servers without
charge to smaller Internet service providers which, in turn, provide the Company
with rack space for the Company's servers and bandwidth to deliver content. The
Company does not recognize as revenue any value to the Internet service
providers associated with the use of the Company's servers and does not expense
the value of the rack space and bandwidth received.
STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to employees using the
intrinsic value method as prescribed by Accounting Principles Board Opinion
("APB") No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. Accordingly, no compensation expense is recorded for options
issued to employees in fixed amounts and with fixed exercise prices at least
equal to the fair market value of the Company's common stock at the date of
grant. The Company has adopted the provisions of Statement of Financial
Accounting Standard ("SFAS") No. 123, "Accounting for Stock-Based Compensation,"
through disclosure only (Note 9). All stock-based awards to nonemployees are
accounted for at their fair value in accordance with SFAS No. 123.
ENGINEERING AND DEVELOPMENT COSTS
Engineering and development costs consist primarily of salaries and related
personnel costs for the design, deployment, testing and enhancement of the
Company's service and the Company's network.
Costs incurred in the engineering and development of the Company's service
are expensed as incurred, except for certain software development costs. Costs
associated with the development of computer software are expensed prior to the
establishment of technological feasibility (as defined by SFAS No. 86,
"Accounting for the costs of Computer Software to be Sold, Leased, or Otherwise
Marketed") and capitalized thereafter. The Company also has adopted Statement of
Position ("SOP") 98-1, which requires computer software costs associated with
internal use software to be charged to operations as incurred until certain
capitalization criteria are met. Costs eligible for capitalization under SFAS
No. 86 and SOP 98-1 have been insignificant to date.
USE OF ESTIMATES
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenue and expenses during the reporting
period. Actual results could differ from those estimates. Significant estimates
in these financial statements include valuation of deferred tax assets and
useful lives of depreciable assets.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents and
accounts receivable. At December 31, 1998 and June 30, 1999, the Company had
cash balances at certain financial institutions in excess of federally insured
limits. However, the Company does not believe that it is subject to unusual
credit risk beyond the normal credit risk associated with
F-8
<PAGE> 64
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
commercial banking relationships. As of June 30, 1999, two customers accounted
for 77% and 15% of accounts receivable. These customers also accounted for 75%
and 14% of total revenue for the six-month period ended June 30, 1999.
INCOME TAXES
Deferred taxes are determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse. Valuation
allowances are provided if, based upon the weight of available evidence, it is
more likely than not some or all of the deferred tax assets will not be
realized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, which include
cash equivalents, accounts receivable, notes receivable, accounts payable,
accrued expenses and notes payable approximate their fair values at June 30,
1999.
OTHER COMPREHENSIVE INCOME
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income,"
which established standards for reporting and displaying comprehensive income
and its components in a financial statement that is displayed with the same
prominence as other financial statements. Comprehensive loss is equal to net
loss, for the period from inception (August 20, 1998) to December 31, 1998 and
for the six-month period ended June 30, 1999.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
Company, to date, has not engaged in derivative and hedging activities, and
accordingly does not believe that the adoption of SFAS No. 133 will have a
material impact on the financial reporting and related disclosures of the
Company. The Company will adopt SFAS No. 133 as required by SFAS No. 137,
"Deferral of the Effective Date of the FASB Statement No. 133," in fiscal year
2001.
PRO FORMA BALANCE SHEET (UNAUDITED)
Upon the closing of the Company's initial public offering, all of the
outstanding shares of convertible preferred stock as of June 30, 1999 will
automatically convert into approximately 32,215,694 shares of common stock. The
unaudited pro forma presentation of the balance sheet has been prepared assuming
the conversion of all shares of convertible preferred stock into common stock at
June 30, 1999. All references to pro forma information in the notes to the
financial statements are unaudited.
3. NET LOSS PER SHARE AND PRO FORMA NET LOSS PER SHARE:
Basic net loss per share is computed using the weighted average number of
common shares outstanding during the period. Dilutive net loss per share is
computed using the weighted average number of common shares outstanding during
the period, plus the dilutive effect of common stock equivalents. Common stock
equivalent shares consist of convertible preferred stock, unvested restricted
common stock, stock options and warrants. During the period from inception
(August 20, 1998) to December 31, 1998 and the six-month period ended June 30,
1999, options to purchase 1,287,000 and 9,116,000 shares of common stock,
F-9
<PAGE> 65
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
respectively, unvested restricted common stock of 18,049,104 and 19,950,804,
respectively, preferred stock convertible into 19,800,000 and 32,215,694 shares
of common stock, respectively, and warrants to purchase none and 2,075,100
shares of common stock, respectively, were excluded from the calculation of
earnings per share since their inclusion would be antidilutive. Pro forma basic
and diluted net loss per share have been calculated assuming the conversion of
all outstanding shares of preferred stock into common stock, as if the shares
had converted immediately upon their issuance. Accordingly, net loss has not
been adjusted for the accrued dividends for preferred stock in the calculation
of pro forma loss per share.
The following is a calculation of pro forma net loss per share (unaudited):
<TABLE>
<CAPTION>
PERIOD
FROM INCEPTION SIX-MONTH
(AUGUST 20, 1998) TO PERIOD ENDED
DECEMBER 31, 1998 JUNE 30, 1999
-------------------- -------------
<S> <C> <C>
Basic and diluted:
Net loss............................................... $ (890,490) $(9,782,787)
----------- -----------
Weighted average number of common shares............... 15,014,868 18,891,436
Weighted average assumed number of common shares upon
conversion of preferred stock........................ 4,247,288 23,522,050
----------- -----------
Total weighted average number of shares used in
computing pro forma net loss per share............... 19,262,156 42,413,486
=========== ===========
Basic and diluted pro forma net loss per common
share................................................ $ (0.05) $ (0.23)
</TABLE>
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
ESTIMATED
DECEMBER 31, JUNE 30, USEFUL
1998 1999 LIVES
------------ ---------- -----------
<S> <C> <C> <C>
Computer and networking equipment.............. $1,384,582 $5,822,526 3 years
Purchased software............................. -- 160,391 3 years
Furniture and fixtures......................... 104,942 280,752 5 years
Office equipment............................... 44,608 225,065 3 years
Leasehold improvements......................... 30,000 370,052 5 years
---------- ----------
1,564,132 6,858,786
Accumulated depreciation and amortization...... (41,152) (584,230)
---------- ----------
Property and equipment, net.................... $1,522,980 $6,274,556
========== ==========
</TABLE>
Depreciation and amortization expense on property and equipment for the
period from inception (August 20, 1998) to December 31, 1998 and the six-month
period ended June 30, 1999 was $41,152 and $548,287, respectively.
Equipment under capital leases at:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, DEPRECIABLE
1998 1999 LIVES
------------ -------- -----------
<S> <C> <C> <C>
Office equipment................................. $40,056 $ 54,451 3 years
Accumulated amortization......................... (1,873) (10,509)
------- --------
Capital leases, net.............................. $38,183 $ 43,942
======= ========
</TABLE>
F-10
<PAGE> 66
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. SENIOR SUBORDINATED NOTES:
During April 1999, Akamai entered into note and warrant purchase agreements
with private investors. Under the agreements, Akamai issued 15% subordinated
demand notes payable in the aggregate amount of $15,000,000 due in May 2004. In
connection with the notes, the Company also issued warrants to purchase an
aggregate of 2,002,836 shares of common stock at $2.50 per share in exchange for
cash. These warrants expire in May 2004. The fair value of the warrants at the
time of issuance was estimated to be approximately $3,876,477, which was
recorded as additional paid-in capital and reduced the carrying value of the
notes. The fair value was estimated using the Black-Scholes model with the
following assumptions: dividend yield of 0%, volatility of 100%, risk free
interest rate of 5.1% and an expected life of five years. The discount on the
notes is being amortized over the term of the notes. For the six months ended
June 30, 1999, interest expense of $129,215 related to the fair value of the
warrants was recognized.
6. COMMITMENTS:
LEASES
The Company leases its facilities and certain equipment under operating
leases. Rent expense for the period from inception (August 20, 1998) to December
31, 1998 and the six-month period ended June 30, 1999 was $36,023 and $185,335,
respectively. The leases expire at various dates through April 30, 2004 and
generally require the payment of real estate taxes, insurance, maintenance, and
operating costs. The Company also leases certain equipment under capital leases.
The minimum aggregate future obligations under noncancelable leases and
equipment loans as of June 30, 1999 are as follows:
<TABLE>
<CAPTION>
CAPITAL
LEASES
(INCLUDING
OPERATING EQUIPMENT
YEAR ENDING LEASES LOAN)
- ----------- ---------- ----------
<S> <C> <C>
1999........................................................ $ 261,841 $ 288,353
2000........................................................ 519,404 576,702
2001........................................................ 519,404 572,621
2002........................................................ 519,404 160,123
2003........................................................ 224,255 --
---------- ----------
Total....................................................... $2,044,308 1,597,799
==========
Less interest............................................... (241,612)
----------
Total principal obligation.................................. 1,356,187
Less current portion........................................ (450,685)
----------
Noncurrent portion of principal obligation.................. $ 905,502
==========
</TABLE>
EQUIPMENT LOAN
The Company received an equipment loan from its bank for $1.5 million on
January 26, 1999. The equipment loan is repayable in monthly installments of
$46,318 for 36 months, with a lump sum payment of $112,500 due in February 2002.
The interest rate on this loan at June 30, 1999 is approximately 10.8%.
In connection with the equipment loan, the Company issued warrants for the
purchase of 72,264 shares of common stock at a purchase price of $0.42. The
warrants were exercisable upon issuance and expire on January 26, 2002. The
Company estimated the value of the warrants to be $25,351 at the date of
issuance, which has been recorded as additional paid-in capital and reduced the
carrying value of the equipment loan. The fair value was estimated using the
Black-Scholes model with the following assumptions: dividend yield of
F-11
<PAGE> 67
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
0%, volatility of 100%, risk free interest rate of 5.1% and an expected life of
five years. The discount on the note is being amortized over the estimated life
of the loan.
BANDWIDTH USAGE AND CO-LOCATION COSTS
The Company has commitments for bandwidth usage and co-location with
various network service providers. For the six months ended December 31, 1999,
and the years ended December 31, 2000, 2001 and 2002, the minimum commitments
are approximately $3,293,500, $4,861,400, $3,309,300, and $964,400,
respectively. Some of these agreements may be amended to either increase or
decrease the minimum commitments during the life of the contract.
7. CONVERTIBLE PREFERRED STOCK:
The authorized capital stock of the Company consists of (i) 300,000,000
shares of voting common stock ("Common Stock") authorized for issuance with a
par value of $0.01 and (ii) 10,000,000 shares of preferred stock with a par
value of $0.01, of which 1,100,000 shares are designated as Series A convertible
preferred stock ("Series A preferred stock"), 1,327,500 shares are designated as
Series B convertible preferred stock ("Series B preferred stock"), 145,195
shares are designated as Series C convertible preferred stock ("Series C
preferred stock"), and 685,194 shares of Series D convertible preferred stock
("Series D preferred stock").
SERIES A CONVERTIBLE PREFERRED STOCK
In November and December 1998, the Company issued 1,100,000 shares of
Series A preferred stock at $7.60 per share to investors for total consideration
of $8,283,758 (net of offering costs of $76,242).
The holders of the Series A preferred stock have voting rights equivalent
to the number of shares of common stock into which their shares of Series A
preferred stock convert. Dividends must be paid when dividends are declared on
common stock. The Series A preferred stock is convertible at any time by the
holders, at the then applicable conversion rate (1-to-1 on the date of issuance;
18.309-to-1 at June 30, 1999) adjusted for certain events including stock splits
and dividends. The Series A preferred stock is redeemable, subject to the
approval of the holders of 66% of the then outstanding shares of Series A
preferred stock beginning November 23, 2003 if the Company has not made a
qualified initial public offering of its common stock. Upon liquidation, holders
of Series A preferred stock are entitled to receive, out of funds then generally
available, $7.60 per share, plus any declared and unpaid dividends, thereon.
Following payment to holders of all other classes of preferred stock to which
the Series A preferred stock is subordinate, holders of Series A preferred stock
are then entitled to share in remaining available funds on an "as-if converted"
basis with holders of common stock.
SERIES B CONVERTIBLE PREFERRED STOCK
In April 1999, the Company issued 1,327,500 shares of Series B preferred
stock at $15.066 per share to private investors for total consideration of
$19,875,115 (net of offering costs of $125,000). In addition, the Company issued
a warrant to purchase 145,195 shares of Series C preferred stock at an exercise
price of $34.436 per share which expires at the earlier of (i) December 31, 1999
and (ii) the date immediately prior to the consummation of a qualified initial
public offering.
The holders of Series B preferred stock have voting rights equivalent to
the number of shares of common stock into which their shares of Series B
preferred stock convert. Dividends accrue annually and are cumulative at a rate
of 8% of the original purchase price of $15.066 per share, on a per share basis.
Dividends will only be paid in the event of a liquidation or redemption, as
defined. The Series B preferred stock is convertible at any time by the holders,
at the then applicable conversion rate (1-to-1 on the date of issuance; 6-to-1
at June 30, 1999) adjusted for certain events including stock splits. The Series
B preferred stock is
F-12
<PAGE> 68
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
redeemable, as defined, subject to the approval of the holders of 66% of the
then outstanding shares of Series B preferred stock beginning April 5, 2003 if
the Company has not made a qualified initial public offering of its common
stock. Upon liquidation, holders of Series B preferred stock are entitled to
receive, out of funds then generally available, $15.066 per share, plus any
accrued and unpaid dividends, thereon. Following payment to holders of all other
classes of preferred stock to which the Series B preferred stock is subordinate,
holders of Series B preferred stock are then entitled to share in remaining
available funds on an "as if converted" basis with holders of common stock.
SERIES C CONVERTIBLE PREFERRED STOCK
In connection with the Series B preferred stock issuance, one holder of the
Series B preferred stock received the option to purchase 145,195 shares of
Series C preferred stock at the purchase price of $34.436 per share. The option
to purchase the Series C preferred stock expires upon the earlier of an initial
public offering or December 31, 1999. As of June 30, 1999, this option had not
been exercised by the holder.
The holders of the Series C preferred stock have voting rights equivalent
to the number of shares of common stock into which their shares of Series C
preferred stock convert. Dividends accrue annually and are cumulative at a rate
of 8% of the original purchase price of $34.436 per share, on a per share basis.
Dividends will only be paid in the event of a liquidation or redemption. The
Series C preferred stock is convertible at any time by the holders, at the then
applicable conversion rate (1-to-1 on the date of issuance; 6.256-to-1 at June
30, 1999) adjusted for certain events including stock splits and dividends
subject to the approval of the holders of 66% of the then outstanding shares of
Series C preferred stock beginning April 5, 2003 if the Company has not made a
qualified initial public offering of its common stock. Upon liquidation, holders
of Series C preferred stock are entitled to receive, out of funds generally
available, $34.436 per share, plus any accrued and unpaid dividends, thereon.
Following payment to holders of all other classes of preferred stock to which
Series C is subordinate, holders of Series C preferred stock are then entitled
to share in remaining available funds on an "as if converted" basis with holders
of common stock.
SERIES D CONVERTIBLE PREFERRED STOCK
In June 1999, the Company issued 685,194 shares of Series D preferred stock
at $18.243 per share to private investors for total consideration of $12,475,000
(net of offering costs of $25,000).
The holders of Series D preferred stock have voting rights equivalent to
the number of shares of common stock into which their shares of Series D
preferred stock convert. Dividends accrue annually and are cumulative at a rate
of 8% of the original purchase price of $18.243 per share, on a per share basis.
Dividends will be paid only in the event of a liquidation or redemption, as
defined. The Series D preferred stock is convertible at any time by the holders,
at the then applicable conversion rate (1-to-1 on the date of issuance; 6-to-1
at June 30, 1999) adjusted for certain events including stock splits and
dividends. The Series D preferred stock is redeemable, as defined, subject to
the approval of the holder of 66% of the then outstanding shares of Series D
preferred stock.
The holder of the Series D preferred stock is also a customer of the
Company. In June 1999, the holder of the Series D preferred stock entered into a
services agreement with the Company at customary rates. The aggregate minimum
value of the services agreement is $12,360,000 through July 2000. Accounts
receivable included $303,795 from this customer at June 30, 1999. Revenue
recognized from this customer for the six-month period ended June 30, 1999 were
$303,795.
F-13
<PAGE> 69
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Upon the closing of the anticipated public offering, all outstanding shares
of preferred stock will automatically convert into shares of common stock as
follows:
<TABLE>
<CAPTION>
SHARES OF
SERIES COMMON STOCK
- ------ ------------
<S> <C>
Series A preferred stock.................................... 20,139,530
Series B preferred stock.................................... 7,965,000
Series C preferred stock.................................... --
Series D preferred stock.................................... 4,111,164
----------
32,215,694
==========
</TABLE>
In August 1999, the Company issued 1,867,480 shares of Series E Convertible
Preferred Stock ("Series E preferred stock") (see Note 13). Upon the closing of
the anticipated public offering, all outstanding shares of Series E preferred
stock will automatically convert into 1,867,480 shares of common stock.
8. STOCKHOLDERS' DEFICIT:
STOCK SPLIT
On January 28, 1999, the Company effected a 3-for-1 stock split through a
stock dividend of common stock. On May 25, 1999, the Company effected a 3-for-1
stock split through a stock dividend of common stock. On September 8, 1999 the
Company effected a 2-for-1 stock split through a stock dividend of common stock.
All references to preferred and common stock share and per share amounts
including options and warrants to purchase common stock have been retroactively
restated to reflect the stock splits.
COMMON STOCK
The common stockholders are entitled to one vote per share. At June 30,
1999, the Company had reserved 44,315,170 shares of common stock, for future
issuance upon conversion of Series A preferred stock, Series B preferred stock,
Series C preferred stock, Series D preferred stock, and the exercise of warrants
and stock options.
NOTES RECEIVABLE FROM OFFICERS FOR STOCK
In the connection with the issuance of restricted common stock, the Company
received full recourse notes receivable from the Chief Executive Officer and
President of the Company in the amount of $1,980,000 and $500,000, respectively.
The notes bear interest at 5.3%, and are payable in full by March 26, 2009 and
May 18, 2009, respectively.
9. 1998 STOCK INCENTIVE PLAN:
In 1998, the Board of Directors adopted the 1998 Stock Incentive Plan (the
"1998 Plan") for the issuance of incentive and nonqualified stock options and
restricted stock awards. The number of shares of common stock reserved for
issuance under the 1998 Plan is 28,755,600 shares. Options to purchase common
stock and restricted stock awards are granted at the discretion of the Board of
Directors.
Under the terms of the 1998 Plan, the exercise price of incentive stock
options granted must not be less than 100% (110% in certain cases) of the fair
market value of the common stock on the date of grant, as determined by the
Board of Directors. The exercise price of nonqualified stock options may be less
than the fair market value of the common stock on the date of grant, as
determined by the Board of Directors but in no case may the exercise price be
less than the statutory minimum. Vesting of options granted is at the discretion
of the Board of Directors, which typically is four years.
F-14
<PAGE> 70
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A restricted stock award provides for the issuance of common stock to
directors, officers, consultants and other key personnel at prices determined by
a Committee selected by the Board of Directors. Participants' unvested shares
are subject to repurchase by the Company at the original purchase price for up
to four years. Generally, 25% of the shares vest on the first anniversary of the
date of purchase and, thereafter, the remaining shares vest on a quarterly basis
through the fourth anniversary of the date of purchase. As of December 31, 1998
and June 30, 1999, the Company had the right to repurchase up to 3,283,200 and
8,847,000 unvested shares, respectively. Such shares may be repurchased at the
original purchase prices ranging from $0.01 to $0.84 per share. The shares
outstanding at December 31, 1998 and June 30, 1999 under the 1998 Plan have a
weighted average repurchase price of $0.02 and $0.24 per share, respectively.
A summary of activity under the Company's 1998 plan for the period from
inception (August 20, 1998) to December 31, 1998 and the six-month period ended
June 30, 1999 is presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
---------- ---------
<S> <C> <C>
RESTRICTED STOCK AWARDS..................................... -- --
Outstanding at inception
Issued.................................................... 3,283,200 $0.02
Repurchased............................................... -- --
---------- -----
Outstanding at December 31, 1998............................ 3,283,200 0.02
Issued.................................................... 8,520,000 0.33
Repurchased............................................... -- --
---------- -----
Outstanding at June 30, 1999................................ 11,803,200 $0.24
========== =====
Vested restricted common stock at June 30, 1999............. 2,956,200 $0.25
========== =====
</TABLE>
There were 954,000 shares of restricted common stock issued outside of the
plan in the period ended December 31, 1998.
<TABLE>
<S> <C> <C>
STOCK OPTION AWARDS
Outstanding at inception.................................... -- --
Granted................................................... 1,287,000 $0.02
Exercised................................................. -- --
Forfeited................................................. -- --
---------- -----
Outstanding at December 31, 1998............................ 1,287,000 $0.02
Granted................................................... 8,128,400 0.24
Exercised................................................. -- --
Forfeited................................................. (299,400) 0.36
---------- -----
Outstanding at June 30, 1999................................ 9,116,000 $0.20
========== =====
</TABLE>
F-15
<PAGE> 71
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
at June 30, 1999:
<TABLE>
<CAPTION>
VESTED AND EXERCISABLE
WEIGHTED -----------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE AVERAGE
EXERCISE OF OPTIONS CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE OF OPTIONS PRICE
-------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.01 - $0.04 6,953,400 9.6 $0.04
$0.34 - $0.50 702,000 9.8 $0.42
$0.84 - $1.00 1,460,600 9.9 $0.90 140,000 $0.84
--------- --- ----- ------ -----
$0.01 - $1.00 9,116,000 9.6 $0.20 140,000 $0.84
========= === ===== ====== =====
</TABLE>
SFAS No. 123, "Accounting for Stock-Based Compensation," encourages but
does not require companies to record compensation cost for stock-based employee
compensation at fair value. The Company has chosen to account for stock-based
compensation granted to employees using the intrinsic value method prescribed in
APB No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. Accordingly, deferred compensation cost for restricted stock
awards and stock options granted to employees is measured as the excess, if any,
of the fair value of the Company's stock at the date of the grant over the
amount that must be paid to acquire the stock. From inception (August 20, 1998)
through December 31, 1998 and the six-month period ended June 30, 1999, the
Company recorded approximately $1,711,600 and $7,835,000, respectively, in
deferred compensation for restricted stock awards and options to purchase common
stock granted at exercise prices subsequently determined to be below the fair
value of the common stock. Compensation expense of $205,617 and $1,338,608 was
recognized during the period from inception (August 20, 1998) through December
31, 1998 and the six-month period ended June 30, 1999, respectively.
Had the value of options granted been measured using the fair value method
prescribed by SFAS No. 123, the fair value of the options granted from inception
(August 20, 1998) through December 31, 1998 and the six-month period ended June
30, 1999 is estimated to be $0.01 and $1.59 per share, respectively. The fair
value of the option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: risk free
rate of 5.5%; no expected dividends; an expected life of 10 years; and no
volatility. Had the Company accounted for stock options to employees under the
fair value method prescribed under SFAS No. 123, net losses as reported for the
period from inception (August 20, 1998) to December 31, 1998 and the six-month
period ended June 30, 1999 would have been $890,890 and $9,818,746,
respectively, under SFAS No. 123. Basic and diluted net loss per share would
have been $(0.06) and $(0.52) on a pro forma basis for the period from inception
(August 20, 1998) to December 31, 1998 and the six-month period ended June 30,
1999, respectively. The effects of applying SFAS No. 123 in this pro forma
disclosure are not indicative of future amounts.
10. INCOME TAXES:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION SIX-MONTH
(AUGUST 20, 1998) PERIOD ENDED
TO DECEMBER 31, JUNE 30,
1998 1999
----------------- ------------
<S> <C> <C>
Current tax expense.................................... -- --
Deferred tax expense/(benefit)......................... $(288,000) $(3,396,000)
Valuation allowance.................................... 288,000 3,396,000
--------- -----------
-- --
========= ===========
</TABLE>
F-16
<PAGE> 72
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company's effective tax rate varies from the statutory rate as follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION SIX-MONTH
(AUGUST 20, 1998) PERIOD ENDED
TO DECEMBER 31, JUNE 30,
1998 1999
----------------- ------------
<S> <C> <C>
U.S. Federal income tax rate............................ (34.0)% (34.0)%
State taxes............................................. (6.3) (5.8)
Deferred compensation amortization...................... 3.2 3.4
Other................................................... (0.9) (0.3)
Valuation allowance..................................... 38.0 36.7
----- -----
-- --
===== =====
</TABLE>
Based on the Company's current financial status, realization of the
Company's deferred tax assets does not meet the "more likely than not" criteria
under SFAS No. 109 and, accordingly, a valuation allowance for the entire
deferred tax asset amount has been recorded. The components of the net deferred
tax asset (liability) and the related valuation allowance are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
<S> <C> <C>
Net operating loss carryforwards....................... $ 16,000 $ 2,915,000
Capitalized start-up costs............................. 207,000 480,000
Capitalized research and development expenses.......... 70,000 377,000
Depreciation........................................... (13,000) (88,000)
Other.................................................. 8,000 --
--------- -----------
288,000 3,684,000
Valuation allowance.................................... (288,000) (3,684,000)
--------- -----------
Net deferred tax assets................................ -- --
========= ===========
</TABLE>
As of June 30, 1999, the Company has federal and state net operating loss
carryforwards of $7,033,000 which begin to expire in 2019. These net operating
loss carryforwards may be used to offset future federal and state taxable income
tax liabilities. The Company also has federal and state tax credit carryforwards
of $58,000 and $36,000, respectively.
Ownership changes resulting from the Company's issuance of capital stock
may limit the amount of net operating loss and tax credit carryforwards that can
be utilized annually to offset future taxable income. The amount of the annual
limitation is determined based upon the Company's value immediately prior to the
ownership change. Subsequent significant changes in ownership could further
affect the limitation in future years.
11. EMPLOYEE BENEFIT PLAN:
In January 1999, the Company established a savings plan for its employees
which is designed to be qualified under Section 401(k) of the Internal Revenue
Code. Eligible employees are permitted to contribute to the 401(k) plan through
payroll deductions within statutory and plan limits. The Company has not
contributed to the savings plan to date.
F-17
<PAGE> 73
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
The following is the supplemental cash flow information for all periods
presented:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION SIX-MONTH
(AUGUST 20, 1998) PERIOD ENDED
TO DECEMBER 31, JUNE 30,
1998 1999
----------------- ------------
<S> <C> <C>
Cash paid during the period for interest................ $ 10,407 $ 66,502
Cash paid during the period for income taxes............ -- 5,990
Noncash financing and investing activities:
Purchase of technology license for stock.............. 490,200 --
Issuance of restricted common stock in exchange for
note receivable.................................... -- 2,480,000
Dividends accrued, not paid on convertible preferred
stock.............................................. -- 287,672
Acquisition of equipment through capital lease........ 40,056 14,395
</TABLE>
13. SUBSEQUENT EVENTS (UNAUDITED):
SERIES E CONVERTIBLE PREFERRED STOCK
In August 1999, the Company issued 1,867,480 shares of Series E preferred
stock at $26.239 per share to a private investor for total consideration of
$49,000,808.
The holders of Series E preferred stock have voting rights equivalent to
the number of shares of common stock into which the shares of Series E preferred
stock convert. Dividends accrue annually and are cumulative at a rate of 8% of
the original purchase price of $26.239 per share, on a per share basis.
Dividends will be paid only in the event of a liquidation or redemption. The
Series E preferred stock is convertible at any time by the holders, at the then
applicable conversion rate (currently 2-to-1) adjusted for certain events such
as stock splits and dividends. The Series E preferred stock is redeemable,
subject to the approval of the holders of 66% of the then outstanding shares of
Series E preferred stock.
In connection with the issuance of Series E preferred stock, the authorized
common stock increased from 60,000,000 to 300,000,000 and the authorized
preferred stock increased from 5,000,000 to 10,000,000 shares. All amounts have
been restated to reflect the increase in authorized shares.
SERIES F CONVERTIBLE PREFERRED STOCK
In September 1999, the Company issued 985,545 shares of Series F preferred
stock at $15.22 per share to a private investor for total consideration of
$14,999,995.
The holders of Series F preferred stock have voting rights equivalent to
the number of shares of common stock into which the shares of Series F preferred
stock convert. Dividends accrue annually and are cumulative at a rate of 8% of
the original purchase price of $15.22 per share, on a per share basis. Dividends
will be paid only in the event of a liquidation or redemption. The Series F
preferred stock is convertible at any time by the holders, at the then
applicable conversion rate (currently 1-to-1) adjusted for certain events such
as stock splits and dividends. The Series F preferred stock is redeemable,
subject to the approval of the holders of 66% of the then outstanding shares of
Series F preferred stock.
F-18
<PAGE> 74
[outside back cover of prospectus]
[Narrative description of graphic material omitted in electronically filed
document.]
The following text appears in the center of the outside back cover of the
prospectus:
[AKAMAI LOGO]
\AH.kuh.my\(Hawaiian) adj: 1 : Intelligent, clever.
2: "Cool." n: 1 Internet content delivery service.
<PAGE> 75
[Narrative description of graphic material omitted in
electronically filed document.]
The following graphic and text appears on the inside back cover of the
prospectus.
The graphic is a map of the world. There are numerous small circles on the
map. There is an arrow facing down on the right hand side of the map and an
arrow facing up on the left hand side of the map.
The following text appears above the graphic:
"More Content"
The following text appears below the graphic:
"More Networks"
The following text appears below the graphic:
"900 Servers
25 Communications Networks
15 Countries
[Akamai Logo]
As of July 31, 1999"
<PAGE> 76
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fees and the Nasdaq National Market listing
fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 34,528
NASD filing fee............................................. 12,920
Nasdaq National Market listing fee.......................... 95,000
Printing and engraving expenses............................. 150,000
Legal fees and expenses..................................... 450,000
Accounting fees and expenses................................ 350,000
Blue Sky fees and expenses (including legal fees)........... 15,000
Transfer agent and registrar fees and expenses.............. 2,000
Miscellaneous............................................... 40,552
----------
Total............................................. $1,150,000
==========
</TABLE>
The Company will bear all expenses shown above.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article SEVENTH of the Registrant's Amended and Restated Certificate of
Incorporation (the "Restated Certificate") provides that no director of the
Registrant shall be personally liable for any monetary damages for any breach of
fiduciary duty as a director, except to the extent that the Delaware General
Corporation Law prohibits the elimination or limitation of liability of
directors for breach of fiduciary duty.
Article EIGHTH of the Restated Certificate provides that a director or
officer of the Registrant (a) shall be indemnified by the Registrant against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement incurred in connection with any litigation or other legal proceeding
(other than an action by or in the right of the Registrant) brought against him
by virtue of his position as a director or officer of the Registrant if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Registrant, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful and (b) shall be indemnified by the Registrant against all expenses
(including attorneys' fees) and amounts paid in settlement incurred in
connection with any action by or in the right of the Registrant brought against
him by virtue of his position as a director or officer of the Registrant if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Registrant, except that no indemnification
shall be made with respect to any matter as to which such person shall have been
adjudged to be liable to the Registrant, unless the Court of Chancery of
Delaware determines that, despite such adjudication but in view of all of the
circumstances, he is entitled to indemnification of such expenses.
Notwithstanding the foregoing, to the extent that a director or officer has been
successful, on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, he is required to be indemnified by
the Registrant against all expenses (including attorneys' fees) incurred in
connection therewith. Expenses shall be advanced to a director or officer at his
request, unless it is determined that he did not act in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Registrant, and, with respect to any criminal action or proceeding had
reasonable cause to believe that his conduct was unlawful, provided that he
undertakes to repay the amount advanced if it is ultimately determined that he
is not entitled to indemnification for such expenses.
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the
II-1
<PAGE> 77
Registrant fails to make an indemnification payment within 60 days after such
payment is claimed by such person, such person is permitted to petition the
court to make an independent determination as to whether such person is entitled
to indemnification. As a condition precedent to the right of indemnification,
the director or officer must give the Registrant notice of the action for which
indemnity is sought and the Registrant has the right to participate in such
action or assume the defense thereof.
Article EIGHTH of the Restated Certificate further provides that the
indemnification provided therein is not exclusive, and provides that in the
event that the Delaware General Corporation Law is amended to expand the
indemnification permitted to directors or officers the Registrant must indemnify
those persons to the fullest extent permitted by such law as so amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
The Underwriting Agreement provides that the Underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of the Company against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Act"). Reference is made to the
form of Underwriting Agreement to be filed as Exhibit 1.1 hereto.
The Registrant has obtained liability insurance for its officers and
directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since incorporation in August 20, 1998, the Registrant has issued the
following securities that were not registered under the Securities Act as
summarized below. Shares on a post-split basis reflect a 3-for-1 stock dividend
on January 28, 1999, a 3-for-1 stock dividend on May 25, 1999 and a 2-for-1
stock dividend on September 8, 1999.
(a) Issuances of Capital Stock.
1. On September 2, 1998, the Registrant issued and sold an aggregate
of 25,159,500 shares of its common stock at a purchase price of
approximately $0.006 per share, to F. Thomson Leighton, Daniel M. Lewin,
and Jonathan Seelig pursuant to their respective stock restriction
agreements.
2. On September 2, 1998, the Registrant issued and sold an aggregate
of 742,500 shares of its common stock at a purchase price of approximately
$0.006 per share, to Preetish Nijhawan pursuant to a right of first refusal
agreement.
3. On September 2, 1998, the Registrant issued and sold an aggregate
of 3,564,000 shares of its common stock at a purchase price of
approximately $0.006 per share, to Randall Kaplan and David Karger,
pursuant to their respective stock restriction agreements.
4. On September 2, 1998, the Registrant issued and sold 180,000 shares
of its common stock at a purchase price of approximately $0.006 per share,
to Marco Greenberg pursuant to a right of first refusal agreement.
5. On October 28, 1998, the Registrant issued and sold 2,383,200
shares of its common stock at a purchase price of approximately $0.014 per
share to Paul Sagan pursuant to a restricted stock agreement.
II-2
<PAGE> 78
6. On November 13, 1998, the Registrant issued and sold 360,000 shares
of its common stock at a purchase price of approximately $0.014 per share
to Gilbert Friesen pursuant to a stock restriction agreement.
7. On November 19, 1998, the Registrant issued and sold 594,000 shares
of its common stock at a purchase price of approximately $0.014 per share,
to Arthur H. Bilger pursuant to a stock restriction agreement.
8. On November 23, 1998, the Registrant issued and sold an aggregate
of 682,110 shares of its common stock to the Massachusetts Institute of
Technology in consideration for an exclusive patent and non-exclusive
copyright license agreement dated as of October 26, 1998 between the
Registrant and the Massachusetts Institute of Technology.
9. On November 23, 1998, the Registrant issued and sold 467,101 shares
of its Series A convertible preferred stock at a purchase price of $7.60
per share to 7 investors pursuant to a Series A convertible preferred stock
purchase agreement.
10. On November 30, 1998, the Registrant issued and sold 205,258
shares of its Series A convertible preferred stock at a purchase price of
$7.60 per share to 10 investors pursuant to a Series A convertible
preferred stock purchase agreement.
11. On December 14, 1998, the Registrant issued and sold 427,641
shares of its Series A convertible preferred stock at a purchase price of
$7.60 per share to 8 investors pursuant to a Series A convertible preferred
stock purchase agreement.
12. On December 3, 1998, the Registrant issued and sold an aggregate
of 900,000 shares of its common stock at a purchase price of approximately
$0.042 per share, to William Bogstad and Yoav Yerushalmi pursuant to their
respective stock restriction agreements.
13. On March 15, 1999, the Registrant issued and sold 1,260,000 shares
of its common stock at a purchase price of approximately $0.042 per share,
to Earl P. Galleher III pursuant to a stock restriction agreement.
14. On March 26, 1999, the Registrant issued and sold 120,000 shares
of its common stock at a purchase price of approximately $0.333 per share,
to Steven P. Heinrich.
15. On March 26, 1999, the Registrant issued 600,000 shares of its
common stock at a purchase price of approximately $0.333 per share, to
Arthur H. Bilger pursuant to a stock restriction agreement.
16. On March 26, 1999, the Registrant issued and sold 5,940,000 shares
of its common stock at a purchase price of approximately $0.333 per share,
to George Conrades pursuant to a stock restriction agreement.
17. On April 16, 1999, the Registrant issued and sold 929,244 shares
of its Series B convertible preferred stock at a purchase price of $15.066
per share to Baker Communications Fund, L.P. pursuant to a Series B
convertible preferred stock and Series C convertible preferred stock
purchase agreement.
18. On April 30, 1999, the Registrant issued and sold 398,256 shares
of its Series B convertible preferred stock to 23 investors pursuant to a
Series B convertible preferred stock and Series C convertible preferred
stock purchase agreement.
19. On May 18, 1999, the Registrant issued and sold 600,000 shares of
common stock at price of approximately $0.833 per share, to Paul Sagan
pursuant to a stock restriction agreement granted under 1998 Stock
Incentive Plan.
20. On June 21, 1999, the Registrant issued and sold 685,194 shares of
its Series D convertible preferred shares at a purchase price of $18.243
per share to Apple Computer Inc. Ltd. pursuant to the Series D convertible
preferred stock purchase agreement.
II-3
<PAGE> 79
21. On July 1, 1999, the Registrant issued and sold 10,000 shares of
its common stock at a purchase price of $0.835 per share, to Amos Hostetter
pursuant to the exercise of a stock option.
22. On July 1, 1999, the Registrant issued and sold 10,000 shares of
its common stock at a purchase price of $0.835 per share, to Benjamin A.
Gomez pursuant to the exercise of a stock option.
23. On July 23, 1999, the Registrant issued and sold an aggregate of
1,300,000 shares of its common stock at a purchase price of $2.50 per
share, to Timothy Weller and Robert O. Ball III pursuant to stock
restriction agreements.
24. On August 6, 1999, the Registrant issued and sold 1,867,480 shares
of its Series E convertible preferred stock at a purchase price of $26.239
per share to Cisco Systems, Inc. pursuant to a Series E convertible
preferred stock purchase agreement.
25. On August 23, 1999, the Registrant issued and sold 112,500 shares
of its common stock at a purchase price of approximately $0.014 per share
to Bruce Maggs pursuant to the exercise of a stock option.
26. On August 30, 1999 the Registrant issued and sold 315,000 shares
of its common stock at a purchase price of $1.0833 per share to Warren
Recicar pursuant to the exercise of a stock option.
27. On September 20, 1999, the Registrant issued and sold 985,545
shares of Series F convertible preferred stock at a purchase price of
$15.22 per share to Microsoft Corporation pursuant to a Series F
convertible preferred stock purchase agreement.
(b) Grants of Stock Options.
1. From inception through June 30, 1999, the Registrant granted stock
options to purchase 9,116,000 shares of common stock at exercise prices
ranging from $0.125 to $1.00 per share to employees, consultants and
directors pursuant to its 1998 Stock Incentive Plan.
2. On April 16, 1999, the Registrant granted an option to purchase up
to 145,195 shares of its Series C convertible preferred stock at an
exercise price of $34.436 per share to Baker Communications Fund, L.P.
pursuant to a Series B convertible preferred stock and Series C convertible
preferred stock purchase agreement.
(c) Issuances of Notes and Warrants
1. On January 27, 1999, the Registrant issued a warrant to purchase up
to 71,046 shares of common stock at an exercise price of approximately
$0.422 per share. As of June 30, 1999, this warrant was exercisable for up
to 72,264 shares of Common Stock at an exercise price of approximately
$0.422 per share.
2. On May 7, 1999, the Registrant issued 15% senior subordinated notes
in the principal amount of $15,000,000 and warrants to purchase up to
2,002,836 shares of common stock at an exercise price of approximately
$2.497 per share to 20 investors pursuant to a 15% senior subordinated
notes and warrants to purchase common stock purchase agreement.
No underwriters were involved in any of the foregoing sales of securities.
Such sales were made in reliance upon an exemption from the registration
provisions of the Securities Act set forth in Section 4(2) thereof relative to
sales by an issuer not involving any public offering or the rules and
regulations thereunder, or, in the case of options to purchase common stock,
Rule 701 of the Securities Act. All of the foregoing securities are deemed
restricted securities for the purposes of the Securities Act.
II-4
<PAGE> 80
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended.
**3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant, to be filed prior to the closing of this
offering.
**3.3 By-Laws of the Registrant.
**3.4 Form of Amended and Restated By-Laws of the Registrant, to
be effective upon the closing of this offering.
*4.1 Specimen common stock certificate.
4.2 Fourth Amended and Restated Registration Rights Agreement
dated September 20, 1999.
5.1 Form of Opinion of Hale and Dorr LLP.
**10.1 Second Amended and Restated 1998 Stock Incentive Plan.
**10.2 Form of Restricted Stock Agreement granted under 1998 Stock
Incentive Plan.
**10.3 Form of Incentive Stock Option Agreement granted under 1998
Stock Incentive Plan.
**10.4 Form of Nonstatutory Stock Option Agreement granted under
1998 Stock Incentive Plan.
10.5 Form of 1999 Employee Stock Purchase Plan.
**10.6 Broadway Hampshire Associates Lease dated March 8, 1999, as
amended, by and between Broadway/Hampshire Associates
Limited Partnership and the Registrant.
**10.7 Loan and Security Agreement dated as of January 27, 1999
between Silicon Valley Bank and the Registrant.
+10.8 Strategic Alliance and Master Services Agreement effective
as of April 1, 1999 by and between the Registrant and Apple
Computer, Inc.
+10.9 Strategic Alliance and Joint Development Agreement dated as
of August 6, 1999 by and between the Registrant and Cisco
Systems, Inc.
**10.10 Series A Convertible Preferred Stock Purchase Agreement
dated as of November 23, 1998 between the Registrant and the
Purchasers named therein.
**10.11 Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock Purchase Agreement dated as of
April 16, 1999 between the Registrant and the Purchasers
named therein.
**10.12 Series D Convertible Preferred Stock Purchase Agreement
dated as of June 21, 1999 between the Registrant and Apple
Computer Inc. Ltd.
**10.13 Series E Convertible Preferred Stock Purchase Agreement
dated as of August 6, 1999 between the Registrant and Cisco
Systems, Inc.
**10.14 Form of Master Services Agreement.
**10.15 Severance Agreement dated March 26, 1999 by and between
George Conrades and the Registrant.
+10.16 Exclusive Patent and Non-Exclusive Copyright License
Agreement dated as of October 26, 1998 between the
Registrant and the Massachusetts Institute of Technology.
**10.17 $1,980,000 Promissory Note dated as of March 26, 1999 by and
between the Registrant and George H. Conrades.
**10.18 $500,000 Promissory Note dated as of May 18, 1999 by and
between the Registrant and Paul Sagan.
**10.19 $623,750 Promissory Note dated as of July 23, 1999 by and
between the Registrant and Robert O. Ball III.
10.20 15% Senior Subordinated Note and Warrant to Purchase Common
Stock Purchase Agreement dated as of May 7, 1999 between the
Registrant and the Purchasers named therein.
</TABLE>
II-5
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.21 $2,619,750 Promissory Note dated July 23, 1999 by and
between the Registrant and Timothy Weller.
10.22 Series F Convertible Preferred Stock Purchase Agreement
dated as of September 20, 1999 between the Registrant and
Microsoft Corporation.
*+10.23 Broadband Streaming Initiative Agreement dated as of
September 20, 1999 between the Registrant and Microsoft
Corporation.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Hale and Dorr LLP (included in Exhibit 5.1).
**24.1 Powers of Attorney (see page II-7).
**27.1 Financial Data Schedule.
**27.2 Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
+ Confidential treatment requested for certain portions of this Exhibit
pursuant to Rule 406 promulgated under the Securities Act, which portions are
omitted and filed separately with the Securities and Exchange Commission.
** Previously filed.
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the registrant pursuant to the Delaware General
Corporation Law, the Restated Certificate of the registrant, the Underwriting
Agreement, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the registrant
will, unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1) For purpose of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-6
<PAGE> 82
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Cambridge,
Massachusetts, on this 27th day of September, 1999.
AKAMAI TECHNOLOGIES, INC.
By: /s/ ROBERT O. BALL III
------------------------------------
Robert O. Ball III
Vice President, General Counsel and
Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman and Chief Executive September 27, 1999
- --------------------------------------------------- Officer (principal executive
George H. Conrades officer)
* President and Chief September 27, 1999
- --------------------------------------------------- Operating Officer (principal
Paul Sagan financial and accounting
officer)
* Director September 27, 1999
- ---------------------------------------------------
Arthur H. Bilger
* Director September 27, 1999
- ---------------------------------------------------
Todd A. Dagres
* Director September 27, 1999
- ---------------------------------------------------
F. Thomson Leighton
* Director September 27, 1999
- ---------------------------------------------------
Daniel M. Lewin
* Director September 27, 1999
- ---------------------------------------------------
Terrance G. McGuire
* Director September 27, 1999
- ---------------------------------------------------
Edward W. Scott
*By: /s/ ROBERT O. BALL III
- --------------------------------------------------
Robert O. Ball III
Attorney-In-Fact
</TABLE>
II-7
<PAGE> 83
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended.
**3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant, to be filed prior to the closing of this
offering.
**3.3 By-Laws of the Registrant.
**3.4 Form of Amended and Restated By-Laws of the Registrant, to
be effective upon the closing of this offering.
*4.1 Specimen common stock certificate.
4.2 Fourth Amended and Restated Registration Rights Agreement
dated September 20, 1999.
5.1 Form of Opinion of Hale and Dorr LLP.
**10.1 Second Amended and Restated 1998 Stock Incentive Plan.
**10.2 Form of Restricted Stock Agreement granted under 1998 Stock
Incentive Plan.
**10.3 Form of Incentive Stock Option Agreement granted under 1998
Stock Incentive Plan.
**10.4 Form of Nonstatutory Stock Option Agreement granted under
1998 Stock Incentive Plan.
10.5 Form of 1999 Employee Stock Purchase Plan.
**10.6 Broadway Hampshire Associates Lease dated March 8, 1999, as
amended, by and between Broadway/Hampshire Associates
Limited Partnership and the Registrant.
**10.7 Loan and Security Agreement dated as of January 27, 1999
between Silicon Valley Bank and the Registrant.
+10.8 Strategic Alliance and Master Services Agreement effective
as of April 1, 1999 by and between the Registrant and Apple
Computer, Inc.
+10.9 Strategic Alliance and Joint Development Agreement dated as
of August 6, 1999 by and between the Registrant and Cisco
Systems, Inc.
**10.10 Series A Convertible Preferred Stock Purchase Agreement
dated as of November 23, 1998 between the Registrant and the
Purchasers named therein.
**10.11 Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock Purchase Agreement dated as of
April 16, 1999 between the Registrant and the Purchasers
named therein.
**10.12 Series D Convertible Preferred Stock Purchase Agreement
dated as of June 21, 1999 between the Registrant and Apple
Computer Inc. Ltd.
**10.13 Series E Convertible Preferred Stock Purchase Agreement
dated as of August 6, 1999 between the Registrant and Cisco
Systems, Inc.
**10.14 Form of Master Services Agreement.
**10.15 Severance Agreement dated March 26, 1999 by and between
George Conrades and the Registrant.
+10.16 Exclusive Patent and Non-Exclusive Copyright License
Agreement dated as of October 26, 1998 between the
Registrant and the Massachusetts Institute of Technology.
**10.17 $1,980,000 Promissory Note dated as of March 26, 1999 by and
between the Registrant and George H. Conrades.
**10.18 $500,000 Promissory Note dated as of May 18, 1999 by and
between the Registrant and Paul Sagan.
**10.19 $623,750 Promissory Note dated as of July 23, 1999 by and
between the Registrant and Robert O. Ball III.
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
10.20 15% Senior Subordinated Note and Warrant to Purchase Common
Stock Purchase Agreement dated as of May 7, 1999 between the
Registrant and the Purchasers named therein.
10.21 $2,619,750 Promissory Note dated July 23, 1999 by and
between the Registrant and Timothy Weller.
10.22 Series F Convertible Preferred Stock Purchase Agreement
dated as of September 20, 1999 between the Registrant and
Microsoft Corporation.
*+10.23 Broadband Streaming Initiative Agreement dated as of
September 20, 1999 between the Registrant and Microsoft
Corporation.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Hale and Dorr LLP (included in Exhibit 5.1).
**24.1 Powers of Attorney (see page II-7).
**27.1 Financial Data Schedule.
**27.2 Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
+ Confidential treatment requested for certain portions of this Exhibit
pursuant to Rule 406 promulgated under the Securities Act, which portions are
omitted and filed separately with the Securities and Exchange Commission.
** Previously filed.
<PAGE> 1
Exhibit 1.1
_______________ SHARES
AKAMAI
COMMON STOCK, $0.01 PAR VALUE PER SHARE
UNDERWRITING AGREEMENT
September __, 1999
<PAGE> 2
September __, 1999
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette
Salomon Smith Barney
Thomas Weisel Partners LLC
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Akamai Technologies, Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell to the several Underwriters named in
Schedule I hereto (the "UNDERWRITERS") _______________ shares of its common
stock, $0.01 par value per share (the "FIRM SHARES"). The Company also proposes
to issue and sell to the several Underwriters not more than an additional
______________ shares of its common stock, $0.01 par value per share (the
"ADDITIONAL SHARES"), if and to the extent that you, as Managers of the
offering, shall have determined to exercise, on behalf of the Underwriters, the
right to purchase such shares of common stock granted to the Underwriters in
Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter
collectively referred to as the "SHARES." The shares of common stock, $0.01 par
value per share, of the Company to be outstanding after giving effect to the
sales contemplated hereby are hereinafter referred to as the "COMMON STOCK."
The Company has filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement, including a prospectus,
relating to the Shares. The registration statement as amended at the time it
becomes effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the
term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462
Registration Statement.
<PAGE> 3
Morgan Stanley & Co. Incorporated ("Morgan Stanley") has
agreed to reserve up to _______ Shares to be purchased by it under this
Agreement for sale to the Company's directors, officers, employees and business
associates and other parties related to the Company (collectively,
"Participants"), as set forth in the Prospectus under the heading "Underwriters"
(the "Directed Share Program"). The Shares to be sold by Morgan Stanley and its
affiliates pursuant to the Directed Share Program are referred to hereinafter as
the "Directed Shares." Any Directed Shares not orally confirmed for purchase by
any Participants by the end of the business day on which this Agreement is
executed will be offered to the public by the Underwriters as set forth in the
Prospectus.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or, to
the Company's knowledge, threatened by the Commission.
(b) (i) The Registration Statement, when it became effective,
did not contain and, as amended or supplemented, if applicable, will
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable,
will comply in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder and (iii)
the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in
this paragraph do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company.
(d) The Company has no subsidiaries.
-2-
<PAGE> 4
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of such
Shares will not be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company that is material to the Company, or
any judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company, and no consent, approval,
authorization or order of, or qualification with, any governmental body
or agency is required for the performance by the Company of its
obligations under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states in connection with
the offer and sale of the Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company, from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement).
(k) There are no legal or governmental proceedings pending or,
to the Company's knowledge, threatened to which the Company is a party
or to which any of the properties of the Company is subject that are
required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as required.
(l) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder.
-3-
<PAGE> 5
(m) The Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
(n) The Company (i) is in compliance with any and all
applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to
conduct its business and (iii) is in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the
Company.
(o) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
have a material adverse effect on the Company.
(p) Except as described in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement.
(q) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (1) the
Company has not incurred any material liability or obligation, direct
or contingent, nor entered into any material transaction not in the
ordinary course of business; (2) the Company has not purchased any of
its outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock other than
ordinary and customary dividends; and (3) there has not been any
material change in the capital stock, short-term debt or long-term debt
of the Company, except in each case as described in the Prospectus.
(r) The Company has good and marketable title in fee simple to
all real property and good and marketable title to all personal
property owned by it which is material to the business of the Company,
in each case free and clear of all liens, encumbrances and defects
except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company;
and any real property and buildings held under
-4-
<PAGE> 6
lease by the Company are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property
and buildings by the Company, in each case except as described in the
Prospectus.
(s) The Company own or possess, or can acquire on reasonable
terms, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names currently
employed by them in connection with the business now operated by it,
and the Company has not received any notice of infringement of or
conflict with asserted rights of others with respect to any of the
foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would be reasonably likely to
have a material adverse affect on the Company.
(t) No material labor dispute with the employees of the
Company exists, except as described in the Prospectus, or, to the
knowledge of the Company, is imminent; and the Company is not aware of
any existing, threatened or imminent labor disturbance by the employees
of any of its principal suppliers, manufacturers or contractors that
could have a material adverse effect on the Company.
(u) The Company is insured by the insurers of recognized
financial responsibility against such losses and risks and in such
amounts as, in the Company's reasonable judgment, are prudent and
customary in the businesses in which they are engaged; the Company has
not been refused any insurance coverage sought or applied for; and the
Company does not have any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a material
adverse effect on the Company, except as described in the Prospectus.
(v) The Company possesses all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business, other than those which,
if not so possessed, would not have a material adverse effect on the
Company, and the Company has not received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
material adverse effect on the Company, except as described the
Prospectus.
(w) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or
specific authorizations; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(3) access to assets is
-5-
<PAGE> 7
permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(x) The accountants who have certified or shall certify the
financial statements filed or to be filed with the Commission as part
of the Registration Statement and the Prospectus are independent
accountants as required by the Securities Act. The consolidated
financial statements of the Company (together with the related notes
thereto) included in the Registration Statement present fairly the
financial position and results of operations of the Company at the
respective dates and for the respective periods to which they apply,
subject to normal year-end adjustments. Such financial statements have
been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved except
as otherwise stated therein. The pro forma financial information of the
Company included in the Registration Statement has been prepared in
accordance with the Commission's rules and guidelines with respect to
pro forma financial statements, has been properly compiled on the bases
described therein and, in the opinion of the Company, the assumptions
used in the preparation thereof are reasonable and the adjustments used
therein are appropriate to give effect to the transactions and
circumstances referred to therein.
(y) The Shares have been approved for listing on the Nasdaq
National Market, subject to official notice of issuance.
(z) The Registration Statement, the Prospectus and any
preliminary prospectus comply, and any amendments or supplements
thereto will comply, with any applicable laws or regulations of foreign
jurisdictions in which the Prospectus or any preliminary prospectus, as
amended or supplemented, if applicable, are distributed in connection
with the Directed Share Program.
(aa) No consent, approval, authorization or order of, or
qualification with, any governmental body or agency, other than those
obtained, is required in connection with the offering of the Directed
Shares in any jurisdiction where the Directed Shares are being offered.
(bb) The Company has not offered, or caused Morgan Stanley to
offer, Shares to any person pursuant to the Directed Share Program with
the specific intent to unlawfully influence (i) a customer or supplier
of the Company to alter the customer's or supplier's level or type of
business with the Company, or (ii) a trade journalist or publication to
write or publish favorable information about the Company or its
products.
(cc) The Company has reviewed its operations and that of its
subsidiaries to evaluate the extent to which the business or operations
of the Company or any of its subsidiaries will be affected by the Year
2000 Problem (that is, any significant risk that computer hardware or
software applications used by the Company and its subsidiaries
-6-
<PAGE> 8
will not, in the case of dates or time periods occurring after December
31, 1999, function at least as effectively as in the case of dates or
time periods occurring prior to January 1, 2000); as a result of such
review, (i) the Company has no reason to believe, and does not believe,
that (A) there are any issues related to the Company's preparedness to
address the Year 2000 Problem that are of a character required to be
described or referred to in the Registration Statement or Prospectus
which have not been accurately described in the Registration Statement
or Prospectus and (B) the Year 2000 Problem will have a material
adverse effect on the condition, financial or otherwise, or on the
earnings, business or operations of the Company and its subsidiaries,
taken as a whole, or result in any material loss or interference with
the business or operations of the Company and its subsidiaries, taken
as a whole; and (ii) the Company reasonably believes, after due
inquiry, that the suppliers, vendors, customers or other material third
parties used or served by the Company and such subsidiaries are
addressing or will address the Year 2000 Problem in a timely manner,
except to the extent that a failure to address the Year 2000 Problem by
any supplier, vendor, customer or material third party would not have a
material adverse effect on the condition, financial or otherwise, or on
the earnings, business or operations of the Company and its
subsidiaries, taken as a whole.
(dd) To the Company's knowledge, no officer or director of the
Company is in breach or violation of any employment agreement,
non-competition agreement, confidentiality agreement, or other
agreement restricting the nature or scope of employment to which such
officer or director is a party, and, to the Company's knowledge, the
conduct of the Company's business, as described in the Registration
Statement and Prospectus, will not result in a breach or violation of
any such agreement.
(ee) There are no outstanding options to acquire shares of
capital stock of the Company except as disclosed in the Registration
Statement and the Prospectus and except as have been granted under the
Second Amended and Restated 1998 Stock Incentive Plan.
(ff) There are no outstanding warrants to acquire shares of
capital stock of the Company except as disclosed in the Registration
Statement and the Prospectus and except as have been granted under the
15% Senior Subordinated Notes and Warrants to Purchase Common Stock
Purchase Agreement dated as of May 7, 1999.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees
to sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $______ a share (the "PURCHASE PRICE").
On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, the Company agrees
to sell to the Underwriters the Additional Shares, and the Underwriters shall
have a one-time right to purchase, severally and
-7-
<PAGE> 9
not jointly, up to _______________ Additional Shares at the Purchase Price. If
you, on behalf of the Underwriters, elect to exercise such option, you shall so
notify the Company in writing not later than 30 days after the date of this
Agreement, which notice shall specify the number of Additional Shares to be
purchased by the Underwriters and the date on which such shares are to be
purchased. Such date may be the same as the Closing Date (as defined below) but
not earlier than the Closing Date nor later than ten business days after the
date of such notice. Additional Shares may be purchased as provided in Section 4
hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
purchased, each Underwriter agrees, severally and not jointly, to purchase the
number of Additional Shares (subject to such adjustments to eliminate fractional
shares as you may determine) that bears the same proportion to the total number
of Additional Shares to be purchased as the number of Firm Shares set forth in
Schedule I hereto opposite the name of such Underwriter bears to the total
number of Firm Shares.
The Company hereby agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it
will not, during the period ending 180 days after the date of the Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Shares to be sold hereunder, (B) the
issuance by the Company of shares of Common Stock upon the exercise of an option
or warrant or the conversion of a security outstanding on the date hereof that
is disclosed in the Prospectus or of which the Underwriters have been advised in
writing, or (C) the issuance by the Company of shares of Common Stock or options
to purchase shares of Common Stock issued pursuant to the Company's stock plans
as described in the Prospectus, provided that any such shares of Common Stock
described in this clause (C), whether to be issued directly or upon exercise of
any option, shall not be issued prior to the 18lst day after the date of the
Prospectus unless the recipient of such shares executes and delivers to you on
or before the date of such issuance a "lock-up" agreement substantially in the
form of Exhibit A hereto.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you
that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The Company is
further advised by you that the Shares are to be offered to the public initially
at $_____________ a share (the "PUBLIC OFFERING PRICE") and to certain dealers
selected by you at a price that represents a concession not in excess of $______
a share under the Public Offering Price, and that any Underwriter may allow, and
such dealers may reallow, a concession, not in excess of $_____ a share, to any
Underwriter or to certain other dealers.
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<PAGE> 10
4. PAYMENT AND DELIVERY. Payment for the Firm Shares shall be
made to the Company in Federal or other funds immediately available in New York
City against delivery of such Firm Shares for the respective accounts of the
several Underwriters at 10:00 a.m., New York City time, on ____________, 1999,
or at such other time on the same or such other date, not later than _________,
1999, as shall be designated in writing by you. The time and date of such
payment are hereinafter referred to as the "CLOSING DATE".
Payment for any Additional Shares shall be made to the Company
in Federal or other funds immediately available in New York City against
delivery of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 2 or at such other time on the same or on such other
date, in any event not later than _______, 1999, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the "OPTION CLOSING DATE".
Certificates for the Firm Shares and Additional Shares shall
be in definitive form and registered in such names and in such denominations as
you shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The
obligations of the Company to sell the Shares to the Underwriters and the
several obligations of the Underwriters to purchase and pay for the Shares on
the Closing Date are subject to the condition that the Registration Statement
shall have become effective not later than [_____] (New York City time) on the
date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date:
(i) there shall not have occurred any
downgrading, nor shall any notice have been given of any
intended or potential downgrading or of any review for a
possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or
any development involving a prospective change, in the
condition, financial or otherwise, or in the
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<PAGE> 11
earnings, business or operations of the Company, from that set
forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement)
that, in your judgment, is material and adverse and that makes
it, in your judgment, impracticable to market the Shares on
the terms and in the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing
Date a certificate, dated the Closing Date and signed by an executive
officer of the Company, to the effect set forth in Section 5(a)(i)
above and to the effect that the representations and warranties of the
Company contained in this Agreement are true and correct as of the
Closing Date and that the Company has complied with all of the
agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date. The
officer signing and delivering such certificate may rely upon the best
of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing
Date an opinion of Hale and Dorr LLP, outside counsel for the Company,
dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in
The Commonwealth of Massachusetts, __________ and
_____________, which, to such counsel's knowledge, are the
only states in which the Company owns or leases any real
property in the United States;
(ii) the authorized capital stock of the Company
conforms as to legal matters to the description thereof
contained in the Prospectus;
(iii) the shares of Common Stock outstanding prior
to the issuance of the Shares have been duly authorized and
are validly issued, fully paid and non-assessable;
(iv) the Shares have been duly authorized and,
when issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be
subject to any preemptive rights under the Delaware General
Corporate Law, the certificate of incorporation or by-laws of
the Company or, to such counsel's knowledge, similar rights
granted by contract;
(v) this Agreement has been duly authorized,
executed and delivered by the Company;
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<PAGE> 12
(vi) the execution and delivery by the Company
of, and the performance by the Company of its obligations
under, this Agreement will not contravene any provision of
applicable law or the certificate of incorporation or by-laws
of the Company or, to such counsel's knowledge, any agreement
or other instrument binding upon the Company that is filed as
an exhibit to the Registration Statement, or, to counsel's
knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company,
and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is
required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares;
(vii) the statements (A) in the Prospectus under
the captions "Description of Capital Stock" and the first,
second, fourth, sixth, eighth, ninth and eleventh paragraphs
under "Underwriters" and (B) in the Registration Statement in
Items 14 and 15, in each case insofar as such statements
constitute summaries of the legal matters, documents or
proceedings referred to therein, fairly present the
information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters
referred to therein;
(viii) after due inquiry, such counsel does not
know of any legal or governmental proceedings pending or
threatened to which the Company is a party or to which any of
the properties of the Company is subject that are required to
be described in the Registration Statement or the Prospectus
and are not so described or of any statutes, regulations,
contracts or other documents that are required by the
Securities Act to rules and regulations thereunder to be
described in the Registration Statement or the Prospectus or
to be filed as exhibits to the Registration Statement that are
not described or filed as required;
(ix) the Company is not and, after giving effect
to the offering and sale of the Shares and the application of
the proceeds thereof as described in the Prospectus, will not
be an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended;
(x) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial
statements and schedules and other financial and statistical
data included therein as to which such counsel need not
express any opinion) comply as to form in all material
respects with requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder,
(B) shall state that nothing has come to its attention that
would cause such counsel to believe that (except for financial
statements and schedules and other financial and statistical
data as to which such counsel need not express any
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<PAGE> 13
belief) the Registration Statement and the prospectus included
therein at the time the Registration Statement became
effective contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and
(C) has no reason to believe that (except for financial
statements and schedules and other financial and statistical
data as to which such counsel need not express any belief) the
Prospectus contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
(d) The Underwriters shall have received on the Closing Date
an opinion of Ropes & Gray, counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in Sections 5(c)(iv),
5(c)(v), 5(c)(vii) (but only as to the statements in the Prospectus
under "Description of Capital Stock" and "Underwriters") and 5(c)(xi)
above.
With respect to Section 5(c)(xi) above, Hale and Dorr LLP and
Ropes & Gray may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement
and Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check
or verification, except as specified.
The opinion of Hale and Dorr LLP described in Section 5(c)
above shall be rendered to the Underwriters at the request of the
Company and shall so state therein.
(e) The Underwriters shall have received on the Closing Date
an opinion of [ ] patent counsel to the Company, dated the Closing
date, [in form and substance reasonably acceptable to them].
(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from PricewaterhouseCoopers, LLP, independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
provided that the letter delivered on the Closing Date shall use a
"cut-off date" not earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the form
of Exhibit A hereto, between you and each of the officers, directors
and beneficial owners of Common Stock of the Company (as defined and
determined according to Rule 13d-3 under the Exchange Act, except that
a 180-day period shall be used rather than the 60- day period set forth
therein) relating to sales and certain other dispositions of shares of
Common Stock or
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<PAGE> 14
certain other securities, delivered to you on or before the date
hereof, shall be in full force and effect on the Closing Date.
The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the delivery to you on the Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of the
Additional Shares and other matters related to the issuance of the Additional
Shares.
6. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, four signed copies of
the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and to furnish to you in New York
City, without charge, prior to 10:00 a.m. New York City time on the
business day next succeeding the date of this Agreement and during the
period mentioned in Section 6(c) below, as many copies of the
Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the Company)
to which Shares may have been sold by you on behalf of the Underwriters
and to any other dealers upon request, either amendments or supplements
to the Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances
when the Prospectus is delivered to a purchaser, be misleading or so
that the Prospectus, as amended or supplemented, will comply with law.
(d) To refrain from releasing any of the officers, directors
or beneficial owners of common stock from the "lock-up" agreements
referenced in Section 5(g) above.
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<PAGE> 15
(e) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(f) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement covering
the twelve-month period ending September 30, 2000 that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
(g) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the registration and delivery of the
Shares under the Securities Act and all other fees or expenses in
connection with the preparation and filing of the Registration
Statement, any preliminary prospectus, the Prospectus and amendments
and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof
to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and
delivery of the Shares to the Underwriters, including any transfer or
other taxes payable thereon, (iii) the cost of printing or producing
any Blue Sky or Legal Investment memorandum in connection with the
offer and sale of the Shares under state securities laws and all
expenses in connection with the qualification of the Shares for offer
and sale under state securities laws as provided in Section 6(d)
hereof, including filing fees and the reasonable fees and disbursements
of counsel for the Underwriters in connection with such qualification
and in connection with the Blue Sky or Legal Investment memorandum,
(iv) all filing fees and the reasonable fees and disbursements of
counsel to the Underwriters incurred in connection with the review and
qualification of the offering of the Shares by the National Association
of Securities Dealers, Inc., (v) all fees and expenses in connection
with the preparation and filing of the registration statement on Form
8-A relating to the Common Stock and all costs and expenses incident to
listing the Shares on the Nasdaq National Market, (vi) the cost of
printing certificates representing the Shares, (vii) the costs and
charges of any transfer agent, registrar or depositary, (viii) the
costs and expenses of the Company relating to investor presentations on
any "road show" undertaken in connection with the marketing of the
offering of the Shares, including, without limitation, expenses
associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road
show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and
any such consultants, and the cost of any aircraft chartered in
connection with the road show, (ix) all other costs and expenses
incident to the performance of the obligations of the Company hereunder
for which provision is not otherwise made in this Section and (x) all
fees and disbursements of counsel incurred by the Underwriters in
connection with the Directed Share Program and stamp duties, similar
taxes or duties or
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<PAGE> 16
other taxes, if any, incurred by the Underwriters in connection with
the Directed Share Program. It is understood, however, that except as
provided in this Section, Section 7 entitled "Indemnity and
Contribution", and the last paragraph of Section 9 below, the
Underwriters will pay all of their costs and expenses, including fees
and disbursements of their counsel, stock transfer taxes payable on
resale of any of the Shares by them and any advertising expenses
connected with any offers they may make.
(h) To place stop transfer orders on any Directed Shares that
have been sold to Participants subject to the three month restriction
on sale, transfer, assignment, pledge or hypothecation imposed by NASD
Regulation, Inc. under its Interpretative Material 2110-1 on
free-riding and withholding to the extent necessary to ensure
compliance with the three month restrictions.
(i) To comply with all applicable securities and other
applicable laws, rules and regulations in each jurisdiction in which
the Directed Shares are offered in connection with the Directed Share
Program.
7. INDEMNITY AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), from and against any and all losses, claims, damages
and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages
or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein; provided, however, that the
foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom
the person asserting any such losses, claims, damages or liabilities
purchased Shares, or any person controlling such Underwriter, if a copy
of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of such Underwriter to such person, if required
by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities,
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<PAGE> 17
unless such failure is the result of noncompliance by the Company with
Section 6(a) hereof.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Underwriter, but only
with reference to information relating to such Underwriter furnished to
the Company in writing by such Underwriter through you expressly for
use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to Section 7(a) or 7(b), such
person (the "INDEMNIFIED PARTY") shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified
party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In
any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local
counsel) for all such indemnified parties and that all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley, in the case of parties
indemnified pursuant to Section 7(a), and by the Company, in the case
of parties indemnified pursuant to Section 7(b). The indemnifying party
shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party
agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject
matter of such proceeding.
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<PAGE> 18
(d) To the extent the indemnification provided for in Section
7(a) or 7(b) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to
therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause 7(d)(i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause 7(d)(i) above but also the relative fault of the Company on the
one hand and of the Underwriters on the other hand in connection with
the statements or omissions that resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand in connection with the
offering of the Shares shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Shares (before
deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as
set forth in the table on the cover of the Prospectus, bear to the
aggregate Public Offering Price of the Shares. The relative fault of
the Company on the one hand and the Underwriters on the other hand
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are
several in proportion to the respective number of Shares they have
purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not
be just or equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in Section 7(d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which
the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any
damages that such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent
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<PAGE> 19
misrepresentation. The remedies provided for in this Section 7 are not
exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in
this Section 7 and the representations, warranties and other statements
of the Company contained in this Agreement shall remain operative and
in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter or by or on
behalf of the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of
the Shares.
8. DIRECTED SHARE PROGRAM INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless Morgan
Stanley and its affiliates and each person, if any, who controls Morgan
Stanley and its affiliates within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act ("Morgan Stanley
Entities"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any
such action or claim) (i) caused by any untrue statement or alleged
untrue statement of a material fact contained in any material prepared
by or with the consent of the Company for distribution to Participants
in connection with the Directed Share Program, or caused by any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading; (ii) caused by the failure of any Participant to pay for
and accept delivery of Directed Shares that the Participant has agreed
to purchase; or (iii) related to, arising out of, or in connection with
the Directed Share Program other than losses, claims, damages or
liabilities (or expenses relating thereto) that are finally judicially
determined to have resulted from the bad faith or gross negligence of
Morgan Stanley Entities.
(b) In case any proceeding (including any governmental
investigation) shall be instituted involving any Morgan Stanley Entity
in respect of which indemnity may be sought pursuant to Section 8(a),
the Morgan Stanley Entity seeking indemnity shall promptly notify the
Company in writing and the Company, upon request of the Morgan Stanley
Entity, shall retain counsel reasonably satisfactory to the Morgan
Stanley Entity to represent the Morgan Stanley Entity and any other the
Company may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Morgan Stanley Entity shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Morgan Stanley Entity unless (i) the Company shall
have agreed to the retention of such counsel or (ii) the named parties
to any such proceeding (including any impleaded parties) include both
the Company and the Morgan Stanley Entity and representation of both
parties by the same counsel would be inappropriate due to actual
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<PAGE> 20
or potential differing interests between them. The Company shall not,
in respect of the legal expenses of the Morgan Stanley Entities in
connection with any proceeding or related proceedings the same
jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Morgan Stanley
Entities. Any such firm for the Morgan Stanley Entities shall be
designated in writing by Morgan Stanley. The Company shall not be
liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the Company agrees to indemnify the
Morgan Stanley Entities from and against any loss or liability by
reason of such settlement or judgment. The Company shall not, without
the prior written consent of Morgan Stanley, effect any settlement of
any pending or threatened proceeding in respect of which any Morgan
Stanley Entity is or could have been a party and indemnity could have
been sought hereunder by such Morgan Stanley Entity, unless such
settlement includes an unconditional release of the Morgan Stanley
Entities from all liability on claims that are the subject matter of
such proceeding.
(c) To the extent the indemnification provided for in Section
8(a) is unavailable to a Morgan Stanley Entity or insufficient in
respect of any losses, claims, damages or liabilities referred to
therein, then the Company, in lieu of indemnifying the Morgan Stanley
Entity thereunder, shall contribute to the amount paid or payable by
the Morgan Stanley Entity as a result of such losses, claims, damages
or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Morgan Stanley Entities on the other hand from the offering of the
Directed Shares or (ii) if the allocation provided by clause 8(c)(i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause 8(c)(i) above but also the relative fault of the Company on the
one hand and of the Morgan Stanley Entities on the other hand in
connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company
on the one hand and of the Morgan Stanley Entities on the other hand in
connection with the offering of the Directed Shares shall be deemed to
be in the same respective proportions as the net proceeds from the
offering of the Directed Shares (before deducting expenses) and the
total underwriting discounts and commissions received by the Morgan
Stanley Entities for the Directed Shares, bear to the aggregate Public
Offering Price of the Shares. If the loss, claim, damage or liability
is caused by an untrue or alleged untrue statement of a material fact,
the relative fault of the Company on the one hand and the Morgan
Stanley Entities on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement or
the omission or alleged omission relates to information supplied by the
Company or by the Morgan Stanley Entities and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(d) The Company and the Morgan Stanley Entities agree that it
would not be just or equitable if contribution pursuant to this Section
8 were determined by pro rata
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<PAGE> 21
allocation (even if the Morgan Stanley Entities were treated as one
entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in Section
8(c). The amount paid or payable by the Morgan Stanley Entities as a
result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject
to the limitations set forth above, any legal or other expenses
reasonably incurred by the Morgan Stanley Entities in connection with
investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 8, no Morgan Stanley Entity shall be
required to contribute any amount in excess of the amount by which the
total price at which the Directed Shares distributed to the public were
offered to the public exceeds the amount of any damages that such
Morgan Stanley Entity has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged
omission. The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be
available to any Morgan Stanley Entity at law or in equity.
(e) The indemnity and contribution provisions contained in
this Section 8 shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Morgan Stanley Entity or the
Company, its officers or directors or any person controlling the
Company and (iii) acceptance of and payment for any of the Directed
Shares.
9. TERMINATION. This Agreement shall be subject to termination
by notice given by you to the Company, if (a) after the execution and delivery
of this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 8(a)(i) through 8(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
10. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement
shall become effective upon the execution and delivery hereof by the parties
hereto.
If, on the Closing Date or the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares that it has or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more
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<PAGE> 22
than one-tenth of the aggregate number of the Shares to be purchased on such
date, the other Underwriters shall be obligated severally in the proportions
that the number of Firm Shares set forth opposite their respective names in
Schedule I bears to the aggregate number of Firm Shares set forth opposite the
names of all such non-defaulting Underwriters, or in such other proportions as
you may specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 10 by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you and the Company for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. If, on the
Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
Additional Shares or (ii) purchase not less than the number of Additional Shares
that such non-defaulting Underwriters would have been obligated to purchase in
the absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.
11. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
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<PAGE> 23
13. HEADINGS. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
Very truly yours,
AKAMAI TECHNOLOGIES, INC.
By: ____________________________
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette
Salomon Smith Barney
Thomas Weisel Partners LLC
Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By: __________________________
Name:
Title:
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<PAGE> 24
SCHEDULE I
NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette
Salomon Smith Barney
Thomas Weisel Partners LLC
[NAMES OF OTHER UNDERWRITERS]
------------
Total ......................
============
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<PAGE> 25
EXHIBIT A
FORM OF LOCK-UP
September __, 1999
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette
Salomon Smith Barney
Thomas Weisel Partners LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with Akamai Technology, Inc., a Delaware corporation
(the "COMPANY") providing for the public offering (the "PUBLIC OFFERING") by the
several Underwriters, including Morgan Stanley (the "UNDERWRITERS"), of
______________ shares (the "SHARES") of the common stock, par value $0.01 per
share, of the Company (the "COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of Morgan Stanley on
behalf of the Underwriters, the undersigned will not, during the period
commencing on the date hereof and ending 180 days after the date of the final
prospectus relating to the Public Offering (the "Prospectus"), (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to the
sale of any Shares to the Underwriters pursuant to the Underwriting Agreement or
transactions relating to shares of Common Stock or other securities acquired in
open market transactions after the completion of the Public Offering. In
addition, the undersigned agrees that, without the prior written consent of
Morgan Stanley on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.
Notwithstanding the foregoing (i) gifts and transfers by will or
intestacy or (ii) transfers to (A) the undersigned's members, partners,
affiliates or immediate family or (B) a trust, the beneficiaries of which are
the undersigned and/or members of the undersigned's immediate family, shall not
be prohibited by this agreement; provided, that (x) the donee or transferee
agrees in writing to be bound by the foregoing in the same manner as it applies
to the undersigned and (y) if the donor or transferor is a reporting person
subject to Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act"), any gifts or transfers made in accordance with this paragraph shall not
require such person to, and such person shall not voluntarily, file a report of
such transaction on Form 4 under the Exchange Act. "Immediate family" shall mean
spouse, lineal descendants, father, mother, brother or sister of the transferor
and father, mother, brother or sister of the transferor's spouse.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
This agreement shall automatically terminate on the date that the
Underwriting Agreement is terminated, in the event that the Underwriters do not
purchase the Shares and the Underwriting Agreement is terminated pursuant to its
terms.
Very truly yours,
---------------------------------
(Name)
---------------------------------
(Address)
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<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
AKAMAI TECHNOLOGIES, INC.
FIRST. The name of the Corporation is: Akamai Technologies, Inc.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 5,000,000 shares, consisting of (i)
4,000,000 shares of Common Stock, $0.01 par value per share ("Common Stock"),
and (ii) 1,000,000 shares of Preferred Stock, $0.01 par value per share
("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled
<PAGE> 2
to vote, irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Without limiting
the generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.
<PAGE> 3
FIFTH. The name and mailing address of the sole incorporator are as
follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
Daniel M. Lewin 15 Charlesden Park
Newtonville, MA 02460.
</TABLE>
SIXTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation.
SEVENTH. Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
EIGHTH. 1. Actions, Suits and Proceedings Other than by or in the Right of
the Corporation. The Corporation shall indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to,
<PAGE> 4
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Notwithstanding anything to the contrary in this Article, except as set forth in
Section 7 below, the Corporation shall not indemnify an Indemnitee seeking
indemnification in connection with a proceeding (or part thereof) initiated by
the Indemnitee unless the initiation thereof was approved by the Board of
Directors of the Corporation. Notwithstanding anything to the contrary in this
Article, the Corporation shall not indemnify an Indemnitee to the extent such
Indemnitee is reimbursed from the proceeds of insurance, and in the event the
Corporation makes any indemnification payments to an Indemnitee and such
Indemnitee is subsequently reimbursed from the proceeds of insurance, such
Indemnitee shall promptly refund such indemnification payments to the
Corporation to the extent of such insurance reimbursement.
2. Actions or Suits by or in the Right of the Corporation. The Corporation
shall indemnify any Indemnitee who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was, or has agreed to become, a director or officer of the
Corporation, or is or was serving, or has agreed to serve, at the request of the
Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees) and, to the extent permitted by law, amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with such
action, suit or proceeding and any appeal therefrom, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery of Delaware shall determine upon application that, despite the
adjudication of such liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
(including attorneys' fees) which the Court of Chancery of Delaware shall deem
proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding the
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
<PAGE> 5
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
4. Notification and Defense of Claim. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below, in
the event that the Corporation does not assume the defense pursuant to Section 4
of this Article of any action, suit, proceeding or investigation of which the
Corporation receives notice under this Article, any expenses (including
attorneys' fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid
by the Corporation in advance of the final disposition of such matter; provided,
however, that the payment of such expenses incurred by an Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined
<PAGE> 6
that the Indemnitee is not entitled to be indemnified by the Corporation as
authorized in this Article. Such undertaking shall be accepted without reference
to the financial ability of the Indemnitee to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines within such 60-day period that the Indemnitee did not
meet the applicable standard of conduct set forth in Section 1 or 2, as the case
may be. Such determination shall be made in each instance by (a) a majority vote
of the directors of the Corporation consisting of persons who are not at that
time parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) a majority vote of a quorum of the
outstanding shares of stock of all classes entitled to vote for directors,
voting as a single class, which quorum shall consist of stockholders who are not
at that time parties to the action, suit or proceeding in question, (c)
independent legal counsel (who may, to the extent permitted by law, be regular
legal counsel to the Corporation), or (d) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by this
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action,
<PAGE> 7
suit, proceeding or investigation arising out of or relating to any actions,
transactions or facts occurring prior to the final adoption of such amendment,
termination or repeal.
9. Other Rights. The indemnification and advancement of expenses provided
by this Article shall not be deemed exclusive of any other rights to which an
Indemnitee seeking indemnification or advancement of expenses may be entitled
under any law (common or statutory), agreement or vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in any other capacity while holding office for the Corporation,
and shall continue as to an Indemnitee who has ceased to be a director or
officer, and shall inure to the benefit of the estate, heirs, executors and
administrators of the Indemnitee. Nothing contained in this Article shall be
deemed to prohibit, and the Corporation is specifically authorized to enter
into, agreements with officers and directors providing indemnification rights
and procedures different from those set forth in this Article. In addition, the
Corporation may, to the extent authorized from time to time by its Board of
Directors, grant indemnification rights to other employees or agents of the
Corporation or other persons serving the Corporation and such rights may be
equivalent to, or greater or less than, those set forth in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise (including any employee benefit plan) against any expense, liability
or loss incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the General Corporation Law
of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
<PAGE> 8
13. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of Delaware is
amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
NINTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
EXECUTED as of the 20th day of August, 1998.
/s/ Daniel M. Lewin
---------------------------------
Daniel M. Lewin
Incorporator
<PAGE> 9
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AKAMAI TECHNOLOGIES, INC.
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
Akamai Technologies, Inc. (hereinafter called the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
The Board of Directors of the Corporation, by unanimous written consent in
lieu of a meeting, duly adopted a resolution, pursuant to Sections 141(f) and
242 of the General Corporation Law of the State of Delaware, setting forth an
amendment to the Certificate of Incorporation of the Corporation and declaring
said amendment to be advisable. The stockholders of the Corporation duly
approved said proposed amendment by written consent in accordance with Sections
228 and 242 of the General Corporation Law of the State of Delaware. The
resolution setting forth the amendment is as follows:
RESOLVED: That the first paragraph of Article FOURTH of the Certificate of
Incorporation of the Corporation be and hereby is deleted in its entirety and
that the following paragraph be inserted in lieu thereof:
"FOURTH. The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 7,000,000 shares,
consisting of (i) 5,000,000 shares of Common Stock, $0.01 par value per
share ("Common Stock"), and (ii) 2,000,000 shares of Preferred Stock,
$0.01 par value per share ("Preferred Stock")."
<PAGE> 10
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its Treasurer on this 18th day of November, 1998.
AKAMAI TECHNOLOGIES, INC.
By: /s/ F. Thomson Leighton
------------------------
F. Thomson Leighton
Treasurer
<PAGE> 11
CERTIFICATE OF DESIGNATIONS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
AKAMAI TECHNOLOGIES, INC.
------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
------------------
Akamai Technologies, Inc., a Delaware corporation (the "Corporation")
certifies that pursuant to the authority contained in Article Fourth of its
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, the Board of
Directors of the Corporation, by unanimous written consent dated as of November
17, 1998 duly adopted the following resolution, which resolution remains in full
force and effect on the date hereof:
RESOLVED, that, pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation in accordance with the provisions
of its Certificate of Incorporation, a series of Preferred Stock of the
Corporation be and hereby is established, consisting of 1,100,000 shares, $.01
par value per share, to be designated the "Series A Convertible Preferred Stock"
(hereinafter, the "Series A Preferred Stock"); that the Board of Directors be
and hereby is authorized to issue such shares of Series A Preferred Stock from
time to time and for such consideration and on such terms as the Board of
Directors shall determine; and that, subject to the limitations provided by law
and by the Certificate of Incorporation, the voting powers, preferences and
relative, participating, optional and other special rights, and qualifications,
limitations and restrictions thereof shall be as set forth on Schedule I
attached hereto.
<PAGE> 12
IN WITNESS WHEREOF, the Corporation has caused this certificate to be duly
executed by an authorized officer this 23rd day of November, 1998.
AKAMAI TECHNOLOGIES, INC.
By: /s/ Daniel Lewin
----------------
Daniel Lewin
President
<PAGE> 13
SCHEDULE I
AKAMAI TECHNOLOGIES, INC.
DESIGNATION OF SERIES A CONVERTIBLE PREFERRED STOCK
The series of Preferred Stock designated and known as "Series A
Convertible Preferred Stock" shall consist of 1,100,000 shares.
1. Voting.
1A. General. Except as may be otherwise provided in these terms of
the Series A Convertible Preferred Stock, in the Certificate of Incorporation
(the "Certificate of Incorporation") of Akamai Technologies, Inc. (the
"Corporation") or by law, the Series A Convertible Preferred Stock shall vote
together with all other classes and series of stock of the Corporation as a
single class on all actions to be taken by the stockholders of the Corporation.
Each share of Series A Convertible Preferred Stock shall entitle the holder
thereof to such number of votes per share on each such action as shall equal the
number of shares of Common Stock (including fractions of a share) into which
each share of Preferred Stock is then convertible.
1B. Board Size. Subject to the provisions of paragraph 1C below, the
Corporation shall not, without the written consent or affirmative vote of the
holders of at least 60% of the then outstanding shares of Series A Convertible
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a series, increase the maximum number of
directors constituting the Board of Directors to a number in excess of seven
(7).
1C. Board Seats. For so long as at least 50% of the shares of Series
A Convertible Preferred Stock issued pursuant to the Purchase Agreement remains
outstanding, the holders of the Series A Convertible Preferred Stock, voting as
a separate series, shall be entitled to elect two (2) directors of the
Corporation. At any meeting (or in a written consent in lieu thereof) held for
the purpose of electing directors, the presence in person or by proxy (or the
written consent) of the holders of at least a majority in interest of the then
outstanding shares of Series A Convertible Preferred Stock shall constitute a
quorum of the Series A Convertible Preferred Stock for the election of directors
to be elected solely by the holders of the Series A Convertible Preferred Stock
voting as a separate series. A vacancy in any directorship elected by the
holders of the Series A Convertible Preferred Stock shall be filled only by the
affirmative vote or written consent of the holders of at least 60% of the then
outstanding shares of Series A Convertible Preferred Stock. The directors to be
elected by the holders of the Series A Convertible Preferred Stock, voting
separately as one class, pursuant to this paragraph 1C, shall serve for terms
extending from the date of their election and qualification until the time of
the next succeeding annual meeting of stockholders and until their successors
have been elected and qualified.
<PAGE> 14
2. Dividends. No dividends shall be declared and set aside for any shares
of the Series A Convertible Preferred Stock except in the event that the Board
of Directors of the Corporation shall declare a dividend payable upon the then
outstanding shares of the Common Stock of the Corporation, in which event the
holders of the Series A Convertible Preferred Stock shall be entitled to the
amount of dividends per share of Series A Convertible Preferred Stock as would
be declared payable on the largest number of whole shares of Common Stock into
which each share of Series A Convertible Preferred Stock held by each holder
thereof could be converted pursuant to the provisions of Section 5 hereof, such
number determined as of the record date for the determination of holders of
Common Stock entitled to receive such dividend. All dividends declared upon the
Preferred Stock shall be declared pro rata per share.
3. Liquidation, Dissolution and Winding-up.
3A. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation (a "Liquidation Event"), whether voluntary or involuntary, the
holders of the shares of Series A Convertible Preferred Stock shall be paid an
amount equal to $7.60 per share plus, in the case of each share, an amount equal
to dividends accrued but unpaid thereon, computed to the date payment thereof is
made available, together with payment to any class of stock ranking equally with
the Series A Convertible Preferred Stock, and before any payment shall be made
to the holders of any stock ranking on liquidation junior to the Series A
Convertible Preferred Stock, such amount payable with respect to one share of
Series A Convertible Preferred Stock being sometimes referred to as the "Series
A Liquidation Preference Payment" and with respect to all shares of Series A
Convertible Preferred Stock being sometimes referred to as the "Series A
Liquidation Preference Payments". If upon any Liquidation Event, the assets to
be distributed to the holders of the Series A Convertible Preferred Stock shall
be insufficient to permit payment to such stockholders of the full preferential
amounts aforesaid, then all of the assets of the Corporation available for
distribution to holders of the Series A Convertible Preferred Stock shall be
distributed to such holders of the Series A Convertible Preferred Stock pro
rata, so that each holder receives that portion of the assets available for
distribution as the number of shares of such stock held by such holder bears to
the total number of shares of such stock then outstanding.
3B. Upon any Liquidation Event, immediately after the holders of
Series A Convertible Preferred Stock and holders of any class of stock ranking
equally with the Series A Convertible Preferred Stock have been paid in full
pursuant to subsection 3A above, the remaining net assets of the Corporation
available for distribution shall be distributed among the holders of the shares
of Common Stock.
<PAGE> 15
Written notice of such Liquidation Event, stating a payment date and the
place where said payments shall be made, shall be given by mail, postage
prepaid, or by facsimile to non-U.S. residents, not less than 20 days prior to
the payment date stated therein, to the holders of record of Series A
Convertible Preferred Stock, such notice to be addressed to each such holder at
its address as shown by the records of the Corporation.
The (x) consolidation or merger of the Corporation into or with any other
entity or entities which results in the exchange of outstanding shares of the
Corporation for securities or other consideration issued or paid or caused to be
issued or paid by any such entity or affiliate thereof (except a consolidation
or merger into a Subsidiary or merger in which the Corporation is the surviving
Corporation and the holders of the Corporation's voting stock outstanding
immediately prior to the transaction constitute a majority of the holders of
voting stock outstanding immediately following the transaction), (y) the sale or
transfer by the Corporation of all or substantially all its assets, or (z) the
sale or transfer by the Corporation's stockholders of capital stock representing
a majority of the outstanding capital stock of the Corporation shall be deemed
to be a Liquidation Event within the meaning of the provisions of this paragraph
3 (subject to the provisions of this paragraph 3 and not the provisions of
paragraph 5G hereof, unless 5G is elected in the following proviso), provided,
however, that if the holders of at least 60% of the then outstanding shares of
Series A Convertible Preferred Stock shall elect the benefits of the provisions
of paragraph 5G in lieu of receiving payment in a Liquidation Event pursuant to
this paragraph 3, then all holders of shares of Series A Convertible Preferred
Stock shall receive the benefits of the provisions of paragraph 5G in lieu of
receiving payment pursuant to this Section 3. Whenever the distribution provided
for in this paragraph 3 shall be payable in property other than cash, the value
of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors of the Corporation.
4. Restrictions. At any time when at least 50% of the shares of Series A
Convertible Preferred Stock issued pursuant to the Purchase Agreement (as
defined in Section 8(a) below) remain outstanding, except where the vote or
written consent of the holders of a greater number of shares of the Corporation
is required by law or by the Certificate of Incorporation, and in addition to
any other vote required by law or the Certificate of Incorporation, without the
written consent of the holders of at least 60% of the then outstanding shares of
Series A Convertible Preferred Stock given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a series, the
Corporation will not:
(1) Consent to any Liquidation Event or merge or consolidate with or
into, or permit any Subsidiary to merge or consolidate with or into, any
other corporation, corporations, entity or entities (except a
consolidation or merger into a Subsidiary or
<PAGE> 16
merger in which the Corporation is the surviving corporation and the
holders of the Corporation's voting stock outstanding immediately prior to
the transaction constitute a majority of the holders of voting stock
outstanding immediately following the transaction or a consolidation or
merger pursuant to which the aggregate consideration definitively and
unconditionally payable to all of the stockholders of the Corporation is
greater than $50 million);
(2) Sell, abandon, transfer, lease or otherwise dispose of all or
substantially all of its properties or assets (unless the aggregate
consideration definitively and unconditionally payable to all of the
stockholders of the Corporation as a result of any such transaction is
greater than $50 million);
(3) Amend, alter or repeal any provision of its Certificate of
Incorporation or By-laws in a manner adverse to holders of the Series A
Convertible Preferred Stock;
(4) Create or authorize the creation of or issue any additional
class or series of shares of stock unless the same ranks junior to or on
parity with the Series A Convertible Preferred Stock as to dividends and
the distribution of assets on a Liquidation Event, or increase the
authorized amount of Series A Convertible Preferred Stock or increase the
authorized amount of any additional class or series of shares of stock
unless the same ranks junior to or on parity with the Series A Convertible
Preferred Stock as to dividends and the distribution of assets on a
Liquidation Event, or create or authorize any obligation or security
convertible into shares of Series A Convertible Preferred Stock or into
shares of any other class or series of stock unless the same ranks junior
to or on parity with the Series A Convertible Preferred Stock as to
dividends and the distribution of assets on a Liquidation Event, whether
any such creation, authorization or increase shall be by means of
amendment to the Certificate of Incorporation or by merger, consolidation
or otherwise;
(5) In any manner amend, alter or change the designations or the
powers, preferences or rights, privileges or the restrictions of the
Series A Convertible Preferred Stock, provided, however, that the
authorization or creation of any shares of capital stock on parity with
Series A Convertible Preferred Stock as to dividends and the distribution
of assets on a Liquidation Event shall not require approval of holders of
Series A Convertible Preferred Stock;
(6) Purchase or redeem, or set aside any sums for the purchase or
redemption of, or pay any dividend or make any distribution on, any shares
of stock ranking on parity with or junior to the Series A Convertible
Preferred Stock as to dividends and the distribution of assets on a
Liquidation Event, except for (i) dividends or other
<PAGE> 17
distributions payable on the Common Stock solely in the form of additional
shares of Common Stock or (ii) repurchases of shares of capital stock (at
the original purchase price therefor) from officers, employees, directors
or consultants of the Corporation which are subject to restrictive stock
purchase, right of first refusal or other agreements under which the
Corporation has the option to repurchase such shares upon the occurrence
of certain events, including termination of employment; or
(7) Increase the number of Reserved Employee Shares without the
affirmative vote or written consent of at least two of the directors
elected solely by the holders of Series A Convertible Preferred Stock or
the affirmative vote or written consent of the holders of at least 60% of
the then outstanding shares of Series A Convertible Preferred Stock.
5. Conversion. The holders of shares of Series A Convertible Preferred
Stock shall have the following conversion rights:
5A. Right to Convert. Subject to the terms and conditions of this
paragraph 5, the holder of any share or shares of Series A Convertible Preferred
Stock shall have the right, at its option at any time, to convert any such
shares of Series A Convertible Preferred Stock (except that upon any Liquidation
Event the right of conversion shall terminate at the close of business on the
business day fixed for payment of the amounts distributable on the Series A
Convertible Preferred Stock) into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Series A Convertible Preferred Stock so to be converted by $7.60 and (ii)
dividing the result by the conversion price of $7.60 per share or in case an
adjustment of such price has taken place pursuant to the further provisions of
this paragraph 5, then by the conversion price as last adjusted and in effect at
the date any share or shares of Preferred Stock are surrendered for conversion
(such price, or such price as last adjusted, being referred to as the "Series A
Conversion Price"). Such rights of conversion shall be exercised by the holder
thereof by giving written notice that the holder elects to convert a stated
number of shares of Series A Convertible Preferred Stock into Common Stock and
by surrender of a certificate or certificates for the shares so to be converted
to the Corporation at its principal office (or such other office or agency of
the Corporation as the Corporation may designate by notice in writing to the
holders of the Series A Convertible Preferred Stock) at any time during its
usual business hours on the date set forth in such notice, together with a
statement of the name or names (with address) in which the certificate or
certificates for shares of Common Stock shall be issued.
5B. Issuance of Certificates; Time Conversion Effected. Promptly
after the receipt of the written notice referred to in paragraph 5A and
surrender of the certificate or
<PAGE> 18
certificates for the share or shares of Series A Convertible Preferred Stock to
be converted, the Corporation shall issue and deliver, or cause to be issued and
delivered, to the holder, registered in such name or names as such holder may
direct, a certificate or certificates for the number of whole shares of Common
Stock issuable upon the conversion of such share or shares of Series A
Convertible Preferred Stock. To the extent permitted by law, such conversion
shall be deemed to have been effected and the Series A Conversion Price shall be
determined as of the close of business on the date on which such written notice
shall have been received by the Corporation and the certificate or certificates
for such share or shares shall have been surrendered as aforesaid, and at such
time the rights of the holder of such share or shares of Series A Convertible
Preferred Stock shall cease, and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby.
5C. Fractional Shares; Dividends; Partial Conversion. No fractional
shares shall be issued upon conversion of Series A Convertible Preferred Stock
into Common Stock and no payment or adjustment shall be made upon any conversion
on account of any cash dividends on the Common Stock issued upon such
conversion. At the time of each conversion, the Corporation shall: (i) if cash
is legally available, pay in cash an amount equal to all dividends accrued and
unpaid on the shares of Series A Convertible Preferred Stock surrendered for
conversion to the date upon which such conversion is deemed to take place as
provided in paragraph 5B, or (ii) if cash is not legally available, provide to
such holder a certificate representing a number of shares of Common Stock equal
to the quotient of all dividends accrued and unpaid on the shares of Series A
Convertible Preferred Stock so surrendered divided by the applicable Series A
Conversion Price. In case the number of shares of Series A Convertible Preferred
Stock represented by the certificate or certificates surrendered pursuant to
paragraph 5A exceeds the number of shares converted, the Corporation shall, upon
such conversion, execute and deliver to the holder, at the expense of the
Corporation, a new certificate or certificates for the number of shares of
Series A Convertible Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. If any fractional share
of Common Stock would, except for the provisions of the first sentence of this
paragraph 5C, be delivered upon such conversion, the Corporation, in lieu of
delivering such fractional share, shall pay to the holder surrendering the
Series A Convertible Preferred Stock for conversion an amount in cash equal to
the current fair market value of such fractional share as determined in good
faith by the Board of Directors of the Corporation, and based upon the aggregate
number of Shares of Series A Convertible Preferred Stock surrendered by any one
holder.
5D. Adjustment of Series A Conversion Price Upon Issuance of Common
Stock. Except as provided in paragraphs 5E and 5F, if and whenever the
Corporation shall
<PAGE> 19
issue or sell, or is, in accordance with subparagraphs 5D(1) through 5D(8),
deemed to have issued or sold, any shares of Common Stock for a consideration
per share less than the Series A Conversion Price in effect immediately prior to
the time of such issue or sale, (such number being appropriately adjusted to
reflect the occurrence of any event described in paragraph 5F), then, forthwith
upon such issue or sale, the Series A Conversion Price shall be reduced to the
price determined by dividing (i) an amount equal to the sum of (a) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
(assuming the conversion of the outstanding shares of Series A Convertible
Preferred Stock) multiplied by the then existing Series A Conversion Price and
(b) the consideration, if any, received by the Corporation upon such issue or
sale, by (ii) the total number of shares of Common Stock outstanding immediately
after such issue or sale (assuming the conversion of the outstanding shares of
Series A Convertible Preferred Stock).
For purposes of this paragraph 5D, the following subparagraphs 5D(1)
to 5D(8) shall also be applicable:
5D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption
in a merger or otherwise) any warrants or other rights to subscribe for or
to purchase, or any options for the purchase of, Common Stock or any stock
or security convertible into or exchangeable for Common Stock (such
warrants, rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible Securities")
whether or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such Options
or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such Options, plus, in
the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon
the issue or sale of all such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares
of Common Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options) shall be less than the Series A Conversion
Price in effect immediately prior to the time of the granting of such
Options, then the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such
price per share as of the date of granting of such Options or the issuance
of such Convertible Securities and thereafter
<PAGE> 20
shall be deemed to be outstanding. Except as otherwise provided in
subparagraph 5D(3), no adjustment of the Series A Conversion Price shall
be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such Options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities.
5D(2) Issuance of Convertible Securities. In case the Corporation
shall in any manner issue (whether directly or by assumption in a merger
or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by dividing (i) the
total amount received or receivable by the Corporation as consideration
for the issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange of all such Convertible
Securities thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Series A Conversion Price in effect
immediately prior to the time of such issue or sale, then the total
maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have been
issued for such price per share as of the date of the issue or sale of
such Convertible Securities and thereafter shall be deemed to be
outstanding, provided that (a) except as otherwise provided in
subparagraph 5D(3), no adjustment of the Series A Conversion Price shall
be made upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities and (b) if any such issue or sale
of such Convertible Securities is made upon exercise of any Options to
purchase any such Convertible Securities for which adjustments of the
Series A Conversion Price have been or are to be made pursuant to other
provisions of this paragraph 5D, no further adjustment of the Series A
Conversion Price shall be made by reason of such issue or sale.
5D(3) Change in Option Price or Conversion Rate. Upon the happening
of any of the following events, namely, if the purchase price provided for
in any Option referred to in subparagraph 5D(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 5D(1) or 5D(2), or the
rate at which Convertible Securities referred to in subparagraph 5D(1) or
5D(2) are convertible into or exchangeable for Common Stock shall change
at any time (including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), the Series A Conversion
Price in effect at the time of such event shall forthwith be readjusted to
the Series A Conversion Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding
<PAGE> 21
provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted, issued
or sold; provided, however, that in no event shall the Series A Conversion
Price then in effect hereunder be increased; and on the expiration of any
such Option or the termination of any such right to convert or exchange
such Convertible Securities, the Series A Conversion Price then in effect
hereunder shall forthwith be increased to the Conversion Price which would
have been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately
prior to such expiration or termination, never been issued.
5D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation
payable in Common Stock (except for the issue of stock dividends or
distributions upon the outstanding Common Stock for which adjustment is
made pursuant to paragraph 5F), Options or Convertible Securities, any
Common Stock, Options or Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration.
5D(5) Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received
by the Corporation therefor, without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Corporation in connection therewith. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for
consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be deemed to be the fair value of
such consideration as determined in good faith by the Board of Directors
of the Corporation, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case any Options shall be issued in connection
with the issue and sale of other securities of the Corporation, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for such consideration as determined in good
faith by the Board of Directors of the Corporation.
5D(6) Record Date. In case the Corporation shall take a record of
the holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (ii) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common
<PAGE> 22
Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
5D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any such shares
shall be considered an issue or sale of Common Stock for the purpose of
this paragraph 5D.
5D(8) Taxed Shares. The initial 650,000 Option Shares (as defined in
paragraph 8 herein and including 165,400 shares issued prior to the
closing of the initial issuance of the Series A Convertible Preferred
Stock) subject to the Plan (as defined in paragraph 8 herein) shall be
deemed to be "Taxed Shares". In case at any time the Corporation shall
grant an award of any of the Taxed Shares or grant an option to purchase
any of the Taxed Shares (including options to purchase an aggregate of
71,500 Taxed Shares granted prior to the date of the initial issuance of
Series A Convertible Preferred Stock), the Corporation shall not be
required to make any adjustment of the Series A Conversion Price;
provided, however, to the extent (i) the right of the Corporation to
repurchase shares (at the purchase price paid by the award recipient)
subject to an award of Taxed Shares terminates or does not exist and/or
(ii) the Corporation issues any shares of its Common Stock upon exercise
of an option to purchase Taxed Shares, then such Taxed Shares shall be
deemed to be "Issued Taxed Shares," and the Corporation shall adjust the
Series A Conversion Price as provided in paragraph 5D hereof and, that for
purposes of such adjustment the Corporation shall be deemed to have
received no consideration for the Issued Taxed Shares. Notwithstanding the
foregoing, if the Company shall repurchase any of the Founders' Shares (as
defined in paragraph 8 herein), any such Founders' Shares repurchased by
the Company shall reduce the number (on a one-for-one basis) of any Taxed
Shares (to the extent that such Taxed Shares have not become Issued Taxed
Shares), such that there shall be no adjustment to the Series A Conversion
Price upon issuance of the Option Shares previously designated as Taxed
Shares. It is the intent of this 5D(8) that notwithstanding any increase
in the number of Option Shares permitted by paragraph 8(c), no more than
an aggregate of 650,000 Option Shares (appropriately adjusted to reflect
an event described in paragraph 5F hereof) be deemed to be Taxed Shares;
and all calculations and determinations made pursuant to this 5D(8) shall
be made in good faith by the Corporation's Board of Directors after
consultation with the Corporation's counsel.
5E. Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Series A Conversion Price in the case of the issuance of (i)
shares of Common Stock issuable
<PAGE> 23
upon conversion of the Series A Convertible Preferred Stock, (ii) shares of
Common Stock issued or issuable as a dividend or distribution on Series A
Convertible Preferred Stock and (iii) Reserved Employee Shares (as defined in
paragraph 8 herein) (other than Taxed Shares).
5F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Series A Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Series A Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
5G. Reorganization or Reclassification. If any capital
reorganization, reclassification, recapitalization, consolidation, merger, sale
of all or substantially all of the Corporation's assets or other similar
transaction (any such transaction being referred to herein as an "Organic
Change") shall be effected in such a way that holders of Common Stock shall be
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such Organic Change, lawful and adequate provisions shall be made
whereby each holder of a share or shares of Series A Convertible Preferred Stock
shall thereupon have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of or in addition to, as the case may
be, the shares of Common Stock immediately theretofore receivable upon the
conversion of such share or shares of Series A Convertible Preferred Stock, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore receivable
upon such conversion had such Organic Change not taken place, and in any case of
a reorganization or reclassification only appropriate provisions shall be made
with respect to the rights and interests of such holder to the end that the
provisions hereof (including without limitation provisions for adjustments of
the Series A Conversion Price) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
5H. Adjustment of Series A Conversion Price Upon Incurrence of
Loss.
(1) If and whenever the Purchasers (as defined in the Purchase
Agreement) shall be entitled to indemnification pursuant to Section 7.13 of the
Purchase Agreement and to the extent the amount of Losses (as defined in the
Purchase Agreement) for which indemnification is provided therein is not paid in
cash, the Series A Conversion Price shall be adjusted such that the number of
shares of Common Stock issuable upon the conversion of
<PAGE> 24
one share of Series A Convertible Preferred Stock shall be equal to the sum of
(A) the number of shares of Common Stock issuable upon conversion of one share
of Series A Convertible Preferred Stock immediately prior to the application of
this Section 5H and (B) the Additional Loss Shares. For purposes of this Section
5H, "Additional Loss Shares" shall mean such number of shares of Common Stock as
is determined by dividing the Loss Amount (as determined in accordance with
Section 7.13(c) of the Purchase Agreement) by the product of (x) the total
number of shares of Series A Convertible Preferred Stock then outstanding times
(y) the Current Series A Value (as determined in accordance with Section 7.13(c)
of the Purchase Agreement).
(2) In addition to any other notice required herein, the Corporation
shall provide each Purchaser with notice of any Loss promptly upon becoming
aware of such Loss, which notice shall specify the amount of such Loss and
specify in reasonable detail each individual item of Loss included in the amount
so stated.
5I. Notice of Adjustment. Upon any adjustment of the Series A
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, or by facsimile
transmission to non-U.S. residents, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Series A Conversion Price resulting
from such adjustment, setting forth in reasonable detail the method upon which
such calculation is based.
5J. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of
its Common Stock;
(2) the Corporation shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or
other rights;
(3) there shall be any capital reorganization or reclassification of
the capital stock of the Corporation, or a consolidation or merger of the
Corporation with or into, or a sale of all or substantially all its assets
to, another entity or entities; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
<PAGE> 25
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by facsimile transmission to non-U.S. residents,
addressed to each holder of any shares of Preferred Stock at the address of such
holder as shown on the books of the Corporation, (a) at least 20 days' prior
written notice of the date on which the books of the Corporation shall close or
a record shall be taken for such dividend, distribution or subscription rights
or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
5K. Stock to be Reserved. The Corporation will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the conversion of Series A Convertible Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Series A Convertible Preferred
Stock. The Corporation covenants that all shares of Common Stock which shall be
so issued shall be duly and validly issued and fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof, and,
without limiting the generality of the foregoing, the Corporation covenants that
it will from time to time take all such action as may be requisite to assure
that the par value per share of the Common Stock is at all times equal to or
less than the Series A Conversion Price in effect at the time. The Corporation
will take all such action as may be necessary to assure that all such shares of
Common Stock may be so issued without violation of any applicable law or
regulation, or of any requirement of any national securities exchange upon which
the Common Stock may be listed.
5L. No Reissuance of Series A Convertible Preferred Stock. Shares of
Series A Convertible Preferred Stock which are converted into shares of Common
Stock as provided herein shall not be reissued.
5M. Issue Tax. The issuance of certificates for shares of Common
Stock upon conversion of Series A Convertible Preferred Stock shall be made
without charge to the holders thereof for any issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the
<PAGE> 26
issuance and delivery of any certificate in a name other than that of the holder
of the Series A Convertible Preferred Stock which is being converted.
5N. Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any Preferred Stock or of any shares of
Common Stock issued or issuable upon the conversion of any shares of Preferred
Stock in any manner which interferes with the timely conversion of such
Preferred Stock, except as may otherwise be required to comply with applicable
securities laws.
5O. Definition of Common Stock. As used in this paragraph 5, the
term "Common Stock" shall mean and include the Corporation's authorized Common
Stock, par value $.01 per share, as constituted on the date of filing of these
terms of the Preferred Stock, and shall also include any capital stock of any
class of the Corporation thereafter authorized which shall neither be limited to
a fixed sum or percentage of par value in respect of the rights of the holders
thereof to participate in dividends nor entitled to a preference in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the shares of Common
Stock receivable upon conversion of shares of Series A Convertible Preferred
Stock shall include only shares designated as Common Stock of the Corporation on
the date of filing of this instrument, or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in subparagraph 5G.
5P. Mandatory Conversion. All outstanding shares of Series A
Convertible Preferred Stock shall automatically convert to shares of Common
Stock if at any time the Corporation shall effect a public offering of shares of
Common Stock (any such offering, regardless of compliance with subsections (i),
(ii) and (iii) herein, being referred to as a "Public Offering") provided (i)
the aggregate net proceeds from such offering to the Corporation shall be at
least $20,000,000; (ii) the price paid by the public for such shares shall be at
least $22.80 (appropriately adjusted to reflect the occurrence of any event
described in paragraph 5F) and (iii) the offering is a firm commitment
underwritten public offering, then effective upon the closing of the sale of
such shares by the Corporation pursuant to such public offering, all outstanding
shares of Preferred Stock shall automatically convert to shares of Common Stock.
6. Redemption. The shares of Preferred Stock shall be redeemed as follows:
6A. Optional Redemption. The Corporation shall not have the right to
call or redeem at any time all or any shares of Series A Convertible Preferred
Stock. With the approval of the holders of 66% of the then outstanding shares of
Series A Convertible Preferred Stock, one or more holders of shares of Series A
Convertible Preferred Stock may,
<PAGE> 27
by giving notice (the "Notice") to the Corporation at any time after November
23, 2003 require the Corporation to redeem all of the outstanding Series A
Convertible Preferred Stock in two equal installments, with one-half of the
shares of Series A Convertible Preferred Stock redeemed on the First Redemption
Date (as defined below), and the remainder redeemed on the first anniversary of
the First Redemption Date (the "Second Redemption Date"). Upon receipt of the
Notice, the Corporation will so notify all other persons holding Series A
Convertible Preferred Stock. After receipt of the Notice, the Corporation shall
fix the first date for redemption (the "First Redemption Date"), provided that
such First Redemption Date shall occur within sixty (60) days after receipt of
the Notice. All holders of Series A Convertible Preferred Stock shall deliver to
the Corporation during regular business hours, at the office of any transfer
agent of the Corporation for the Series A Convertible Preferred Stock, or at the
principal office of the Corporation or at such other place as may be designated
by the Corporation, the certificate or certificates for the Series A Convertible
Preferred Stock, duly endorsed for transfer to the Corporation (if required by
it) on or before the First Redemption Date. The First Redemption Date and the
Second Redemption Date are collectively referred to as the "Redemption Dates".
6B. Redemption Price and Payment. The Series A Convertible Preferred
Stock to be redeemed on the Redemption Dates shall be redeemed by paying for
each share in cash an amount equal to $7.60 per share, plus an amount equal to
all dividends accrued and unpaid on each such share, such amount being referred
to as the "Series A Redemption Price." Such payment shall be made in full on
each of the Redemption Dates to the holders entitled thereto.
6C. Redemption Mechanics. At least 15 but not more than 35 days
prior to each Redemption Date, written notice (the "Redemption Notice") shall be
given by the Corporation by mail, postage prepaid, or by facsimile transmission
to non-U.S. residents, to each holder of record (at the close of business on the
business day next preceding the day on which the Redemption Notice is given) of
shares of Series A Convertible Preferred Stock notifying such holder of the
redemption and specifying the Series A Redemption Price, the Redemption Date and
the place where said Series A Redemption Price shall be payable. The Redemption
Notice shall be addressed to each holder at his address as shown by the records
of the Corporation. From and after the close of business on the Redemption Date,
unless there shall have been a default in the payment of the Series A Redemption
Price, all rights of holders of shares of Series A Convertible Preferred Stock
(except the right to receive the Series A Redemption Price) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for redemption of
shares of Series A Convertible Preferred Stock on any Redemption Date are
insufficient to redeem the total number of outstanding shares of Series A
Convertible Preferred Stock to be
<PAGE> 28
redeemed on such Redemption Date, the holders of shares of Series A Convertible
Preferred Stock shall share ratably in any funds legally available for
redemption of such shares according to the respective amounts which would be
payable with respect to the full number of shares owned by them if all such
outstanding shares were redeemed in full. The shares of Series A Convertible
Preferred Stock not redeemed shall remain outstanding and entitled to all rights
and preferences provided herein; provided, however, that such unredeemed shares
shall be entitled to receive interest accruing daily with respect to the
applicable Series A Redemption Price at the rate of 15% per annum, payable
quarterly in arrears. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of such shares of Series A
Convertible Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available, on the basis set forth
above.
6D. Redeemed or Otherwise Acquired Shares to be Retired. Any shares
of Series A Convertible Preferred Stock redeemed pursuant to this paragraph 6 or
otherwise acquired by the Corporation in any manner whatsoever shall be canceled
and shall not under any circumstances be reissued; and the Corporation may from
time to time take such appropriate corporate action as may be necessary to
reduce accordingly the number of authorized shares of Series A Convertible
Preferred Stock.
7. Amendments. Except where the vote or written consent of the holders of
a greater number of shares of the Corporation is required by these terms of the
Series A Convertible Preferred Stock by law or by the Certificate of
Incorporation, no provision of these terms of the Series A Convertible Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least 60% of the then outstanding shares
of Series A Convertible Preferred Stock.
8. Definitions. As used herein, the following terms shall have the
following meanings:
(a) The term "Purchase Agreement" shall mean the Series A
Convertible Preferred Stock Purchase Agreement dated as of November 23, 1998
between the Corporation and the Purchasers listed in Exhibit 1.01 thereto as in
effect on November 23, 1998.
(b) The term the "Plan" shall mean the Corporation's 1998 Stock
Incentive Plan.
(c) The term "Reserved Employee Shares" shall mean shares of Common
Stock reserved by the Corporation pursuant to the Plan from time to time for (i)
the sale of shares of Common Stock to employees, consultants or non-employee
directors (other than representatives of the holders of Preferred Stock) of the
Corporation or (ii) the exercise of options to purchase Common Stock granted to
employees, consultants or non-employee directors (other than
<PAGE> 29
representatives of the holders of Preferred Stock) of the Corporation, not to
exceed in the aggregate 650,000 shares of Common Stock for both clauses (i) and
(ii) , with such number including 236,900 shares issued or subject to options
granted prior to the date of the initial issuance of the Series A Convertible
Preferred Stock (the "Option Shares") (appropriately adjusted to reflect an
event described in paragraph 5F hereof), provided that, such number of such
shares subject to the Plan shall be increased by up to 839,914 additional shares
of Common Stock (appropriately adjusted to reflect an event described in
paragraph 5F hereof) (collectively, the "Founders' Shares") upon the repurchase
of such Founders' Shares by the Company from the Founders pursuant to
contractual rights held by the Company. The foregoing number of Reserved
Employee Shares may be increased by the affirmative vote or written consent of
the directors elected solely by the holders of Series A Convertible Preferred
Stock or the affirmative vote or written consent of the holders of at least 60%
of the then outstanding shares of Series A Convertible Preferred Stock.
(c) The term "Subsidiary" or "Subsidiaries" shall mean any
corporation, partnership, trust or other entity of which the Corporation and/or
any of its other subsidiaries directly or indirectly owns at the time a majority
of the outstanding shares of every class of equity security of such corporation,
partnership, trust or other entity.
Executed: November 23, 1998 AKAMAI TECHNOLOGIES, INC.
/s/ Daniel Lewin
----------------
Daniel Lewin
President
<PAGE> 30
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AKAMAI TECHNOLOGIES, INC.
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
Akamai Technologies, Inc. (hereinafter called the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
The Board of Directors of the Corporation, by unanimous written consent in
lieu of a meeting, duly adopted a resolution, pursuant to Sections 141(f) and
242 of the General Corporation Law of the State of Delaware, setting forth an
amendment to the Certificate of Incorporation of the Corporation and declaring
said amendment to be advisable. The stockholders of the Corporation duly
approved said proposed amendment by written consent in accordance with Sections
228 and 242 of the General Corporation Law of the State of Delaware, and written
notice of such consent has been or will be given to all stockholders who have
not consented in writing to said amendment. The resolution setting forth the
amendment is as follows:
RESOLVED: That the first paragraph of Article FOURTH of the Certificate of
Incorporation of the Corporation be and hereby is deleted in its
entirety and that the following paragraph be inserted in lieu
thereof:
"FOURTH. The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 17,000,000 shares,
consisting of (i) 15,000,000 shares of Common Stock, $0.01 par value per
share ("Common Stock"), and (ii) 2,000,000 shares of Preferred Stock,
$0.01 par value per share ("Preferred Stock")."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President on this 26th day of January, 1999.
AKAMAI TECHNOLOGIES, INC.
By: /s/ Daniel M. Lewin
-------------------
Daniel M. Lewin
President
<PAGE> 31
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AKAMAI TECHNOLOGIES, INC.
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
Akamai Technologies, Inc. (hereinafter called the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
The Board of Directors of the Corporation, by unanimous written consent in
lieu of a meeting, duly adopted a resolution, pursuant to Sections 141(f) and
242 of the General Corporation Law of the State of Delaware, setting forth an
amendment to the Certificate of Incorporation of the Corporation and declaring
said amendment to be advisable. The stockholders of the Corporation duly
approved said proposed amendment by written consent in accordance with Sections
228 and 242 of the General Corporation Law of the State of Delaware, and written
notice of such consent has been or will be given to all stockholders who have
not consented in writing to said amendment. The resolution setting forth the
amendment is as follows:
RESOLVED: That the first paragraph of Article FOURTH of the Certificate of
Incorporation of the Corporation be and hereby is deleted in its
entirety and that the following paragraph be inserted in lieu
thereof:
"FOURTH. The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 27,000,000 shares,
consisting of (i) 22,000,000 shares of Common Stock, $0.01 par value per
share ("Common Stock"), and (ii) 5,000,000 shares of Preferred Stock,
$0.01 par value per share ("Preferred Stock")."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President on this 16th day of April, 1999.
AKAMAI TECHNOLOGIES, INC.
By: /s/ Daniel M. Lewin
-------------------
Daniel M. Lewin
President
<PAGE> 32
CERTIFICATE OF DESIGNATIONS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
AKAMAI TECHNOLOGIES, INC.
-------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------
Akamai Technologies, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article Fourth of its
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, the Board of the
Directors of the Corporation, at a meeting held on April 13, 1999, duly adopted
the following resolution, which resolution remains in full force and effect on
the date hereof:
RESOLVED, that, pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation, a series of Preferred Stock of the
Corporation be and hereby is established, consisting of 1,327,500 shares, $0.01
par value per share, to be designated "Series B Convertible Preferred Stock"
(hereinafter, the "Series B Preferred Stock"); that the Board of Directors be
and hereby is authorized to issue such shares of Series B Preferred Stock from
time to time and for such consideration and on such terms as the Board of
Directors shall determine; and that, subject to the limitations provided by law
and by the Certificate of Incorporation, the voting powers, preferences and
relative, participating, optional and other special rights, and qualifications,
limitations and restrictions thereof shall be as set forth on Schedule I
attached hereto.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be duly
executed by its President on this 16th day of April, 1999
AKAMAI TECHNOLOGIES, INC.
By: /s/ Daniel Lewin
-----------------
Daniel Lewin
President
<PAGE> 33
SCHEDULE I
AKAMAI TECHNOLOGIES, INC.
DESIGNATION OF SERIES B CONVERTIBLE PREFERRED STOCK
The series of Preferred Stock designated and known as "Series B
Convertible Preferred Stock" shall consist of 1,327,500 shares.
1. Voting.
1A. General. Except as may be otherwise provided in the terms of the
Series B Convertible Preferred Stock, in the Certificate of Incorporation (the
"Certificate of Incorporation") of Akamai Technologies, Inc. (the "Corporation")
or by law, the Series B Convertible Preferred Stock shall vote together with all
other classes and series of stock of the Corporation as a single class on all
actions to be taken by the stockholders of the Corporation. Each share of Series
B Convertible Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Series B
Convertible Preferred Stock is then convertible.
1B. Board Size. Subject to the provisions of paragraph 1C below, the
Corporation shall not, without the written consent or affirmative vote of the
holders of at least 60% of the then outstanding shares of Series B Convertible
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a series, increase the maximum number of
directors constituting the Board of Directors to a number in excess of nine (9).
1C. Board Seats. For so long as at least 50% of the shares of Series B
Convertible Preferred Stock issued pursuant to the Purchase Agreement (as
defined in paragraph 9 herein) remains outstanding, the holders of the Series B
Convertible Preferred Stock, voting as a separate series, shall be entitled to
elect one (1) director of the Corporation. At any meeting (or in a written
consent in lieu thereof) held for the purpose of electing directors, the
presence in person or by proxy (or the written consent) of the holders of at
least a majority in interest of the then outstanding shares of Series B
Convertible Preferred Stock shall constitute a quorum of the Series B
Convertible Preferred Stock for the election of directors to be elected solely
by the holders of the Series B Convertible Preferred Stock voting as a separate
series. A vacancy in any directorship elected by the holders of the Series B
Convertible Preferred Stock will be filled only by the affirmative vote or
written consent of the holders of at least 60% of the then outstanding shares of
Series B Convertible Preferred Stock. The directors to be elected by the holders
of the Series B Convertible Preferred Stock, voting separately as one class,
pursuant to this paragraph 1C, shall serve for terms extending from the date of
their election and qualification until the time of the next succeeding annual
meeting of stockholders and until their successors have been elected and
qualified.
2. Ranking. The Series B Convertible Preferred Stock shall rank, with
respect to dividend distributions and distributions upon a Liquidation Event (as
defined in paragraph 4A herein), senior to all classes of common stock of the
Company and to each other class of capital stock or series of preferred stock
(including the Series A Convertible Preferred Stock of the
<PAGE> 34
Corporation) established before the Preferred Stock Issue Date, by the Board of
Directors, pari passu with the Series C Convertible Preferred Stock of the
Corporation, and senior or pari passu to any other class of capital stock or
series of preferred stock established after the Preferred Stock Issue Date by
the Board of Directors. All classes of common stock of the Company, the Series A
Convertible, Preferred Stock and any other class of capital stock or series of
preferred stock established after the Preferred Stock Issue Date to which the
Series B Convertible Preferred Stock is senior, are collectively referred to
herein as "Junior Securities". The Series C Convertible Preferred Stock of the
Corporation and any other class of capital stock or series of preferred stock
established after the Preferred Stock Issue Date which ranks pari passu with the
Series B Convertible Preferred Stock, are collectively referred to herein as
"Pari Passu Securities".
3. Dividends.
3A. The holders of shares of the Series B Convertible Preferred Stock
shall be entitled to receive, when, as and if dividends are declared by the
Board of Directors out of funds of the Corporation legally available therefor,
cumulative preferential dividends at the annual rate of 8% on the Series B
Liquidation Preference Payments (as defined in paragraph 4A herein); provided,
however, that any such dividends shall be declared and paid only in the event of
(i) a Liquidation Event pursuant to paragraph 4A hereof or (ii) a Redemption
pursuant to paragraph 7B hereof. Holders of shares of Series B Convertible
Preferred Stock shall be entitled to receive the dividends provided for herein
in preference to and in priority over any dividends upon any of the Junior
Securities.
3B. Dividends on the Series B Convertible Preferred Stock shall accrue
on a daily basis from, the Preferred Stock Issue Date and, to the extent they
are not paid, shall accumulate on an annual basis on each December 31, whether
or not the Corporation has earnings or profits, whether or not there are funds
legally available for the payment of such dividends and whether or not dividends
are declared.
4. Liquidation, Dissolution and Winding-Up.
4A. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation (a "Liquidation Event"), whether voluntary or involuntary, the
holders of the shares of Series B Convertible Preferred Stock shall be paid an
amount equal to $15.066 per share plus, in the case of each share, an amount
equal to dividends accrued but unpaid thereon, computed to the date payment
thereof is made available, together with payment to any Pari Passu Securities,
and before any payment shall be made to the holders of any Junior Securities,
such amount payable with respect to one share of Series B Convertible Preferred
Stock being sometimes referred to as the "Series B Liquidation Preference
Payment" and with respect to all shares of Series B Convertible Preferred Stock
being sometimes referred to as the "Series B Liquidation Preference Payments".
If upon any Liquidation Event, the assets to be distributed to the holders of
the Series B Convertible Preferred Stock shall be insufficient to permit payment
to such stockholders of the full preferential amounts aforesaid, then all of the
assets of the Corporation available for distribution to holders of the Series B
Convertible Preferred Stock shall be distributed to such holders of the Series B
Convertible Preferred Stock pro rata, so that each
<PAGE> 35
holder receives that portion of the assets available for distribution as the
number of shares of such stock held by such holder bears to the total number of
shares of such stock then outstanding.
4B. Upon any Liquidation Event, immediately after the holders of Series
B Convertible Preferred Stock and holders of any Pari Passu Securities have been
paid in full pursuant to paragraph 4A above, the remaining net assets of the
Corporation available for distribution shall be distributed among the holders of
the shares of Junior Securities.
Written notice of such Liquidation Event, stating a payment date and the
place where said payments shall be made. shall be given by mail, postage
prepaid, or by facsimile to non-U.S. residents not less than 20 days prior to
the payment date stated therein, to the holders of record of Series B
Convertible Preferred Stock, such notice to be addressed to each such holder at
its address as shown by the records of the Corporation.
The (x) consolidation or merger of the Corporation into or with any other
entity or entities which results in the exchange of outstanding shares of the
Corporation for securities or other consideration issued or paid or caused to be
issued or paid by any such entity or affiliate thereof (except a consolidation
or merger into a Subsidiary or merger in which the Corporation is the surviving
Corporation and the holders of the Corporation's voting stock outstanding
immediately prior to the transaction constitute a majority of the holders of
voting stock outstanding immediately following the transaction), (y) sale or
transfer by the Corporation of all or substantially all of its assets, or (z)
sale or transfer by the Corporation's stockholders of capital stock representing
a majority of the outstanding capital stock of the Corporation shall be deemed
to be a Liquidation Event within the meaning of the provisions of this paragraph
4 (subject to the provisions of this paragraph 4 and not the provisions of
paragraph 6G hereof unless paragraph 6G is elected in the following proviso);
provided, however, that if the holders of at least 60% of the then outstanding
shares of Series B Convertible Preferred Stock shall elect the benefits of the
provisions of paragraph 6G in lieu of receiving payment in a Liquidation Event
pursuant to this paragraph 4, then all holders of shares of Series B Convertible
Preferred Stock shall receive the benefits of the provisions of paragraph 6G in
lieu of receiving payment pursuant to this paragraph 4. Whenever the
distribution provided for in this paragraph 4 shall be payable in property other
than cash, the value of such distribution shall be the fair market value of such
property as determined in good faith by the Board of Directors of the
Corporation.
5. Restrictions. At any time when at least 50% of the shares of Series B
Convertible Preferred Stock issued pursuant to the Purchase Agreement remain
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the written consent of the holders
of at least 60% of the then outstanding shares of Series B Convertible Preferred
Stock given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a series, the Corporation will not:
(1) Consent to any Liquidation Event or merge or consolidate with or
into, or permit any Subsidiary to merge or consolidate with or into, any other
corporation, corporations, entity or entities (except a consolidation or merger
into a Subsidiary or merger in which the Corporation is the surviving
corporation and the holders of the Corporation's voting stock
<PAGE> 36
outstanding immediately prior to the transaction constitute a majority of the
holders of voting stock outstanding immediately following the transaction or a
consolidation or merger pursuant to which the aggregate consideration definitely
and unconditionally payable to all of the stockholders of the Corporation is
greater than $400 million);
(2) Sell, abandon, transfer, lease or otherwise dispose of all or
substantially all of its properties or assets (unless the aggregate
consideration definitely and unconditionally payable to all of the stockholders
of the Corporation is greater than $400 million);
(3) Amend, alter or repeal any provision of its Certificate of
Incorporation or By-laws in a manner adverse to holders of the Series B
Convertible Preferred Stock;
(4) Create or authorize the creation of or issue any additional class
or series of shares of stock (other than the Series C Convertible Preferred
Stock of the Corporation) unless the same ranks junior to or on parity with the
Series B Convertible Preferred Stock as to dividends and the distribution of
assets on a Liquidation Event, or increase the authorized amount of Series B
Convertible Preferred Stock or increase the authorized amount of any additional
class or series of shares of stock unless the same ranks junior to or on parity
with the Series B Convertible Preferred Stock as to dividends and the
distribution of assets on a Liquidation Event, or create or authorize any
obligation or security convertible into shares of Series B Convertible Preferred
Stock or into shares of any other class or series of stock unless the same ranks
junior to or on parity with the Series B Convertible Preferred Stock as to
dividends and the distribution of assets on a Liquidation Event, whether any
such creation, authorization or increase shall be by means of amendment to the
Certificate of Incorporation or by merger, consolidation or otherwise;
(5) In any manner amend, alter or change the designations or the
powers, preferences or rights, privileges or the restrictions of the Series B
Convertible Preferred Stock, provided, however, that the authorization or
creation of any shares of capital stock on parity with the Series B Convertible
Preferred Stock as to dividends and the distribution of assets on a Liquidation
Event shall not require approval of holders of Series B Convertible Preferred
Stock;
(6) Purchase or redeem, or set aside any sums for the purchase or
redemption of, or pay any dividend or make any distribution on, any Junior
Securities, except for (i) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock or (ii)
repurchases of shares of capital stock (at the original purchase price therefor)
from officers, employees, directors or consultants of the Corporation which are
subject to restrictive stock purchase, right of first refusal or other
agreements under which the Corporation has the option to repurchase such shares
upon the occurrence of certain events, including termination of employment; or
(7) Increase the number of Reserved Employee Shares without the
affirmative vote or written consent of a majority of the directors designated
solely by the holders of Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock or the affirmative vote or written consent of the
holders of at least 50% of the then outstanding shares of Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock and Series C Convertible
Preferred Stock, voting together as a single class on a Common Stock equivalent
basis.
<PAGE> 37
6. Conversion. The holders of shares of Series B Convertible Preferred
Stock shall have the following conversion rights:
6A. Right to Convert. Subject to the terms and conditions of this
paragraph 6, the holder of any share or shares of Series B Convertible Preferred
Stock shall have the right, at its option at any time, to convert any such
shares of Series B Convertible Preferred Stock (except that upon any Liquidation
Event the right of conversion shall terminate at the close of business on the
business day fixed for payment of the amounts distributable on the Series B
Convertible Preferred Stock) into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Series B Convertible Preferred Stock so to be converted by $15.066 and (ii)
dividing the result by the conversion price of $15.066 per share or in case an
adjustment of such price has taken place pursuant to the further provisions of
this paragraph 6, then by the conversion price as list adjusted and in effect at
the date any share or shares of Series B Convertible Preferred Stock are
surrendered for conversion (such price, or such price as last adjusted, being
referred to as the "Series B Conversion Price"). Such rights of conversion shall
be exercised by the holder thereof by giving written notice that the holder
elects to convert a stated number of shares of Series B Convertible Preferred
Stock into Common Stock and by surrender of a certificate or certificates for
the shares so to be converted to the Corporation at its principal office (or
such other office or agency of the Corporation as the Corporation may designate
by notice in writing to the holders of the Series B Convertible Preferred Stock)
at any time during its usual business hours on the date set forth in such
notice, together with a statement of the name or names (with address) in which
the certificate or certificates for shares of Common Stock shall be issued.
6B. Issuance of Certificates; Time Conversion Effected. Promptly after
the receipt of the written notice referred to in paragraph 6A and surrender of
the certificate or certificates for the share or shares of Series B Convertible
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number of
whole shares of Common Stock issuable upon the conversion of such share or
shares of Series B Convertible Preferred Stock. To the extent permitted by law,
such conversion shall be deemed to have been effected and the Series B
Conversion Price shall be determined as of the close of business on the date on
which such written notice shall have been received by the Corporation and the
certificate or certificates for such share or shares shall have been surrendered
as aforesaid, and at such time the right of the holder of such share or shares
of Series B Convertible Preferred Stock shall cease, and the person or persons
in whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby.
6C. Fractional Shares; Dividends; Partial Conversion. No fractional
shares shall be issued upon conversion of Series B Convertible Preferred Stock
into Common Stock and no payment or adjustment shall be made upon any conversion
on account of any cash dividends on the Common Stock issued upon such
conversion. At the time of each conversion, the Corporation shall pay in cash an
amount equal to all dividends declared and unpaid (if any) on the shares of
Series B Convertible Preferred Stock surrendered for conversion to the date upon
which such conversion is deemed to take place as provided in paragraph 6B. In
case the number of shares of Series B Convertible Preferred Stock represented by
the certificate or certificates
<PAGE> 38
surrendered pursuant to paragraph 6A exceeds the number of shares converted, the
Corporation shall, upon such conversion, execute and deliver to the holder, at
the expense of the Corporation, a new certificate or certificates for the number
of shares of Series B Convertible Preferred Stock represented by the certificate
or certificates surrendered which are not to be converted. If any fractional
share of Common Stock would, except for the provisions of the first sentence of
this paragraph 6C, be delivered upon such conversion, the Corporation, in lieu
of delivering such fractional share, shall pay to the holder surrendering the
Series B Convertible Preferred Stock for conversion an amount in cash equal to
the current fair market value of such fractional share as determined in good
faith by the Board of Directors of the Corporation, and based upon the aggregate
number of shares of Series B Convertible Preferred Stock surrendered by any one
holder.
6D. Adjustment of Series B Conversion Price Upon Issuance of Common
Stock. Except as provided in paragraphs 6E and 6F, if and whenever the
Corporation shall issue or sell, or is, in accordance with subparagraphs 6D(1)
through 6D(7), deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than the Series B Conversion Price in effect
immediately prior to the time of such issue or sale, (such number being
appropriately adjusted to reflect the occurrence of any event described in
paragraph 6F), then, forthwith upon such issue or sale, the Series B Conversion
Price shall be reduced to the price determined by dividing (i) an amount equal
to the sum of (a) the number of shares of Common Stock outstanding immediately
prior to such issue or sale (assuming the conversion of the outstanding shares
of Series B Convertible Preferred Stock) multiplied by the then existing Series
B Conversion Price and (b) the consideration, if any, received by the
Corporation upon such issue or sale, by (ii) the total number of shares of
Common Stock outstanding immediately after such issue or sale (assuming the
conversion of the outstanding shares of Series B Convertible Preferred Stock).
For purposes of this paragraph 6D, the following subparagraphs 6D(1) to
6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in
a merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "Options" and such convertible exchangeable
stock or securities being called "Convertible Securities") whether or not
such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or receivable by the
Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the
Corporation upon the exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if it any, payable upon the issue or
sale of all such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or
exchange of
<PAGE> 39
all such Convertible Securities issuable upon the exercise of such Options)
shall be less than the Series B Conversion Price in effect immediately
prior to the time of the granting of such Options, then the total maximum
number of shares of Common Stock issuable upon the exercise of such Options
or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date of
granting of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise provided
in subparagraph 6D(3), no adjustment of the Series B Conversion Price shall
be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such Options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the Corporation
shall in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Corporation as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon
the conversion or exchange of all such Convertible Securities thereof, by
(ii) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be less
than the Series B Conversion Price in effect immediately prior to the time
of such issue or sale, then the total maximum number of shares of Common
Stock issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued for such price per share as
of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except as
otherwise provided in subparagraph 6D(3), no adjustment of the Series B
Conversion Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities and (b) if any
such issue or sale of such Convertible Securities is made upon exercise of
any Options to purchase any such Convertible Securities for which
adjustments of the Series B Conversion Price have been or are to be made
pursuant to other provisions of this paragraph 6D, no further adjustment of
the Series B Conversion Price shall be made by reason of such issue or
sale.
6D(3) Change in Option Price or Conversion Rate. Upon the happening of
any of the following events, namely, if the purchase price provided for in
any Option referred to in subparagraph 6D(1), the additional consideration,
if any, payable upon the conversion or exchange of any Convertible
Securities referred to in subparagraph 6D(1) or 6D(2), or the rate at which
Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Series B Conversion Price in
effect at the time of such event shall forthwith be readjusted to the
Series B Conversion Price which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case
<PAGE> 40
may be, at the time initially granted, issued or sold; provided, however,
that in no event shall the Series B Conversion Price then in effect
hereunder be increased; and on the expiration of any such Option or the
termination of any such right to convert or exchange such Convertible
Securities, the Series B Conversion Price then in effect hereunder shall
forthwith be increased to the Conversion Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation
payable in Common Stock (except for the issue of stock dividends or
distributions upon the outstanding Common Stock for which adjustment is
made pursuant to paragraph 6F), Options or
Convertible Securities, any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
6D(5) Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received
by the Corporation therefor, without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Corporation in connection therewith. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for
consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be deemed to be the fair value of
such consideration as determined in good faith by the Board of Directors of
the Corporation, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case any Options shall be issued in connection
with the issue and sale of other securities of the Corporation, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for such consideration as determined in good
faith by the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (ii) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation (or any Subsidiary), and the disposition
of any such shares shall be considered an issue or sale of Common Stock for
the purpose of this paragraph 6D.
<PAGE> 41
6E. Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Corporation shall not be required to make any adjustment of
the Series B Conversion Price in the case of the issuance of (i) shares of
Series C Convertible Preferred Stock pursuant to the Purchase Agreement, (ii)
shares of Common Stock issuable upon conversion of the Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock or Series C Convertible
Preferred Stock, (iii) shares of Common Stock issued or issuable as a dividend
or distribution on Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock or Series C Convertible Preferred Stock, (iv) Reserved Employee
Shares (as defined in paragraph 9 herein) or (v) warrant shares issued as
contemplated by the Purchase Agreement or shares of Common Stock issuable upon
conversion of such warrant shares.
6F. Subdivision or Combination of Common Stock. In case the Corporation
shall at any time subdivide (by any stock split, stock dividend or otherwise)
its outstanding shares of Common Stock into a greater number of shares, the
Series B Conversion Price in effect immediately prior to such subdivision shall
be proportionately reduced and, conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares, the Series B
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
6G. Reorganization or Reclassification. If any capital reorganization,
reclassification, recapitalization, consolidation, merger, sale of all or
substantially all of the Corporation's assets or other similar transaction (any
such transaction being referred to herein as an "Organic Change") shall be
effected in such a way that holders of Common Stock shall be entitled to receive
(either directly or upon subsequent liquidation) stock, securities or assets
with respect to or in exchange for Common Stock, then, as a condition of such
Organic Change, lawful and adequate provisions shall be made whereby each holder
of a share or shares of Series B Convertible Preferred Stock shall thereupon
have the right to receive, upon the basis and upon the terms and conditions
specified herein and in lieu of or in addition to, as the case may be, the
shares of Common Stock immediately theretofore receivable upon the conversion of
such share or shares of Series B Convertible Preferred Stock, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such Common Stock immediately theretofore receivable upon
such conversion had such Organic Change not taken place, and in any case of a
reorganization or reclassification only appropriate provisions shall be made
with respect to the rights and interests of such holder to the end that the
provisions hereof (including without limitation provisions for adjustments of
the Series B Conversion Price) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the Series B
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, or by facsimile
transmission to non-U.S. residents, addressed to each holder of shares of Series
B Convertible Preferred Stock at the address of such holder as shown on the
books of the Corporation, which notice shall state the Series B Conversion Price
resulting from such adjustment, setting forth in reasonable detail the method
upon which such calculation is based.
<PAGE> 42
6I. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of its
Common Stock;
(2) the Corporation shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights;
(3) there shall be any capital reorganization or reclassification of
the capital stock of the Corporation, or a consolidation or merger of the
Corporation with or into, or a sale of all or substantially all of its assets
to, another entity or entities; or
(4) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by facsimile transmission to non-U.S. residents,
addressed to each holder of any shares of Preferred Stock at the address of such
holder as shown on the books of the Corporation, (a) at least 20 days' prior
written notice of the date on which the books of the Corporation shall close or
a record shall be taken for such dividend, distribution or subscription rights
or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to "exchange their Common Stock
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
6J. Stock to be Reserved. The Corporation will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the conversion of Series B Convertible Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Series B Convertible Preferred
Stock. The Corporation covenants that all shares of Common Stock which shall be
so issued shall be duly and validly issued and fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof, and,
without limiting the generality of the foregoing, the Corporation covenants that
it will from time to time take all such action as may be requisite to assure
that the par value per share of the Common Stock is at all times equal to or
less than the Series B Conversion Price in effect at the time. The Corporation
will take all such action as may be necessary to assure that all such shares of
Common Stock may be so issued without violation of any applicable law or
regulation, or of any requirement of any national securities exchange upon which
the Common Stock may be listed.
<PAGE> 43
6K. No Reissuance of Series B Convertible Preferred Stock. Shares of
Series B Convertible Preferred Stock which are converted into shares of Common
Stock as provided herein shall not be reissued.
6L. Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of Series B Convertible Preferred Stock shall be made without
charge to the holder thereof for any issuance tax in respect thereof; provided
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Series B Convertible
Preferred Stock which is being converted.
6M. Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any Series B Convertible Preferred Stock
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series B Convertible Preferred Stock in any manner which interferes
with the timely conversion of such Preferred Stock, except as may otherwise be
required to comply with applicable securities laws.
6N. Definition of Common Stock. As used in this paragraph 6, the term
"Common Stock" shall mean and include the Corporation's authorized Common Stock,
par value $.01 per share, as constituted on the date of filing of these terms of
the Series B Convertible Preferred Stock, and shall also include any capital
stock of any class of the Corporation thereafter authorized which shall neither
be limited to a fixed sum or percentage of par value in respect of the rights of
the holders thereof to participate in dividends nor entitled to a preference in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the shares of Common
Stock receivable upon conversion of shares of Series B Convertible Preferred
Stock shall include only shares designated as Common Stock of the Corporation on
the date of filing of this instrument, or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in subparagraph 6G.
6O. Mandatory Conversion. All outstanding shares of Series B
Convertible Preferred Stock shall automatically convert to shares of Common
Stock if at any time the Corporation shall effect a public offering of shares of
Common Stock (any such offering, regardless of compliance with subsections (i),
(ii) and (iii) herein, being referred to as a "Public Offering"), provided (i)
the aggregate gross proceeds from such offering to the Corporation shall be at
least $20,000,000; (ii) the price paid by the public for such shares shall be at
least (x) 2.0 times the then Series B Conversion Price if the Public Offering
occurs prior to the 18 month anniversary of the Preferred Stock Issue Date or
(y) 3.0 times the then Series B Conversion Price if the Public Offering occurs
on or after the 18 month anniversary of the Preferred Stock Issue Date, and
(iii) the offering is a firm commitment underwritten Public Offering, and such
automatic conversion shall be effective upon the closing of the sale of such
shares by the Corporation pursuant to such Public Offering.
<PAGE> 44
7. Redemption. The shares of Series B Convertible Preferred Stock shall be
redeemed as follows:
7A. Optional Redemption. The Corporation shall not have the right to
call or redeem at any time all or any shares of Series B Convertible Preferred
Stock. With the approval of the holders of 66% of the then outstanding shares of
Series B Convertible Preferred Stock, one or more holders of shares of Series B
Convertible Preferred Stock may, by giving notice (the "Notice") to the
Corporation, require the Corporation to redeem any or all of the outstanding
Series B Convertible Preferred Stock on the Redemption Date (as defined below).
Upon receipt of the Notice, the Corporation will so notify all other persons
holding Series B Convertible Preferred Stock. After receipt of the Notice, the
Corporation shall fix the first date for redemption, which shall be the date
specified in the Notice, being any date on or after the earlier of (i) the fifth
(5th) anniversary of the Preferred Stock Issue Date and (ii) the date which is
the day before the Corporation is due to redeem any outstanding Junior
Securities (the "Redemption Date"). All holders of Series B Convertible
Preferred Stock shall deliver to the Corporation during regular business hours,
at the office of any transfer agent of the Corporation for the Series B
Convertible Preferred Stock, or at the principal office of the Corporation or at
such other place as may be designated by the Corporation, the certificate or
certificates for the Series B Convertible Preferred Stock, duly endorsed for
transfer to the Corporation (if required by it) on or before the Redemption
Date.
7B. Redemption Price and Payment. The Series B Convertible Preferred
Stock to be redeemed on the Redemption Date shall be redeemed by paying for each
share in cash an amount equal to the Series B Redemption Price (as defined
below). For purposes of this paragraph 7B, the "Series B Redemption Price" shall
mean $15.066 per share, plus an amount equal to all dividends accrued and unpaid
on each such share; provided, however, that if the Redemption Date is after the
fifth (5th) anniversary of the Preferred Stock Issue Date, then the "Series B
Redemption Price" shall mean the greater of (i) $15.066 per share, plus an
amount equal to all dividends accrued and unpaid on each such share and (ii) the
Fair Market Value (as defined below) of the Common Stock underlying the Series B
Convertible Preferred Stock. Such payment shall be made in full on the
Redemption Date to the holders entitled thereto. For purposes of this paragraph
7B, "Fair Market Value" of the Common Stock shall mean the average of the fair
market valuations of the Common Stock performed by two investment banks (the
"Initial Appraisers"), one of which shall be retained by the Corporation and one
of which shall be retained by the holders of a majority in interest of the
Series B Convertible Preferred Stock. Subject to the following sentence, such
determination by the Initial Appraisers of Fair Market Value shall be final and
binding on the parties. If the higher of the two valuations of the Initial
Appraisers is equal to or greater than 110% of the lower valuation, the
Corporation and holders of a majority in interest of the Series B Convertible
Preferred Stock shall select a third investment bank (the "Final Appraiser"),
which shall be mutually agreeable to the Corporation and the holders of a
majority in interest of the Series B Convertible Preferred Stock. The fair
market value of the Common Stock as determined by the Final Appraiser shall be
final and binding on the parties. The fees and expenses of the Initial
Appraisers shall be paid for by the party selecting such Initial Appraiser and
the fees and expenses of the Final Appraiser shall be shared by the Corporation
and the holders of the Series B Convertible Preferred Stock.
<PAGE> 45
7C. Redemption Mechanics. At least 15 but not more than 35 days prior
to the Redemption Date, written notice (the "Redemption Notice") shall be given
by the Corporation by mail, postage prepaid, or by facsimile transmission to
non-U.S. residents, to each holder of record (at the close of business on the
business day next preceding the day on which the Redemption Notice is given) of
shares of Series B Convertible Preferred Stock notifying such holder of the
redemption and specifying the Series B Redemption Price, the Redemption Date and
the place where said Series B Redemption Price shall be payable. The Redemption
Notice shall be addressed to each holder at his address as shown by the records
of the Corporation. From and after the close of business on the Redemption Date
unless there shall have been a default in the payment of the Series B Redemption
Price, all rights of holders of shares of Series B Convertible Preferred Stock
(except the right to receive the Series B Redemption Price) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for redemption of
shares of Series B Convertible Preferred Stock on the Redemption Date are
insufficient to redeem the total number of outstanding shares of Series B
Convertible Preferred Stock to be redeemed on such Redemption Date, the holders
of shares of Series B Convertible Preferred Stock shall share ratably in any
funds legally available for redemption of such shares according to the
respective amounts which would be payable with respect to the full number of
shares owned by them if all such outstanding shares were redeemed in full. The
shares of Series B Convertible Preferred Stock not redeemed shall remain
outstanding and entitled to all rights and preferences provided herein;
provided, however, that such unredeemed shares shall be entitled to receive
interest accruing daily with respect to the applicable Series B Redemption Price
at the rate of 15% per annum, payable quarterly in arrears. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of such shares of Series B Convertible Preferred Stock, such
funds will be used, at the end of the next succeeding fiscal quarter, to redeem
the balance of such shares, or such portion thereof for which funds are then
legally available, on the basis set forth above.
7D. Redeemed or Otherwise Acquired Shares to be Retired. Any shares of
Series B Convertible Preferred Stock redeemed pursuant to this paragraph 7 or
otherwise acquired by the Corporation in any manner whatsoever shall be canceled
and shall not under any circumstances be reissued; and the Corporation may from
time to time take such appropriate corporate action as may be necessary to
reduce accordingly the number of authorized shares of Series B Convertible
Preferred Stock.
8. Amendments. Except where the vote or written consent of the holders of
a greater number of shares of the Corporation is required by these terms of the
Series B Convertible Preferred Stock, by law or by the Certificate of
Incorporation, no provision of these terms of the Series B Convertible Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least 60% of the then outstanding shares
of Series B Convertible Preferred Stock.
9. Definitions. As used herein, the following terms shall have the
following meanings:
(1) The term "Founders" shall mean F. Thomson Leighton, Daniel Lewin,
Jonathan Seelig, Randall Kaplan, Gilbert Friesen and David Karger.
<PAGE> 46
(2) The term "Preferred Stock Issue Date" shall mean the date on which
the Series B Convertible Preferred Stock is originally issued by the Corporation
pursuant to the Purchase Agreement.
(3) The term "Purchase Agreement" shall mean the Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock Purchase Agreement
dated as of April 16, 1999 between the Corporation, Baker Communications Fund,
L.P. and the other purchasers named therein, as in effect on April 16, 1999.
(4) The term the "Plan" shall mean the Corporation's 1998 Stock
Incentive Plan.
(5) The term "Reserved Employee Shares" shall mean shares of Common
Stock reserved by the Corporation pursuant to the Plan from time to time for (i)
the sale of shares of Common Stock to employees, consultants or non-employee
directors (other than representatives of the holders of Preferred Stock) of the
Corporation or (ii) the exercise of options to purchase Common Stock granted to
employees, consultants or non-employee directors (other than representatives of
the holders of Preferred Stock) of the Corporation, not to exceed in the
aggregate 3,450,000 shares of Common Stock for both clauses (i) and (ii), with
such number including 710,700 shares issued or subject to options granted prior
to the date of the initial issuance of the Series A Convertible Preferred Stock
(the "Option Shares") (approximately adjusted to reflect an event described in
paragraph 6F hereof); provided that, such number of such shares subject to the
Plan shall be increased by up to 2,519,742 additional shares of Common Stock
(appropriately adjusted to reflect an event described in paragraph 6F hereof)
(collectively, the "Founders' Shares") upon the repurchase of such Founders'
Shares by the Corporation from the Founders pursuant to contractual rights hold
by the Corporation. The foregoing numbers of Reserved Employee Shares may be
increased by the affirmative vote or written consent of a majority of the
directors designated solely by the holders of Series A Convertible Preferred
Stock and Series B Convertible Preferred Stock or the affirmative vote or
written consent of the holders of at least 50% of the then outstanding shares of
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and
Series C Convertible Preferred Stock, voting together as a single class on a
Common Stock equivalent basis.
<PAGE> 47
(6) The term "Subsidiary" or "Subsidiaries" shall mean any corporation,
partnership, trust or other entity of which the Corporation and/or any of its
other subsidiaries directly or indirectly owns at the time a majority of the
outstanding shares of every class of equity security of such corporation,
partnership, trust or other entity.
<PAGE> 48
CERTIFICATE OF DESIGNATIONS
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
AKAMAI TECHNOLOGIES, INC.
-------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------
Akamai Technologies, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article Fourth of its
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, the Board of the
Directors of the Corporation, at a meeting held on April 13, 1999, duly adopted
the following resolution, which resolution remains in full force and effect on
the date hereof:
RESOLVED, that, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation, a series of Preferred Stock
of the Corporation be and hereby is established, consisting of 145,195 shares,
$0.01 par value per share, to be designated "Series C Convertible Preferred
Stock" (hereinafter, the "Series C Preferred Stock"); that the Board of
Directors be and hereby is authorized to issue such shares of Series C Preferred
Stock from time to time and for such consideration and on such terms as the
Board of Directors shall determine; and that, subject to the limitations
provided by law and by the Certificate of Incorporation, the voting powers,
preferences and relative, participating, optional and other special rights, and
qualifications, limitations and restrictions thereof shall be as set forth on
Schedule I attached hereto.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by its President on this 16th day of April, 1999
AKAMAI TECHNOLOGIES, INC.
By: /s/ Daniel Lewin
------------------------------
Daniel Lewin
President
<PAGE> 49
SCHEDULE 1
AKAMAI TECHNOLOGIES, INC.
DESIGNATION OF SERIES C CONVERTIBLE PREFERRED STOCK
The series of Preferred Stock designated and known as "Series C
Convertible Preferred Stock" shall consist of 145,195 shares.
1. Voting. Except as may be otherwise provided in these terms of the
Series C Convertible Preferred Stock, in the Certificate of Incorporation (the
"Certificate of Incorporation") of Akamai Technologies, Inc. (the "Corporation")
or by law, the Series C Convertible Preferred Stock shall vote together with all
other classes and series of stock of the Corporation as a single class on all
actions to be taken by the stockholders of the Corporation. Each share of Series
C Convertible Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Series C
Convertible Preferred Stock is then convertible.
2. Ranking. The Series C Convertible Preferred Stock shall rank, with
respect to dividend distributions and distributions upon a Liquidation Event (as
defined in paragraph 4A herein), senior to all classes of common stock of the
Company and to each other class of capital stock or series of preferred stock
(including the Series A Convertible Preferred Stock of the Corporation)
established before the Series B Preferred Stock Issue Date, by the Board of
Directors, pari passu with the Series B Convertible Preferred Stock of the
Corporation, and senior or pari passu to any other class of capital stock or
series of preferred stock established after the Series B Preferred Stock Issue
Date by the Board of Directors. All classes of common stock of the Company, the
Series A Convertible Preferred Stock and any other class of capital stock or
series of preferred stock established after the Series B Preferred Stock Issue
Date to which the Series C Convertible Preferred Stock is senior, are
collectively referred to herein as "Junior Securities". The Series B Convertible
Preferred Stock of the Corporation and any other class of capital stock or
series of preferred stock established after the Series B Preferred Stock Issue
Date which ranks pari passu with the Series C Convertible Preferred Stock, are
collectively referred to herein as "Pari Passu Securities".
3. Dividends.
3A. The holders of shares of the Series C Convertible
Preferred Stock shall be entitled to receive, when, as and if dividends are
declared by the Board of Directors out of funds of the Corporation legally
available therefor, cumulative preferential dividends at the annual rate of 8%
on the Series C Liquidation Preference Payments (as defined in paragraph 4A
herein); provided, however, that any such dividends shall be declared and paid
only in the event of (i) a Liquidation Event pursuant to paragraph 4A hereof or
(ii) a Redemption pursuant to paragraph 7B hereof. Holders of shares of Series C
Convertible Preferred Stock shall be entitled to receive the dividends provided
for herein in preference to and in priority over any dividends upon any of the
Junior Securities.
3B. Dividends on the Series C Convertible Preferred Stock
shall accrue on a daily basis from the Series C Preferred Stock Issue Date and,
to the extent they are not paid, shall
<PAGE> 50
accumulate on an annual basis on each December 31, whether or not the
Corporation has earnings or profits, whether or not there are funds legally
available for the payment of such dividends and whether or not dividends are
declared.
4. Liquidation, Dissolution and Winding-up.
4A. Liquidation. Upon any liquidation, dissolution or winding
up of the Corporation (a "Liquidation Event"), whether voluntary or involuntary,
the holders of the shares of Series C Convertible Preferred Stock shall be paid
an amount equal to $34.436 per share plus, in the case of each share, an amount
equal to dividends accrued but unpaid thereon, computed to the date payment
thereof is made available, together with payment to any Pari Passu Securities,
and before any payment shall be made to the holders of any Junior Securities,
such amount payable with respect to one share of Series C Convertible Preferred
Stock being sometimes referred to as the "Series C Liquidation Preference
Payment" and with respect to all shares of Series C Convertible Preferred Stock
being sometimes referred to as the "Series C Liquidation Preference Payments".
If upon any Liquidation Event, the assets to be distributed to the holders of
the Series C Convertible Preferred Stock shall be insufficient to permit payment
to such stockholders of the full preferential amounts aforesaid, then all of the
assets of the Corporation available for distribution to holders of the Series C
Convertible Preferred Stock shall be distributed to such holders of the Series C
Convertible Preferred Stock pro rata, so that each holder receives that portion
of the assets available for distribution as the number of shares of such stock
held by such holder bears to the total number of shares of such stock then
outstanding.
4B. Upon any Liquidation Event, immediately after the holders
of Series C Convertible Preferred Stock and holders of any Pari Passu Securities
have been paid in full pursuant to paragraph 4A above, the remaining net assets
of the Corporation available for distribution shall be distributed among the
holders of the shares of Junior Securities.
Written notice of such Liquidation Event, stating a payment date and
the place where said payments shall be made, shall be given by mail, postage
prepaid, or by facsimile to non-U.S. residents, not less than 20 days prior to
the payment date stated therein, to the holders of record of Series C
Convertible Preferred Stock, such notice to be addressed to each such holder at
its address as shown by the records of the Corporation.
The (x) consolidation or merger of the Corporation into or with any
other entity or entities which results in the exchange of outstanding shares of
the Corporation for securities or other consideration issued or paid or caused
to be issued or paid by any such entity or affiliate thereof (except a
consolidation or merger into a Subsidiary or merger in which the Corporation is
the surviving Corporation and the holders of the Corporation's voting stock
outstanding immediately prior to the transaction constitute a majority of the
holders of voting stock outstanding immediately following the transaction), (y)
sale or transfer by the Corporation of all or substantially all of its assets,
or (z) sale or transfer by the Corporation's stockholders of capital stock
representing a majority of the outstanding capital stock of the Corporation
shall be deemed to be a Liquidation Event within the meaning of the provisions
of this paragraph 4 (subject to the provisions of this paragraph 4 and not the
provisions of paragraph 6G hereof, unless paragraph 6G is elected in the
following proviso); provided, however, that if the holders of at least 60% of
the then outstanding shares of Series C Convertible Preferred Stock shall elect
the
<PAGE> 51
benefits of the provisions of paragraph 6G in lieu of receiving payment in a
Liquidation Event pursuant to this paragraph 4, then all holders of shares of
Series C Convertible Preferred Stock shall receive the benefits of the
provisions of paragraph 6G in lieu of receiving payment pursuant to this
paragraph 4. Whenever the distribution provided for in this paragraph 4 shall be
payable in property other than cash, the value of such distribution shall be the
fair market value of such property as determined in good faith by the Board of
Directors of the Corporation.
5. Restrictions. At any time when at least 50% of the shares of Series
C Convertible Preferred Stock issued pursuant to the Purchase Agreement remain
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the written consent of the holders
of at least 60% of the then outstanding shares of Series C Convertible Preferred
Stock given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a series, the Corporation will not:
(1) Consent to any Liquidation Event or merge or consolidate
with or into, or permit any Subsidiary to merge or consolidate with or into, any
other corporation, corporations, entity or entities (except a consolidation or
merger into a Subsidiary or merger in which the Corporation is the surviving
corporation and the holders of the Corporation's voting stock outstanding
immediately prior to the transaction constitute a majority of the holders of
voting stock outstanding immediately following the transaction or a
consolidation or merger pursuant to which the aggregate consideration definitely
and unconditionally payable to all of the stockholders of the Corporation is
greater than $400 million);
(2) Sell, abandon, transfer, lease or otherwise dispose of all
or substantially all of its properties or assets (unless the aggregate
consideration definitely and unconditionally payable to all of the stockholders
of the Corporation is greater than $400 million);
(3) Amend, alter or repeal any provision of its Certificate of
Incorporation or By-laws in a manner adverse to holders of the Series C
Convertible Preferred Stock;
(4) Create or authorize the creation of or issue any
additional class or series of shares of stock (other than the Series B
Convertible Preferred Stock of the Corporation) unless the same ranks junior to
or on parity with the Series C Convertible Preferred Stock as to dividends and
the distribution of assets on a Liquidation Event, or increase the authorized
amount of Series C Convertible Preferred Stock or increase the authorized amount
of any additional class or series of shares of stock unless the same ranks
junior to or on parity with the Series C Convertible Preferred Stock as to
dividends and the distribution of assets on a Liquidation Event, or create or
authorize any obligation or security convertible into shares of Series C
Convertible Preferred Stock or into shares of any other class or series of stock
unless the same ranks junior to or on parity with the Series C Convertible
Preferred Stock as to dividends and the distribution of assets on a Liquidation
Event, whether any such creation, authorization or increase shall be by means of
amendment to the Certificate of Incorporation or by merger, consolidation or
otherwise;
<PAGE> 52
(5) In any manner amend, alter or change the designations or
the powers, preferences or rights, privileges or the restrictions of the Series
C Convertible Preferred Stock, provided, however, that the authorization or
creation of any shares of capital stock on parity with the Series C Convertible
Preferred Stock as to dividends and the distribution of assets on a Liquidation
Event shall not require approval of holders of Series C Convertible Preferred
Stock;
(6) Purchase or redeem, or set aside any sums for the purchase
or redemption of, or pay any dividend or make any distribution on, any Junior
Securities, except for (i) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock or (ii)
repurchases of shares of capital stock (at the original purchase price therefor)
from officers, employees, directors or consultants of the Corporation which are
subject to restrictive stock purchase, right of first refusal or other
agreements under which the Corporation has the option to repurchase such shares
upon the occurrence of certain events, including termination of employment; or
(7) Increase the number of Reserved Employee Shares without
the affirmative vote or written consent of a majority of the directors
designated solely by the holders of Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock or the affirmative vote or written consent
of the holders of at least 50% of the then outstanding shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock, voting together as a single class on a Common Stock
equivalent basis.
6. Conversion. The holders of shares of Series C Convertible Preferred
Stock shall have the following conversion rights:
6A. Right to Convert. Subject to the terms and conditions of
this paragraph 6, the holder of any share or shares of Series C Convertible
Preferred Stock shall have the right, at its option at any time, to convert any
such shares of Series C Convertible Preferred Stock (except that upon any
Liquidation Event the right of conversion shall terminate at the close of
business on the business day fixed for payment of the amounts distributable on
the Series C Convertible Preferred Stock) into such number of fully paid and
nonassessable shares of Common Stock as is obtained by (i) multiplying the
number of shares of Series C Convertible Preferred Stock so to be converted by
$34.436 and (ii) dividing the result by the conversion price of $34.436 per
share or in case an adjustment of such price has taken place pursuant to the
further provisions of this paragraph 6, then by the conversion price as last
adjusted and in effect at the date any share or shares of Series C Convertible
Preferred Stock are surrendered for conversion (such price, or such price as
last adjusted, being referred to as the "Series C Conversion Price"). Such
rights of conversion shall be exercised by the holder thereof by giving written
notice that the holder elects to convert a stated number of shares of Series C
Convertible Preferred Stock into Common Stock and by surrender of a certificate
or certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Series C
Convertible Preferred Stock) at any time during its usual business hours on the
date set forth in such notice, together with a statement of the name or names
(with address) in which the certificate or certificates for shares of Common
Stock shall be issued.
<PAGE> 53
6B. Issuance of Certificates; Time Conversion Effected.
Promptly after the receipt of the written notice referred to in paragraph 6A and
surrender of the certificate or certificates for the share or shares of Series C
Convertible Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Series C Convertible Preferred Stock. To the extent permitted
by law, such conversion shall be deemed to have been effected and the Series C
Conversion Price shall be determined as of the close of business on the date on
which such written notice shall have been received by the Corporation and the
certificate or certificates for such share or shares shall have been surrendered
as aforesaid, and at such time the rights of the holder or such share or shares
of Series C Convertible Preferred Stock shall cease, and the person or persons
in whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby.
6C. Fractional Shares; Dividends; Partial Conversion. No
fractional shares shall be issued upon conversion of Series C Convertible
Preferred Stock into Common Stock and no payment or adjustment shall be made
upon any conversion on account of any cash dividends on the Common Stock issued
upon such conversion. At the time of each conversion, the Corporation shall pay
in cash an amount equal to all dividends declared and unpaid (if any) on the
shares of Series C Convertible Preferred Stock surrendered for conversion to the
date upon which such conversion is deemed to take place as provided in paragraph
6B. In case the number of shares of Series C Convertible Preferred Stock
represented by the certificate or certificates surrendered pursuant to paragraph
6A exceeds the number of shares converted, the Corporation shall, upon such
conversion, execute and deliver to the holder, at the expense of the
Corporation, a new certificate or certificates for the number of shares of
Series C Convertible Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. If any fractional share
of Common Stock would, except for the provisions of the first sentence of this
paragraph 6C, be delivered upon such conversion, the Corporation, in lieu of
delivering such fractional share, shall pay to the holder surrendering the
Series C Convertible Preferred Stock for conversion an amount in cash equal to
the current fair market value of such fractional share as determined in good
faith by the Board of Directors of the Corporation, and based upon the aggregate
number of shares of Series C Convertible Preferred Stock surrendered by any one
holder.
6D. Adjustment of Series C Conversion Price Upon Issuance of
Common Stock. Except as provided in paragraphs 6E and 6F, if and whenever the
Corporation shall issue or sell, or is, in accordance with subparagraphs 6D(1)
through 6D(7), deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than the Series C Conversion Price in effect
immediately prior to the time of such issue or sale, (such number being
appropriately adjusted to reflect the occurrence of any event described in
paragraph 6F), then, forthwith upon such issue or sale, the Series C Conversion
Price shall be reduced to the price determined by dividing (i) an amount equal
to the sum of (a) the number of shares of Common Stock outstanding immediately
prior to such issue or sale (assuming the conversion of the outstanding shares
of Series C Convertible Preferred Stock) multiplied by the then existing Series
C Conversion Price and (b) the consideration, if any, received by the
Corporation upon such issue or sale, by (ii) the total number of shares of
Common Stock outstanding immediately
<PAGE> 54
after such issue or sale (assuming the conversion of the outstanding shares of
Series C Convertible Preferred Stock).
For purposes of this paragraph 6D, the following subparagraphs
6D(1) to 6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the
total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation
upon the exercise of all such Options, plus, in the case of such
Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of all such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the
exercise of such Options) shall be less than the Series C Conversion
Price in effect immediately prior to the time of the granting of such
Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall be deemed to have been
issued for such price per share as of the date of granting of such
Options or the issuance of such Convertible Securities and thereafter
shall be deemed to be outstanding. Except as otherwise provided in
subparagraph 6D(3), no adjustment of the Series C Conversion Price
shall be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock issuable upon such conversion or exchange
(determined by dividing (i) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion
or exchange of all such Convertible Securities thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be
less than the Series C Conversion Price in effect immediately prior to
the time of such issue or sale, then the total maximum number of
<PAGE> 55
shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been issued for such
price per share as of the date of the issue or sale of such of such
Convertible Securities and thereafter shall be deemed to be
outstanding, provided that (a) except as otherwise provided in
subparagraph 6D(3), no adjustment of the Series C Conversion Price
shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (b) if any
such issue or sale of such Convertible Securities is made upon exercise
or any Options to purchase any such Convertible Securities for which
adjustments of the Series C Conversion Price have been or are to be
made pursuant to other provisions of this paragraph 6D, no further
adjustments of the Series C Conversion Price shall be made by reason of
such issue or sale.
6D(3) Change in Option Price of Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1), the
additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in subparagraph
6D(1) or 6D(2), or the rate at which Convertible Securities referred to
in subparagraph 6D(1) or 6D(2) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to,
changes under or by reason if provisions designed to protect against
dilution), the Series C Conversion Price in effect at the time of such
event shall forthwith be readjusted to the Series C Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold; provided,
however, that in no event shall the Series C Conversion Price then in
effect hereunder be increased; and on the expiration of any such Option
or the termination of any such right to convert or exchange such
Convertible Securities, the Series C Conversion Price then in effect
hereunder shall forthwith be increased to the Conversion Price which
would have been in effect at the time of such expiration or termination
had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock (except for the issue of stock
dividends or distributions upon the outstanding Common Stock for which
adjustment is made pursuant to paragraph 6F), Options or Convertible
Securities, any Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall
be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for consideration other than cash, the amount
of the consideration other than cash received by the Corporation shall
be deemed to be the fair value of such consideration as determined in
good faith by
<PAGE> 56
the Board of Directors of the Corporation without deduction of any
expenses incurred or any underwriting commissions or concessions paid
or allowed by the Corporation in connection therewith. In case any
Options shall be issued in connection with the issue and sale of other
securities of the Corporation, together comprising one integral
transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have
been issued for such consideration as determined in good faith by the
Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take a record
of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities or (ii) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Corporation (or any Subsidiary), and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purpose of this paragraph 6D.
6E. Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Corporation shall not be required to make any adjustment
for the Series C Conversion Price in the case of the issuance of (i) shares of
Series B Convertible Preferred Stock pursuant to the Purchase Agreement, (ii)
shares of Common Stock issuable upon conversion of the Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock or Series C Convertible
Preferred Stock, (iii) shares of Common Stock issued or issuable as a dividend
or distribution on Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock or Series C Convertible Preferred Stock, (iv) Reserved Employee
Shares (as defined in paragraph 9 herein) or (v) warrant shares issued as
contemplated by the Purchase Agreement or shares of Common Stock issuable upon
conversion of such warrant shares.
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Series C Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Series C Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
6G. Reorganization or Reclassification. If any capital
reorganization, reclassification, recapitalization, consolidation, merger, sale
of all or substantially all of the Corporation's assets or other similar
transaction (any such transaction being referred to herein as an "Organic
Change") shall be effected in such a way that holders of Common Stock shall be
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such Organic Change,
<PAGE> 57
lawful and adequate provisions shall be made whereby each holder of a share or
shares of Series C Convertible Preferred Stock shall thereupon have the right to
receive, upon the basis and upon the terms and conditions specified herein and
in lieu of or in addition to, as the case may be, the shares of Common Stock
immediately theretofore receivable upon the conversion of such share or shares
of Series C Convertible Preferred Stock, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
Organic Change not taken place, and in any case of a reorganization or
reclassification only appropriate provisions shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
(including without limitation provisions for adjustments of the Series C
Conversion Price) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the Series C
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, or by facsimile
transmission to non-U.S. residents, addressed to each holder of shares of Series
C Convertible Preferred Stock at the address of such holder as shown on the
books of the Corporation, which notice shall state the Series C Conversion Price
resulting from such adjustment, setting forth in reasonable detail the method
upon which such calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the holders of
its Common Stock;
(2) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into, or a sale of all or substantially all of
its assets to, another entity or entities; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by facsimile transmission to non-U.S. residents,
addressed to each holder of any shares of Preferred Stock at the address of such
holder as shown on the books of the Corporation, (a) at least 20 days' prior
written notice of the date on which the books of the Corporation shall close or
a record shall be taken for such dividend, distribution or subscription rights
or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend,
<PAGE> 58
distribution or subscription rights, the date on which the holders or Common
Stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be.
6J. Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Series C Convertible Preferred Stock
as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series C Convertible
Preferred Stock. The Corporation covenants that all shares of Common Stock which
shall be so issued shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all such action as may
be requisite to assure that the par value per share of the Common Stock is at
all times equal to or less than the Series C Conversion Price in effect at the
time. The Corporation will take all such action as may be necessary to assure
that all such shares of Common Stock may be so issued without violation of any
applicable law or regulation, or of any requirement of any national securities
exchange upon which the Common Stock may be listed.
6K. No Reissuance of Series C Convertible Preferred Stock.
Shares of Series C Convertible Preferred Stock which are converted into shares
of Common Stock as provided herein shall not be reissued.
6L. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Series C Convertible Preferred Stock shall be
made without charge to the holders thereof for any issuance tax in respect
thereof; provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Series C Convertible Preferred Stock which is being converted.
6M. Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any Series C Convertible Preferred
Stock or of any shares of Common Stock issued or issuable upon the conversion of
any shares of Series C Convertible Preferred Stock in any manner which
interferes with the timely conversion of such Preferred Stock, except as may
otherwise be required to comply with applicable securities laws.
6N. Definition of Common Stock. As used in this paragraph 6,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.01 per share, as constituted on the date of filing of
these terms of the Series C Convertible Preferred Stock, and shall also include
any capital stock of any class of the Corporation thereafter authorized which
shall neither be limited to a fixed sum of percentage of par value in respect of
the rights of the holders thereof to participate in dividends nor entitled to a
preference in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Series C
Convertible Preferred Stock shall include only shares designated as Common Stock
of the Corporation on the date of filing of this instrument, or in case of any
reorganization or
<PAGE> 59
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in subparagraph 6G.
6O. Mandatory Conversion. All outstanding shares of Series C
Convertible Preferred Stock shall automatically convert to shares of Common
Stock if at any time the Corporation shall effect a public offering of shares of
Common Stock (any such offering, regardless of compliance with subsections (i),
(ii) and (iii) herein, being referred to as a "Public Offering"), provided (i)
the aggregate gross proceeds from such offering to the Corporation shall be at
least $20,000,000; (ii) the price paid by the public for such shares shall be at
least (x) 2.0 times the then Series B Conversion Price if the Public Offering
occurs prior to the 18 month anniversary of the Series B Preferred Stock Issue
Date or (y) 3.0 times the then Series B Conversion Price if the Public Offering
occurs on or after the 18 month anniversary of the Series B Preferred Stock
Issue Date, and (iii) the offering is a firm commitment underwritten Public
Offering, and such automatic conversion shall be effective upon the closing of
the sale of such shares by the Corporation pursuant to such Public Offering.
7. Redemption. The shares of Series C Convertible Preferred Stock shall
be redeemed as follows:
7A. Optional Redemption. The Corporation shall not have the
right to call or redeem at any time all or any shares of Series C Convertible
Preferred Stock. With the approval of the holders of 66% of the then outstanding
shares of Series C Convertible Preferred Stock, one or more holders of shares of
Series C Convertible Preferred Stock may, by giving notice (the "Notice") to the
Corporation, require the Corporation to redeem any or all of the outstanding
Series C Convertible Preferred Stock on the Redemption Date (as defined below).
Upon receipt of the Notice, the Corporation will so notify all other persons
holding Series C Convertible Preferred Stock. After receipt of the Notice, the
Corporation shall fix the first date for redemption, which shall be the date
specified in the Notice, being any date on or after the earlier of (i) the fifth
(5th) anniversary of the Series B Preferred Stock Issue Date and (ii) the date
which is the day before the Corporation is due to redeem any outstanding Junior
Securities (the "Redemption Date"). All holders of Series C Convertible
Preferred Stock shall delivery to the Corporation during regular business hours,
at the office of any transfer agent of the Corporation for the Series C
Convertible Preferred Stock, or at the principal office of the Corporation or at
such other place as may be designated by the Corporation, the certificate or
certificates for the Series C Convertible Preferred Stock, duly endorsed for
transfer to the Corporation (if required by it) on or before the Redemption
Date.
7B. Redemption Price and Payment. The Series C Convertible
Preferred Stock to be redeemed on the Redemption date shall be redeemed by
paying for each share in cash an amount equal to the Series C Redemption Price
(as defined below). For purposes of this paragraph 7B the "Series C Redemption
Price" shall mean $34.436 per share, plus an amount equal to all dividends
accrued and unpaid on each such share; provided, however, that if the Redemption
Date is after the fifth (5th) anniversary of the Series B Preferred Stock Issue
Date, then the "Series C Redemption Price" shall mean the greater of (i) $34.436
per share, plus an amount equal to all dividends accrued and unpaid on each such
share and (ii) the Fair Market Value (as defined below) of the Common Stock
underlying the Series C Convertible Preferred Stock. Such payment shall be made
in full on the Redemption Date to the holders entitled
<PAGE> 60
thereto. For purposes of this paragraph 7B, "Fair Market Value" of the Common
stock shall mean the average of the fair market valuations of the Common Stock
performed by two investment banks (the "Initial Appraisers"), one of which shall
be retained by the Corporation and one of which shall be retained by the holders
of a majority in interest of the Series C Convertible Preferred Stock. Subject
to the following sentence, such determination by the Initial Appraisers of Fair
Market Value shall be final and binding on the parties. If the higher of the two
valuations of the Initial Appraisers is equal to or greater than 110% of the
lower valuation, the Corporation and holders of a majority in interest of the
Series C Convertible Preferred Stock shall select a third investment bank (the
"Final Appraiser"), which shall be mutually agreeable to the Corporation and the
holders of a majority in interest of the Series C Convertible Preferred Stock.
The fair market value of the Common Stock as determined by the Final Appraiser
shall be final and binding on the parties. The fees and expenses of the Initial
Appraisers shall be paid for by the party selecting such Initial Appraiser and
the fees and expenses of the Final Appraiser shall be shared by the Corporation
and the holders of the Series C Convertible Preferred Stock.
7C. Redemption Mechanics. At least 15 but not more than 35
days prior to the Redemption Date, written notice (the "Redemption Notice")
shall be given by the Corporation by mail, postage prepaid, or by facsimile
transmission to non-U.S. residents, to each holder of record (at the close of
business on the business day next preceding the day on which the Redemption
Notice is given) of shares of Series C Convertible Preferred Stock notifying
such holder of the redemption and specifying the Series C Redemption Price, the
Redemption Date and the place where said Series C Redemption Price shall be
payable. The Redemption Notice shall be addressed to each holder at his address
as shown by the records of the Corporation. From and after the close of business
on the Redemption Date, unless there shall have been a default in the payment of
the Series C Redemption Price, all rights of holders of shares of Series C
Convertible Preferred Stock (except the right to receive the Series C Redemption
Price) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the Corporation legally
available for redemption of shares of Series C Convertible Preferred Stock on
the Redemption Date are insufficient to redeem the total number of outstanding
shares of Series C Convertible Preferred Stock to be redeemed on such Redemption
Date, the holders of shares of Series C Convertible Preferred Stock shall share
ratably in any funds legally available for redemption of such shares according
to the respective amounts which would be payable with respect to the full number
of shares owned by them if all such outstanding shares were redeemed in full.
The shares of Series C Convertible Preferred Stock not redeemed shall remain
outstanding and entitled to all rights and preferences provided herein;
provided, however, that such unredeemed shares shall be entitled to receive
interest accruing daily with respect to the applicable Series C Redemption Price
at the rate of 15% per annum, payable quarterly in arrears. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of such shares of Series C Convertible Preferred Stock, such
funds will be used, at the end of the next succeeding fiscal quarter, to redeem
the balance of such shares, or such portion thereof for which funds are then
legally available, on the basis set forth above.
7D. Redeemed or Otherwise Acquired Shares to be Retired. Any
shares of Series C Convertible Preferred Stock redeemed pursuant to this
paragraph 7 or otherwise acquired by the Corporation in any manner whatsoever
shall be canceled and shall not under any
<PAGE> 61
circumstances be reissued; and the Corporation may from time to time take such
appropriate corporate action as may be necessary to reduce accordingly the
number of authorized shares of Series C Convertible Preferred Stock.
8. Amendments. Except where the vote or written consent of the holders
of a greater number of shares of the Corporation is required by these terms of
the Series C Convertible Preferred Stock, by law or by the Certificate of
Incorporation, no provision of these terms of the Series C Convertible Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least 60% of the then outstanding shares
of Series C Convertible Preferred Stock.
9. Definitions. As used herein, the following terms shall have the
following meanings:
(1) The term "Founders" shall mean F. Thornson Leighton,
Daniel Lewin, Jonathan Seelig, Randall Kaplan, Gilbert Friesen and David Karger.
(2) The term "Purchase Agreement" shall mean the Series B
Convertible Preferred Stock and Series C Convertible Preferred Stock Purchase
Agreement dated as of April 16, 1999 between the Corporation, Baker
Communications Fund, L.P. and the other purchasers named therein, as in effect
on April 16, 1999.
(3) The term the "Plan" shall mean the Corporation's 1998
Stock Incentive Plan.
(4) The term "Reserved Employee Shares" shall mean shares of
Common Stock reserved by the Corporation pursuant to the Plan from time to time
for (i) the sale of shares of Common Stock to employees, consultants or
non-employee directors (other than representatives of the holders of Preferred
Stock) of the Corporation or (ii) the exercise of options to purchase Common
Stock granted to employees, consultants or non-employee directors (other than
representatives of the holders of Preferred Stock) of the Corporation, not to
exceed in the aggregate 3,450,000 shares of Common Stock for both clauses (i)
and (ii), with such number including 710,700 shares issued or subject to options
granted prior to the date of the initial issuance of the Series A Convertible
Preferred Stock (the "Option Shares") (appropriately adjusted to reflect an
event described in paragraph 6F hereof); provided that, such number of such
shares subject to the Plan shall be increased by up to 2,519,742 additional
shares of Common Stock (appropriately adjusted to reflect an event described in
paragraph 6F hereof) (collectively, the "Founders' Shares") upon the repurchase
of such Founders' Shares by the Corporation from the Founders pursuant to
contractual rights held by the Corporation. The foregoing numbers of Reserved
Employee Shares may be increased by the affirmative vote or written consent of a
majority of the directors designated solely by the holders of Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock or the
affirmative vote or written consent of the holders of at least 50% of the then
outstanding shares of Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock, voting together as a
single class on a Common Stock equivalent basis.
<PAGE> 62
(5) The term "Series B Conversion Price" shall mean the
conversion price of the Series B Convertible Preferred Stock from time to time
under the terms of the designation of the Series B Convertible Preferred Stock
of the Corporation.
(6) The term "Series B Preferred Stock Issue Date" shall mean
the date on which the Series B Convertible Preferred Stock is originally issued
by the Corporation pursuant to the Purchase Agreement.
(7) The term "Series C Preferred Stock Issue Date" shall mean
the date on which the Series C Convertible Preferred Stock is originally issued
by the Corporation pursuant to the Purchase Agreement.
(8) The term "Subsidiary" or "Subsidiaries" shall mean any
corporation, partnership, trust or other entity of which the Corporation and/or
any of its other subsidiaries directly or indirectly owns at the time a majority
of the outstanding shares of every class of equity security of such corporation,
partnership, trust or other entity.
<PAGE> 63
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AKAMAI TECHNOLOGIES, INC.
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
Akamai Technologies, Inc. (hereinafter called the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
The Board of Directors of the Corporation, by unanimous written consent
in lieu of a meeting, duly adopted a resolution, pursuant to Sections 141(f) and
242 of the General Corporation Law of the State of Delaware, setting forth an
amendment to the Certificate of Incorporation of the Corporation and declaring
said amendment to be advisable. The stockholders of the Corporation duly
approved said proposed amendment by written consent in accordance with Sections
228 and 242 of the General Corporation Law of the State of Delaware, and written
notice of such consent has been or will be given to all stockholders who have
not consented in writing to said amendment. The resolution setting forth the
amendment is as follows:
RESOLVED: That the first paragraph of Article FOURTH of the Certificate
of Incorporation of the Corporation be and hereby is deleted in its entirety and
that the following paragraph be inserted in lieu thereof:
"FOURTH. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 65,000,000
shares, consisting of (i) 60,000,000 shares of Common Stock, $0.01 par
value per share ("Common Stock"), and (ii) 5,000,000 shares of
Preferred Stock, $0.01 par value per share ("Preferred Stock").
<PAGE> 64
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its Treasurer on this 25th day of May, 1999.
AKAMAI TECHNOLOGIES, INC.
By: /s/ Paul Sagan
----------------------------------
Paul Sagan
Treasurer
<PAGE> 65
CERTIFICATE OF DESIGNATIONS
OF
SERIES D CONVERTIBLE PREFERRED STOCK
OF
AKAMAI TECHNOLOGIES, INC.
-----------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-----------------
Akamai Technologies, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article Fourth of its
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, the Board of the
Directors of the Corporation, at a meeting held on May 18, 1999, duly adopted
the following resolution, which resolution remains in full force and effect on
the date hereof:
RESOLVED, that, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation, a series of Preferred Stock
of the Corporation be and hereby is established, consisting of 685,194 shares,
$0.01 par value per share, to be designated "Series D Convertible Preferred
Stock" (hereinafter, the "Series D Preferred Stock"); that the Board of
Directors be and hereby is authorized to issue such shares of Series D Preferred
Stock from time to time and for such consideration and on such terms as the
Board of Directors shall determine; and that, subject to the limitations
provided by law and by the Certificate of Incorporation, the voting powers,
preferences and relative, participating, optional and other special rights, and
qualifications, limitations and restrictions thereof shall be as set forth on
Schedule I attached hereto.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by its President on this 21st day of June, 1999.
AKAMAI TECHNOLOGIES, INC.
By: /s/ Paul Sagan
-------------------------------
Paul Sagan
President
<PAGE> 66
Schedule I
AKAMAI TECHNOLOGIES, INC.
DESIGNATION OF SERIES D CONVERTIBLE PREFERRED STOCK
The series of Preferred Stock designated and known as "Series D
Convertible Preferred Stock" shall consist of 685,194 shares.
1. Voting. Except as may be otherwise provided in these terms of the
Series D Convertible Preferred Stock, in the Certificate of Incorporation (the
"Certificate of Incorporation") of Akamai Technologies, Inc. (the "Corporation")
or by law, the Series D Convertible Preferred Stock shall vote together with all
other classes and series of stock of the Corporation as a single class on all
actions to be taken by the stockholders of the Corporation. Each share of Series
D Convertible Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Series D
Convertible Preferred Stock is then convertible.
2. Ranking. The Series D Convertible Preferred Stock shall rank, with
respect to dividend distributions and distributions upon a Liquidation Event (as
defined in paragraph 4A herein), senior to all classes of common stock of the
Company and to each other class of capital stock or series of preferred stock
(including the Series A Convertible Preferred Stock of the Corporation)
established before the Series B Preferred Stock Issue Date, by the Board of
Directors, pari passu with the Series B Convertible Preferred Stock and the
Series C Convertible Preferred Stock of the Corporation, and senior or pari
passu to any other class of capital stock or series of preferred stock
established after the Preferred Stock Issue Date by the Board of Directors. All
classes of common stock of the Company, the Series A Convertible Preferred Stock
and any other class of capital stock or series of preferred stock established
after the Preferred Stock Issue Date to which the Series D Convertible Preferred
Stock is senior, are collectively referred to herein as "Junior Securities". The
Series B Convertible Preferred Stock and the Series C Convertible Preferred
Stock of the Corporation and any other class of capital stock or series of
preferred stock established after the Preferred Stock Issue Date which ranks
pari passu with the Series D Convertible Preferred Stock, are collectively
referred to herein as "Pari Passu Securities".
3. Dividends. The holders of shares of the Series D Convertible
Preferred Stock shall be entitled to receive, when, as and if dividends are
declared by the Board of Directors out of funds of the Corporation legally
available therefor, cumulative preferential dividends at the annual rate of 8%
on the Series D Liquidation Preference Payments (as defined in paragraph 4A
herein); provided, however, that any such dividends shall only be paid, whether
declared or not, immediately upon the occurrence of (i) a Liquidation Event
pursuant to paragraph 4.A hereof or (ii) a Redemption pursuant to paragraph 7B
hereof. Holders of shares of Series D Convertible Preferred Stork shall be
entitled to receive the dividends provided for herein in preference to and in
priority over any dividends upon any of the Junior Securities. Dividends on the
Series D Convertible Preferred Stock shall accrue on a daily basis from the
Preferred Stock Issue Date and, to the extent they are not paid, shall
accumulate on an annual basis on each December 31,
<PAGE> 67
whether or not the Corporation has earnings or profits, whether or not there are
funds legally available for the payment of such dividends and whether or not
dividends are declared.
4. Liquidation, Dissolution and Winding-up.
4A. Liquidation. Upon any liquidation, dissolution or winding
up of the Corporation (a "Liquidation Event"), whether voluntary or involuntary,
the holders of the shares of Series D Convertible Preferred Stock shall be paid
an amount equal to $18.243 per share plus, in the case of each share, an amount
equal to dividends accrued but unpaid thereon, computed to the date payment
thereof is made available, together with payment to any Pari Passu Securities,
and before any payment shall be made to the holders of any Junior Securities,
such amount payable with respect to one share of Series D Convertible Preferred
Stock being sometimes referred to as the "Series D Liquidation Preference
Payment" and with respect to all shares of Series D Convertible Preferred Stock
being sometimes referred to as the "Series D Liquidation Preference Payments".
If upon any Liquidation Event, the assets to be distributed to the holders of
the Series D Convertible Preferred Stock shall be insufficient to permit payment
to such stockholders of the full preferential amounts aforesaid, then all of the
assets of the Corporation available for distribution to holders of the Series D
Convertible Preferred Stock and Pari Passu Securities shall be distributed to
such holders of the Series D Convertible Preferred Stock and Pari Passu
Securities pro rata, so that each holder receives that portion of the assets
available for distribution as the number of shares of such stock held by such
holder bears to the total number of shares of such stock then outstanding.
4B. Upon any Liquidation Event, immediately after the holders
of Series D Convertible Preferred Stock and holders of any Pari Passu Securities
have been paid in full pursuant to paragraph 4A above, the remaining net assets
of the Corporation available for distribution shall be distributed among the
holders of the shares of Junior Securities.
Written notice of such Liquidation Event, stating a payment date and
the place where said payments shall be made, shall be given by mail, postage
prepaid, or by facsimile to non-U.S. residents, not less than 20 days prior to
the payment date stated therein, to the holders of record of Series D
Convertible Preferred Stock, such notice to be addressed to each such holder at
its address as shown by the records of the Corporation.
The (x) consolidation or merger of the Corporation into or with any
other entity or entities which results in the exchange of outstanding shares of
the Corporation for securities or other consideration issued or paid or caused
to be issued or paid by any such entity or affiliate thereof (except a
consolidation or merger into a Subsidiary or merger in which the Corporation is
the surviving Corporation and the holders of the Corporation's voting stock
outstanding immediately prior to the transaction constitute a majority of the
holders of voting stock outstanding immediately following the transaction), (y)
sale or transfer by the Corporation of all or substantially all of its assets,
or (z) sale or transfer by the Corporation's stockholders of capital stock
representing a majority of the outstanding capital stock of the Corporation
shall be deemed to be a Liquidation Event within the meaning of the provisions
of this paragraph 4 (subject to the provisions of this paragraph 4 and not the
provisions of paragraph 6G hereof, unless paragraph 6G is elected in the
following proviso); provided, however, that if the holders of at
<PAGE> 68
least 60% of the then outstanding shares of Series D Convertible Preferred Stock
shall elect the benefits of the provisions of paragraph 6G in lieu of receiving
payment in a Liquidation Event pursuant to this paragraph 4, then all holders of
shares of Series D Convertible Preferred Stock shall receive the benefits of the
provisions of paragraph 6G in lieu of receiving payment pursuant to this
paragraph 4 for the particular Organic Change (as defined in Section 6G) causing
the rights of Section 6G to be available. The election of the rights under
Section 6G for any particular Organic Change shall not constitute an election of
the rights available under Section 6G for any other Organic Change, for which
the holders of Series D Convertible Preferred Stock shall have a new election
under the foregoing proviso. Whenever the distribution provided for in this
paragraph 4 shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as determined in
good faith by the Board of Directors of the Corporation.
5. Restrictions. At any time when at least 50% of the shares of Series
D Convertible Preferred Stock issued pursuant to the Purchase Agreement remain
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the written consent of the holders
of at least 60% of the then outstanding shares of Series D Convertible Preferred
Stock given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a series, the Corporation will not:
(1) Consent to any Liquidation Event or merge or consolidate
with or into, or permit any Subsidiary to merge or consolidate with or into, any
other corporation, corporations, entity or entities (except a consolidation or
merger into a Subsidiary or merger in which the Corporation is the surviving
corporation and the holders of the Corporation's voting stock outstanding
immediately prior to the transaction constitute a majority of the holders of
voting stock outstanding immediately following the transaction or a
consolidation or merger pursuant to which the aggregate consideration definitely
and unconditionally payable to all of the stockholders of the Corporation is
greater than $400 million) without the affirmative vote or written consent of
the holders of at least 50% of the then outstanding shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock and Series D
Convertible Preferred Stock, voting together as a single class on a Common Stock
equivalent basis;
(2) Sell, abandon, transfer, lease or otherwise dispose of all
or substantially all of its properties or assets (unless the aggregate
consideration definitely and unconditionally payable to all of the stockholders
of the Corporation is greater than $400 million) without the affirmative vote or
written consent of the holders of at least 50% of the then outstanding shares of
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and
Series D Convertible Preferred Stock, voting together as a single class on a
Common Stock equivalent basis;
(3) Amend, alter or repeal any provision of its Certificate of
Incorporation or By-laws in a manner adverse to holders of the Series D
Convertible Preferred Stock;
<PAGE> 69
(4) Create or authorize the creation of or issue any
additional class or series of shares of stock (other than the Series C
Convertible Preferred Stock of the Corporation) unless the same ranks junior to
or on parity with the Series D Convertible Preferred Stock as to dividends and
the distribution of assets on a Liquidation Event, or increase the authorized
amount of Series D Convertible Preferred Stock or increase the authorized amount
of any additional class or series of shares of stock unless the same ranks
junior to or on parity with the Series D Convertible Preferred Stock as to
dividends and the distribution of assets on a Liquidation Event, or create or
authorize any obligation or security convertible into shares of Series D
Convertible Preferred Stock or into shares of any other class or series of stock
unless the same ranks junior to or on parity with the Series D Convertible
Preferred Stock as to dividends and the distribution of assets on a Liquidation
Event, whether any such creation, authorization or increase shall be by means of
amendment to the Certificate of Incorporation or by merger, consolidation or
otherwise;
(5) In any manner amend, alter or change the designations or
the powers, preferences or rights, privileges or the restrictions of the Series
D Convertible Preferred Stock, provided, however, that the authorization or
creation of any shares of capital stock on parity with the Series D Convertible
Preferred Stock as to dividends and the distribution of assets on a Liquidation
Event shall not require the approval of holders of Series D Convertible
Preferred Stock;
(6) Purchase or redeem, or set aside any sums for the purchase
or redemption of, or pay any dividend or make any distribution on, any Junior
Securities, except for (i) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock or (ii)
repurchases of shares of capital stock (at the original purchase price therefor)
from officers, employees, directors or consultants of the Corporation which are
subject to restrictive stock purchase, right of first refusal or other
agreements under which the Corporation has the option to repurchase such shares
upon the occurrence of certain events, including termination of employment; or
(7) Increase the number of Reserved Employee Shares without
the affirmative vote or written consent of a majority of the directors
designated solely by the holders of Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock or the affirmative vote or written consent
of the holders of at least 50% of the then outstanding shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock and Series D Convertible Preferred Stock, voting
together as a single class on a Common Stock equivalent basis.
6. Conversion. The holders of shares of Series D Convertible Preferred
Stock shall have the following conversion rights:
6A. Right to Convert. Subject to the terms and conditions of
this paragraph 6, the holder of any share or shares of Series D Convertible
Preferred Stock shall have the right, at its option at any time, to convert any
such shares of Series D Convertible Preferred Stock (except that upon any
Liquidation Event the right of conversion shall terminate at the close of
business on the business day fixed for payment of the amounts distributable on
the Series D
<PAGE> 70
Convertible Preferred Stock) into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Series D Convertible Preferred Stock so to be converted by $18.243 and (ii)
dividing the result by the conversion price of $6.081 per share or in case an
adjustment of such price has taken place pursuant to the further provisions of
this paragraph 6, then by the conversion price as last adjusted and in effect at
the date any share or shares of Series D Convertible Preferred Stock are
surrendered for conversion (such price, or such price as last adjusted, being
referred to as the "Series D Conversion Price"). Such rights of conversion shall
be exercised by the holder thereof by giving written notice that the holder
elects to convert a stated number of shares of Series D Convertible Preferred
Stock into Common Stock and by surrender of a certificate or certificates for
the shares so to be converted to the Corporation at its principal office (or
such other office or agency of the Corporation as the Corporation may designate
by notice in writing to the holders of the Series D Convertible Preferred Stock)
at any time during its usual business hours on the date set forth in such
notice, together with a statement of the name or names (with address) in which
the certificate or certificates for shares of Common Stock shall be issued.
6B. Issuance of Certificates; Time Conversion Effected.
Promptly after the receipt of the written notice referred to in paragraph 6A and
surrender of the certificate or certificates for the share or shares of Series D
Convertible Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Series D Convertible Preferred Stock. To the extent permitted
by law, such conversion shall be deemed to have been effected and the Series D
Conversion Price shall be determined as of the close of business on the date on
which such written notice shall have been received by the Corporation and the
certificate or certificates for such share or shares shall have been surrendered
as aforesaid, and at such time the rights of the holder of such share or shares
of Series D Convertible Preferred Stock shall cease, and the person or persons
in whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby.
6C. Fractional Shares; Dividends; Partial Conversion. No
fractional shares shall be issued upon conversion of Series D Convertible
Preferred Stock into Common Stock and no payment or adjustment shall be made
upon party conversion on account of any cash dividends on the Common Stock
issued upon such conversion. At the time of each conversion, the Corporation
shall pay in cash an amount equal to all dividends declared and unpaid (if any)
on the shares of Series D Convertible Preferred Stock surrendered for conversion
to the date upon which such conversion is deemed to take place as provided in
paragraph 6B. In case the number of shares of Series D Convertible Preferred
Stock represented by the certificate or certificates surrendered pursuant to
paragraph 6A exceeds the number of shares converted, the Corporation shall, upon
such conversion, execute and deliver to the holder, at the expense of the
Corporation, a new certificate or certificates for the number of shares of
Series D Convertible Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. If any fractional share
of Common Stock would, except for the provisions of the first sentence of this
paragraph 6C, be delivered upon such conversion, the Corporation, in lieu of
delivering such fractional share, shall pay to the holder surrendering the
Series D Convertible Preferred Stock
<PAGE> 71
for conversion an amount in cash equal to the current fair market value of such
fractional share as determined in good faith by the Board of Directors of the
Corporation, and based upon the aggregate number of shares of Series D
Convertible Preferred Stock surrendered by any one holder.
6D. Adjustment of Series D Conversion Price Upon Issuance of
Common Stock. Except as provided in paragraphs 6E and 6F, if and whenever the
Corporation shall issue or sell, or is, in accordance with subparagraphs, 6D(1)
through 6D(7), deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than the Series D Conversion Price in effect
immediately prior to the time of such issue or sale, (such number being
appropriately adjusted to reflect the occurrence of any event described in
paragraph 6F), then, forthwith upon such issue or sale, the Series D Conversion
Price shall be reduced to the price determined by dividing (i) an amount equal
to the sum of (a) the number of shares of Common Stock outstanding immediately
prior to such issue or sale (assuming the conversion of the outstanding shares
of Series D Convertible Preferred Stock) multiplied by the then existing Series
D Conversion Price and (b) the consideration, if any, received by the
Corporation upon such issue or sale, by (ii) the total number of shares of
Common Stock outstanding immediately after such issue or sale (assuming the
conversion of the outstanding shares of Series D Convertible Preferred Stock).
For purposes of this paragraph 6D, the following subparagraphs 6D(1) to
6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the
total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation
upon the exercise of all such Options, plus, in the case of such
Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of all such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the
exercise of such Options) shall be less than the Series D Conversion
Price in effect immediately prior to the time of the granting of such
Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall be deemed to have been
issued for such price per share as of the date of granting of such
<PAGE> 72
Options or the issuance of such Convertible Securities and thereafter
shall be deemed to be outstanding. Except as otherwise provided in
subparagraph 6D(3), no adjustment of the Series D Conversion Price
shall be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or
receivable by the Corporation as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange of all such Convertible Securities thereof, by
(ii) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities) shall be
less than the Series D Conversion Price in effect immediately prior to
the time of such issue or sale, then the total maximum number of shares
of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been issued for such
price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided
that (a) except as otherwise provided in subparagraph 6D(3), no
adjustment of the Series D Conversion Price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities and (b) if any such issue or sale of such
Convertible Securities is made upon exercise of any Options to purchase
any such Convertible Securities for which adjustments of the Series D
Conversion Price have been or are to be made pursuant to other
provisions of this paragraph 6D, no further adjustment of the Series D
Conversion Price shall be made by reason of such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1), the
additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in subparagraph
6D(1) or 6D(2), or the rate at which Convertible Securities referred to
in subparagraph 6D(1) or 6D(2) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against
dilution), the Series D Conversion Price in effect at the time of such
event shall forthwith be readjusted to the Series D Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold; provided,
however, that in no event shall the Series D Conversion Price then in
effect hereunder be increased; and on the expiration of any such Option
or the termination of any such right to convert or exchange such
Convertible Securities, the Series D Conversion Price then in effect
hereunder shall forthwith be increased to the Conversion Price which
would have been
<PAGE> 73
in effect at the time of such expiration or termination had such Option
or Convertible Securities, to the extent outstanding immediately prior
to such expiration or termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock (except for the issue of stock
dividends or distributions upon the outstanding Common Stock for which
adjustment is made pursuant to paragraph 6F), Options or Convertible
Securities, any Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall
be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for consideration other than cash, the amount
of the consideration other than cash received by the Corporation shall
be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to
have been issued for such consideration as determined in good faith by
the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take a record
of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities or (ii) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Corporation (or any Subsidiary), and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purpose of this paragraph 6D.
6E. Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Corporation shall not be required to make any adjustment of
the Series D Conversion Price if it first obtains the written consent of the
holders of at least 60% of the then outstanding shares
<PAGE> 74
of Series D Convertible Preferred Stock that no adjustment shall be required. In
no event shall the Corporation be required to make any adjustment to the Series
D Conversion Price in the case of the issuance of (i) shares of Series C
Convertible Preferred Stock pursuant to the Series B Purchase Agreement, (ii)
shares of Common Stock issuable upon conversion of the Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock or Series D Convertible Preferred Stock, (iii) shares of Common
Stock issued or issuable as a dividend or distribution on Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock or Series D Convertible Preferred Stock, (iv) Reserved Employee
Shares (as defined in paragraph 9 herein), (v) warrants issued in connection
with senior subordinated notes of the Corporation as contemplated by the
Series B Purchase Agreement or shares of Common Stock issuable upon conversion
of such warrants, or (vi) Options outstanding as of the Preferred Stock Issue
Date.
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Series D Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Series D Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
6G. Reorganization or Reclassification. If any capital
reorganization, reclassification, recapitalization, consolidation, merger, sale
of all or substantially all of the Corporation's assets or other similar
transaction (any such transaction being referred to herein as an "Organic
Change") shall be effected in such a way that holders of Common Stock shall be
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such Organic Change, lawful and adequate provisions shall be made
whereby each holder of a share or shares of Series D Convertible Preferred Stock
shall thereupon have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of or in addition to, as the case may
be, the shares of Common Stock immediately theretofore receivable upon the
conversion of such share or shares of Series D Convertible Preferred Stock, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore receivable
upon such conversion had such Organic Change not taken place, and in any case of
a reorganization or reclassification only appropriate provisions shall be made
with respect to the rights and Interests of such holder to the end that the
provisions hereof (including without limitation provisions for adjustments of
the Series D Conversion Price) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the Series D
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, or by facsimile
transmission to non-U.S. residents, addressed to each holder of shares of Series
D Convertible Preferred Stock at the address of such holder as shown on the
books of the Corporation, which notice shall state the Series D Conversion Price
resulting
<PAGE> 75
from such adjustment, setting forth in reasonable detail the method upon which
such calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the holders of
its Common Stock;
(2) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into, or a sale of all or substantially all of
its assets to, another entity or entities; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by facsimile transmission to non-U.S. residents,
addressed to each holder of any shares of Preferred Stock at the address of such
holder as shown on the books of the Corporation, (a) at least 20 days' prior
written notice of the date on which the books of the Corporation shall close or
a record shall be taken for such dividend, distribution or subscription rights
or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least 20
days prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (a) shall also specify, in the
case of arty such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
6J. Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Series D Convertible Preferred Stock
as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series D Convertible
Preferred Stock. The Corporation covenants that all shares of Common Stock which
shall be so issued shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all such action as may
be requisite to assure that the par value per share of the Common Stock is at
all times equal to or less than the Series D Conversion Price in effect at the
time. The Corporation will take all such action as may be necessary to assure
that all such shares of
<PAGE> 76
Common Stock may be so issued without violation of any applicable law or
regulation, or of any requirement of any national securities exchange upon which
the Common Stock may be listed.
6K. No Reissuance of Series D Convertible Preferred Stock.
Shares of Series D Convertible Preferred Stock which are converted into shares
of Common Stock as provided herein shall not be reissued.
6L. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Series D Convertible Preferred Stock shall be
made without charge to the holders thereof for any issuance tax in respect
thereof; provided, that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Series D Convertible Preferred Stock which is being converted.
6M. Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any Series D Convertible Preferred
Stock or of any shares of Common Stock issued or issuable upon the conversion of
any shares of Series D Convertible Preferred Stock in any manner which
interferes with the timely conversion of such Preferred Stock, except as may
otherwise be required to comply with applicable securities laws.
6N. Definition of Common Stock. As used in this paragraph 6,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.01 per share, as constituted on the date of filing of
these terms of the Series D Convertible Preferred Stock, and shall also include
any capital stock of any class of the Corporation thereafter authorized which
shall neither be limited to a fixed sum or percentage of par value in respect of
the rights of the holders thereof to participate in dividends nor entitled to a
preference in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Series D
Convertible Preferred Stock shall include only shares designated as Common Stock
of the Corporation on the date of filing of this instrument, or in case of any
reorganization or reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in subparagraph 6G.
6O. Mandatory Conversion. All outstanding shares of Series D
Convertible Preferred Stock shall automatically convert to shares of Common
Stock if at any time the Corporation shall effect a public offering of shares of
Common Stock (any such offering, regardless of compliance with subsections (i),
(ii) and (iii) herein, being referred to as a "Public Offering"), provided (i)
the aggregate gross proceeds from such offering to the Corporation shall be at
least $20,000,000; (ii) the price paid by the public for such shares shall be at
least (x) 2.0 times the then Series B Conversion Price if the Public Offering
occurs prior to the 18 month anniversary of the Series B Preferred Stock Issue
Date or (y) 3.0 times the then Series B Conversion Price if the Public Offering
occurs on or after the 18 month anniversary of the Series B Preferred Stock
Issue Date, and (iii) the offering is a firm commitment underwritten Public
Offering, and such automatic conversion shall be effective upon the closing of
the sale of such shares by the Corporation pursuant to such Public Offering.
<PAGE> 77
7. Redemption. The shares of Series D Convertible Preferred Stock shall
be redeemed as follows:
7A. Operational Redemption. The Corporation shall not have the
right to call or redeem at any time all or any shares of Series D Convertible
Preferred Stock. With the approval of the holders of 66% of the then outstanding
shares of Series D Convertible Preferred Stock, one or more holders of shares of
Series D Convertible Preferred Stock may, by giving notice (the "Notice") to the
Corporation, require the Corporation to redeem any or all of the outstanding
Series D Convertible Preferred Stock on the Redemption Date (as defined below).
Upon receipt of the Notice, the Corporation will so notify all other persons
holding Series D Convertible Preferred Stock. After receipt of the Notice, the
Corporation shall fix the first date for redemption, which shall be the date
specified in the Notice, being any date on or after the earlier of (i) the fifth
(5th) anniversary of the Series B Preferred Stock Issue Date and (ii) the date
which is the day before the Corporation is due to redeem any outstanding Junior
Securities (the "Redemption Date"). All holders of Series D Convertible
Preferred Stock shall deliver to the Corporation during regular business hours,
at the office of any transfer agent of the Corporation for the Series D
Convertible Preferred Stock, or at the principal office of the Corporation or at
such other place as may be designated by the Corporation, the certificate or
certificates for the Series D Convertible Preferred Stock, duly endorsed for
transfer to the Corporation (if required by it) on or before the Redemption
Date.
7B. Redemption Price and Payment. The Series D Convertible
Preferred Stock to be redeemed on the Redemption Date shall be redeemed by
paying for each share in cash an amount equal to the Series D Redemption Price
(as defined below). For purposes of this paragraph 7B, the "Series D Redemption
Price" shall mean $18.243 per share, plus an amount equal to all dividends
accrued and unpaid on each such share, provided, however, that if the Redemption
Date is after the fifth (5th) anniversary of the Series B Preferred Stock Issue
Date, then the "Series D Redemption Price" shall mean the greater of (i) $18.243
per share, plus an amount equal to all dividends accrued and unpaid on each such
share and (ii) the Fair Market Value (as defined below) of the Common Stock
underlying the Series D Convertible Preferred Stock. Such payment shall be made
in full on the Redemption Date to the holders entitled thereto. For purposes of
this paragraph 7B, "Fair Market Value" of the Common Stock shall mean the
average of the fair market valuations of the Common Stock performed by two
investment banks (the "Initial Appraisers"), one of which shall be retained by
the Corporation and one of which shall be retained by the holders of a majority
in interest of the Series D Convertible Preferred Stock. Subject to the
following sentence, such determination by the Initial Appraisers of Fair Market
Value shall be final and binding on the parties. If the higher of the two
valuations of the Initial Appraisers is equal to or greater than 110% of the
lower valuation, the Corporation and holders of a majority in interest of the
Series D Convertible Preferred Stock shall select a third investment bank (the
"Final Appraiser"), which shall be mutually agreeable to the Corporation and the
holders of a majority in interest of the Series D Convertible Preferred Stock.
The fair market value of the Common Stock as determined by the Final Appraiser
shall be final and binding on the parties. The fees and expenses of the Initial
Appraisers shall be paid for by the party selecting such Initial Appraiser and
the fees and expenses of the final Appraiser shall be shared by the Corporation
and the holders of the Series D Convertible Preferred Stock.
<PAGE> 78
7C. Redemption Mechanics. At least 15 but not more than 35
days prior to the Redemption Date, written notice (the "Redemption Notice")
shall be given by the Corporation by mail, postage prepaid, or by facsimile
transmission to non-U.S. residents, to each holder of record (at the close of
business on the business day next preceding the day on which the Redemption
Notice is given) of shares of Series D Convertible Preferred Stock notifying
such holder of the redemption and specifying the Series D Redemption Price, the
Redemption Date and the place where said Series D Redemption Price shall be
payable. The Redemption Notice shall be addressed to each holder at his address
as shown by the records of the Corporation. From and after the close of business
on the Redemption Date, unless there shall have been a default in the payment of
the Series D Redemption Price, all rights of holders of shares of Series D
Convertible Preferred Stock (except the right to receive the Series D Redemption
Price) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the Corporation legally
available for redemption of shares of Series D Convertible Preferred Stock on
the Redemption Date are insufficient to redeem the total number of outstanding
shares of Series D Convertible Preferred Stock to be redeemed on such Redemption
Date, the holders of shares of Series D Convertible Preferred Stock shall share
ratably in any funds legally available for redemption of such shares according
to the respective amounts which would be payable with respect to the full number
of shares owned by them if all such outstanding shares were redeemed in full.
The shares of Series D Convertible Preferred Stock not redeemed shall remain
outstanding and entitled to all rights and preferences provided herein;
provided, however, that such unredeemed shares shall be entitled to receive
interest accruing daily with respect to the applicable Series D Redemption Price
at the rate of 15% per annum, payable quarterly in arrears. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of such shares of Series D Convertible Preferred Stock, such
funds will be used, at the end of the next succeeding fiscal quarter, to redeem
the balance of such shares, or such portion thereof for which funds are then
legally available, on the basis set forth above.
7D. Redeemed or Otherwise Acquired Shares to be Retired. Any
shares of Series D Convertible Preferred Stock redeemed pursuant to this
paragraph 7 or otherwise acquired by the Corporation in any manner whatsoever
shall be canceled and shall not under any circumstances be reissued; and the
Corporation may from time to time take such appropriate corporate action as may
be necessary to reduce accordingly the number of authorized shares of Series D
Convertible Preferred Stock.
8. Amendments. Except where the vote or written consent of the holders
of a different number of shares of the Corporation is required by these terms of
the Series D Convertible Preferred Stock, by law or by the Certificate of
Incorporation, no provision of these terms of the Series D Convertible Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least 60% of the then outstanding shares
of Series D Convertible Preferred Stock.
<PAGE> 79
9. Definitions. As used herein, the following terms shall have the
following meanings:
(1) The term "Founders" shall mean F. Thomson Leighton, Daniel
Lewin, Jonathan Seelig, Randall Kaplan, Gilbert Friesen and David Karger.
(2) The term "Preferred Stock Issue Date" shall mean the date
on which the Series D Convertible Preferred Stock is originally issued by the
Corporation pursuant to the Purchase Agreement.
(3) The term "Purchase Agreement" shall mean the Series D
Convertible Preferred Stock Purchase Agreement dated as of June 21, 1999 between
the Corporation and Apple Computer Inc. Ltd., as in effect on June 21, 1999.
(4) The term the "Plan" shall mean the Corporation's 1998
Stock Incentive Plan.
(5) The term "Reserved Employee Shares" shall mean shares of
Common Stock reserved by the Corporation pursuant to the Plan from time to time
for (i) the sale of shares of Common Stock to employees, consultants or
non-employee directors (other than representatives of the holders of Preferred
Stock) of the Corporation or (ii) the exercise of options to purchase Common
Stock granted to employees, consultants or non-employee directors (other than
representatives of the holders of Preferred Stock) of the Corporation, not to
exceed in the aggregate 11,377,800 shares of Common Stock for both clauses (i)
and (ii), with such number including 2,132,100 shares issued or subject to
options granted prior to the date of the initial issuance of the Series A
Convertible Preferred Stock (the "Option Shares") (appropriately adjusted to
reflect an event described in paragraph 6F hereof); provided that, such number
of such shares subject to the Plan shall be increased by up to 7,559,226
additional shares of Common Stock (appropriately adjusted to reflect an event
described in paragraph 6F hereof) (collectively, the "Founders' Shares") upon
the repurchase of such Founders' Shares by the Corporation from the Founders
pursuant to contractual rights held by the Corporation. The foregoing numbers of
Reserved Employee Shares may be increased by the affirmative vote or written
consent of a majority of the directors designated solely by the holders of
Series A Convertible Preferred Stock and Series B Convertible Preferred Stock or
the affirmative vote or written consent of the holders of at least 50% of the
then outstanding shares of Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D
Convertible Preferred Stock, voting together as a single class on a Common Stock
equivalent basis.
(6) The term "Series B Conversion Price" shall mean the
conversion price of the Series B Convertible Preferred Stock from time to time
under the terms of the designation of the Series B Convertible Preferred Stock
of the Corporation.
(7) The term "Series B Preferred Stock Issue Date" shall mean
April 16, 1999.
<PAGE> 80
(8) The term "Series B Purchase Agreement" shall mean the
Series B Convertible Preferred Stock and Series C Convertible Preferred Stock
Purchase Agreement dated as of April 16, 1999 among the Corporation and the
purchasers named therein.
(9) The term "Subsidiary" or "Subsidiaries" shall mean any
corporation, partnership, trust or other entity of which the Corporation and/or
any of its other subsidiaries directly or indirectly owns at the time a majority
of the outstanding shares of every class of equity security of such corporation,
partnership, trust or other entity.
<PAGE> 81
CERTIFICATE OF DESIGNATIONS
OF
SERIES E CONVERTIBLE PREFERRED STOCK
OF
AKAMAI TECHNOLOGIES, INC.
-------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------
Akamai Technologies, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article Fourth of its
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, the Board of the
Directors of the Corporation, at a meeting held on August 5, 1999, duly adopted
the following resolution, which resolution remains in full force and effect on
the date hereof:
RESOLVED, that, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation, a series of Preferred Stock
of the Corporation be and hereby is established, consisting of 1,867,480 shares,
$0.01 par value per share, to be designated "Series E Convertible Preferred
Stock" (hereinafter, the "Series E Preferred Stock"); that the Board of
Directors be and hereby is authorized to issue such shares of Series E Preferred
Stock from time to time and for such consideration and on such terms as the
Board of Directors shall determine; and that, subject to the limitations
provided by law and by the Certificate of Incorporation, the voting powers,
preferences and relative, participating, optional and other special rights, and
qualifications, limitations and restrictions thereof shall be as set forth on
Schedule I attached hereto.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by its President on this 6th day of August, 1999
AKAMAI TECHNOLOGIES, INC.
By: /s/ Paul Sagan
-----------------------------------
Paul Sagan
President
<PAGE> 82
Schedule I
AKAMAI TECHNOLOGIES, INC.
DESIGNATION OF SERIES E CONVERTIBLE PREFERRED STOCK
The series of Preferred Stock designated and known as "Series E
Convertible Preferred Stock" shall consist of 1,867,480 shares.
1. Voting. Except as may be otherwise provided in these terms of the
Series E Convertible Preferred Stock, in the Certificate of Incorporation (the
"Certificate of Incorporation") of Akamai Technologies, Inc. (the "Corporation")
or by law, the Series E Convertible Preferred Stock shall vote together with all
other classes and series of stock of the Corporation as a single class on all
actions to be taken by the stockholders of the Corporation. Each share of Series
E Convertible Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Series E
Convertible Preferred Stock is then convertible.
2. Ranking. The Series E Convertible Preferred Stock shall rank, with
respect to dividend distributions and distributions upon a Liquidation Event (as
defined in paragraph 4A herein), senior to all classes of common stock of the
Company and to each other class of capital stock or series of preferred stock
(including the Series A Convertible Preferred Stock of the Corporation)
established before the Series B Preferred Stock Issue Date, by the Board of
Directors, pari passu with the Series B Convertible Preferred Stock, the Series
C Convertible Preferred Stock and the Series D Convertible Preferred Stock of
the Corporation, and senior or pari passu to any other class of capital stock or
series of preferred stock established after the Preferred Stock Issue Date by
the Board of Directors. All classes of common stock of the Company, the Series A
Convertible Preferred Stock and any other class of capital stock or series of
preferred stock established after the Preferred Stock Issue Date to which the
Series E Convertible Preferred Stock is senior, are collectively referred to
herein as "Junior Securities". The Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock and the Series D Convertible Preferred
Stock of the Corporation and any other class of capital stock or series of
preferred stock established after the Preferred Stock Issue Date which ranks
pari passu with the Series E Convertible Preferred Stock, are collectively
referred to herein as "Pari Passu Securities".
3. Dividends. The holders of shares of the Series E Convertible
Preferred Stock shall be entitled to receive, when, as and if dividends are
declared by the Board of Directors out of funds of the Corporation legally
available therefor, cumulative preferential dividends at the annual rate of 8%
on the Series E Liquidation Preference Payments (as defined in paragraph 4A
herein); provided, however, that any such dividends shall only be paid, whether
declared or not, immediately upon the occurrence of (i) a Liquidation Event
pursuant to paragraph 4A hereof or (ii) a Redemption pursuant to paragraph 7B
hereof. Holders of shares of Series E Convertible Preferred Stock shall be
entitled to receive the dividends provided for herein in preference to and in
priority over any dividends upon any of the Junior Securities. Dividends on the
Series E Convertible Preferred Stock shall accrue on a daily basis from the
Preferred Stock Issue Date and, to the extent they are not paid, shall
accumulate on an annual basis on each December 31,
<PAGE> 83
whether or not the Corporation has earnings or profits, whether or not there are
funds legally available for the payment of such dividends and whether or not
dividends are declared.
4. Liquidation, Dissolution and Winding-up.
4A. Liquidation. Upon any liquidation, dissolution or winding
up of the Corporation (a "Liquidation Event"), whether voluntary or involuntary,
the holders of the shares of Series E Convertible Preferred Stock shall be paid
an amount equal to $26.239 per share plus, in the case of each share, an amount
equal to dividends accrued but unpaid thereon, computed to the date payment
thereof is made available, together with payment to any Pari Passu Securities,
and before any payment shall be made to the holders of any Junior Securities,
such amount payable with respect to one share of Series E Convertible Preferred
Stock being sometimes referred to as the "Series E Liquidation Preference
Payment" and with respect to all shares of Series E Convertible Preferred Stock
being sometimes referred to as the "Series E Liquidation Preference Payments".
If upon any Liquidation Event, the assets to be distributed to the holders of
the Series E Convertible Preferred Stock shall be insufficient to permit payment
to such stockholders of the full preferential amounts aforesaid, then all of the
assets of the Corporation available for distribution to holders of the Series E
Convertible Preferred Stock and Pari Passu Securities shall be distributed to
such holders of the Series E Convertible Preferred Stock and Pari Passu
Securities pro rata, so that each holder receives that portion of the assets
available for distribution as the number of shares of such stock held by such
holder bears to the total number of shares of such stock then outstanding.
4B. Upon any Liquidation Event, immediately after the holders
of Series E Convertible Preferred Stock and holders of any Pari Passu Securities
have been paid in full pursuant to paragraph 4A above, the remaining net assets
of the Corporation available for distribution shall be distributed among the
holders of the shares of Junior Securities.
Written notice of such Liquidation Event, stating a payment date and
the place where said payments shall be made, shall be given by mail, postage
prepaid, or by facsimile to non-U.S. residents, not less than 20 days prior to
the payment date stated therein, to the holders of record of Series E
Convertible Preferred Stock, such notice to be addressed to each such holder at
its address as shown by the records of the Corporation.
The (x) consolidation or merger of the Corporation into or with any
other entity or entities which results in the exchange of outstanding shares of
the Corporation for securities or other consideration issued or paid or caused
to be issued or paid by any such entity or affiliate thereof (except a
consolidation or merger into a Subsidiary or merger in which the Corporation is
the surviving Corporation and the holders of the Corporation's voting stock
outstanding immediately prior to the transaction constitute a majority of the
holders of voting stock outstanding immediately following the transaction), (y)
sale or transfer by the Corporation of all or substantially all of its assets,
or (z) sale or transfer by the Corporation's stockholders of capital stock
representing a majority of the outstanding capital stock of the Corporation
shall be deemed to be a Liquidation Event within the meaning of the provisions
of this paragraph 4 (subject to the provisions of this paragraph 4 and not the
provisions of paragraph 6G hereof, unless paragraph 6G is elected in the
following proviso); provided, however, that if the holders of at least 60% of
the then outstanding shares of Series E Convertible Preferred Stock shall elect
the benefits of the provisions of paragraph 6G in lieu of receiving payment in a
Liquidation Event
<PAGE> 84
pursuant to this paragraph 4, then all holders of shares of Series E Convertible
Preferred Stock shall receive the benefits of the provisions of paragraph 6G in
lieu of receiving payment pursuant to this paragraph 4 for the particular
Organic Change (as defined in Section 6G) causing the rights of Section 6G to be
available. The election of the rights under Section 6G for any particular
Organic Change shall not constitute an election of the rights available under
Section 6G for any other Organic Change, for which the holders of Series E
Convertible Preferred Stock shall have a new election under the foregoing
proviso. Whenever the distribution provided for in this paragraph 4 shall be
payable in property other than cash, the value of such distribution shall be the
fair market value of such property as determined in good faith by the Board of
Directors of the Corporation.
5. Restrictions. At any time when at least 50% of the shares of Series
E Convertible Preferred Stock issued pursuant to the Purchase Agreement remain
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the written consent of the holders
of at least 60% of the then outstanding shares of Series E Convertible Preferred
Stock given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a series, the Corporation will not:
(1) Consent to any Liquidation Event or merge or consolidate
with or into, or permit any Subsidiary to merge or consolidate with or into, any
other corporation, corporations, entity or entities (except a consolidation or
merger into a Subsidiary or merger in which the Corporation is the surviving
corporation and the holders of the Corporation's voting stock outstanding
immediately prior to the transaction constitute a majority of the holders of
voting stock outstanding immediately following the transaction or a
consolidation or merger pursuant to which the aggregate consideration definitely
and unconditionally payable to all of the stockholders of the Corporation is
greater than $1.2 billion) without the affirmative vote or written consent of
the holders of at least 50% of the then outstanding shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series D
Convertible Preferred Stock and Series E Convertible Preferred Stock, voting
together as a single class on a Common Stock equivalent basis;
(2) Sell, abandon, transfer, lease or otherwise dispose of all
or substantially all of its properties or assets (unless the aggregate
consideration definitely and unconditionally payable to all of the stockholders
of the Corporation is greater than $1.2 billion) without the affirmative vote or
written consent of the holders of at least 50% of the then outstanding shares of
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series D Convertible Preferred Stock and Series E Convertible Preferred Stock,
voting together as a single class on a Common Stock equivalent basis;
(3) Amend, alter or repeal any provision of its Certificate of
Incorporation or By-laws in a manner adverse to holders of the Series E
Convertible Preferred Stock;
(4) Create or authorize the creation of or issue any
additional class or series of shares of stock (other than the Series C
Convertible Preferred Stock of the Corporation) unless the same ranks junior to
or on parity with the Series E Convertible Preferred Stock as to dividends and
the distribution of assets on a Liquidation Event, or increase the authorized
<PAGE> 85
amount of Series E Convertible Preferred Stock or increase the authorized amount
of any additional class or series of shares of stock unless the same ranks
junior to or on parity with the Series E Convertible Preferred Stock as to
dividends and the distribution of assets on a Liquidation Event, or create or
authorize any obligation or security convertible into shares of Series E
Convertible Preferred Stock or into shares of any other class or series of stock
unless the same ranks junior to or on parity with the Series E Convertible
Preferred Stock as to dividends and the distribution of assets on a Liquidation
Event, whether any such creation, authorization or increase shall be by means of
amendment to the Certificate of Incorporation or by merger, consolidation or
otherwise;
(5) In any manner amend, alter or change the designations or
the powers, preferences or rights, privileges or the restrictions of the Series
E Convertible Preferred Stock, provided, however, that the authorization or
creation of any shares of capital stock on parity with the Series E Convertible
Preferred Stock as to dividends and the distribution of assets on a Liquidation
Event shall not require the approval of holders of Series E Convertible
Preferred Stock;
(6) Purchase or redeem, or set aside any sums for the purchase
or redemption of, or pay any dividend or make any distribution on, any Junior
Securities, except for (i) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock or (ii)
repurchases of shares of capital stock (at the original purchase price therefor)
from officers, employees, directors or consultants of the Corporation which are
subject to restrictive stock purchase, right of first refusal or other
agreements under which the Corporation has the option to repurchase such shares
upon the occurrence of certain events, including termination of employment; or
(7) Increase the number of Reserved Employee Shares without
the affirmative vote or written consent of a majority of the directors
designated solely by the holders of Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock or the affirmative vote or written consent
of the holders of at least 50% of the then outstanding shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series D Convertible Preferred Stock and Series E
Convertible Preferred Stock, voting together as a single class on a Common Stock
equivalent basis.
6. Conversion. The holders of shares of Series E Convertible Preferred
Stock shall have the following conversion rights:
6A. Right to Convert. Subject to the terms and conditions of
this paragraph 6, the holder of any share or shares of Series E Convertible
Preferred Stock shall have the right, at its option at any time, to convert any
such shares of Series E Convertible Preferred Stock (except that upon any
Liquidation Event the right of conversion shall terminate at the close of
business on the business day fixed for payment of the amounts distributable on
the Series E Convertible Preferred Stock) into such number of fully paid and
nonassessable shares of Common Stock as is obtained by (i) multiplying the
number of shares of Series E Convertible Preferred Stock so to be converted by
$26.239 and (ii) dividing the result by the conversion price of $26.239 per
share or in case an adjustment of such price has taken place pursuant to the
further provisions of this paragraph 6, then by the conversion price as last
adjusted and in effect at the date any share or shares of Series E Convertible
Preferred Stock are surrendered for conversion (such
<PAGE> 86
price, or such price as last adjusted, being referred to as the "Series E
Conversion Price"). Such rights of conversion shall be exercised by the holder
thereof by giving written notice that the holder elects to convert a stated
number of shares of Series E Convertible Preferred Stock into Common Stock and
by surrender of a certificate or certificates for the shares so to be converted
to the Corporation at its principal office (or such other office or agency of
the Corporation as the Corporation may designate by notice in writing to the
holders of the Series E Convertible Preferred Stock) at any time during its
usual business hours on the date set forth in such notice, together with a
statement of the name or names (with address) in which the certificate or
certificates for shares of Common Stock shall be issued.
6B. Issuance of Certificates; Time Conversion Effected.
Promptly after the receipt of the written notice referred to in paragraph 6A and
surrender of the certificate or certificates for the share or shares of Series E
Convertible Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Series E Convertible Preferred Stock. To the extent permitted
by law, such conversion shall be deemed to have been effected and the Series E
Conversion Price shall be determined as of the close of business on the date on
which such written notice shall have been received by the Corporation and the
certificate or certificates for such share or shares shall have been surrendered
as aforesaid, and at such time the rights of the holder of such share or shares
of Series E Convertible Preferred Stock shall cease, and the person or persons
in whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby.
6C. Fractional Shares; Dividends; Partial Conversion. No
fractional shares shall be issued upon conversion of Series E Convertible
Preferred Stock into Common Stock and no payment or adjustment shall be made
upon any conversion on account of any cash dividends on the Common Stock issued
upon such conversion. At the time of each conversion, the Corporation shall pay
in cash an amount equal to all dividends declared and unpaid (if any) on the
shares of Series E Convertible Preferred Stock surrendered for conversion to the
date upon which such conversion is deemed to take place as provided in paragraph
6B. In case the number of shares of Series E Convertible Preferred Stock
represented by the certificate or certificates surrendered pursuant to paragraph
6A exceeds the number of shares converted, the Corporation shall, upon such
conversion, execute and deliver to the holder, at the expense of the
Corporation, a new certificate or certificates for the number of shares of
Series E Convertible Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. If any fractional share
of Common Stock would, except for the provisions of the first sentence of this
paragraph 6C, be delivered upon such conversion, the Corporation, in lieu of
delivering such fractional share, shall pay to the holder surrendering the
Series E Convertible Preferred Stock for conversion an amount in cash equal to
the current fair market value of such fractional share as determined in good
faith by the Board of Directors of the Corporation, and based upon the aggregate
number of shares of Series E Convertible Preferred Stock surrendered by any one
holder.
6D. Adjustment of Series E Conversion Price Upon Issuance of
Common Stock. Except as provided in paragraphs 6E and 6F, if and whenever the
Corporation shall issue or sell, or is, in accordance with subparagraphs 6D(1)
through 6D(7), deemed to have issued or sold,
<PAGE> 87
any shares of Common Stock for a consideration per share less than the Series E
Conversion Price in effect immediately prior to the time of such issue or sale,
(such number being appropriately adjusted to reflect the occurrence of any event
described in paragraph 6F), then, forthwith upon such issue or sale, the Series
E Conversion Price shall be reduced to the price determined by dividing (i) an
amount equal to the sum of (a) the number of shares of Common Stock outstanding
immediately prior to such issue or sale (assuming the conversion of the
outstanding shares of Series E Convertible Preferred Stock) multiplied by the
then existing Series E Conversion Price and (b) the consideration, if any,
received by the Corporation upon such issue or sale, by (ii) the total number of
shares of Common Stock outstanding immediately after such issue or sale
(assuming the conversion of the outstanding shares of Series E Convertible
Preferred Stock).
For purposes of this paragraph 6D, the following subparagraphs
6D(1) to 6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the
total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation
upon the exercise of all such Options, plus, in the case of such
Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of all such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the
exercise of such Options) shall be less than the Series E Conversion
Price in effect immediately prior to the time of the granting of such
Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall be deemed to have been
issued for such price per share as of the date of granting of such
Options or the issuance of such Convertible Securities and thereafter
shall be deemed to be outstanding. Except as otherwise provided in
subparagraph 6D(3), no adjustment of the Series E Conversion Price
shall be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per
share for which
<PAGE> 88
Common Stock is issuable upon such conversion or exchange (determined
by dividing (i) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion
or exchange of all such Convertible Securities thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be
less than the Series E Conversion Price in effect immediately prior to
the time of such issue or sale, then the total maximum number of shares
of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been issued for such
price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided
that (a) except as otherwise provided in subparagraph 6D(3), no
adjustment of the Series E Conversion Price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities and (b) if any such issue or sale of such
Convertible Securities is made upon exercise of any Options to purchase
any such Convertible Securities for which adjustments of the Series E
Conversion Price have been or are to be made pursuant to other
provisions of this paragraph 6D, no further adjustment of the Series E
Conversion Price shall be made by reason of such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1), the
additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in subparagraph
6D(1) or 6D(2), or the rate at which Convertible Securities referred to
in subparagraph 6D(1) or 6D(2) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against
dilution), the Series E Conversion Price in effect at the time of such
event shall forthwith be readjusted to the Series E Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold; provided,
however, that in no event shall the Series E Conversion Price then in
effect hereunder be increased; and on the expiration of any such Option
or the termination of any such right to convert or exchange such
Convertible Securities, the Series E Conversion Price then in effect
hereunder shall forthwith be increased to the Conversion Price which
would have been in effect at the time of such expiration or termination
had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock (except for the issue of stock
dividends or distributions upon the outstanding Common Stock for which
adjustment is made pursuant to paragraph 6F), Options or Convertible
Securities, any Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall
be deemed to have been issued or sold without consideration.
<PAGE> 89
6D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for consideration other than cash, the amount
of the consideration other than cash received by the Corporation shall
be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to
have been issued for such consideration as determined in good faith by
the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take a record
of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities or (ii) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Corporation (or any Subsidiary), and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purpose of this paragraph 6D.
6E. Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Corporation shall not be required to make any adjustment of
the Series E Conversion Price if it first obtains the written consent of the
holders of at least 60% of the then outstanding shares of Series E Convertible
Preferred Stock that no adjustment shall be required. In no event shall the
Corporation be required to make any adjustment to the Series E Conversion Price
in the case of the issuance of (i) shares of Series C Convertible Preferred
Stock pursuant to the Series B Purchase Agreement, (ii) shares of Common Stock
issuable upon conversion of the Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, Series C Convertible Preferred Stock, Series D
Convertible Preferred Stock or Series E Convertible Preferred Stock, (iii)
shares of Common Stock issued or issuable as a dividend or distribution on
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series D Convertible Preferred Stock or
Series E Convertible Preferred Stock, (iv) Reserved Employee Shares (as defined
in paragraph 9 herein), (v) warrants issued in connection with senior
subordinated notes of the Corporation as contemplated by the Series B Purchase
Agreement or shares of Common Stock issuable upon conversion of such warrants,
or (vi) Options outstanding as of the Preferred Stock Issue Date.
<PAGE> 90
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Series E Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Series E Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
6G. Reorganization or Reclassification. If any capital
reorganization, reclassification, recapitalization, consolidation, merger, sale
of all or substantially all of the Corporation's assets or other similar
transaction (any such transaction being referred to herein as an "Organic
Change") shall be effected in such a way that holders of Common Stock shall be
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such Organic Change, lawful and adequate provisions shall be made
whereby each holder of a share or shares of Series E Convertible Preferred Stock
shall thereupon have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of or in addition to, as the case may
be, the shares of Common Stock immediately theretofore receivable upon the
conversion of such share or shares of Series E Convertible Preferred Stock, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore receivable
upon such conversion had such Organic Change not taken place, and in any case of
a reorganization or reclassification only appropriate provisions shall be made
with respect to the rights and interests of such holder to the end that the
provisions hereof (including without limitation provisions for adjustments of
the Series E Conversion Price) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the Series E
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, or by facsimile
transmission to non-U.S. residents, addressed to each holder of shares of Series
E Convertible Preferred Stock at the address of such holder as shown on the
books of the Corporation, which notice shall state the Series E Conversion Price
resulting from such adjustment, setting forth in reasonable detail the method
upon which such calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the holders of
its Common Stock;
(2) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into, or a sale of all or substantially all of
its assets to, another entity or entities; or
<PAGE> 91
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by facsimile transmission to non-U.S. residents,
addressed to each holder of any shares of Preferred Stock at the address of such
holder as shown on the books of the Corporation, (a) at least 20 days' prior
written notice of the date on which the books of the Corporation shall close or
a record shall be taken for such dividend, distribution or subscription rights
or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
6J. Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Series E Convertible Preferred Stock
as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series E Convertible
Preferred Stock. The Corporation covenants that all shares of Common Stock which
shall be so issued shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all such action as may
be requisite to assure that the par value per share of the Common Stock is at
all times equal to or less than the Series E Conversion Price in effect at the
time. The Corporation will take all such action as may be necessary to assure
that all such shares of Common Stock may be so issued without violation of any
applicable law or regulation, or of any requirement of any national securities
exchange upon which the Common Stock may be listed.
6K. No Reissuance of Series E Convertible Preferred Stock.
Shares of Series E Convertible Preferred Stock which are converted into shares
of Common Stock as provided herein shall not be reissued.
6L. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Series E Convertible Preferred Stock shall be
made without charge to the holders thereof for any issuance tax in respect
thereof; provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Series E Convertible Preferred Stock which is being converted.
6M. Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any Series E Convertible Preferred
Stock or of any shares of Common Stock issued or issuable upon the conversion of
any shares of Series E Convertible Preferred
<PAGE> 92
Stock in any manner which interferes with the timely conversion of such
Preferred Stock, except as may otherwise be required to comply with applicable
securities laws.
6N. Definition of Common Stock. As used in this paragraph 6,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.01 per share, as constituted on the date of filing of
these terms of the Series E Convertible Preferred Stock, and shall also include
any capital stock of any class of the Corporation thereafter authorized which
shall neither be limited to a fixed sum or percentage of par value in respect of
the rights of the holders thereof to participate in dividends nor entitled to a
preference in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Series E
Convertible Preferred Stock shall include only shares designated as Common Stock
of the Corporation on the date of filing of this instrument, or in case of any
reorganization or reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in subparagraph 6G.
6O. Mandatory Conversion. All outstanding shares of Series E
Convertible Preferred Stock shall automatically convert to shares of Common
Stock if at any time the Corporation shall effect a public offering of shares of
Common Stock (any such offering, regardless of compliance with subsections (i),
(ii) and (iii) herein, being referred to as a "Public Offering"), provided (i)
the aggregate gross proceeds from such offering to the Corporation shall be at
least $20,000,000, (ii) the price paid by the public for such shares shall be at
least (x) 2.0 times the then Series B Conversion Price if the Public Offering
occurs prior to the 18 month anniversary of the Series B Preferred Stock Issue
Date or (y) 3.0 times the then Series B Conversion Price if the Public Offering
occurs on or after the 18 month anniversary of the Series B Preferred Stock
Issue Date and (iii) the offering is a firm commitment underwritten Public
Offering, and such automatic conversion shall be effective upon the closing of
the sale of such shares by the Corporation pursuant to such Public Offering.
<PAGE> 93
7. Redemption. The shares of Series E Convertible Preferred Stock shall
be redeemed as follows:
7A. Optional Redemption. The Corporation shall not have the
right to call or redeem at any time all or any shares of Series E Convertible
Preferred Stock. With the approval of the holders of 66% of the then outstanding
shares of Series E Convertible Preferred Stock, one or more holders of shares of
Series E Convertible Preferred Stock may, by giving notice (the "Notice") to the
Corporation, require the Corporation to redeem any or all of the outstanding
Series E Convertible Preferred Stock on the Redemption Date (as defined below).
Upon receipt of the Notice, the Corporation will so notify all other persons
holding Series E Convertible Preferred Stock. After receipt of the Notice, the
Corporation shall fix the first date for redemption, which shall be the date
specified in the Notice, being any date on or after the earlier of (i) the fifth
(5th) anniversary of the Series B Preferred Stock Issue Date and (ii) the date
which is the day before the Corporation is due to redeem any outstanding Junior
Securities (the "Redemption Date"). All holders of Series E Convertible
Preferred Stock shall deliver to the Corporation during regular business hours,
at the office of any transfer agent of the Corporation for the Series E
Convertible Preferred Stock, or at the principal office of the Corporation or at
such other place as may be designated by the Corporation, the certificate or
certificates for the Series E Convertible Preferred Stock, duly endorsed for
transfer to the Corporation (if required by it) on or before the Redemption
Date.
7B. Redemption Price and Payment. The Series E Convertible
Preferred Stock to be redeemed on the Redemption Date shall be redeemed by
paying for each share in cash an amount equal to the Series E Redemption Price
(as defined below). For purposes of this paragraph 7B, the "Series E Redemption
Price" shall mean $26.239 per share, plus an amount equal to all dividends
accrued and unpaid on each such share; provided, however, that if the Redemption
Date is after the fifth (5th) anniversary of the Series B Preferred Stock Issue
Date, then the "Series E Redemption Price" shall mean the greater of (i) $26.239
per share, plus an amount equal to all dividends accrued and unpaid on each such
share and (ii) the Fair Market Value (as defined below) of the Common Stock
underlying the Series E Convertible Preferred Stock. Such payment shall be made
in full on the Redemption Date to the holders entitled thereto. For purposes of
this paragraph 7B, "Fair Market Value" of the Common Stock shall mean the
average of the fair market valuations of the Common Stock performed by two
investment banks (the "Initial Appraisers"), one of which shall be retained by
the Corporation and one of which shall be retained by the holders of a majority
in interest of the Series E Convertible Preferred Stock. Subject to the
following sentence, such determination by the Initial Appraisers of Fair Market
Value shall be final and binding on the parties. If the higher of the two
valuations of the Initial Appraisers is equal to or greater than 110% of the
lower valuation, the Corporation and holders of a majority in interest of the
Series E Convertible Preferred Stock shall select a third investment bank (the
"Final Appraiser"), which shall be mutually agreeable to the Corporation and the
holders of a majority in interest of the Series E Convertible Preferred Stock.
The fair market value of the Common Stock as determined by the Final Appraiser
shall be final and binding on the parties. The fees and expenses of the Initial
Appraisers shall be paid for by the party selecting such Initial Appraiser and
the fees and expenses of the Final Appraiser shall be shared by the Corporation
and the holders of the Series E Convertible Preferred Stock.
7C. Redemption Mechanics. At least 15 but not more than 35
days prior to the Redemption Date, written notice (the "Redemption Notice")
shall be given by the Corporation
<PAGE> 94
by mail, postage prepaid, or by facsimile transmission to non-U.S. residents, to
each holder of record (at the close of business on the business day next
preceding the day on which the Redemption Notice is given) of shares of Series E
Convertible Preferred Stock notifying such holder of the redemption and
specifying the Series E Redemption Price, the Redemption Date and the place
where said Series E Redemption Price shall be payable. The Redemption Notice
shall be addressed to each holder at his address as shown by the records of the
Corporation. From and after the close of business on the Redemption Date, unless
there shall have been a default in the payment of the Series E Redemption Price,
all rights of holders of shares of Series E Convertible Preferred Stock (except
the right to receive the Series E Redemption Price) shall cease with respect to
such shares, and such shares shall not thereafter be transferred on the books of
the Corporation or be deemed to be outstanding for any purpose whatsoever. If
the funds of the Corporation legally available for redemption of shares of
Series E Convertible Preferred Stock on the Redemption Date are insufficient to
redeem the total number of outstanding shares of Series E Convertible Preferred
Stock to be redeemed on such Redemption Date, the holders of shares of Series E
Convertible Preferred Stock shall share ratably in any funds legally available
for redemption of such shares according to the respective amounts which would be
payable with respect to the full number of shares owned by them if all such
outstanding shares were redeemed in full. The shares of Series E Convertible
Preferred Stock not redeemed shall remain outstanding and entitled to all rights
and preferences provided herein; provided, however, that such unredeemed shares
shall be entitled to receive interest accruing daily with respect to the
applicable Series E Redemption Price at the rate of 15% per annum, payable
quarterly in arrears. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of such shares of Series E
Convertible Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available, on the basis set forth
above.
7D. Redeemed or Otherwise Acquired Shares to be Retired. Any
shares of Series E Convertible Preferred Stock redeemed pursuant to this
paragraph 7 or otherwise acquired by the Corporation in any manner whatsoever
shall be canceled and shall not under any circumstances be reissued; and the
Corporation may from time to time take such appropriate corporate action as may
be necessary to reduce accordingly the number of authorized shares of Series E
Convertible Preferred Stock.
8. Amendments. Except where the vote or written consent of the holders
of a different number of shares of the Corporation is required by these terms of
the Series E Convertible Preferred Stock, by law or by the Certificate of
Incorporation, no provision of these terms of the Series E Convertible Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least 60% of the then outstanding shares
of Series E Convertible Preferred Stock.
9. Definitions. As used herein, the following terms shall have the
following meanings:
(1) The term "Founders" shall mean F. Thomson Leighton, Daniel
Lewin, Jonathan Seelig, Randall Kaplan, Gilbert Friesen and David Karger.
<PAGE> 95
(2) The term "Preferred Stock Issue Date" shall mean the date
on which the Series E Convertible Preferred Stock is originally issued by the
Corporation pursuant to the Purchase Agreement.
(3) The term "Purchase Agreement" shall mean the Series E
Convertible Preferred Stock Purchase Agreement dated as of August 6, 1999
between the Corporation and Cisco Systems, Inc., as in effect on August 6, 1999.
(4) The term the "Plan" shall mean the Corporation's 1998
Stock Incentive Plan.
(5) The term "Reserved Employee Shares" shall mean shares of
Common Stock reserved by the Corporation pursuant to the Plan from time to time
for (i) the sale of shares of Common Stock to employees, consultants or
non-employee directors (other than representatives of the holders of Preferred
Stock) of the Corporation or (ii) the exercise of options to purchase Common
Stock granted to employees, consultants or non-employee directors (other than
representatives of the holders of Preferred Stock) of the Corporation, not to
exceed in the aggregate 11,377,800 shares of Common Stock for both clauses (i)
and (ii), with such number including 2,132,100 shares issued or subject to
options granted prior to the date of the initial issuance of the Series A
Convertible Preferred Stock (the "Option Shares") (appropriately adjusted to
reflect an event described in paragraph 6F hereof); provided that, such number
of such shares subject to the Plan shall be increased by up to 7,559,226
additional shares of Common Stock (appropriately adjusted to reflect an event
described in paragraph 6F hereof) (collectively, the "Founders' Shares") upon
the repurchase of such Founders' Shares by the Corporation from the Founders
pursuant to contractual rights held by the Corporation. The foregoing numbers of
Reserved Employee Shares may be increased by the affirmative vote or written
consent of a majority of the directors designated solely by the holders of
Series A Convertible Preferred Stock and Series B Convertible Preferred Stock or
the affirmative vote or written consent of the holders of at least 50% of the
then outstanding shares of Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, Series C Convertible Preferred Stock, Series D
Convertible Preferred Stock and Series E Convertible Preferred Stock, voting
together as a single class on a Common Stock equivalent basis.
(6) The term "Series B Conversion Price" shall mean the
conversion price of the Series B Convertible Preferred Stock from time to time
under the terms of the designation of the Series B Convertible Preferred Stock
of the Corporation.
(7) The term "Series B Preferred Stock Issue Date" shall mean
April 16, 1999.
(8) The term "Series B Purchase Agreement" shall mean the
Series B Convertible Preferred Stock and Series C Convertible Preferred Stock
Purchase Agreement dated as of April 16, 1999 among the Corporation and the
purchasers named therein.
<PAGE> 96
(9) The term "Subsidiary" or "Subsidiaries" shall mean any
corporation, partnership, trust or other entity of which the Corporation and/or
any of its other subsidiaries directly or indirectly owns at the time a majority
of the outstanding shares of every class of equity security of such corporation,
partnership, trust or other entity.
<PAGE> 97
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AKAMAI TECHNOLOGIES, INC.
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
Akamai Technologies, Inc. (hereinafter called the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
The Board of Directors of the Corporation, at a meeting held on August
5, 1999, duly adopted a resolution, pursuant to Sections 141(f) and 242 of the
General Corporation Law of the State of Delaware, setting forth an amendment to
the Certificate of Incorporation of the Corporation and declaring said amendment
to be advisable. The stockholders of the Corporation duly approved said proposed
amendment by written consent in accordance with Sections 228 and 242 of the
General Corporation Law of the State of Delaware, and written notice of such
consent has been or will be given to all stockholders who have not consented in
writing to said amendment. The resolution setting forth the amendment is as
follows:
RESOLVED: That the first paragraph of Article FOURTH of the
Certificate of Incorporation of the Corporation be and
hereby is deleted in its entirety and that the following
paragraph be inserted in lieu thereof:
"FOURTH. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 310,000,000
shares, consisting of (i) 300,000,000 shares of Common Stock, $0.01 par
value per share ("Common Stock"), and (ii) 10,000,000 shares of
Preferred Stock, $0.01 par value per share ("Preferred Stock").
<PAGE> 98
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President on this 5th day of August, 1999.
AKAMAI TECHNOLOGIES, INC.
By: /s/ Paul Sagan
-----------------------------
Paul Sagan
President
<PAGE> 99
CERTIFICATE OF DESIGNATIONS
OF
SERIES F CONVERTIBLE PREFERRED STOCK
OF
AKAMAI TECHNOLOGIES, INC.
------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
------------
Akamai Technologies, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article Fourth of its
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, the Board of the
Directors of the Corporation, at a meeting held on September 20, 1999, duly
adopted the following resolution, which resolution remains in full force and
effect on the date hereof:
RESOLVED, that, pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation, a series of Preferred Stock of the
Corporation be and hereby is established, consisting of 985,545 shares, $0.01
par value per share, to be designated "Series F Convertible Preferred Stock"
(hereinafter, the "Series F Preferred Stock"); that the Board of Directors be
and hereby is authorized to issue such shares of Series F Preferred Stock from
time to time and for such consideration and on such terms as the Board of
Directors shall determine; and that, subject to the limitations provided by law
and by the Certificate of Incorporation, the voting powers, preferences and
relative, participating, optional and other special rights, and qualifications,
limitations and restrictions thereof shall be as set forth on Schedule I
attached hereto.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be duly
executed by its President on this 20th day of September, 1999.
AKAMAI TECHNOLOGIES, INC.
By: /s/ PAUL SAGAN
---------------------------------
Paul Sagan
President
1
<PAGE> 100
Schedule I
AKAMAI TECHNOLOGIES, INC.
DESIGNATION OF SERIES F CONVERTIBLE PREFERRED STOCK
The series of Preferred Stock designated and known as "Series F Convertible
Preferred Stock" shall consist of 985,545 shares.
1. Voting. Except as may be otherwise provided in these terms of the
Series F Convertible Preferred Stock, in the Certificate of Incorporation (the
"Certificate of Incorporation") of Akamai Technologies, Inc. (the "Corpora-
tion") or by law, the Series F Convertible Preferred Stock shall vote together
with all other classes and series of stock of the Corporation as a single class
on all actions to be taken by the stockholders of the Corporation. Each share
of Series F Convertible Preferred Stock shall entitle the holder thereof to
such number of votes per share on each such action as shall equal the number of
shares of Common Stock (including fractions of a share) into which each share
of Series F Convertible Preferred Stock is then convertible.
2. Ranking. The Series F Convertible Preferred Stock shall rank, with
respect to dividend distributions and distributions upon a Liquidation Event
(as defined in paragraph 4A herein), senior to all classes of common stock of
the Company and to each other class of capital stock or series of preferred
stock (including the Series A Convertible Preferred Stock of the Corporation)
established before the Series B Preferred Stock Issue Date, by the Board of
Directors, pari passu with the Series B Convertible Preferred Stock, the
Series C Preferred Stock, the Series D Convertible Preferred Stock and the
Series E Convertible Preferred Stock of the Corporation, and senior or pari
passu to any other class of capital stock or series of preferred stock
established after the Preferred Stock Issue Date by the Board of Directors. All
classes of common stock of the Company, the Series A Convertible Preferred
Stock and any other class of capital stock or series of preferred stock
established after the Preferred Stock Issue Date to which the Series F
Convertible Preferred Stock is senior, are collectively referred to herein as
"Junior Securities". The Series B Convertible Preferred Stock, the Series C
Convertible Preferred Stock, the Series D Convertible Preferred Stock and the
Series E Convertible Preferred Stock of the Corporation and any other class of
capital stock or series of preferred stock established after the Preferred
Stock Issue Date which ranks pari passu with the Series F Convertible Preferred
Stock, are collectively referred to herein as "Pari Passu Securities".
2
<PAGE> 101
3. Dividends. The holders of shares of the Series F Convertible Preferred
Stock shall be entitled to receive, when, as and if dividends are declared by
the Board of Directors out of funds of the Corporation legally available
therefor, cumulative preferential dividends at the annual rate of 8% on the
Series F Liquidation Preference Payments (as defined in paragraph 4A herein);
provided, however, that any such dividends shall only be paid, whether declared
or not, immediately upon the occurrence of (i) a Liquidation Event pursuant to
paragraph 4A hereof or (ii) a Redemption pursuant to paragraph 7B hereof.
Holders of shares of Series F Convertible Preferred Stock shall be entitled to
receive the dividends provided for herein in preference to and in priority over
any dividends upon any of the Junior Securities. Dividends on the Series F
Convertible Preferred Stock shall accrue on a daily basis from the Preferred
Stock Issue Date and, to the extent they are not paid, shall accumulate on an
annual basis on each December 31, whether or not the Corporation has earnings or
profits, whether or not there are funds legally available for the payment of
such dividends and whether or not dividends are declared.
4. Liquidation, Dissolution and Winding-up.
4A. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation (a "Liquidation Event"), whether voluntary or involuntary, the
holders of the shares of Series F Convertible Preferred Stock shall be paid an
amount equal to $15.22 per share plus, in the case if each share, an amount
equal to dividends accrued but unpaid thereon, computed to the date payment
thereof is made available, together with payment to any Pari Passu Securities,
and before any payment shall be made to the holders of any Junior Securities,
such amount payable with respect to one share of Series F Convertible Preferred
Stock being sometimes referred to as the "Series F Liquidation Preference
Payment" and with respect to all shares of Series F Convertible Preferred Stock
being sometimes referred to as the "Series F Liquidation Preference Payments".
If upon any Liquidation Event, the assets to be distributed to the holders of
the Series F Convertible Preferred Stock shall be insufficient to permit
payment to such stockholders of the full preferential amounts aforesaid, then
all of the assets of the Corporation available for distribution to holders of
the Series F Convertible Preferred Stock and Pari Passu Securities shall be
distributed to such holders of the Series F Convertible Preferred Stock and
Pari Passu Securities pro rata, so that each holder receives that portion of
the assets available for distribution as the number of shares of such stock
held by such holder bears to the total number of shares of such stock then
outstanding.
4B. Upon any Liquidation Event, immediately after the holders of Series
F Convertible Preferred Stock and holders of any Pari Passu Securities have been
paid in full pursuant to paragraph 4A above, the remaining net assets of the
Corporation available for distribution shall be distributed among the holders
of the shares of Junior Securities.
Written notice of such Liquidation Event, stating a payment date and the
place where said payments shall be made, shall be given by mail, postage
prepaid, or by facsimile to non-U.S. residents, not less than 20 days prior to
the payment date stated therein, to the holders of record of Series F
Convertible Preferred Stock, such notice to be addressed to each such holder at
its address as shown by the records of the Corporation.
The (x) consolidation or merger of the Corporation into or with any other
entity or entities which results in the exchange of outstanding shares of the
Corporation for securities or other consideration issued or paid or caused to
be issued or paid by any such entity or affiliate
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thereof (except a consolidation or merger into a Subsidiary or merger in which
the Corporation is the surviving Corporation and the holders of the
Corporation's voting stock outstanding immediately prior to the transaction
constitute a majority of the holders of voting stock outstanding immediately
following the transaction), (y) sale or transfer by the Corporation of all or
substantially all of its assets, or (z) sale or transfer by the Corporation's
stockholders of capital stock representing a majority of the outstanding
capital stock of the Corporation shall be deemed to be a Liquidation Event
within the meaning of the provisions of this paragraph 4 (subject to the
provisions of this paragraph 4 and not the provisions of paragraph 6G hereof,
unless paragraph 6G is elected in the following proviso); provided, however,
that if the holders of at least 60% of the then outstanding shares of Series F
Convertible Preferred Stock shall elect the benefits of the provisions of
paragraph 6G in lieu of receiving payment in a Liquidation Event pursuant to
this paragraph 4, then all holders of shares of Series F Convertible Preferred
Stock shall receive the benefits of the provisions of paragraph 6G in lieu of
receiving payment pursuant to this paragraph 4 for the particular Organic
Change (as defined in Section 6G) causing the rights of Section 6G to be
available. The election of the rights under Section 6G for any particular
Organic Change shall not constitute an election of the rights available under
Section 6G for any other Organic Change, for which the holders of Series F
Convertible Preferred Stock shall have a new election under the foregoing
proviso. Whenever the distribution provided for in this paragraph 4 shall be
payable in property other than cash, the value of such distribution shall be
the fair market value of such property as determined in good faith by the Board
of Directors of the Corporation.
5. Restrictions. At any time when at least 50% of the shares of
Series F Convertible Preferred Stock issued pursuant to the Purchase Agreement
remain outstanding, except where the vote or written consent of the holders of
a greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the written consent of the holders
of at least 60% of the then outstanding shares of Series F Convertible
Preferred Stock given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a series, the Corporation will not:
(1) Consent to any Liquidation Event or merge or consolidate with
or into, or permit any Subsidiary to merge or consolidate with or into, any
other corporation, corporations, entity or entities (except a consolidation or
merger into a Subsidiary or merger in which the Corporation is the surviving
corporation and the holders of the Corporation's voting stock outstanding
immediately prior to the transaction constitute a majority of the holders of
voting stock outstanding immediately following the transaction or a
consolidation or merger pursuant to which the aggregate consideration
definitely and unconditionally payable to all of the stockholders of the
Corporation is greater than $1.2 billion) without the affirmative vote or
written consent of the holders of at least 50% of the then outstanding shares
of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series D Convertible Preferred Stock, Series E Convertible Preferred Stock and
Series F Convertible Preferred Stock, voting together as a single class on a
Common Stock equivalent basis;
(2) Sell, abandon, transfer, lease or otherwise dispose of all or
substantially all of its properties or assets (unless the aggregate
consideration definitely and unconditionally payable to all of the stockholders
of the Corporation is greater than $1.2 billion) without the affirmative vote
or written consent of the holders of at least 50% of the then outstanding shares
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of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series D Convertible Preferred Stock, Series E Convertible Preferred Stock
and Series F Convertible Preferred Stock, voting together as a single class on a
Common Stock equivalent basis;
(3) Amend, alter or repeal any provision of its Certificate of
Incorporation or By-laws in a manner adverse to holders of the Series F
Convertible Preferred Stock;
(4) Create or authorize the creation of or issue any additional class
or series of shares of stock (other than the Series C Convertible Preferred
Stock of the Corporation) unless the same ranks junior to or on parity with the
Series F Convertible Preferred Stock as to dividends and the distribution of
assets on a Liquidation Event, or increase the authorized amount of Series F
Convertible Preferred Stock or increase the authorized amount of any additional
class or series of shares of stock unless the same ranks junior to or on parity
with the Series F Convertible Preferred Stock as to dividends and the
distribution of assets on a Liquidation Event, or create or authorize any
obligation or security convertible into shares of Series F Convertible Preferred
Stock or into shares of any other class or series of stock unless the same ranks
junior to or on parity with the Series F Convertible Preferred Stock as to
dividends and the distribution of assets on a Liquidation Event, whether any
such creation, authorization or increase shall be by means of amendment to the
Certificate of Incorporation or by merger, consolidation or otherwise;
(5) In any manner amend, alter or change the designations or the
powers, preferences or rights, privileges or the restrictions of the Series F
Convertible Preferred Stock, provided, however, that the authorization or
creation of any shares of capital stock on parity with the Series F Convertible
Preferred Stock as to dividends and the distribution of assets on a Liquidation
Event shall not require the approval of holders of Series F Convertible
Preferred Stock;
(6) Purchase or redeem, or set aside any sums for the purchase or
redemption of, or pay any dividend or make any distribution on, any Junior
Securities, except for (i) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock or (ii)
repurchases of shares of capital stock (at the original purchase price therefor)
from officers, employees, directors or consultants of the Corporation which are
subject to restrictive stock purchase, right of first refusal or other
agreements under which the Corporation has the option to repurchase such shares
upon the occurrence of certain events, including termination of employment; or
(7) Increase the number of Reserved Employee Shares without the
affirmative vote or written consent of a majority of the directors designated
solely by the holders of Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock or the affirmative vote or written consent of the
holders of at least 50% of the then outstanding shares of Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock, Series D Convertible Preferred Stock, Series E Convertible
Preferred Stock and Series F Convertible Preferred Stock, voting together as a
single class on a Common Stock equivalent basis.
6. Conversion. The holders of shares of Series F Convertible Preferred
Stock shall have the following conversion rights:
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6A. Right to Convert. Subject to the terms and conditions of this
paragraph 6, the holder of any share or shares of Series F Convertible
Preferred Stock shall have the right, at its option at any time, to convert any
such shares of Series F Convertible Preferred Stock (except that upon any
Liquidation Event the right of conversion shall terminate at the close of
business on the business day fixed for payment of the amounts distributable on
the Series F Convertible Preferred Stock) into such number of fully paid and
nonassessable shares of Common Stock as is obtained by (i) multiplying the
number of shares of Series F Convertible Preferred Stock so to be converted by
$15.22 and (ii) dividing the result by the conversion price of $15.22 per share
or in case an adjustment of such price has taken place pursuant to the further
provisions of this paragraph 6, then by the conversion price as last adjusted
and in effect at the date any share or shares of Series F Convertible Preferred
Stock are surrendered for conversion (such price, or such price as last
adjusted, being referred to as the "Series F Conversion Price"). Such rights of
conversion shall be exercised by the holder thereof by giving written notice
that the holder elects to convert a stated number of shares of Series F
Convertible Preferred Stock into Common Stock and by surrender of a certificate
or certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Series F
Convertible Preferred Stock) at any time during its usual business hours on the
date set forth in such notice, together with a statement of the name or names
(with address) in which the certificate or certificates for shares of Common
Stock shall be issued.
6B. Issuance of Certificates; Time Conversion Effected. Promptly after
the receipt of the written notice referred to in paragraph 6A and surrender of
the certificate or certificates for the share or shares of Series F Convertible
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number
of whole shares of Common Stock issuable upon the conversion of such share or
shares of Series F Convertible Preferred Stock. To the extent permitted by law,
such conversion shall be deemed to have been effected and the Series F
Conversion Price shall be determined as of the close of business on the date
on which such written notice shall have been received by the Corporation and
the certificate or certificates for such share or shares shall have been
surrendered as aforesaid, and at such time the rights of the holder of such
share or shares of Series F Convertible Preferred Stock shall cease, and the
person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed
to have become the holder or holders of record of the shares represented
thereby.
6C. Fractional Shares; Dividends; Partial Conversion. No fractional
shares shall be issued upon conversion of Series F Convertible Preferred Stock
into Common Stock and no payment or adjustment shall be made upon any
conversion on account of any cash dividends on the Common Stock issued upon
such conversion. At the time of each conversion, the Corporation shall pay in
cash an amount equal to all dividends declared and unpaid (if any) on the
shares of Series F Convertible Preferred Stock surrendered for conversion to
the date upon which such conversion is deemed to take place as provided in
paragraph 6B. In case the number of shares of Series F Convertible Preferred
Stock represented by the certificate or certificates surrendered pursuant to
paragraph 6A exceeds the number of shares converted, the Corporation shall,
upon such conversion, execute and deliver to the holder, at the expense of the
Corporation, a new certificate or certificates for the number of shares of
Series F Convertible
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Preferred Stock represented by the certificate or certificates surrendered which
are not to be converted. If any fractional share of Common Stock would, except
for the provisions of the first sentence of this paragraph 6C, be delivered upon
such conversion, the Corporation, in lieu of delivering such fractional share,
shall pay to the holder surrendering the Series F Convertible Preferred Stock
for conversion an amount in cash equal to the current fair market value of such
fractional share as determined in good faith by the Board of Directors of the
Corporation, and based upon the aggregate number of shares of Series F
Convertible Preferred Stock surrendered by any one holder.
6D. Adjustment of Series F Conversion Price Upon Issuance of Common
Stock. Except as provided in paragraphs 6E and 6F, if and whenever the
Corporation shall issue or sell, or is, in accordance with subparagraphs 6D(1)
through 6D(7), deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than the Series F Conversion Price in effect
immediately prior to the time of such issue or sale, (such number being
appropriately adjusted to reflect the occurrence of any event described in
paragraph 6F), then, forthwith upon such issue or sale, the Series F Conversion
Price shall be reduced to the price determined by dividing (i) an amount equal
to the sum of (a) the number of shares of Common Stock outstanding immediately
prior to such issue or sale (assuming the conversion of the outstanding shares
of Series F Convertible Preferred Stock) multiplied by the then existing Series
F Conversion Price and (b) the consideration, if any, received by the
Corporation upon such issue or sale, by (ii) the total number of shares of
Common Stock outstanding immediately after such issue or sale (assuming the
conversion of the outstanding shares of Series F Convertible Preferred Stock).
For purposes of this paragraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in
a merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible Securities")
whether or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise of such Options or
upon the conversion or exchange of such Convertible Securities (determined
by dividing (i) the total amount, if any, received or receivable by the
Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the
Corporation upon the exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or sale
of all such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Series F Conversion Price in effect
immediately prior to the time of the granting of such Options, then the
total maximum number of shares of Common Stock issuable upon the exercise
of such Options or upon conversion
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or exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such Options shall be deemed to have been issued for such
price per share as of the date of granting of such Options or the issuance of
such Convertible Securities and thereafter shall be deemed to be outstanding.
Except as otherwise provided in subparagraph 6D(3), no adjustment of the Series
F Conversion Price shall be made upon the actual issue of such Common Stock or
of such Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities.
6D(2) Issuance of Convertible Securities. In case the Corporation shall
in any manner issue (whether directly or by assumption in a merger or otherwise)
or sell any Convertible Securities, whether or not the rights to exchange or
convert any such Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange of all such
Convertible Securities thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Series F Conversion Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except as
otherwise provided in subparagraph 6D(3), no adjustment of the Series F
Conversion Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (b) if any such issue
or sale of such Convertible Securities is made upon exercises of any Options to
purchase any such Convertible Securities for which adjustments of the Series F
Conversion Price have been or are to be made pursuant to other provisions of
this paragraph 6D, no further adjustment of the Series F Conversion Price shall
be made by reason of such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon the happening of any
of the following events, namely, if the purchase price provided for in any
Option referred to in subparagraph 6D(1), the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in subparagraph 6D(1) or 6D(2), or the rate at which Convertible Securities
referred to in subparagraph 6D(1) or 6D(2) are convertible into or exchangeable
for Common Stock shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against dilution),
the Series F Conversion Price in effect at the time of such event shall
forthwith be readjusted to the Series F Conversion Price which would have been
in effect at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional consideration
or conversion rate, as the case may be, at the time initially granted, issued or
sold; provided, however, that in no event shall the Series F Conversion Price
then in effect hereunder be increased; and on the expiration of any such Option
or the termination of any such right to convert or exchange such Convertible
Securities, the Series F Conversion Price then in effect
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hereunder shall forthwith be increased to the Conversion Price which would
have been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately
prior to such expiration or termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a dividend
or make any other distribution upon any stock of the Corporation payable in
Common Stock (except for the issue of stock dividends or distributions upon
the outstanding Common Stock for which adjustment is made pursuant to
paragraph 6F), Options or Convertible Securities, any Common Stock, Options
or Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold without
consideration.
6D(5) Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by
the Corporation therefor, without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Corporation in connection therewith. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for consideration
other than cash, the amount of the consideration other than cash received by
the Corporation shall be deemed to be the fair value of such consideration
as determined in good faith by the Board of Directors of the Corporation,
without deduction of any expenses incurred or any underwriting commissions
or concessions paid or allowed by the Corporation in connection therewith.
In case any Options shall be issued in connection with the issue and sale of
other securities of the Corporation, together comprising one integral
transaction in which no specific consideration is allocated to such Options
by the parties thereto, such Options shall be deemed to have been issued for
such consideration as determined in good faith by the Board of Directors of
the Corporation.
6D(6) Record Date. In case the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to receive
a dividend or other distribution payable in Common Stock, Options or
Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to
be the date of the issue or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the
account of the Corporation (or any Subsidiary), and the disposition of any
such shares shall be considered an issue or sale of Common Stock for the
purpose of this paragraph 6D.
6E. Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Corporation shall not be required to make any adjustment of
the Series F Conversion Price if it first obtains the written consent of the
holders of at least 60% of the then outstanding shares of Series F Convertible
Preferred Stock that no adjustment shall be required. In no event shall the
Corporation be required to make any adjustment to the Series F
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Conversion Price in the case of the issuance of (i) shares of Series C
Convertible Preferred Stock pursuant to the Series B Purchase Agreement, (ii)
shares of Common Stock issuable upon conversion of the Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock, Series D Convertible Preferred Stock, Series E Convertible
Preferred Stock or Series F Convertible Preferred Stock, (iii) shares of Common
Stock issued or issuable as a dividend or distribution on Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock, Series D Convertible Preferred Stock, Series E Convertible
Preferred Stock or Series F Convertible Preferred Stock, (iv) Reserved Employee
Shares (as defined in paragraph 9 herein), (v) warrants issued in connection
with senior subordinated notes of the Corporation as contemplated by the Series
B Purchase Agreement or shares of Common Stock issuable upon conversion of such
warrants, or (vi) Options outstanding as of the Preferred Stock Issue Date.
6F. Subdivision or Combination of Common Stock. In case the Corporation
shall at any time subdivide (by any stock split, stock dividend or otherwise)
its outstanding shares of Common Stock into a greater number of shares, the
Series F Conversion Price in effect immediately prior to such subdivision shall
be proportionately reduced, and, conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares, the Series F
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
6G. Reorganization or Reclassification. If any capital reorganization,
reclassification, recapitalization, consolidation, merger, sale of all or
substantially all of the Corporation's assets or other similar transaction (any
such transaction being referred to herein as an "Organic Change") shall be
effected in such a way that holders of Common Stock shall be entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock, then, as a condition of
such Organic Change, lawful and adequate provisions shall be made whereby each
holder of a share or shares of Series F Convertible Preferred Stock shall
thereupon have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of or in addition to, as the case may
be, the shares of Common Stock immediately theretofore receivable upon the
conversion of such share or shares of Series F Convertible Preferred Stock,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such Common Stock immediately
theretofore receivable upon such conversion had such Organic Change not taken
place, and in any case of a reorganization or reclassification only appropriate
provisions shall be made with respect to the rights and interests of such
holder to the end that the provisions hereof (including without limitation
provisions for adjustments of the Series F Conversion Price) shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise of such
conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the Series F Conversion
Price, then and in each such case the Corporation shall give written notice
thereof, by first class mail, postage prepaid, or by facsimile transmission to
non-U.S. residents, addressed to each holder of shares of Series F Convertible
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Series F Conversion Price resulting
from such adjustment, setting forth in reasonable detail the method upon which
such calculation is based.
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6I. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of its
Common Stock;
(2) the Corporation shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock of any class or other rights;
(3) there shall be any capital reorganization or reclassification of the
capital stock of the Corporation, or a consolidation or merger of the
Corporation with or into, or a sale of all or substantially all of its assets
to, another entity or entities; or
(4) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by facsimile transmission to non-U.S.
residents, addressed to each holder of any shares of Preferred Stock at the
address of such holder as shown on the books of the Corporation, (a) at least
20 days' prior written notice of the date on which the books of the Corporation
shall close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least 20 days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause (a) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled thereto
and such notice in accordance with the foregoing clause (b) shall also specify
the date on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
6J. Stock to be Reserved. The Corporation will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the conversion of Series F Convertible Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Series F Convertible Preferred
Stock. The Corporation covenants that all shares of Common Stock which shall be
so issued shall be duly and validly issued and fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof, and,
without limiting the generality of the foregoing, the Corporation covenants
that it will from time to time take all such action as may be requisite to
assure that the par value per share of the Common Stock is at all times equal
to or less than the Series F Conversion Price in effect at the time. The
Corporation will take all such action as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any
applicable law or regulation, or of any requirement of any national securities
exchange upon which the Common Stock may be listed.
6K. No Reissuance of Series F Convertible Preferred Stock. Shares of
Series F Convertible Preferred Stock which are converted into shares of Common
Stock as provided
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herein shall not be reissued.
6L. Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of Series F Convertible Preferred Stock shall be made without
charge to the holders thereof for any issuance tax in respect thereof; provided
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Series F Convertible
Preferred Stock which is being converted.
6M. Closing of Books. The Corporation will at no time close its transfer
books against the transfer of any Series F Convertible Preferred Stock or of
any shares of Common Stock issued or issuable upon the conversion of any shares
of Series F Convertible Preferred Stock in any manner which interferes with the
timely conversion of such Preferred Stock, except as may otherwise be required
to comply with applicable securities laws.
6N. Definition of Common Stock. As used in this paragraph 6, the term
"Common Stock" shall mean and include the Corporation's authorized Common Stock,
par value $.01 per share, as constituted on the date of filing of these terms
of the Series F Convertible Preferred Stock, and shall also include any capital
stock of any class of the Corporation thereafter authorized which shall neither
be limited to a fixed sum or percentage of par value in respect of the rights
of the holders thereof to participate in dividends nor entitled to a preference
in the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the shares of
Common Stock receivable upon conversion of shares of Series F Convertible
Preferred Stock shall include only shares designated as Common Stock of the
Corporation on the date of filing of this instrument, or in case of any
reorganization or reclassification of the outstanding shares thereof, the
stock, securities or assets provided for in subparagraph 6G.
6O. Mandatory Conversion. All outstanding shares of Series F Convertible
Preferred Stock shall automatically convert to shares of Common Stock if at any
time the Corporation shall effect a public offering of shares of Common Stock
(any such offering, regardless of compliance with subsections (i), (ii) and
(iii) herein, being referred to as a "Public Offering"), provided (i) the
aggregate gross proceeds from such offering to the Corporation shall be at least
$20,000,000, (ii) the price paid by the public for such shares shall be at
least (x) 2.0 times the then Series B Conversion Price if the Public Offering
occurs prior to the 18 month anniversary of the Series B Preferred Stock Issue
Date or (y) 3.0 times the then Series B Conversion Price if the Public Offering
occurs on or after the 18 month anniversary of the Series B Preferred Stock
Issue Date and (iii) the offering is a firm commitment underwritten Public
Offering, and such automatic conversion shall be effective upon the closing of
the sale of such shares by the Corporation pursuant to such Public Offering.
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7. Redemption. The shares of Series F Convertible Preferred Stock shall
be redeemed as follows:
7A. Optional Redemption. The Corporation shall not have the right to
call or redeem at any time all or any shares of Series F Convertible Preferred
Stock. With the approval of the holders of 66% of the then outstanding shares of
Series F Convertible Preferred Stock, one or more holders of shares of Series F
Convertible Preferred Stock may, by giving notice (the "Notice") to the
Corporation, require the Corporation to redeem any or all of the outstanding
Series F Convertible Preferred Stock on the Redemption Date (as defined below).
Upon receipt of the Notice, the Corporation will so notify all other persons
holding Series F Preferred Convertible Stock. After receipt of the Notice, the
Corporation shall fix the first date for redemption, which shall be the date
specified in the Notice, being any date on or after the earlier of (i) the fifth
(5th) anniversary of the Series B Preferred Stock Issue Date and (ii) the date
which is the day before the Corporation is due to redeem any outstanding Junior
Securities (the "Redemption Date"). All holders of the Series F Convertible
Preferred Stock shall deliver to the Corporation during regular business hours,
at the office of any transfer agent of the Corporation for the Series F
Convertible Preferred Stock, or at the principal office of the Corporation or at
such other place as may be designated by the Corporation, the certificate or
certificates for the Series F Convertible Preferred Stock, duly endorsed for
transfer to the Corporation (if required by it) on or before the Redemption
Date.
7B. Redemption Price and Payment. The Series F Convertible Preferred
Stock to be redeemed on the Redemption Date shall be redeemed by paying for each
share in cash an amount equal to the Series F Redemption Price (as defined
below). For purposes of this paragraph 7B, the "Series F Redemption Price" shall
mean $15.22 per share, plus an amount equal to all dividends accrued and unpaid
on each such share; provided, however, that if the Redemption Date is after the
fifth (5th) anniversary of the Series B Preferred Stock Issue Date, then the
"Series F Redemption Price" shall mean the greater of (i) $15.22 per share, plus
an amount equal to all dividends accrued and unpaid on each such share and (ii)
the Fair Market Value (as defined below) of the Common Stock underlying the
Series F Convertible Preferred Stock. Such payment shall be made in full on the
Redemption Date to the holders entitled thereto. For purposes of this paragraph
7B, "Fair Market Value" of the Common Stock shall mean the average of the fair
market valuations of the Common Stock performed by two investment banks (the
"Initial Appraisers"), one of which shall be retained by the Corporation and one
of which shall be retained by the holders of a majority in interest of the
Series F Convertible Preferred Stock. Subject to the following sentence, such
determination by the Initial Appraisers of Fair Market Value shall be final and
binding on the parties. If the higher of the two valuations of the Initial
Appraisers is equal to or greater than 110% of the lower valuation, the
Corporation and holders of a majority in interest of the Series F Convertible
Preferred Stock shall select a third investment bank (the "Final Appraiser"),
which shall be mutually agreeable to the Corporation and the holders of a
majority in interest of the Series F Convertible Preferred Stock. The fair
market value of the Common Stock as determined by the Final Appraiser shall be
final and binding on the parties. The fees and expenses of the Initial
Appraisers shall be paid for by the party selecting such Initial Appraiser and
the fees and expenses of the Final Appraiser shall be shared by the Corporation
and the holders of the Series F Convertible Preferred Stock.
7C. Redemption Mechanics. At least 15 but not more than 35 days prior
to the Redemption Date, written notice (the "Redemption Notice") shall be given
by the
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Corporation by mail, postage prepaid, or by facsimile transmission to non-U.S.
residents, to each holder of record (at the close of business on the business
day next preceding the day on which the Redemption Notice is given) of shares
of Series F Convertible Preferred Stock notifying such holder of the redemption
and specifying the Series F Redemption Price, the Redemption Date and the place
where said Series F Redemption Price shall be payable. The Redemption Notice
shall be addressed to each holder at his address as shown by the records of the
Corporation. From and after the close of business on the Redemption Date,
unless there shall have been a default in the payment of the Series F
Redemption Price, all rights of holders of shares of Series F Convertible
Preferred Stock (except the right to receive the Series F Redemption Price)
shall cease with respect to such shares, and such shares shall not thereafter
be transferred on the books of the Corporation or be deemed to be outstanding
for any purpose whatsoever. If the funds of the Corporation legally available
for redemption of shares of Series F Convertible Preferred Stock on the
Redemption Date are insufficient to redeem the total number of outstanding
shares of Series F Convertible Preferred Stock to be redeemed on such
Redemption Date, the holders of shares of Series F Convertible Preferred Stock
shall share ratably in any funds legally available for redemption of such
shares according to the respective amounts which would be payable with respect
to the full number of shares owned by them if all such outstanding shares were
redeemed in full. The shares of Series F Convertible Preferred Stock not
redeemed shall remain outstanding and entitled to all rights and preferences
provided herein; provided, however, that such unredeemed shares shall be
entitled to receive interest accruing daily with respect to the applicable
Series F Redemption Price at the rate of 15% per annum, payable quarterly in
arrears. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of such shares of Series F Convertible
Preferred Stock, such funds will be used, at the end of the next succeeding
fiscal quarter, to redeem the balance of such shares, or such portion thereof
for which funds are then legally available, on the basis set forth above.
7D. Redeemed or Otherwise Acquired Shares to be Retired. Any shares
of Series F Convertible Preferred Stock redeemed pursuant to this paragraph 7
or otherwise acquired by the Corporation in any manner whatsoever shall be
canceled and shall not under any circumstances be reissued; and the
Corporation may from time to time take such appropriate corporate action as may
be necessary to reduce accordingly the number of authorized shares of Series F
Convertible Preferred Stock.
8. Amendments. Except where the vote or written consent of the holders of
a different number of shares of the Corporation is required by these terms of
the Series F Convertible Preferred Stock, by law or by the Certificate of
Incorporation, no provision of these terms of the Series F Convertible
Preferred Stock may be amended, modified or waived without the written consent
or affirmative vote of the holders of at least 60% of the then outstanding
shares of Series F Convertible Preferred Stock.
9. Definitions. As used herein, the following terms shall have the
following meanings:
(1) The term "Founders" shall mean F. Thomson Leighton, Daniel
Lewin, Jonathan Seelig, Randall Kaplan, Gilbert Friesen and David Karger.
(2) The term "Preferred Stock Issue Date" shall mean the date on
which the Series F Convertible Preferred Stock is originally issued by the
Corporation pursuant to the
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Purchase Agreement.
(3) The term "Purchase Agreement" shall mean the Series F Convertible
Preferred Stock Purchase Agreement dated as of September 20, 1999 between the
Corporation and Microsoft Corporation, as in effect on September 20, 1999.
(4) The term the "Plan" shall mean the Corporation's Second Amended
and Restated 1998 Stock Incentive Plan.
(5) The term "Reserved Employee Shares" shall mean shares of Common
Stock reserved by the Corporation pursuant to the Plan from time to time for (i)
the sale of shares of Common Stock to employees, consultants or non-employee
directors (other than representatives of the holders of Preferred Stock) of the
Corporation or (ii) the exercise of options to purchase Common Stock to
employees, consultants or non-employee directors (other than representatives of
the holders of Preferred Stock) of the Corporation, not to exceed in the
aggregate 28,755,600 shares of Common Stock for both clauses (i) and (ii), with
such number including 4,264,200 shares issued or subject to options granted
prior to the date of the initial issuance of the Series A Convertible Preferred
Stock (the "Option Shares") (appropriately adjusted to reflect an event
described in paragraph 6F hereof); provided that, such number of such shares
subject to the Plan shall be increased by up to 15,118,452 additional shares of
Common Stock (appropriately adjusted to reflect an event described in paragraph
6F hereof) (collectively, the "Founders' Shares") upon the repurchase of such
Founders' Shares by the Corporation from the Founders pursuant to contractual
rights held by the Corporation. The foregoing numbers of Reserved Employee
Shares may be increased by the affirmative vote or written consent of a majority
of the directors designated solely by the holders of Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock or the affirmative vote
or written consent of the holders of at least 50% of the then outstanding shares
of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series D Convertible Preferred Stock,
Series E Convertible Preferred Stock, Series F Convertible Preferred Stock,
voting together as a single class on a Common Stock equivalent basis.
(6) The term "Series B Conversion Price" shall mean the conversion
price of the Series B Convertible Preferred Stock from time to time under the
terms of the designation of the Series B Convertible Preferred Stock of the
Corporation.
(7) The term "Series B Preferred Stock Issue Date" shall mean
April 16, 1999.
(8) The term "series B Purchase Agreement" shall mean the Series B
Convertible Preferred Stock and Series C Convertible Preferred Stock Purchase
Agreement dated as of April 16, 1999 among the Corporation and the purchasers
named therein.
(9) The term "Subsidiary" or "Subsidiaries" shall mean any
corporation, partnership, trust or other entity of which the Corporation and/or
any of its other subsidiaries directly or indirectly owns at the time a
majority of the outstanding shares of every class of equity security of such
corporation, partnership, trust or other entity.
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<PAGE> 1
Exhibit 4.2
FOURTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
September 20, 1999
To each of the Purchasers (as defined herein)
and the Founders (as defined herein)
Dear Sirs:
This will confirm that in consideration of the agreement by the Series F
Purchaser (as defined herein) on the date hereof to purchase shares (the "SERIES
F PREFERRED SHARES") of Series F Convertible Preferred Stock, par value $.01 per
share, of Akamai Technologies, Inc., a Delaware corporation (the "COMPANY"),
pursuant to the Series F Convertible Preferred Stock Purchase Agreement of even
date herewith (the "SERIES F PURCHASE AGREEMENT") between the Company and the
Series F Purchaser, and as an inducement to the Series F Purchaser to consummate
the transactions contemplated by the Series F Purchase Agreement, the Company
covenants and agrees with each of you as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"COMMON STOCK" shall mean the Common Stock, par value $.01 per share,
of the Company, as constituted as of the date of this Agreement.
"CONVERSION SHARES" shall mean the Series A Conversion Shares, the
Series B Conversion Shares, the Series C Conversion Shares, the Series D
Conversion Shares, the Series E Conversion Shares and the Series F Conversion
Shares.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"FOUNDERS" shall mean F. Thomson Leighton, Daniel Lewin, Jonathan
Seelig, Randall Kaplan, David Karger, Gilbert Friesen, Preetish Nijahwan, Marco
Greenberg, Paul Sagan, the F. Thomson Leighton 1998 Irrevocable Trust, the
Daniel Lewin 1998 Irrevocable Trust, and the Arthur H. Bilger 1996 Family Trust.
<PAGE> 2
"FOUNDERS' REGISTRABLE SHARES" shall mean up to 32,281,200 shares of
Common Stock held by the Founders.
"ORIGINAL RESTRICTED STOCK" shall mean (1) the Series A Conversion
Shares, excluding Series A Conversion Shares which have been (a) registered
under the Securities Act pursuant to an effective registration statement filed
thereunder and disposed of in accordance with the registration statement
covering them or (b) publicly sold pursuant to Rule 144 under the Securities
Act, and (2) for purposes of Sections 2, 6 and 11(d) hereof, the Founders'
Registrable Shares, but excluding shares of Common Stock which have been (a)
registered under the Securities Act pursuant to an effective registration
statement filed thereunder and disposed of in accordance with the registration
statement covering them or (b) publicly sold pursuant to Rule 144 under the
Securities Act.
"PREFERRED SHARES" shall mean the Series A Preferred Shares, the
Series B Preferred Shares, the Series C Preferred Shares, the Series D Preferred
Shares, the Series E Preferred Shares and the Series F Preferred Shares.
"PRIOR AGREEMENT" shall mean the Third Amended and Restated
Registration Rights Agreement dated August 6, 1999 among the Company, the
Founders, the Series A Purchasers, the Series B Purchasers, the Series D
Purchaser and the Series E Purchaser.
"PURCHASERS" shall mean the Series A Purchasers, the Series B
Purchasers, the Series D Purchaser, the Series E Purchaser and the Series F
Purchaser.
"RESTRICTED STOCK" shall mean Original Restricted Stock and/or Series
B/C/D/E/F Restricted Stock.
"REGISTRATION EXPENSES" shall mean the expenses so described in
Section 6.
"SECURITIES ACT" shall mean the Securities Act of 1933 or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"SECURITIES LAWS" shall mean the Securities Act and all applicable
state securities laws, rules and regulations in effect at the time.
"SELLING EXPENSES" shall mean the expenses so described in Section 6.
"SERIES A CONVERSION SHARES" shall mean shares of Common Stock issued
or issuable upon conversion of the Series A Preferred Shares, and any shares of
capital stock received in respect thereof.
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<PAGE> 3
"SERIES A PREFERRED SHARES" shall mean the shares of Series A
Convertible Preferred Stock, $0.01 par value per share, of the Company purchased
by the Series A Purchasers pursuant to the Series A Purchase Agreement.
"SERIES A PURCHASE AGREEMENT" shall mean the Series A Convertible
Preferred Stock Purchase Agreement dated November 23, 1998, as amended December
8, 1998, among the Company and the Series A Purchasers.
"SERIES A PURCHASERS" shall mean those persons listed on Exhibit 1.01
to the Series A Purchase Agreement.
"SERIES B CONVERSION SHARES" shall mean shares of Common Stock issued
or issuable upon conversion of the Series B Preferred Shares, and any shares of
capital stock received in respect thereof.
"SERIES B PREFERRED SHARES" shall mean any shares of Series B
Convertible Preferred Stock, $0.01 par value per share of the Company purchased
by the Series B Purchasers pursuant to the Series B Purchase Agreement.
"SERIES B PURCHASE AGREEMENT" shall mean the Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock Purchase Agreement
dated as of April 16, 1999 among the Company and the Series B Purchasers.
"SERIES B PURCHASERS" shall mean those persons listed on EXHIBIT 1.01
to the Series B Purchase Agreement.
"SERIES B/C/D/E/F RESTRICTED STOCK" shall mean (i) the Series B
Conversion Shares, excluding Series B Conversion Shares which have been (a)
registered under the Securities Act pursuant to an effective registration
statement filed thereunder and disposed of in accordance with the registration
statement covering them or (b) publicly sold pursuant to Rule 144 under the
Securities Act, (ii) the Series C Conversion Shares, excluding Series C
Conversion Shares which have been (a) registered under the Securities Act
pursuant to an effective registration statement filed thereunder and disposed of
in accordance with the registration statement covering them or (b) publicly sold
pursuant to Rule 144 under the Securities Act, (iii) the Series D Conversion
Shares, excluding Series D Conversion Shares which have been (a) registered
under the Securities Act pursuant to an effective registration statement filed
thereunder and disposed of in accordance with the registration statement
covering them or (b) publicly sold pursuant to Rule 144 under the Securities
Act, (iv) the Series E Conversion Shares, excluding Series E Conversion Shares
which have been (a) registered under the Securities Act pursuant to an effective
registration statement filed thereunder and disposed of in accordance with the
registration statement covering them or (b) publicly sold pursuant to Rule 144
under the Securities Act, and (v) the Series F Conversion Shares, excluding
Series F Conversion Shares which have been (a) registered under the Securities
Act pursuant to an effective registration statement filed thereunder and
disposed of in accordance
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<PAGE> 4
with the registration statement covering them or (b) publicly sold pursuant to
Rule 144 under the Securities Act.
"SERIES C CONVERSION SHARES" shall mean shares of Common Stock issued
or issuable upon conversion of the Series C Preferred Shares, and any shares of
capital stock received in respect thereof.
"SERIES C PREFERRED SHARES" shall mean any shares of Series C
Convertible Preferred Stock, $0.01 par value per share, of the Company that are
purchased by the Series B Purchasers pursuant to the Series B Purchase
Agreement.
"SERIES D CONVERSION SHARES" shall mean any shares of Common Stock
issued or issuable upon conversion of the Series D Preferred Shares, and any
shares of capital stock received in respect thereof.
"SERIES D PREFERRED SHARES" shall mean any shares of Series D
Convertible Preferred Stock, $0.01 par value per share, of the Company that are
purchased by the Series D Purchaser pursuant to the Series D Purchase Agreement.
"SERIES D PURCHASE AGREEMENT" shall mean the Series D Convertible
Preferred Stock Purchase Agreement dated as of June 21, 1999 among the Company
and the Series D Purchaser.
"SERIES D PURCHASER" shall mean Apple Computer Inc. Ltd.
"SERIES E CONVERSION SHARES" shall mean any shares of Common Stock
issued or issuable upon conversion of the Series E Preferred Shares, and any
shares of capital stock received in respect thereof.
"SERIES E PREFERRED SHARES" shall mean any shares of Series E
Convertible Preferred Stock, $.01 par value per share, of the Company that are
purchased by the Series E. Purchaser pursuant to the Series E. Purchase
Agreement.
"SERIES E PURCHASE AGREEMENT" shall mean the Series E Convertible
Preferred Stock, Purchase Agreement dated as of August 6, 1999 among the Company
and the Series E Purchase.
"SERIES E PURCHASER" shall mean Cisco Systems, Inc.
"SERIES F CONVERSION SHARES" shall mean any shares of Common Stock
issued or issuable upon conversion of the Series F Preferred Shares, and any
shares of capital stock received in respect thereof.
"SERIES F PURCHASER" shall mean Microsoft Corporation.
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<PAGE> 5
For all purposes of this Agreement, each holder of Restricted Stock
shall be treated (i) as a "PURCHASER" solely with respect to shares of
Conversion Shares he or it holds as such, and/or (ii) as a "FOUNDER" solely with
respect to shares of Common Stock he holds as such; and this Agreement shall be
interpreted accordingly.
2. REQUIRED REGISTRATION.
(a) On or after October 30, 2003, (i) the holders of Original
Restricted Stock (excluding the Founders) constituting at least a majority in
interest of the total shares of Series A Preferred Stock then outstanding and/or
(ii) the holders of Original Restricted Stock (excluding the Series A
Purchasers) constituting at least seventy-five percent (75%) of the Common Stock
then outstanding may request the Company to register under the Securities Act
all or any portion of the shares of Original Restricted Stock held by such
requesting holder or holders for sale in the manner specified in such notice
(subject to the limitations set forth in subsection 2(g) hereof), provided that
the aggregate price to the public of such offering would exceed $5,000,000.
(b) On or after April 16, 2002, the holders of Series B/C/D/E/F
Restricted Stock constituting at least 30% in interest of the total shares of
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock then outstanding may
request the Company to register under the Securities Act all or any portion of
the shares of Series B/C/D/E/F Restricted Stock held by such requesting holder
or holders for sale in the manner specified in such notice (subject to the
limitations set forth in subsection 2(g) hereof), PROVIDED that the aggregate
price to the public of such offering would exceed $5,000,000.
(c) The only securities which the Company shall be required to
register pursuant to this Section 2 shall be shares of Common Stock; provided,
however, that, in any underwritten public offering contemplated by this Section
2 or Sections 3 and 4, the holders of Preferred Shares shall be entitled to sell
such Preferred Shares to the underwriters for conversion and sale of the shares
of Common Stock issued upon conversion thereof. Notwithstanding anything to the
contrary contained herein, the Company shall not be required to effect a
registration of shares of its Common Stock pursuant to this Section 2 within 180
days after the effective date of a registration statement filed by the Company
covering a firm commitment underwritten public offering in which the holders of
Restricted Stock shall have been entitled to join pursuant to Sections 3 or 4.
(d) Following receipt of any notice under subsection 2(a), the
Company shall immediately notify all holders of Original Restricted Stock
(including the Founders) from whom notice has not been received and such holders
shall then be entitled within 30 days thereafter to request the Company to
include in the requested registration all or any portion of their shares of
Original Restricted Stock. The Company shall use its best efforts to register
under the Securities Act, for public sale in accordance with the method of
disposition described in subsection 2(a), the number of shares of Original
Restricted Stock specified in such notice (and in all notices received by the
Company from other holders within 30 days after the
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<PAGE> 6
giving of such notice by the Company). The Company shall be obligated to
register Original Restricted Stock pursuant to subsection 2(a) on two occasions
only as follows: (i) one at the request of Series A Purchasers holding Original
Restricted Stock who have so requested pursuant to clause (i) of subsection 2(a)
and (ii) one at the request of holders of Common Stock who have so requested
pursuant to clause (ii) of subsection 2(a); PROVIDED, HOWEVER, that such
obligation shall be deemed satisfied only when a registration statement,
covering all of the offered shares of Original Restricted Stock specified in
notices received as aforesaid for sale in accordance with the method of
disposition specified by the requesting holders, shall have become effective or
if such registration statement has been withdrawn prior to the consummation of
the offering at the request of the Series A Purchasers (other than as a result
of a material adverse change in the business or financial condition of the
Company) and, if such method of disposition is a firm commitment underwritten
public offering, all such shares shall have been sold pursuant thereto.
(e) Following receipt of any notice under subsection 2(b), the
Company shall immediately notify all holders of Series B/C/D/E/F Restricted
Stock from whom notice has not been received and such holders shall then be
entitled within 30 days thereafter to request the Company to include in the
requested registration all or any portion of their shares of Series B/C/D/E/F
Restricted Stock. The Company shall use its best efforts to register under the
Securities Act, for public sale in accordance with the method of disposition
described in subsection 2(b), the number of shares of Series B/C/D/E/F
Restricted Stock specified in such notice (and in all notices received by the
Company from other holders within 30 days after the giving of such notice by the
Company). The Company shall be obligated to register Series B/C/D/E/F Restricted
Stock pursuant to subsection 2(b) on three occasions only; provided, however,
that such obligation shall be deemed satisfied only when a registration
statement, covering all of the offered shares of Series B/C/D/E/F Restricted
Stock specified in notices received as aforesaid for sale in accordance with the
method of disposition specified by the requesting holders, shall have become
effective or if such registration statement has been withdrawn prior to the
consummation of the offering at the request of the Series B Purchasers, the
Series D Purchaser, the Series E Purchaser or the Series F Purchaser (other than
as a result of a material adverse change in the business or financial condition
of the Company) and, if such method of disposition is a firm commitment
underwritten public offering, all such shares shall have been sold pursuant
thereto, or, if such method of disposition includes the resale of the shares
from time to time at prevailing market prices, such registration statement has
remained effective and available for resale for at least 120 days.
(f) The Company (or at the option of the Company, the holders of
Common Stock) shall be entitled to include in any registration statement
referred to in this Section 2, for sale in accordance with the method of
disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account or the account of such other holders,
except as and to the extent that, in the opinion of the managing underwriter (if
such method of disposition shall be an underwritten public offering), such
inclusion would adversely affect the marketing of the Restricted Stock to be
sold subject to the limitations set forth in subsection 2(g) hereof). Except for
registration statements on Form S-4, S-8 or any successor thereto, the Company
will not file with the Commission any other registration statement with respect
to its Common Stock, whether for its own account or that of other stockholders,
from the
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<PAGE> 7
date of receipt of a notice from requesting holders pursuant to this Section 2
until the completion of the period of distribution of the registration
contemplated thereby.
(g) If, in the opinion of the managing underwriter, the inclusion of
all of the Restricted Stock requested to be registered under this Section would
adversely affect the marketing of such shares, then, (i) in the case of a
registration requested pursuant to clause (i) of subsection 2(a), shares to be
sold by the Company or other holders of Common Stock (including the Founders)
shall first be excluded, and then if necessary, shares of Original Restricted
Stock to be sold by the Series A Purchasers shall be excluded in such manner
that the shares to be sold shall be allocated among the Series A Purchasers
selling Original Restricted Stock pro rata based on their ownership of Original
Restricted Stock, (ii) in the case of a registration requested pursuant to
clause (ii) of subsection 2(a), shares to be sold by the Company or any other
holders of Common Stock (excluding the Founders and including any shares of
Original Restricted Stock held by the Series A Purchasers) shall first be
excluded, and then if necessary, shares of Original Restricted Stock to be sold
by the Founders shall be excluded in such manner that the shares to be sold
shall be allocated among the Founders selling Original Restricted Stock pro rata
based on their ownership of Original Restricted Stock, and (iii) in the case of
a registration requested pursuant to subsection 2(b), shares to be sold by the
Company or other holders of Common Stock shall first be excluded, and then if
necessary, shares of Series B/C/D/E/F Restricted Stock to be sold by the Series
B Purchasers, the Series D Purchaser, the Series E Purchaser and the Series F
Purchaser shall be excluded in such a manner that the shares to be sold shall be
allocated among the Series B Purchasers, the Series D Purchaser, the Series E
Purchaser and the Series F Purchaser selling Series B/C/D/E/F Restricted Stock
pro rata based on their ownership of Series B/C/D/E/F Restricted Stock;
provided, however, that in any registration in which both the Series A
Purchasers and Founders shall have requested registration pursuant to both
clauses (i) and (ii) of subsection 2(a), then shares to be sold by the Company
or other holders of Common Stock (including the Founders) shall first be
excluded, and then if necessary, shares of Original Restricted Stock to be sold
by the Series A Purchasers shall be excluded in such manner that the shares to
be sold shall be allocated among the Series A Purchasers selling Original
Restricted Stock pro rata based on their ownership of Original Restricted Stock.
3. INCIDENTAL REGISTRATION. If, following the Company's first
registered public offering of its Common Stock, the Company at any time (other
than pursuant to Section 2 or Section 4) proposes to register any of its
securities under the Securities Act for sale to the public, whether for its own
account only or for its own account and for the account of other security
holders (except with respect to registration statements on Forms S-4, S-8 or
another form not available for registering the Restricted Stock for sale to the
public), each such time it will give written notice to all Purchasers holding
outstanding Restricted Stock of its intention so to do. Upon the written request
of any such holder received by the Company within 30 days after the giving of
any such notice by the Company to register at least 900,000 shares
(appropriately adjusted for any of the events specified in Section 8 herein) of
its Restricted Stock, the Company will use its best efforts to cause the
Restricted Stock as to which registration shall have been so requested to be
included in the securities to be covered by the registration statement proposed
to be filed by the Company, all to the extent requisite to permit the sale or
other disposition by the
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<PAGE> 8
holder (in accordance with such written request) of such Restricted Stock so
registered. In the event that any registration pursuant to this Section 3 shall
be, in whole or in part, an underwritten public offering of Common Stock, the
number of shares of Restricted Stock to be included in such an underwriting may
be reduced (pro rata among the requesting holders based upon the number of
shares of Restricted Stock held by such requesting holders) if and to the extent
that the managing underwriter shall be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein, but in no event shall the amount of securities of the requesting
holders be reduced below thirty percent (30%) of the total amount to be included
in such offering; provided, however, that such number of shares of Restricted
Stock shall not be reduced if any shares are to be included in such underwriting
for the account of any person (including the Founders) other than the Company or
requesting Purchasers holding Restricted Stock. Notwithstanding the foregoing
provisions, the Company may withdraw any registration statement referred to in
this Section 3 without thereby incurring any liability to the holders of
Restricted Stock.
4. REGISTRATION ON FORM S-3.
(a) If at any time (i) a holder or holders of Restricted Stock then
outstanding request that the Company file a registration statement on Form S-3
or any successor thereto for a public offering of all or any portion of the
shares of Restricted Stock held by such requesting holder or holders, the
reasonably anticipated aggregate price to the public of which would exceed
$1,000,000, and (ii) the Company is a registrant entitled to use Form S-3 or any
successor thereto to register such shares, then the Company shall use its best
efforts to register under the Securities Act on Form S-3 or any successor
thereto, for public sale in accordance with the method of disposition specified
in such notice, the number of shares of Restricted Stock specified in such
notice. Whenever the Company is required by this Section 4 to use its best
efforts to effect the registration of Restricted Stock, each of the procedures
and requirements of Section 2 (including but not limited to the requirement that
the Company notify all holders of Restricted Stock from whom notice has not been
received and provide them with the opportunity to participate in the offering)
shall apply to such registration, PROVIDED, HOWEVER, that no more than two (2)
registrations on Form S-3 may be requested and obtained under this Section 4
within any twelve (12) month period preceding the date of such request.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Company's obligation under this Agreement to register Restricted
Stock under the Securities Act on registration statements ("REGISTRATION
STATEMENTS") may, upon the reasonable determination of the Board of Directors
made only once during any 12-month period, be suspended in the event and during
such period as unforeseen circumstances (including without limitation (i) an
underwritten primary offering by the Company (which includes no secondary
offering) if the Company is advised in writing by its underwriters that the
registration of the Restricted Stock would have a material adverse effect on the
Company's offering, or (ii) pending negotiations relating to, or consummation
of, a transaction or the occurrence of an event which would require additional
disclosure of material information by the Company in Registration Statements or
such other filings, as to which the Company has a bona fide business purpose for
preserving confidentiality or which renders the Company unable to comply with
the Commission's
8
<PAGE> 9
requirements) exist (such unforeseen circumstances being hereinafter referred to
as a "SUSPENSION EVENT") which would make it impractical or inadvisable for the
Company to file the Registration Statements or such other filings or to cause
such to become effective. Such suspension shall continue only for so long as
such event is continuing but in no event for a period longer than ninety (90)
days. The Company shall notify the Purchasers of the existence and nature of any
Suspension Event.
5. REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of Sections 2, 3 or 4 to use its best efforts to effect the
registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section 2,
shall be on Form S-1 or other form of general applicability satisfactory to the
managing underwriter selected as therein provided) with respect to such
securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and each such
amendment and supplement thereto (in each case including all exhibits) and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "BLUE SKY" laws
of such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter reasonably shall request;
PROVIDED, HOWEVER, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
9
<PAGE> 10
(f) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, and promptly prepare
and furnish to such seller a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Restricted Stock, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) if the offering is underwritten and at the request of any seller
of Restricted Stock, use its best efforts to furnish to such seller on the date
that Restricted Stock is delivered to the underwriters for sale pursuant to such
registration: (i) a copy of an opinion dated such date of counsel representing
the Company for the purposes of such registration, addressed to the underwriters
and to such seller, to such effect as reasonably may be requested by counsel for
the underwriters, and (ii) a letter dated such date from the independent public
accountants retained by the Company, addressed to the underwriters and to such
seller, stating that they are independent public accountants within the meaning
of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five business days
prior to the date of such letter) with respect to such registration as such
underwriters reasonably may request;
(h) make available for inspection by each seller of Restricted Stock,
any underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, reasonable access to all financial and other records, pertinent
corporate documents and properties of the Company, as such parties may
reasonably request, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement;
(i) cooperate with the selling holders of Restricted Stock and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Restricted Stock to be sold, such certificates to
be in such denominations and registered in such names as such holders or the
managing underwriters may request at least two business days prior to any sale
of Restricted Stock; and
(j) permit any holder of Restricted Stock which holder, in the sole
and exclusive judgment, exercised in good faith, of such holder, might be deemed
to be a controlling person of the Company, to participate in good faith in the
preparation of such registration or
10
<PAGE> 11
comparable statement and to require the insertion therein of material, furnished
to the Company in writing, which in the reasonable judgment of such holder and
its counsel should be included.
For purposes of Section 5(a) and 5(b) and of Section 2(f), the period
of distribution of Restricted Stock in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Restricted Stock in any other registration shall be deemed to extend until
the earlier of the sale of all Restricted Stock covered thereby and 180 days
after the effective date thereof.
In connection with each registration hereunder, the sellers of
Restricted Stock will furnish to the Company in writing such information
requested by the Company with respect to themselves and the proposed
distribution by them as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws and to make the
registration statement correct, accurate and complete in all respects with
respect to such sellers; provided, however, that this requirement shall not be
deemed to limit any disclosure obligation arising out of any seller's
relationship to the Company if one of such seller's agents or affiliates is an
officer, director or control person of the Company. In addition, the sellers
shall, if requested by the Company, execute such other agreements, which are
reasonably satisfactory to them and which shall contain such provisions as may
be customary and reasonable in order to accomplish the registration of the
Restricted Stock.
In connection with each registration pursuant to Sections 2, 3 or 4
covering an underwritten public offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
6. EXPENSES. All expenses incurred by the Company in complying with
Sections 2, 3 and 4, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "BLUE SKY" laws,
fees and expenses of one counsel for the selling holders of Restricted Stock in
connection with the registration of Restricted Stock (which counsel shall be
selected (i) by the Series A Purchasers selling Original Restricted Stock if
such registration is made pursuant to clause (i) of subsection 2(a), (ii) by the
Founders selling Original Restricted Stock if such registration is made pursuant
to clause (ii) of subsection 2(a), and (iii) by the holders of at least 30% in
interest of shares of Series B/C/D/E/F Restricted Stock if such registration is
made pursuant to subsection 2(b); PROVIDED, HOWEVER, if both the Series A
Purchasers and the Founders register shares of Original Restricted Stock
pursuant to subsection 2(a), such counsel shall be selected by the Series A
Purchasers, subject to approval by the Founders (which approval shall not be
unreasonably withheld)), fees of the National Association of Securities Dealers,
Inc., transfer taxes, fees of transfer agents and registrars, costs of any
insurance which might be obtained, but excluding any Selling Expenses, are
called "REGISTRATION EXPENSES". All underwriting discounts and selling
11
<PAGE> 12
commissions applicable to the sale of Restricted Stock and the fees and expenses
of more than one counsel for the selling holders of Restricted Stock in
connection with the registration of Restricted Stock are called "SELLING
EXPENSES".
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 2, 3 or 4. All Selling Expenses in
connection with each registration statement under Sections 2, 3 or 4 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
7. INDEMNIFICATION.
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 2, 3 or 4, the Company will
indemnify and hold harmless each holder of Restricted Stock, its officers and
directors, each underwriter of such Restricted Stock thereunder and each other
person, if any, who controls such seller or underwriter within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such holder, officer, director, underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Restricted Stock was registered under the Securities Act pursuant to Sections 2,
3 or 4, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, (ii) any blue sky application or other document
executed by the Company specifically for that purpose or based upon written
information furnished by the Company filed in any state or other jurisdiction in
order to qualify any or all of the Restricted Stock under the securities laws
thereof (any such application, document or information herein called a "BLUE SKY
APPLICATION"), (iii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (iv) any violation by the Company or its agents of any
rule or regulation promulgated under the Securities Act applicable to the
Company or its agents and relating to action or inaction required of the Company
in connection with such registration, or (v) any failure to register or qualify
the Restricted Stock in any state where the Company or its agents has
affirmatively undertaken or agreed in writing that the Company (the undertaking
of any underwriter chosen by the Company being attributed to the Company) will
undertake such registration or qualification on the seller's behalf (provided
that in such instance the Company shall not be so liable if it has undertaken
its best efforts to so register or qualify the Restricted Stock) and will
reimburse each such holder, and such officer and director, each such underwriter
and each such controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that the Company will not
be liable in any such case if and to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by any such seller, any such underwriter or any such
controlling person in writing specifically for use in such registration
statement or prospectus.
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<PAGE> 13
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 2, 3 or 4, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each other holder of
Restricted Stock, each underwriter and each person who controls any underwriter
within the meaning of the Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director,
other seller, underwriter or, controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Sections 2, 3 or 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or any Blue Sky Application or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company and each such officer, director, other seller,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, PROVIDED, HOWEVER, that such seller will be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such seller, as such, furnished
in writing to the Company by such seller specifically for use in such
registration statement or prospectus, and PROVIDED, FURTHER, HOWEVER, that the
liability of each seller hereunder shall be limited to the proportion of any
such loss, claim, damage, liability or expense which is equal to the proportion
that the public offering price of the shares sold by such seller under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds received
by such seller from the sale of Restricted Stock covered by such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 7 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 7 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 7 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of
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<PAGE> 14
investigation and of liaison with counsel so selected; PROVIDED, HOWEVER, that,
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that the interests of the indemnified party reasonably may be deemed to conflict
with the interests of the indemnifying party, the indemnified party shall have
the right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) The indemnities provided in this Section 7 shall survive the
transfer of any Restricted Stock by such holder.
8. CHANGES IN COMMON STOCK OR PREFERRED STOCK. If, and as often as, there
is any change in the Common Stock or the Preferred Shares by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock or
the Preferred Shares as so changed.
9. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration, at all times
after 90 days after any registration statement covering a public offering of
securities of the Company under the Securities Act shall have become effective,
the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as such holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Restricted Stock without
registration.
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Charter or By-laws
14
<PAGE> 15
of the Company or any provision of any indenture, agreement or other instrument
to which it or any of its properties or assets is bound, conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent the
indemnification provisions herein may be deemed not enforceable.
11. MISCELLANEOUS.
(a) TRANSFERS; ASSIGNS. All covenants and agreements contained in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
(including without limitation transferees of any Preferred Shares or Restricted
Stock), whether so expressed or not; PROVIDED, HOWEVER, that registration rights
conferred herein on the holders of Preferred Shares, Common Stock or Restricted
Stock shall only inure to the benefit of a transferee of Preferred Shares,
Common Stock or Restricted Stock if (i) there is transferred to such transferee
at least 600,000 shares of such stock (appropriately adjusted for any of the
events specified in Section 8 hereof) to the direct or indirect transferor of
such transferee or (ii) such transferee is a Qualified Transferee (as such term
is defined in that certain Fourth Amended and Restated Stockholders' Agreement
by and among the Company, the Purchasers and the Founders (the "STOCKHOLDERS'
AGREEMENT")) and (iii), that such transferee executes a writing agreeing to be
bound by the provisions of this Agreement and the Stockholders' Agreement (to
the extent the same remains in effect).
(b) NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage prepaid, or telexed, in the case of
non-U.S. residents, addressed as follows:
if to the Company or any other party hereto, at the address of such
party and its counsel set forth in the Series A Purchase Agreement, Series B
Purchase Agreement, the Series D Purchase Agreement, the Series E Purchase
Agreement, the Series F Purchase Agreement or in the Stockholders' Agreement
with a copy to the Company's counsel as indicated in the Series A Purchase
Agreement;
if to any subsequent holder of Preferred Shares or Restricted Stock,
to it at such address as may have been furnished to the Company in writing by
such holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Preferred Shares
or Restricted Stock) or to the holders of Preferred Shares or Restricted Stock
(in the case of the Company) in accordance with the provisions of this
paragraph.
15
<PAGE> 16
(c) GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the General Corporation Law of the State of
Delaware as to matters within the scope thereof, and as to all other matters
shall be governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts.
(d) AMENDMENTS; MODIFICATIONS. This Agreement may not be amended or
modified, and no provision hereof may be waived, without the written consent of
the Company and the holders of (i) at least 50% of the Founders' Registrable
Shares, (ii) at least 50% of the Conversion Shares, and (iii) at least 60% of
the outstanding shares of Series B/C/D Restricted Stock; provided, however, that
any amendment, modification or waiver that would directly or indirectly impair
or adversely affect the rights of the holders of Series B/C/D/E/F Restricted
Stock under, or the ability of such holders to exercise their rights under,
Sections 2 and 3 of this Agreement, shall not be effective without the written
consent of the holders of at least 50% of the outstanding shares of Series
B/C/D/E/F Restricted Stock. Notwithstanding the foregoing, no amendment,
modification or waiver approved in accordance herewith shall be effective if and
to the extent such amendment, modification or waiver directly or indirectly
grants to the holders of any type of Restricted Stock any rights more favorable
than any rights granted hereunder to the holders of any other type of Restricted
Stock or otherwise treats the holders of any type of Restricted Stock
differently than the holders of any other type of Restricted Stock. Any
amendment, modification or waiver to this Section 11(d) shall require the
written consent of the holders of (i) at least 50% of the Founders' Registrable
Shares, (ii) at least 50% of the Conversion Shares, (iii) at least 60% of the
outstanding shares of Series B/C/D Restricted Stock, and (iv) at least 50% of
the outstanding shares of Series B/C/D/E/F Restricted Stock.
(e) COUNTERPART SIGNATURES. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) TERM. The obligations of the Company to register shares of
Restricted Stock under Sections 2, 3 or 4 shall terminate five years after
completion of a Qualified Public Offering (as defined in Section 6.01 of the
Series F Purchase Agreement).
(g) LOCK-UP AGREEMENT. If requested in writing by the underwriters
for the initial underwritten public offering of securities of the Company, each
holder of Restricted Stock who is a party to this Agreement shall agree not to
sell publicly any shares of Restricted Stock or any other shares of Common Stock
(other than shares of Restricted Stock or other shares of Common Stock being
registered in such offering), without the consent of such underwriters, for a
period of not more than 180 days following the effective date of the
registration statement relating to such offering; PROVIDED, HOWEVER, that all
(i) persons entitled to registration rights with respect to shares of Common
Stock who are not parties to this Agreement, (ii) executive officers, (iii)
directors and (iv) employees who hold, or have been awarded options to purchase,
an aggregate of up to 720,000 shares of Common Stock of the Company, shall also
have agreed not to sell publicly their shares of Common Stock under the
circumstances and pursuant to the terms set forth in this Section 11(g).
16
<PAGE> 17
(h) OTHER REGISTRATIONS. The Company shall not grant to any third
party any registration rights comparable to or more favorable than any of those
contained herein, so long as any of the registration rights under this Agreement
remains in effect.
(i) SEVERABILITY. If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
(j) AMENDMENT OF PRIOR AGREEMENT. The Company, the Founders and the
Series A Purchasers, the Series B Purchasers, the Series D Purchaser and the
Series E Purchaser (including the holders of at least (i) 50% of the Founders'
Registrable Shares, (ii) 50% of the Conversion Shares, and (iii) 60% of the
outstanding shares of Series B/C/D Restricted Stock (as such terms are defined
in the Prior Agreement)) hereby agree pursuant to Section 11(d) of the Prior
Agreement that the Prior Agreement is hereby amended and restated in the form of
this Agreement and is of no further force or effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 18
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter, whereupon this Agreement shall be a
binding agreement between the Company and you.
Very truly yours,
AKAMAI TECHNOLOGIES, INC.
/s/ Paul Sagan
By:____________________________
Name: Paul Sagan
Title: President
AGREED TO AND ACCEPTED as of the date
first above written.
FOUNDERS:
/s/ Daniel Lewin
______________________________________________
Daniel Lewin
/s/ F. Thomson Leighton
______________________________________________
F. Thomson Leighton
______________________________________________
Jonathan Seelig
_______________________________________
Randall Kaplan
/s/ Preetish Nijhawan
________________________________
Preetish Nijhawan
______________________________________
Marco Greenberg
18
<PAGE> 19
___________________________
David Karger
______________________________________________
Gilbert B. Friesen
/s/ Paul Sagan
______________________________________
Paul Sagan
F. Thomson Leighton 1998 Irrevocable Trust
By:___________________________________________
Print Name:___________________________________
Title:________________________________________
Daniel Lewin 1998 Irrevocable Trust
By:___________________________________
Print Name:___________________________
Title:________________________________
Arthur H. Bilger 1996 Family Trust
By:___________________________________
Print Name:___________________________
Title:________________________________
19
<PAGE> 20
SERIES A PURCHASERS:
BATTERY VENTURES IV, L.P.
By: Battery Partners IV, LLC
By: /s/ Todd A. Dagres
-----------------------------------
Member Manager
BATTERY INVESTMENT PARTNERS IV, LLC
By: /s/ Todd A. Dagres
-----------------------------------
Member Manager
ADASE PARTNERS, L.P.
By: /s/ Arthur Bilger
-----------------------------------
Print Name: Arthur Bilger
---------------------------
Title:
--------------------------------
/s/ Paul Sagan
- --------------------------------------
Paul Sagan
David Allan Kaplan Revocable Trust Dated
December 19, 1980
By:
-----------------------------------
Print Name:
---------------------------
Title:
--------------------------------
- --------------------------------------
Jonathan Seelig
20
<PAGE> 21
______________________________________
Michael Seelig
______________________________________
Julie Seelig
______________________________________
Gilbert B. Friesen
Ehrenkranz & Ehrenkranz LLP
By:___________________________________
Print Name:___________________________
Title:________________________________
Peter Morton Lifetime Trust
By:___________________________________
Print Name:___________________________
Title:________________________________
______________________________________
Brian T. Bedol
21
<PAGE> 22
Richard Donner & Lauren Shuler Donner as
trustees of the R&L Donner Trust under
the amended and restated trust agreement
dated 12/15/95
By:
-----------------------------------
Print Name:___________________________
Title:________________________________
Straight Arrow Publishers Company, L.P.
By:
-----------------------------------
Print Name:
---------------------------
Title:
--------------------------------
- --------------------------------------
Randall Kaplan
/s/ Earl P. Galleher III
- --------------------------------------
Earl P. Galleher III
- --------------------------------------
Linda Eder Ross
Polaris Venture Partners II L.P.
By: /s/ John Gannon
-----------------------------------
Print Name: John Gannon
---------------------------
Title:
--------------------------------
Polaris Venture Partners Founders Fund II L.P.
By: /s/ John Gannon
-----------------------------------
22
<PAGE> 23
John Gannon
Print Name:___________________________
Title:________________________________
/s/ George Conrades
______________________________________
George Conrades
______________________________________
David F. Callan
______________________________________
Scott Morrisse
______________________________________
Thomas A. Herring
SERIES B PURCHASERS:
AT INVESTORS LLC
/s/ Arthur Bilger
By:___________________________________
Arthur Bilger
Print Name:___________________________
Title:________________________________
BAKER COMMUNICATIONS FUND, L.P.
By: Baker Capital Partners, LLC
its General Partner
/s/ Edward Scott
By:___________________________________
Edward Scott
Print Name:___________________________
Title:________________________________
23
<PAGE> 24
BATTERY INVESTMENT PARTNERS IV, LLC
/s/ Todd A. Dagres
By:___________________________________
Todd A. Dagress
Print Name:___________________________
Member Manager
Title:________________________________
BATTERY VENTURES IV, L.P.
/s/ Todd A. Dagres
By:___________________________________
Todd A. Dagres
Print Name:___________________________
Member Manager
Title:________________________________
______________________________________
Brian T. Bedol
______________________________________
David F. Callan
/s/ George Conrades
______________________________________
George Conrades
DAVID ALLAN KAPLAN REVOCABLE TRUST
By:___________________________________
Print Name:___________________________
Title:________________________________
24
<PAGE> 25
______________________________________
James Dolce
EHRENKRANZ & EHRENKRANZ LLP
By:___________________________________
Print Name:___________________________
Title:________________________________
______________________________________
Gilbert B. Friesen
/s/ Earl P. Galleher III
______________________________________
Earl P. Galleher III
______________________________________
Thomas A. Herring
______________________________________
Randall Kaplan
______________________________________
Scott Morrisse
PETER MORTON LIFETIME TRUST
By:___________________________________
Print Name:___________________________
Title:________________________________
POLARIS VENTURE PARTNERS FOUNDERS
FUND II L.P.
/s/ John Gannon
By:___________________________________
25
<PAGE> 26
John Gannon
Print Name:___________________________
Title:________________________________
POLARIS VENTURE PARTNERS II L.P.
/s/ John Gannon
By:___________________________________
John Gannon
Print Name:___________________________
Title:________________________________
RICHARD DONNER & LAUREN SHULER DONNER
AS TRUSTEES OF THE R&L DONNER TRUST
UNDER THE AMENDED AND RESTATED TRUST
AGREEMENT DATED 12/15/95
By:___________________________________
Print Name:___________________________
Title:________________________________
______________________________________
Linda Eder Ross
/s/ Paul Sagan
______________________________________
Paul Sagan
______________________________________
Jonathan Seelig
______________________________________
Michael Seelig
______________________________________
Julie Seelig
26
<PAGE> 27
STRAIGHT ARROW PUBLISHERS CO., L.P.
By:___________________________________
Print Name:___________________________
Title:________________________________
SERIES D PURCHASER:
Apple Computer Inc. Ltd.
By:_________________________________
Print Name:__________________________
Title:________________________________
SERIES E PURCHASER:
Cisco Systems, Inc.
By:_________________________________
Print Name:__________________________
Title:________________________________
SERIES F PURCHASER:
Microsoft Corporation
/s/ Gregory Maffei
By:_________________________________
Gregory Maffei
Print Name:__________________________
Chief Financial Officer
Title:________________________________
27
<PAGE> 1
EXHIBIT 5.1
[HALE AND DORR LLP LETTERHEAD]
October , 1999
Akamai Technologies, Inc.
201 Broadway
Cambridge, MA 02139
Re: REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form S-1 (File No. 333-85679) (as amended, the "Registration
Statement") filed with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), for the
registration of 6,900,000 shares of Common Stock, $.01 par value per share (the
"Shares"), of Akamai Technologies, Inc., a Delaware corporation (the "Company"),
including 900,000 Shares issuable upon exercise of an over-allotment option
granted by the Company.
The Shares are to be sold by the Company pursuant to an underwriting
agreement (the "Underwriting Agreement") to be entered into by and among the
Company and Morgan Stanley Dean Witter, Donaldson, Lufkin & Jenrette, Salomon
Smith Barney and Thomas Weisel Partners LLC, as representatives of the several
underwriters named in the Underwriting Agreement, the form of which has been
filed as Exhibit 1.1 to the Registration Statement.
We are acting as counsel for the Company in connection with the issue and
sale by the Company of the Shares. We have examined signed copies of the
Registration Statement as filed with the Commission. We have also examined and
relied upon the Underwriting Agreement, minutes of meetings of the stockholders
and the Board of Directors of the Company as provided to us by the Company,
stock record books of the Company as provided to us by the Company, the
Certificate of Incorporation and By-Laws of the Company, each as restated and/or
amended to date, and such other documents as we have deemed necessary for
purposes of rendering the opinions hereinafter set forth.
<PAGE> 2
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as copies, the authenticity of the originals of such latter documents and the
legal competence of all signatories to such documents.
We assume that the appropriate action will be taken, prior to the offer and
sale of the Shares in accordance with the Underwriting Agreement, to register
and qualify the Shares for sale under all applicable state securities or "blue
sky" laws.
We express no opinion herein as to the laws of any state or jurisdiction
other than the state laws of The Commonwealth of Massachusetts, the Delaware
General Corporation Law statute and the federal laws of the United States of
America. To the extent that any other laws govern the matters as to which we are
opining herein, we have assumed that such laws are identical to the state laws
of The Commonwealth of Massachusetts, and we are expressing no opinion herein as
to whether such assumption is reasonable or correct.
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly authorized for issuance and, when the Shares are issued
and paid for in accordance with the terms and conditions of the Underwriting
Agreement, the Shares will be validly issued, fully paid and nonassessable.
It is understood that this opinion is to be used only in connection with
the offer and sale of the Shares while the Registration Statement is in effect.
Please note that we are opining only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters. This opinion
is based upon currently existing statutes, rules, regulations and judicial
decisions, and we disclaim any obligation to advise you of any change in any of
these sources of law or subsequent legal or factual developments which might
affect any matters or opinions set forth herein.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act and to the use of our
name therein and in the related Prospectus under the caption "Legal Matters." In
giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission.
Very truly yours,
HALE AND DORR LLP
<PAGE> 1
Exhibit 10.5
AKAMAI TECHNOLOGIES, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock
Purchase Plan of Akamai Technologies, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
a. "BOARD" shall mean the Board of Directors of the Company.
b. "CODE" shall mean the Internal Revenue Code of 1986, as amended.
c. "COMMON STOCK" shall mean the Common Stock of the Company.
d. "COMPANY" shall mean Akamai Technologies, Inc. and any Designated
Subsidiary of the Company.
e. "COMPENSATION" shall mean all base straight time gross earnings
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
f. "DESIGNATED SUBSIDIARY" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
g. "EMPLOYEE" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
h. "ENROLLMENT DATE" shall mean the first day of each Offering
Period.
i. "EXERCISE DATE" shall mean the last Trading Day of each Purchase
Period.
<PAGE> 2
j. "FAIR MARKET VALUE" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation The Nasdaq
National Market or The Nasdaq Small Cap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, of no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable; or
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable; or
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(4) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement on Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "REGISTRATION
STATEMENT").
k. "OFFERING PERIODS" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after June 1 and
December 1 of each year and terminating on the last Trading Day in the periods
ending twenty-four months later; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
May 31, 2000. The duration and timing of Offering Periods may be changed
pursuant to Section 4 of this Plan.
l. "PLAN" shall mean this Employee Stock Purchase Plan.
m. "PURCHASE PERIOD" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date; provided, however, that
the first Purchase Period under the Plan shall commence with the first Trading
Day on or after the date on which the Securities and Exchange Commission
declares the Company's Registration Statement effective and shall end on the
last Trading Day on or before May 31, 2000.
-2-
<PAGE> 3
n. "PURCHASE PRICE" shall mean 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that, in the event (i) the Company's stockholders
approve an increase in the number of shares available for issuance under the
Plan, (ii) all or a portion of such additional shares are to be issued with
respect to one or more Offering Periods that are underway at the time of such
stockholder approval ("NEW SHARES"), and (iii) the Fair Market Value of a share
of Common Stock on the date of such approval (the "AUTHORIZATION DATE FMV") is
higher than the Fair Market Value on the Enrollment Date for any such Offering
Period, the Purchase Price with respect to New Shares shall be 85% of the
Authorization Date FMV or the Fair Market Value of a share of Common Stock on
the Exercise Date, whichever is lower.
o. "RESERVES" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
p. "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
q. "TRADING DAY" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
3. Eligibility.
a. Any Employee who shall be employed by the Company at least _____
days prior to a given Enrollment Date shall be eligible to participate in the
Plan.
b. Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after June 1 and December 1 of each year, or on such other
date as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after
-3-
<PAGE> 4
the date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
May 31, 2000. The Board shall have the power to change the duration of Offering
Periods (including the commencement dates thereof) with respect to future
offerings without stockholder approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Offering Period to be
affected thereafter.
5. Participation.
a. An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in a form
provided by the Company's payroll office and filing it with the Company's
payroll office prior to the applicable Enrollment Date.
b. Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
termination by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
a. At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
b. All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
c. A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may decrease the rate of his or her
payroll deductions to zero percent (0%) once during each Offering Period by
completing or filing with the Company a new subscription agreement authorizing
such change in payroll deduction rate. The Board may, in its discretion,
increase or decrease the number of participation rate changes during any
Offering Period. The change in rate shall be effective with the first full
payroll period following five (5) business days after the Company's receipt of
the new subscription agreement unless the Company elects to process a given
change in participation more quickly. A participant's subscription agreement
shall remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.
d. Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
-4-
<PAGE> 5
e. At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 5,000
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. Exercise of the option
shall occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof. The option shall expire on the last day
of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal.
a. A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any
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<PAGE> 6
time by giving written notice to the Company in the form of Exhibit A to this
Plan. All of the participant's payroll deductions credited to his or her account
shall be paid to such participant promptly after receipt of notice of withdrawal
and such participant's option for the Offering Period shall be automatically
terminated, and no further payroll deductions for the purchase of shares shall
be made for such Offering Period. If a participant withdraws from an Offering
Period, payroll deductions shall not resume at the beginning of the succeeding
Offering Period unless the participant delivers to the Company a new
subscription agreement.
b. A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason, he
or she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
a. Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 600,000 shares. If, on a given Exercise Date, the number of shares with
respect to which options are to be exercised exceeds the number of shares then
available under the Plan, the Company shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
b. The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
c. Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to
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<PAGE> 7
determine eligibility and to adjudicate all disputed claims filed under the
Plan. Every finding, decision and determination made by the Board or its
committee shall, to the full extent permitted by law, be final and binding upon
all parties.
15. Designation of Beneficiary.
a. A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
b. Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. User of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
a. Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the
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<PAGE> 8
number of shares of Common Stock covered by each option under the Plan which has
not yet been exercised shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an option.
b. Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "NEW EXERCISE DATE"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
c. Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a New Exercise Date (the "NEW
EXERCISE DATE") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
a. The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be
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<PAGE> 9
terminated by the Board of Directors on any Exercise Date if the Board
determines that the termination of the Plan is in the best interests of the
Company and its stockholders. Except as provided in Section 19 hereof, no
amendment may make any change in any option theretofore granted which adversely
affects the rights of any participant. To the extent necessary to comply with
Section 423 of the Code (or any successor rule or provision or any other
applicable law, regulation or stock exchange rule), the Company shall obtain
stockholder approval in such a manner and to such a degree as required.
b. Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the date of the
Company's initial public offering of its equity securities registered on Form
S-1 with the Securities and Exchange Commission. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 20 hereof.
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<PAGE> 10
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
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<PAGE> 11
EXHIBIT A
AKAMAI TECHNOLOGIES, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Akamai
Technologies, Inc. 1999 Employee Stock Purchase Plan which began on
________________, 19 ____ (the "ENROLLMENT DATE") hereby notifies the Company
that he or she hereby withdraws from the Offering Period. He or she hereby
directs the Company to pay to the undersigned as promptly as practicable all the
payroll deductions credited to his or her account with respect to such Offering
Period. The undersigned understands and agrees that his or her option for such
Offering Period will be automatically terminated. The undersigned understands
further that no further payroll deductions will be made for the purchase of
shares in the current Offering Period and the undersigned shall be eligible to
participate in succeeding Offering Periods only by delivering to the Company a
new Subscription Agreement.
Name and Address of Participant:
___________________________________
___________________________________
___________________________________
Signature:
___________________________________
Date:_______________________________
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Exhibit 10.8
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
STRATEGIC ALLIANCE AND MASTER SERVICES AGREEMENT
BY AND BETWEEN
AKAMAI TECHNOLOGIES, INC.
201 BROADWAY
CAMBRIDGE, MASSACHUSETTS, U.S.A. 02139
PHONE: 617-250-3000
FAX: 617-250-3001
("AKAMAI")
AND
APPLE COMPUTER, INC.
1 INFINITE LOOP
CUPERTINO, CALIFORNIA, U.S.A. 95014
PHONE: (408) 996-1010
FAX: (408) 974-8530
("APPLE")
<TABLE>
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APPLE CONTACT AKAMAI CONTACT
Name: [**] Name: Paul Sagan
Title: [**] Title: President and
Chief Operating Officer
Phone: [**] Phone: (617) 250-3006
Fax: Fax: (617) 250-3001
Email: [**] Email: [email protected]
</TABLE>
<TABLE>
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APPLE CONTACT FOR NOTICES AKAMAI CONTACT FOR NOTICES
Name: Nancy Heinen, Esq. Name: Controller,
Title: General Counsel Akamai Technologies, Inc.
Address: 1 Infinite Loop, Cupertino, Address: 201 Broadway, Cambridge,
California, U.S.A. 95014 Massachusetts, U.S.A. 02139
Phone: (408) 974-5013 Phone: (617) 250-3000
Fax: (408) 974-8530 Fax: (617) 250-3001
</TABLE>
Akamai/Apple Proprietary and Confidential
<PAGE> 2
STRATEGIC ALLIANCE AND MASTER SERVICES AGREEMENT
This STRATEGIC ALLIANCE AND MASTER SERVICES AGREEMENT,
consisting of the terms and conditions set forth below and the attached
schedules, each of which is incorporated into and made a part hereof by this
reference (the "Agreement"), is entered into by and between AKAMAI TECHNOLOGIES,
INC., a Delaware corporation ("Akamai"), having its principal place of business
as set forth on the cover page of this Agreement, and APPLE COMPUTER, INC., a
California corporation ("Apple"), having its principal place of business as set
forth on the cover page of this Agreement, effective as of April 1, 1999 (the
"Effective Date").
BACKGROUND
Akamai has developed proprietary technology to efficiently deliver
content over the Internet, and is in the business of providing services
including the distribution of such content. To support such services, Akamai has
deployed a worldwide network dedicated to web content distribution.
Apple owns and distributes QuickTime technology, which includes
software and a format that facilitates the distribution of audio, video, sound,
music, 3D, virtual reality and other multimedia content, including streaming
media, over the Internet and other computer networks (today known as QuickTime 4
and with any later versions or releases, "QuickTime"). Part of Apple's QuickTime
technology consists of software for playback of content in the QuickTime format
(currently and with any later versions or releases, "QuickTime Player"). Apple
is in the process of developing and deploying a service currently offered under
the name "QuickTime TV" intended principally for transmitting over the Internet
through computer networks owned or operated by or for Apple live streams of
multimedia content in QuickTime format (today and as may be later renamed
"QT-TV").
Akamai and Apple desire to enter into this Agreement whereby Apple and
Akamai will work together to optimize the Akamai Network (as defined below) to
make publicly available streaming media content in the QuickTime format over
QT-TV and otherwise as provided in this Agreement to ensure that the optimal
server will be chosen to deliver the best performance to customers/users of
QT-TV and Apple Content. Akamai will provide to Apple certain web content
distribution and network communications services to facilitate the deployment of
QT-TV and the serving of streaming media content in the QuickTime format, all on
the terms and subject to the conditions set forth below.
Akamai/Apple Proprietary and Confidential
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<PAGE> 3
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Akamai and Apple agree
as follows:
1. AKAMAI SERVICES AND OBLIGATIONS.
1.1 FREEFLOW SERVICES. Pursuant to the terms and subject to the
conditions of this Agreement, Akamai shall provide to Apple during the Term (as
defined in Section 10.1), the services ordered by Apple as set forth on the
attached SCHEDULE A: FREEFLOW(sm) ORDER FORM, in accordance with the description
thereof in the attached SCHEDULE B, FREEFLOW SERVICE SCHEDULE (the "FreeFlow
Services") for use in connection with deployment of QT-TV and in support of the
distribution of other Apple Content (as defined in Section 2.1) over the
Internet.
1.2 EXCLUSIVITY.
1.2.1 TERM. During the period commencing on the later of (a)[**]; or (b)[**];
and ending on [**], unless earlier terminated in accordance with this
Agreement (the "Exclusivity Period"), [**] shall not [**] to the [**]
for use by [**] as QT-TV ("QT-TV Content"), where [**] provided by [**]
but such restriction shall not apply to the [**] (whether [**] or not)
for the [**] where [**] is by a [**].
1.2.2 CONDITIONS. The Exclusivity Period will continue [**]
(i) Akamai is in default of any of its obligations under the Agreement, and
such default has not been cured within the cure period set forth in
Section 10.2 hereof.
(ii) Any event allowing termination by Apple under Section 10 occurs.
(iii) A notice of intent to cease offering the FreeFlow Services has been
given by Akamai under Section 10.4.
(iv) Akamai undergoes a Change of Control. For purposes of this Agreement, a
"Change of Control" means any transaction (or series of related
transactions) that would occasion: (a) Akamai's sale or lease of all or
substantially all of its assets to another unaffiliated entity; or (b)
any merger or consolidation resulting in the exchange of the
outstanding shares of Akamai for securities or consideration issued, or
caused to be issued, by the acquiring corporation or its subsidiary,
unless the stockholders of Akamai as of the date prior to the closing
date of such transaction (or series of related transactions) hold at
least 50% of the voting power
Akamai/Apple Proprietary and Confidential
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
of the surviving corporation in such a transaction.
(v) Akamai does not meet service levels (as described in Section 1.3 and
SCHEDULE C) whereby Outages are [**] in duration for [**]
If an event described in Section 1.2.2 occurs, the provisions
of this Section 1.2 will immediately cease in effect and Apple
may [**]
1.2.3 TERMINATION OF EXCLUSIVITY. Upon a Change of Control to [**], or any
successor in interest to the assets or business of [**] as applicable,
[**] with the termination of exclusivity. Upon a Change of Control [**]
exclusivity under Section 1.2 shall terminate [**] if assignment of
this Agreement to such entity is approved by Apple under Section 14.3.
1.2.4 SCALABILITY: If at any time [**] the FreeFlow Services used or
requested by Apple in accordance with Section 1.3, 1.4, 1.5 or 1.6
hereof [**] Apple may [**] of this Section 1.2 for the [**] under
Section 7.3. Once Akamai is able to [**] the required FreeFlow
Services, then the [**] period set forth in Section 1.2.1. These rights
are available to Apple in addition to and independent of the right to
terminate exclusivity as set forth in Section 1.2.2. In the event of
[**] the necessary FreeFlow Services [**] Apple shall have the [**] of
the event [**]. The [**] to accommodate the [**] under Section 7.3. If
at any time Akamai [**] any portion of the FreeFlow Services requested
by Apple in accordance with the performance criteria described in
Section 1.6, Apple may [**] that Akamai does [**] without any penalty
or breach of this Section 1.2.
1.3 NETWORK AVAILABILITY AND OPERATIONS. Akamai shall provide, maintain and
operate, at its own cost, on a twenty-four hours per day, seven days per week,
365 days per year basis, a geographically distributed network of proprietary web
servers (the "Akamai Network"), all network software and peripherals, and all
Internet connectivity in support of QT-TV and Apple Content (as defined below),
as required to provide the FreeFlow Services in accordance with this Agreement.
Outages, service interruptions, uptime and other performance metrics will be
governed by the service level commitments and credits terms in Schedule C:
Service Level Commitments and Credits. Akamai shall staff its Network Operating
Center ("NOC") twenty-four hours per day, seven days per week, 365 days per year
with at least that number of appropriately trained employees sufficient to
adequately perform its services under this Agreement.
Akamai/Apple Proprietary and Confidential
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
1.4 ACCESS TO AKAMAI NETWORK; UPDATES; INSTALLATION AND TRAINING. On or before
the Effective Date, Akamai shall deliver to Apple one copy of the Akamai
Software (as defined in Section 4.1), and the related Documentation (as defined
in Section 4.1) together with all user IDs and passwords as necessary for Apple
to access the Akamai Network and utilize the FreeFlow Services. In addition,
Akamai shall provide to Apple during the Term [**], maintenance for the Akamai
Software and deliver to Apply one copy of any update, new version, upgrade or
other revision of the Akamai Software (along with related Documentation) that
Akamai makes available to customers during the Term. Akamai shall, [**], (a)
install the Akamai Software on a machine designated by Apple, and (b) provide
qualified Apple personnel a reasonable amount of training in the use of the
Akamai Software and the FreeFlow Services.
1.5 NETWORK SECURITY. Akamai shall keep in place and in operation at all times
network security as specified in SCHEDULE D: NETWORK SECURITY PROTOCOLS to
monitor and protect against unauthorized access to Apple Content (as defined in
Section 2.1) while on, within or passing through the Akamai Network. Apple
acknowledges, however, that the portion of the Akamai Network through which
Apple Content will pass and the web servers on which Apple Content will be
stored will not be segregated or in a separate physical location from web
servers on which Akamai's other customers' content is or will be transmitted or
stored. Akamai will notify Apple immediately in the event of any breach of
network security that affects or may affect Apple Content and describe the steps
Akamai is taking to correct and prevent a similar situation from occurring
again.
1.6 NETWORK CAPACITY. Akamai shall maintain at all times during the Term
adequate capacity on the Akamai Network as necessary to meet Apple's minimum
estimated network usage as described in Section 7.3, as well as the anticipated
network usage by other Akamai customers. Akamai shall use reasonable efforts to
deploy Akamai servers on network backbones [**] (such as, and by way of
illustration only,[**]), subject to Apple making reasonable efforts to assist
Akamai to obtain access to such backbones on commercially reasonable terms and
conditions. Subject to Apple's performance of its obligations under Section 2
below, Akamai shall, at the time of the [**] by Apple (on or about [**]), cause
the Akamai Network to have the capacity to serve [**] users at an average rate
of [**]second on a continuous basis, and within [**] date (anticipated to be on
or about [**]), cause the Akamai Network to have the capacity to support [**]
users at an average rate of [**] second on [**] basis. The Akamai Network will
remain geographically distributed, and Akamai shall provide to Apple [**] of the
Akamai Network [**] shall be [**] Akamai shall also promptly notify Apple in the
event of [**] Without limiting the above, to support Apple's worldwide
customers, on or before [**] Akamai will locate Akamai Network [**].
Akamai/Apple Proprietary and Confidential
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
1.7 ADDITIONAL SERVICES. Akamai shall provide Apple with such installation,
support, training or other additional services relating to distributing media
content over the Internet as may be requested by Apple from time to time during
the Term and set forth in a separate schedule or addendum agreed to and executed
by both parties.
2. APPLE RESPONSIBILITIES AND OBLIGATIONS.
2.1 APPLE CONTENT. As between the parties, Apple will be solely responsible for
the creation, renewal, updating, deletion, editorial content, control and all
other aspects of any files, software, scripts, multimedia images, graphics,
audio, video, text, or other [**] any web site owned or operated by Apple and
routed to, passed through and/or stored on or within the Akamai Network or
otherwise transmitted or routed using the Free Flow Services ("Apple Content")
provided that Apple shall not be responsible for or have any obligation [**] for
[**] Apple Content that result from [**] such content [**].
2.2 TAGGING OF APPLE CONTENT. Apple will be responsible for utilizing the
RENAME(sm) module of the Akamai Software to tag/rename the uniform resource
locator ("URL") of the Apple Content to route such Apple Content to the Akamai
Network. In the event Apple has actual knowledge that any Apple Content
infringes the intellectual property or other rights of a third party or violates
any applicable laws or regulations (including, without limitation, laws and
regulations relating to indecency or obscenity), Apple shall use commercially
reasonable efforts to remove such Apple Content from Apple's origin server
and/or remove the RENAME(sm) URL/tag from such Apple Content so that it will not
be routed to and not pass through the Akamai Network.
2.3 MAINTAIN QT-TV AND APPLE CONTENT. As between the parties, Apple will be
solely responsible for maintaining the availability of QT-TV, any web site(s)
that serve Apple Content, the connectivity of QT-TV and such web site(s) to the
Internet, the hosting of all Apple Content on Apple's computer servers, as well
as all IP addresses, domain names and other elements that Apple deems necessary
to operate and maintain QT-TV and to serve Apple Content.
3. ADDITIONAL AGREEMENTS OF THE PARTIES.
3.1 [**] QT-TV. [**] Akamai agrees to provide a reasonable amount of [**]
assistance to Apple to assist in Apple's [**] performance of QT-TV and to enable
Apple to develop [**] source suppliers and providers to QT-TV.
Akamai/Apple Proprietary and Confidential
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
3.2 ENHANCEMENTS TO AKAMAI NETWORK'S ABILITY TO SERVE QUICKTIME. The parties
agree to cooperate to monitor and enhance the performance of QuickTime on the
Akamai Network as follows:
3.2.1 Akamai shall provide to Apple, subject to the restrictions and
limitations set forth herein and in Section 4 below, [**], certain [**]
which will provide [**] information helpful to [**] the Akamai
Network's ability to [**]. Apple agrees to evaluate the [**] after
delivery of [**] and related documentation for possible inclusion of
the [**], in order to determine whether [**] (i) provides meaningful
[**] information relative to the ability of the Akamai Network to [**],
and (ii) does not [**]. In the event Apple [**] it will notify Akamai
of its reasons [**] and provide Akamai an opportunity to [**] by Apple
in the [**]. In the event Apple elects [**] Akamai hereby grants to
Apple the perpetual, irrevocable royalty-free, non-exclusive license to
[**] to prepare [**] and to distribute, [**] created by Apple under
this Section 3.2.1, [**]. Apple will notify Akamai of, and provide
Akamai an opportunity to [**]. All Akamai [**] disclosed to Apple shall
be considered "Confidential Information" as defined in Section 9 below.
3.2.2 Apple hereby grants to Akamai, [**] subject to the terms and conditions
of this Agreement, [**], in accordance with the terms of [**], unless
otherwise specified in this Agreement; and (b) such [**] deems
necessary [**] each solely for the purpose of enhancing and optimizing
the Akamai Network's ability to serve QT-TV and Apple Content. All [**]
disclosed to Akamai by Apple shall be considered "Confidential
Information" of Apple as defined in Section 9 below, and without
limiting Section 9, Akamai shall not, for itself or any affiliate of
Akamai or any third party, (i) disclose the [**] to any third party,
(ii) alter or duplicate any aspect of the [**], except as expressly
permitted under this Agreement or remove any proprietary markings or
notices thereon or therein, (iii) assign, transfer, distribute, or
otherwise provide access to the [**] to any third party, or (iv) copy,
sell, license, assign or transfer the [**]. In the event Akamai
undergoes a Change of Control (as defined in Section 1.2.2(v)), Akamai
shall immediately [**] or at Apple's option [**].
3.3 [**]. Each party shall use commercially reasonable efforts and provide
sufficient resources, at its own expense, to [**] specified by Akamai within the
Akamai Network (the results thereof, the "[**]"). Each party agrees to require
that all employees and independent contractors participating in this endeavor
sign or otherwise have in effect such confidentiality and ownership/invention
assignment agreements as may be reasonably required by either party. Such [**]
will be deemed complete only when the parties have had an opportunity to [**]
and have reasonably determined that the [**].
Akamai/Apple Proprietary and Confidential
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
3.4 [**]; OTHER APPLICATIONS. It is understood and acknowledged that QT-TV -
currently [**]. The parties shall, as may be mutually agreed from time to time,
explore the possibility of [**] development at a later date. Any such
development will be pursuant to a separate written agreement.
3.5 USAGE FORECASTS. The parties agree to discuss on a periodic basis (no less
often than quarterly) the forecast of the advisable Akamai Network capacity and
anticipated overall usage of Akamai resources by Apple.
3.6 [**] QT-TV. The following provisions will apply [**] as contemplated under
Section 3.3 above.
3.6.1 In the event that, during the Term: (x) Apple [**] that has outstanding
capital stock or its equivalent ("Capital Stock") (including any
securities convertible into or exchangeable for capital stock or its
equivalent) held by any person or entity (a "Third Party")[**] (ii) a
person or entity that [**] prior to such transaction or (iii) an [**]
or, prior to [**] such Entity,[**] for consideration to any Third Party
any shares of Capital Stock of such Entity (each, a "[**]"); or (y) any
Entity to which [**] subsequently issues for consideration Capital
Stock (including any securities convertible into or exchangeable for
capital stock or its equivalent, "New Securities") (a [**]), provided
there is no outstanding [**] hereunder at the time [**] to engage in a
Qualifying Transfer or Qualifying Issuance, [**] shall have, in
connection with the first such Qualifying Transfer or Qualifying
Issuance, the [**] [**] (the [**] the outstanding Capital Stock, on a
fully diluted basis assuming full exercise of all outstanding
securities which are convertible into or exchangeable for Capital Stock
(including any New Securities issued in connection with such Qualifying
Issuance), of such Entity,[**] Capital Stock equal to the [**] Capital
Stock [**] in such Qualifying Transfer or Qualifying Issuance;
provided, that the Prior Right shall not apply to (1) any [**] Capital
Stock of the Entity by the Entity, [**] or any other person controlling
the Entity or (2) any transaction in which [**] in the Entity or any
other person controlling the Entity. The Prior Right shall not apply
to, and this Section 3.6 grants [**] to participate [**] that do not
constitute a [**] computer networks owned or operated by or for [**].
3.6.2 [**] shall (or shall cause the Entity to) [**] the terms or the
proposed terms of the Qualifying Transfer or Qualifying Issuance, which
notice shall set forth, in reasonable detail, the terms or proposed
terms of such Qualifying Transfer or Qualifying Issuance, the [**] for
which the [**] such Prior Right as to all the shares of Capital Stock
available [**] such Prior Right pursuant to the [**] (or the Entity,
Akamai/Apple Proprietary and Confidential
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
if the [**] was issued by the Entity) [**] after receipt of the [**]
Prior Right. If [**] Prior Right or fails to provide notice within such
[**] and the Entity shall have up to [**] from the date of the [**] to
complete the Qualifying Transfer or Qualifying Issuance upon the same
terms specified in the [**] whereupon [**]. If [**] the Entity [**] of
the Qualifying Transfer or Qualifying Issuance in any material respect,
[**] the Entity shall [**] of the revised terms of such proposed
transaction by delivery of [**] pursuant to the procedure set forth
above. In the event that [**] or the Entity and are [**] will provide a
[**] therefor and provide [**] for the [**] of the [**] other than
[**].
3.6.3 The obligations of this Section 3.6 [**] in the event (i) the [**] or
(ii)[**]. [**] under this Section 3.6 [**] any termination of this
Agreement.
3.7 FREEDOM OF ACTION. Except for the right to audit described in Section 7.5
below and any rights Apple (directly or through its subsidiary Apple Computer
Inc. Ltd.) may have under the Stock Purchase Agreement and related agreements
executed concurrent herewith or as a consequence of its acquisition of any
securities of Akamai, Apple shall have no right to have access to any of
Akamai's proprietary business information except as otherwise contemplated by
this Agreement, or to share in any revenues from any of Akamai's agreements,
arrangements or relationships, and Akamai shall be free to support and provide
services to any and all competitors to Apple, QuickTime and QT-TV, and to
support third parties in the distribution of streaming media in QuickTime and
all other formats, and to retain any and all revenues and relationships
resulting therefrom.
4. AKAMAI SOFTWARE; RESTRICTIONS.
4.1 LICENSE OF AKAMAI SOFTWARE. Akamai grants [**] to Apple a limited,
worldwide, nontransferable and nonexclusive license to use, during, the
Term,[**], the GeoFlow(sm) software and the RENAME(sm) software as more fully
described in SCHEDULE E: AKAMAI SOFTWARE (collectively, and together with any
updates, new versions, upgrades or other revisions thereof made available by
Akamai during the Term and all related documentation, the "Akamai Software"), in
object code form only (except as provided in Section 3.2.1 as to the [**],
subject to the restrictions set forth below.
4.2 LICENSE RESTRICTIONS. Apple's use of the Akamai Software is limited as
follows:
4.2.1 Apple shall use the RENAME(sm) software solely for the purpose of
renaming the URL of Apple Content;
Akamai/Apple Proprietary and Confidential
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
4.2.2 Apple shall use the GeoFlow(sm) software for Apple's internal purposes
only, solely in conjunction with and for the purpose of (i) analyzing
the flow of Apple Content that is delivered using the FreeFlow
Services, and (ii)[**] as described in Section 3.1.
4.2.3 Apple acknowledges that Akamai has advised it that the GeoFlow(sm)
software contains certain third party software elements, including
without limitation software relating to the GeoFlow(sm) mapping
functions, and Apple agrees with respect to such elements that are
specifically identified in SCHEDULE F, Apple shall be prohibited from
replicating or distributing such mapping images or otherwise using the
same other than for Apple's internal business purposes.
4.2.4 Apple shall not, for itself, any affiliate of Apple or any third party:
sell, license, assign, or transfer the Akamai Software or any
Documentation; decompile, disassemble, or reverse engineer the Akamai
Software; copy the Akamai Software or any Documentation (except that
Apple may make a reasonable number of copies of the Akamai Software for
backup purposes only); or remove from the Akamai Software or any
Documentation any notice of the confidential nature thereof or the
proprietary rights of Akamai or its suppliers in such items.
4.3 ADDITIONAL APPLE RESTRICTIONS. Apple shall not: (a) provide access to the
Akamai Software to any third party; or (b) export, re-export or permit any third
party to export or re-export the Akamai Software or Documentation outside of the
territorial limits of the country in which it was originally delivered without
appropriate licenses and clearances.
4.4 ESCROW. Within [**] after the Effective Date, the parties shall enter into a
[**] reasonably acceptable to both parties, pursuant to which [**] that are
[**]. Akamai shall [**] to the [**] that it is required to [**] under this
Agreement, [**]. In the event of a [**], Akamai agrees to grant, and does hereby
grant to Apple, the [**] the [**] for the [**] thereof and to [**] and to [**]
only, for the limited purpose of [**] in a manner consistent with the manner in
which [**] under this Agreement and any [**]; provided that [**] such rights
only in the event of [**] pursuant to such [**] agreement. [**] agreement will
provide that the [**] upon the occurrence of any one or more of the following
events:
a. [**] business in the ordinary course, makes an [**] appointed
[**] or makes a [**] similar law; and
b. [**] its right to [**] under Section 7.4.2.
Akamai/Apple Proprietary and Confidential
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
5. INTELLECTUAL PROPERTY RIGHTS.
5.1 QUICKTIME TECHNOLOGY AND APPLE CONTENT; LIMITED LICENSE TO USE. As between
Apple and Akamai, Apple (or its suppliers or licensors) shall retain all right,
title and interest in and to QT-TV, QuickTime, [**], and any and all
enhancements, improvements, bug fixes, updates and upgrades thereto developed by
or as a result of this Agreement (hereinafter collectively referred to as the
"QuickTime Technology") and any Apple Content. Apple hereby grants to Akamai a
limited non-exclusive, non-transferable license during the Term to use the
QuickTime Technology and Apple Content solely as necessary to perform Akamai's
obligations hereunder. Akamai may not assign, transfer, sell, license,
sublicense or grant any of its rights to the QuickTime Technology or any Apple
Content to any other person or entity. Akamai acknowledges that the QuickTime
Technology and Apple Content constitutes proprietary information and/or trade
secrets of Apple or its providers that is or may be protected by U.S. copyright,
trade secret and similar laws and certain international treaty provisions. This
Agreement does not transfer or convey to Akamai or any third party any right,
title or interest in or to the QuickTime Technology or any Apple Content or any
associated intellectual property rights, except as specifically set forth in the
terms of this Agreement.
5.2 AKAMAI SOFTWARE, DOCUMENTATION AND FREEFLOW SERVICES. As between Apple and
Akamai, Akamai (or its suppliers or licensors) shall own all right, title and
interest in and to the Akamai Software and Documentation (and any and all
enhancements, improvements, bug fixes, updates and upgrades thereto), the
FreeFlow Services, and the Akamai Network. Apple acknowledges that the Akamai
Software, Documentation, FreeFlow Services, and Akamai Network constitute
proprietary information and trade secrets of Akamai or its suppliers or
licensors and that the Akamai Software and any and all enhancements,
improvements, bug fixes, updates and upgrades thereto developed by or as a
result of this Agreement, and Documentation therefor are protected by U.S.
copyright, trade secret and similar laws and certain international treaty
provisions. This Agreement does not transfer or convey to Apple or any third
party any right, title or interest in or to the Akamai Software, Documentation,
FreeFlow Services, or Akamai Network or any associated intellectual property
rights, except as specifically set forth in the terms of this Agreement.
5.3 DEVELOPMENT OF INTELLECTUAL PROPERTY.
5.3.1 ASSIGNMENT. Akamai acknowledges that except as the parties may
otherwise agree by separate written agreement, all copyrightable
material, notes, records, drawings, designs, inventions, improvements,
developments, discoveries and trade secrets conceived, made or
discovered by Akamai, solely or in collaboration
Akamai/Apple Proprietary and Confidential
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with others, in the course of the development activities contemplated
under Sections 3.1, 3.2.2, 3.3 or 3.4 of this Agreement that are
original works or that modify, enhance, or create derivative works of
any QuickTime Technology or Apple Content ("AKAMAI WORK PRODUCT"), are
the sole property of Apple. Akamai further shall assign (or cause to be
assigned) and does hereby assign fully to Apple all Akamai Work Product
and any copyrights, patents, mask work rights or other intellectual
property rights relating thereto. Apple acknowledges that except as the
parties may otherwise agree by separate written agreement, all
copyrightable material, notes, records, drawings, designs, inventions,
improvements, developments, discoveries and trade secrets conceived,
made or discovered by Apple, solely or in collaboration with others, in
the course of the development activities contemplated under Sections
3.1, 3.2.1 or 3.4 of this Agreement that modify, enhance, or create
derivative works of any of the Akamai Software, Documentation, FreeFlow
Services, or Akamai Network ("APPLE WORK PRODUCT"), are the sole
property of Akamai. Apple further shall assign (or cause to be
assigned) and does hereby assign fully to Akamai all Apple Work Product
and any copyrights, patents, mask work rights or other intellectual
property rights relating thereto. Akamai Work Product and Apple Work
Product is sometimes referred to hereinafter collectively as "Work
Product".
5.3.2 FURTHER ASSURANCES. Each of Akamai and Apple shall assist the other
party, or its designee, at such other party's expense, in every proper
way to secure Apple's or Akamai's rights, as the case may be in the
Akamai Work Product or the Apple Work Product, respectively, and any
copyrights, patents, mask work rights or other intellectual property
rights relating thereto in any and all countries, including the
disclosure to Apple or Akamai, as the case may be, of all pertinent
information and data with respect thereto, the execution of all
applications, specifications, oaths, assignments and all other
instruments that Apple or Akamai, as the case may be, deems necessary
in order to apply for and obtain such rights and in order to record or
perfect Apple's or Akamai's interest therein.
5.3.3 PRE-EXISTING MATERIALS. Each party agrees that if in the course of
performing, any development activities hereunder, it incorporates into
any Work Product any invention, improvement, development, concept,
discovery or other proprietary information owned by any third party,
(i) it shall inform the other party, in writing, before incorporating
such invention, improvement, development, concept, discovery or other
proprietary information into any Work Product; and (ii) it hereby
grants the other party a nonexclusive, royalty-free, perpetual,
irrevocable, worldwide license to use, reproduce, distribute, perform,
display, prepare derivative works of, make, have made, sell and export
such item as part of or in connection with such Work Product.
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6. PUBLICITY; TRADEMARKS.
6.1 PUBLICITY. During the Term, Akamai may: (a) identify Apple as a customer;
(b) hyperlink from Akamai's web site to Apple's home page; and (c) display the
QuickTime logo on the Akamai web site in accordance with Apple's guidelines for
the use of such mark. On or about the Effective Date, the parties shall issue
one or more mutually acceptable joint press releases announcing this Agreement.
The content of the press release shall be subject to the approval of each party
in its sole discretion, provided that neither party will unreasonably delay its
review. The parties may from time to time during the Term identify mutually
agreeable marketing opportunities within QT-TV. During the Term, Apple shall
place the Akamai logo and a hyperlink to the Akamai home page on the QuickTime
and QT-TV home pages.
6.2 MARKS; USAGE RESTRICTIONS.
6.2.1 In addition to the rights granted in Section 6.1, each party may
display or refer to the other party's proprietary indicia, trademarks,
service marks, trade names, logos, symbols and/or brand names
(collectively "Marks") upon the advance written approval of that party.
Neither party may remove, destroy or alter the other party's Marks. All
use of a party's Marks shall be subject to such party's logo and
trademark usage guide, as provided to the other party or made available
on a party's website, and as the same may be updated from time to time.
6.2.2 Each party agrees that it shall not challenge or assist others to
challenge the rights of the other party or its suppliers or licensors
in the Marks or the registration of the Marks, or attempt to register
any trademarks, trade names or other proprietary indicia confusingly
similar to the Marks.
6.2.3 All Marks (other than Akamai Marks) appearing on or incorporated in the
QuickTime Technology or Apple Content are and shall remain, as between
Akamai and Apple, the exclusive property of Apple or its providers. All
Marks (other than Apple Marks) appearing on or incorporated in the
Akamai Software, Documentation or FreeFlow Services are and shall
remain, as between Akamai and Apple, the exclusive property of Akamai
or its suppliers. Neither party grants any rights in the Marks or in
any other trademark, trade name, service mark, business name or
goodwill of the other except as expressly permitted hereunder or by
separate written agreement of the parties and all use of a party's
Marks shall inure to the benefit of the owner of such Mark.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
7. FEES; PRICING AND PAYMENT TERMS.
7.1 FEES; PAYMENT TERMS. Akamai's current fees for the FreeFlow Services
(including license fees, installation charges, service usage and other fees) are
set forth in the attached SCHEDULE A AND SCHEDULE B. Subject to the provisions
of Section 7.3 below, such fees will remain in effect for the period ending [**]
after the Effective Date. Thereafter, the parties shall [**] or the remainder of
the Term. All prices are in United States dollars and do not include sales, use,
value-added or import taxes, customs duties or similar taxes that may be
assessed by any jurisdiction. Amounts due hereunder are payable [**] after
receipt of invoice. In the event that [**] any other party [**] with respect to
the FreeFlow Services provided by Akamai to Apple hereunder, or any portion
thereof, then [**], provided however,[**] all of the [**] terms and conditions
[**].
7.2 TAXES. All taxes, duties, fees and other governmental charges of any kind
(including sales and use taxes, but excluding taxes based on the gross revenues
or net income of Akamai) which are imposed by or under the authority of any
government or any political subdivision thereof on the fees for any of the
FreeFlow Services provided by Akamai under this Agreement shall be borne by
Apple and shall not be considered a part of, a deduction from or an offset
against such fees.
7.3 [**] USAGE [**]. Subject to the provisions of Section 7.4 below and to
Akamai's satisfactory performance of its obligations under this Agreement:
7.3.1 Commencing on [**] and continuing through [**] Apple agrees to commit
to purchase FreeFlow Services at a rate of [**] per month usage of the
Akamai Network, measured based on Akamai's [**] convention, or [**] per
month.
7.3.2 Commencing on [**] and continuing through [**]provided that [**]
pursuant to section 3.3 Apple agrees to commit to purchase [**] of
FreeFlow Services.
7.3.3 Apple's commitments under this Section 7.3 [**], and any Apple Content,
[**] originated by Apple and distributed through the Akamai Network
will be [**] such commitment. For avoidance of doubt, any FreeFlow
Services used by Apple [**] (to the extent there exists [**]. Moreover,
in the event that a [**] to provide for its own distribution through
Akamai, [**] for the corresponding month. If Apple, at and as of [**],
has not paid Akamai fees equal to at least [**] in the aggregate, then
Apple shall pay to Akamai the difference between [**] and the fee
amounts actually paid by Apple.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
7.3.4 In the event that Akamai gives Apple notice of Akamai's intent to
terminate this Agreement under Section 10.4, or if the provisions of
Section 1.2.3 apply, the [**] of Apple under this Section 7.3 will
immediately [**].
7.4 [**] PURCHASE OF AKAMAI BY CERTAIN THIRD PARTIES.
7.4.1 In the event Apple (or any successor entity to the business of QT-TV in
which Apple has a continuing equity interest) [**] at any time during
the Exclusivity Period for any reason (other than a breach hereunder by
Akamai), [**] Akamai FreeFlow Services as follows. For avoidance of
doubt, Apple will be deemed to have [**] if it or its successor in
interest [**] with Apple but otherwise [**], or if [**] directs all
content providers [**] directly to Akamai [**]. During the period
following [**] and for the duration of the Exclusivity Period, Apple
will be obligated to purchase [**] FreeFlow Services equal to [**]
amount Apple actually purchased [**] during the twelve (12) months (or
any shorter period preceding [**]) immediately preceding the end of
beginning of the month in which [**]; provided however, that Akamai
agrees that Apple's [**], as adjusted pursuant to this Section 7.4.1,
shall be [**] that Akamai acquires [**] during all or any portion of
the immediately preceding twelve (12) months or such shorter period.
7.4.2 During the Term, in the event [**] then Akamai agrees as follows:
(a) Akamai shall require [**] to provide Apple with
[**] QT-TV and the distribution of QuickTime media [**] at the
[**] such services during the [**] generally available to
Akamai or its successors' customers; and
(b) In the event [**] hereby [**] to Apple to Apple
hereunder [**], over the Internet.
The foregoing obligation of Akamai is subject to the
understanding that [**] as described in this Section 7.4.2
[**] in the event that [**].
7.5 ACCURATE RECORDS; RIGHT TO AUDIT. Akamai shall maintain complete and
accurate records and log files to support and document the fees charged to Apple
in connection with this Agreement. Akamai shall, upon written request from
Apple, provide access to such records and log files during regular business
hours at Akamai's convenience, to Apple or to an independent auditor(s) chosen
by Apple for the purposes of audit. Apple's right to conduct such audits shall
be limited to twice in any one calendar year.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
If any such audit discloses that Akamai has overcharged Apple for such fees by
[**] or more for the period under audit, Akamai shall pay, in addition to such
deficiency, the costs of such audit. Akamai shall keep such records and log
files for a rolling three years from the date of service.
8. REPRESENTATIONS AND WARRANTIES.
8.1 AKAMAI'S REPRESENTATIONS AND WARRANTIES. Akamai represents and warrants to
Apple as follows:
8.1.1 Akamai and its licensors own or possess the necessary rights, title and
licenses in and to the Akamai Software, Documentation, and FreeFlow
Services and the Akamai Network necessary to grant the licenses granted
hereunder and perform the FreeFlow Services hereunder without claim or
encumbrance, including without claim of infringement of the
intellectual property, or other rights of any third party. Akamai has
the right to enter into this Agreement and to perform its obligations
hereunder.
8.1.2 Akamal has obtained and will maintain in effect throughout the Term any
and all consents, approvals and other authorizations necessary for the
performance of its obligations hereunder.
8.1.3 At all times during the Term, Akamai shall meet or exceed the network
availability, capacity and operations and performance levels as set
forth in Section 1 above.
8.1.4 YEAR 2000 READINESS WARRANTY. Akamai warrants that the FreeFlow
Services, Akamai Network and Akamai Software are Year 2000 Ready. "Year
2000 Ready" means the ability to: (i) accept input and provide output
of data involving dates correctly and without ambiguity as to the
twentieth or twenty-first centuries; (ii) manage, store, sort, perform
calculations, and otherwise process data involving dates before,
during, and after January 1, 2000 without malfunction, abends or
aborts; and (iii) correctly process leap years including the year 2000.
The foregoing warranty is subject to the condition that all other
products (e.g., hardware, software, and firmware) which interface with
the FreeFlow Services or are used with the Akamai Software (including
any Apple Content or other elements) properly exchange date data with
the FreeFlow Services and/or Akamai Software, as the case may be;
provided, however, that Akamai covenants that it will undertake to
obtain a Year 2000 readiness warranty from all hardware vendors, third
party software licensors and Internet connectivity providers. In the
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
event Akamai becomes aware that the FreeFlow Services, Akamai Network
or Akamai Software or any hardware, third party software or Internet
connectivity provider is not Year 2000 Ready, Akamai shall immediately
notify Apple and promptly undertake to correct the Akamai Software,
FreeFlow Services, or Akamai Network third party product or service
provider to eliminate such problem. If Akamai fails to correct any
portion of the Akamai Software or such third party product or service
that does not meet the foregoing warranty within a reasonable period of
time, Apple shall have the right, in addition to all other remedies
available to it, to immediately terminate this Agreement.
8.1.5 Akamai warrants that (i) the Akamai Software, the FreeFlow Services,
the Akamai Network, and Documentation and any [**], provided they are
used by Apple in accordance with this Agreement (and where appropriate,
the Documentation), do not and will not infringe any patent, copyright,
trade secret, trademark, right of privacy or publicity or other
proprietary right of any third party; and (ii) to the best of Akamai's
knowledge, no claim, action or suit for the infringement of any patent,
copyright, trade secret, trademark or other intellectual property
right, or the misappropriation of a trade secret or other proprietary
right, has been made or is pending against Akamai or any third party
from which Akamai has obtained rights in connection with the Akamai
Software, the FreeFlow Services, Akamai Network, Documentation and [**]
provided to Apple hereunder.
8.1.6 WARRANTY DISCLAIMER. EXCEPT AS SPECIFICALLY PROVIDED IN THIS SECTION
8.1, AKAMAI EXPRESSLY DISCLAIMS ALL WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, TO THE FULLEST EXTENT PERMITTED BY LAW, INCLUDING BUT NOT
LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY FITNESS FOR A
PARTICULAR PURPOSE AND INFRINGEMENT.
8.2 APPLE'S REPRESENTATIONS AND WARRANTIES. Apple represents and warrants
to Akamai as follows:
8.2.1 Apple has the right to enter into this Agreement and to perform its
obligations hereunder.
8.2.2 Apple has obtained and will maintain in effect to its knowledge
throughout the Term any and all consents, approvals and other
authorizations necessary for the performance of its obligations
hereunder.
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8.2.3 WARRANTY DISCLAIMER. EXCEPT AS SPECIFICALLY PROVIDED IN THIS SECTION
8.2, APPLE EXPRESSLY DISCLAIMS ALL WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, TO THE FULLEST EXTENT PERMITTED BY LAW, INCLUDING BUT NOT
LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY FITNESS FOR A
PARTICULAR PURPOSE AND INFRINGEMENT.
9. CONFIDENTIAL INFORMATION. All information disclosed by either party
("Disclosing Party") to the other party ("Receiving Party"), if disclosed in
writing, labeled as proprietary or confidential, or if disclosed orally, reduced
to writing within thirty (30) days and labeled as proprietary or confidential
(collectively, "Confidential Information") shall remain the sole property of the
Disclosing Party. Except to perform its obligations to exercise its rights under
this Agreement, the Receiving Party shall not use any Confidential Information
of the Disclosing Party for its own account. The Receiving Party shall use at
least the same level of efforts it uses to protect its own most confidential
information, but in no event less than reasonable care, to protect the
Disclosing Party's Confidential Information. The Receiving Party shall not
disclose Confidential Information to any third party without the express written
consent of the Disclosing Party (except solely for Receiving Party's internal
business needs, to employees or consultants who are bound by a written agreement
with Receiving Party to restrict the disclosure and use of such Confidential
Information in a manner consistent with this Agreement). Confidential
Information shall exclude information (i) available to the public other than by
a breach of this Agreement; (ii) rightfully received from a third party not in
breach of an obligation of confidentiality; (iii) independently developed by the
Receiving Party without access to Confidential Information; (iv) known to the
Receiving Party at the time of disclosure; or (v) produced in compliance with
applicable law or a court order, provided the Disclosing Party is given
reasonable notice of such law or order and an opportunity to attempt to preclude
or limit such production. Subject to the above, the Receiving Party agrees to
cease using any and all materials embodying Confidential Information, and to
promptly return such materials to the Disclosing Party upon request.
10. TERM AND TERMINATION.
10.1 TERM; INITIAL TERM; RENEWALS. This Agreement shall become effective as of
the Effective Date and remain in full force and effect through April 1, 2001,
unless earlier terminated in accordance with this Agreement. Upon the expiration
of such initial term, this Agreement may be renewed upon mutual agreement. The
initial term, together with any renewal period, is collectively referred to as
the "Term."
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
10.2 TERMINATION UPON DEFAULT. Either party may terminate this Agreement in the
event that the other party defaults in performing any obligation under this
Agreement and such default continues unremedied for a period of [**] following
written notice of default.
10.3 TERMINATION UPON INSOLVENCY. Either party may terminate this Agreement,
effective upon delivery of written notice by such party: (i) upon the
institution of insolvency, receivership or bankruptcy proceedings or any other
proceedings for the settlement of debts of the other party; (ii) upon the making
of an assignment for the benefit of creditors by the other party; or (iii) upon
the dissolution of the other party.
10.4 AKAMAI TERMINATION UPON TERMINATION OF FREEFLOW SERVICES. Akamai may
terminate this Agreement if it ceases offering the FreeFlow Services (or their
substantial equivalent) to [**] or other parties for a period of [**] provided
that if such election is made during the Exclusivity Period, Akamai shall give
Apple at least [**] advance notice of such intent to terminate. If such election
is made after the Exclusivity Period, Akamai shall give Apple at least [**]
advance notice to terminate.
10.5 TERMINATION BY APPLE. Apple may terminate this Agreement in accordance with
Section 8.1.4.
10.6 EFFECT OF TERMINATION. The provisions of Sections 3.2.1, 3.7, 4, 5, 6.2.2,
6.2.3, 7.2, 7.5, 8, 9, 10.6, 11, 12, 13, 14.4-14.8, and 14.10-14.13 shall
survive termination of this Agreement. All other rights and obligations of the
parties shall cease upon termination of this Agreement. The term of any license
granted hereunder shall expire upon expiration or termination of this Agreement;
provided, however, that the licenses granted to Apple under Sections 3.2.1, 4.4
and 5.3.3 will survive.
11. DISPUTE RESOLUTION.
11.1 INFORMAL DISPUTE RESOLUTION. In the case of any disputes under this
Agreement, the parties shall first attempt in good faith to resolve their
dispute informally, or by means of commercial mediation, without the necessity
of a formal proceeding as follows: Either party may, upon written notice to the
other, submit such dispute to the parties' chief executive officers, who shall
meet to attempt to resolve the dispute by good faith negotiations. In the event
the parties are unable to resolve such dispute within thirty (30) days after
such notice is received, either party may proceed to submit the dispute to
mediation in Santa Clara County, California. If such mediation is unsuccessful
in resolving the dispute thirty (30) days after such submission, either party
may avail itself of any remedies available to it. Notwithstanding the foregoing,
each party shall have
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
the right to seek equitable relief for any breach of the confidentiality or
license provisions of this Agreement.
12. INDEMNIFICATION.
12.1 MUTUAL INDEMNIFICATION. Each party shall indemnify and hold the other,
its assignees, agents, officers and employees harmless from and against any
damages to real or tangible personal property and/or bodily injury to persons,
including death, to the extent such damages result from its or its employees' or
agents' gross negligence or willful misconduct.
12.2 AKAMAI INDEMNIFICATION OBLIGATIONS.
12.2.1 Akamai shall defend, indemnify and hold harmless Apple and its
affiliates, licensors, suppliers, officers, directors, employees and
agents from and against any suit, demand, proceeding, or assertion of a
third party against Apple and pay any and all damages, liability and
expenses (including court costs and reasonable attorneys' fees) based
upon (a) a claim that any of the Akamai Software, Documentation,[**],
FreeFlow Services, or the Akamai Network or operation thereof infringes
any valid patent, copyright, trade secret, or other intellectual
property right; or (b) any unauthorized alterations to Apple Content
due to breaches in Akamai Network security, provided that: (i) Apple
promptly notifies Akamai, in writing, of the suit, claim or proceeding
or a threat of suit, claim or proceeding; (ii) at Akamai's reasonable
request and expense, Apple provides Akamai with reasonable assistance
for the defense of the suit, claim or proceeding; and (iii) Apple
allows Akamai sole control of the defense of any claim and all
negotiations for settlement or compromise provided that Akamai may not
enter into any settlement agreement which would in any manner
whatsoever affect the right of, or bind Apple in any manner to such
third party, without Apple's prior written consent.
12.2.2 If a claim of infringement under this Section 12.2 occurs, or if Akamai
determines that a claim is likely to occur, Akamai shall promptly, at
its sole option, either: (i) procure for Apple the right or license to
continue to use the Akamai Software, [**], or FreeFlow Services free of
the infringement claim; or (ii) replace or modify the Akamai
Software,[**], or FreeFlow Services to make them non-infringing
provided that the replacement software or services are substantially
similar in functionality. If these remedies are not reasonably
available to Akamai, Akamai may, at its option, terminate this
Agreement and return any fees paid by Apple in advance.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
12.2.3 Despite the provisions of this Section 12.2, Akamai has no obligation
to the extent any claim of infringement that is based upon or arises
out of: (i) any modification to the Akamai Software if the modification
was not made by or for Akamai; or (ii) the use or combination of the
Akamai Software with any hardware, software, products, data or other
materials not specified or provided by Akamai; or (iii) Apple's use of
the FreeFlow Services other than in accordance with the Documentation.
12.2.4 THE PROVISIONS OF THIS SECTION 12.2 STATE THE SOLE AND EXCLUSIVE
OBLIGATIONS OF AKAMAI FOR ANY PATENT, COPYRIGHT, TRADEMARK, TRADE
SECRET OR OTHER INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT.
12.3 APPLE INDEMNIFICATION OBLIGATIONS.
12.3.1 Apple shall defend Akamai and its affiliates, licensors, suppliers,
officers, directors, employees and agents from and against any claim,
demand or lawsuit against Akamai, and pay any and all damage,
liability, and expenses (including court costs and reasonable
attorneys' fees) finally awarded to the extent incurred as a result of
any such claim alleging that [**] provided that: (i) Akamai promptly
notifies Apple, in writing, of the suit, claim or proceeding or a
threat of suit, claim or proceeding; (ii) at Apple's reasonable request
and expense, Akamai provides Apple with reasonable assistance for the
defense of the suit, claim or proceeding; and (iii) Apple has sole
control of the defense of any claim and all negotiations for settlement
or compromise, provided that Apple may not enter into any settlement
agreement which would in any manner whatsoever affect the right of, or
bind Akamai in any manner to such third party, without Akamai's prior
written consent.
12.3.2 Despite the provisions of this Section 12.3, Apple has no obligation to
the extent any claim of infringement that is based upon or arises out
of: (i) any modification to the Apple Software if the modification was
not made by or for Apple; or (ii) the use or combination of the Apple
Software with any hardware, software, products, data or other materials
not specified or provided by Apple; or (iii) [**] other than in
accordance with the terms of this Agreement.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
12.3.3 THE PROVISIONS OF THIS SECTION 12.3 STATE THE SOLE AND EXCLUSIVE
OBLIGATIONS OF APPLE FOR ANY PATENT, COPYRIGHT, TRADEMARK, TRADE SECRET
OR OTHER INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT.
13. LIMITATION OF LIABILITY AND DAMAGES.
13.1 LIMITATION OF LIABILITY. EXCEPT FOR A PARTY'S INDEMNIFICATION
OBLIGATIONS IN SECTION 12, AKAMAI'S AND APPLE'S LIABILITY TO THE OTHER PARTY FOR
ALL CLAIMS ARISING OUT OF THIS AGREEMENT, WHETHER IN CONTRACT, TORT OR
OTHERWISE, SHALL BE LIMITED TO [**].
13.2 EXCEPT FOR LIABILITIES ARISING UNDER SECTION 9, IN NO EVENT SHALL
EITHER PARTY BE LIABLE TO THE OTHER OR ANY THIRD PARTY FOR ANY LOSS OF DATA,
LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, OR OTHER SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR INDIRECT DAMAGES UNLESS INCLUDED IN AN AWARD SUBJECT TO AN
INDEMNITY OBLIGATION UNDER SECTION 12.2 OR SECTION 12.3 ARISING FROM OR IN
RELATION TO THIS AGREEMENT OR THE USE OF THE SERVICES, HOWEVER CAUSED AND
REGARDLESS OF THEORY OF LIABILITY. THIS LIMITATION WILL APPLY EVEN IF SUCH PARTY
HAS BEEN ADVISED OR IS AWARE OF THE POSSIBILITY OF SUCH DAMAGES.
14. MISCELLANEOUS.
14.1 INDEPENDENT SERVICE PROVIDER. The relationship of Akamai and Apple
established by this Agreement is that of independent service providers, and
nothing contained in this Agreement shall be construed to (i) give either party
the power to direct and control the day-to-day activities of the other; (ii)
deem the parties to be acting as partners, joint venturers, co-owners or
otherwise as participants in a joint undertaking; or (iii) allow either party to
create or assume any obligation on behalf of the other party for any purpose
whatsoever.
14.2 NOTICES. Any notice required or permitted hereunder shall be in writing
and shall be delivered as follows (with notice deemed given as indicated): (i)
by personal delivery when delivered personally; (ii) by established overnight
courier upon written verification of receipt; (iii) by facsimile transmission
when receipt is confirmed orally; or (iv) by certified or registered mail,
return receipt requested, upon verification of receipt. All notices must be sent
to the contact person for notices at the address listed on the cover page of
this Agreement. Either party may change its contact person for notices and/or
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
address for notice by means of notice to the other party given in accordance
with this Section 14.2.
14.3 ASSIGNMENT. [**] assign this Agreement, in whole or in part, in connection
with any internal reorganization or a sale of all or substantially all of its
assets related to this Agreement. [**], assign this Agreement, in whole or in
part, either voluntarily or by operation of law. [**] shall not unreasonably
withhold or delay its consent to any proposed assignment by [**] or any
successor in interest to the business or assets of either entity) if such entity
agrees in writing to assume all obligations of [**] hereunder and demonstrates
that it can and will perform all such obligations at or above the commitments
made by [**] hereunder. Any attempt to assign this Agreement in violation of
this Section 14.3 shall be a material default of this Agreement and shall be
void.
14.4 THIRD PARTY BENEFICIARIES. This Agreement is solely for the benefit of the
parties and their successors and permitted assigns, and does not confer any
rights or remedies on any other person or entity.
14.5 GOVERNING LAW. This Agreement shall be interpreted according to the laws of
the State of California without regard to or application of choice-of-law rules
or principles.
14.6 ENTIRE AGREEMENT AND WAIVER. This Agreement and any Schedules hereto shall
constitute the entire agreement between Akamai and Apple with respect to the
subject matter hereof and all prior agreements, representations, and statement
with respect to such subject matter are superceded hereby, including without
limitation any non-disclosure agreement previously executed between the parties.
The terms of this Agreement shall control in the event of any inconsistency with
the terms of any Schedule hereto. Except as provided in Section 7.1, this
Agreement may be changed only by written agreement signed by both Akamai and
Apple. No failure of either party to exercise or enforce any of its rights under
this Agreement shall act as a waiver of any particular or subsequent breaches;
and the waiver of any breach shall not act as a waiver of subsequent breaches.
14.7 SEVERABILITY. In the event any provision of this Agreement is held by a
court or other tribunal of competent jurisdiction to be unenforceable, that
provision will be enforced to the maximum extent permissible under applicable
law, and the other provisions of this Agreement will remain in full force and
effect. The parties further agree that in the event such provision is an
essential part of this Agreement, they will begin negotiations for a suitable
replacement provision with like economic effect and intent.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
14.8 NON-DISCLOSURE OF AGREEMENT TERMS. Neither party shall disclose to third
parties, other than its agents and representatives on a need-to-know basis, the
terms of this Agreement or any Schedule hereto without the prior written consent
of the other party, except either party shall be entitled to disclose (i) such
terms to the extent required by law; (ii) the existence of this Agreement; (iii)
press releases as allowed under Section 6.1.
14.9 FORCE MAJEURE. If either party is prevented from performing any of its
obligations under this Agreement due to any cause beyond the party's reasonable
control, including, without limitation, an act of God, fire, flood, earthquake,
explosion, war, strike, embargo, government regulation, civil or military
authority (a "force majeure event") the time for that party's performance will
be extended for the period of the delay or inability to perform due to such
occurrence; provided, however, that Apple will not be excused from the payment
of any sums of money owed by Apple to Akamai; and provided further, however,
that if a party suffering a force majeure event is unable to cure that event
within thirty (30) days, the other party may terminate this Agreement.
14.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be deemed an
original, and all of which shall constitute one and the same Agreement.
14.11 CONSTRUCTION. This Agreement shall be construed and interpreted fairly, in
accordance with the plain meaning of its terms, and there shall be no
presumption or inference against the party drafting this Agreement in construing
or interpreting the provisions hereof.
14.12 REMEDIES. Except as provided in Sections 12.2 and 12.3, the rights and
remedies of the parties set forth in this Agreement are not exclusive and are in
addition to any other rights and remedies available to it at law or in equity.
14.13 BINDING EFFECT. This Agreement shall be binding upon and shall inure to
the benefit of the respective parties hereto, their respective
successors-in-interest, legal representatives, heirs and assigns.
IN WITNESS WHEREOF, each of the parties, by its duly authorized
representative, has entered into this Agreement as of the Effective Date.
<TABLE>
<S> <C>
APPLE COMPUTER, INC. AKAMAI TECHNOLOGIES, INC.
By: /s/ [**] By: /s/ Paul Sagan
Name: [**] Name: Paul Sagan
Title: [**] Title: President and COO
</TABLE>
Akamai/Apple Proprietary and Confidential
-24-
<PAGE> 25
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE A - FREEFLOW ORDER FORM 1
CONTRACT SALES
EFFECTIVE 4/1/99 REP:
DATE:
TYPE: /X/ New / / Upgrade / / Renewal
<TABLE>
<CAPTION>
CUSTOMER INFORMATION: CUSTOMER CONTACT:
<S> <C> <C> <C>
Company Name: [**]
Name: Apple Computer Phone: [**]
Billing Fax:
Address: 1 Infinite Loop E-Mail: [**]
Cupertino, CA 95014
</TABLE>
<TABLE>
<CAPTION>
BILLING CONTACT: (if different than Customer Contact) TECHNICAL CONTACT:
<S> <C> <C> <C>
Name: [**]
Name: Same Phone: [**]
Phone: Fax:
Fax: E-Mail: [**]
E-Mail:
</TABLE>
UPGRADE/ACCOUNT CHANGE AUTHORITY: (Check contacts with authority to upgrade
contract)
<TABLE>
<S> <C> <C> <C>
X Customer Billing Technical Other (See Special
Contact Contact Contact Instructions)
----- ----- ----- -----
</TABLE>
TOTAL CHARGES SUMMARY: (SEE ATTACHED DETAILED PRODUCTS AND SERVICES
DESCRIPTIONS)
<TABLE>
<S> <C> <C> <C>
INITIAL FEE: One-time fee after installation is INITIAL FEE: WAIVED
complete
PRICE PER MBPS: Rate per Mbps for FreeFlow services:
[**] Mbps -[**] per Mbps
[**] Mbps -[**] per Mbps
[**] Mbps + - [**] per Mbps
(these rates are [**] on FreeFlow)
COMMITTED
INFORMATION Committed Monthly Usage of 100
-----
RATE (CIR): FreeFlow service CIR: MPBS
MONTHLY Monthly fees billed in advance STANDARD
RECURRING FEES: (based on CIR), MONTHLY
= Price per Mbps x CIR RECURRING: [**]
</TABLE>
INITIAL TERM: [**], STARTING WITH THE EFFECTIVE DATE
-25-
<PAGE> 26
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
AKAMAI PRODUCTS & SERVICES DETAILED DESCRIPTIONS
FREEFLOW SERVICE CONFIGURATION
<TABLE>
<CAPTION>
Initial Recurring
Fees Charges
---- -------
<S> <C> <C> <C>
FreeFlow -Initial RENAME script consultation and project
Integration plan development [**]
Details and
Requirements
- on-site integration meeting and development
FreeFlow - per chart, page 1 - [**]
Service
Network
Utilization
([**] for usage of [**] Mbps/month)
Billing to be based on [**] of FreeFlow usage
There will be a [**] Mbps committed rate of FreeFlow
utilization during this time - any usage above the
Committed Information Rate will be billed per the rates
indicated in the table on Page 1
- Committed Rate fees [**]
- Usage over the CIR [**]
SUBTOTAL: [**] [**]
ADJUSTMENTS: [**] ---
[**]
TOTAL (AT COMMITTED RATE): [**] [**]
SPECIAL
INSTRUCTIONS:
- [**]
</TABLE>
Akamai/Apple Proprietary and Confidential
-26-
<PAGE> 27
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE A - FREEFLOW ORDER FORM 2
CONTRACT SALES
EFFECTIVE 8/1/99 REP:
DATE:
TYPE: /X/ New / / Upgrade / / Renewal
<TABLE>
<CAPTION>
CUSTOMER INFORMATION: CUSTOMER CONTACT:
<S> <C> <C> <C>
Company Name: [**]
Name: Apple Computer Phone: [**]
Billing Fax:
Address: 1 Infinite Loop E-Mail: [**]
Cupertino, CA 95014
BILLING CONTACT: (if different than Customer
Contact) TECHNICAL CONTACT:
Name: [**] Name: [**]
Phone: Phone: [**]
Fax: Fax:
E-Mail: E-Mail: [**]
</TABLE>
UPGRADE/ACCOUNT CHANGE AUTHORITY: (Check contacts with authority to upgrade
contract)
<TABLE>
<S> <C> <C> <C>
/X/ Customer / / Billing / / Technical / / Other (See Special
Contact Contact Contact Instructions)
</TABLE>
TOTAL CHARGES SUMMARY: (SEE ATTACHED DETAILED PRODUCTS AND SERVICES
DESCRIPTIONS)
<TABLE>
<S> <C> <C> <C>
INITIAL FEE: One-time fee after installation is INITIAL FEE: N/A
complete
PRICE PER MBPS: Rate per Mbps for FreeFlow services:
[**] Mbps - [**] per Mbps
[**] Mbps -[**] per Mbps
[**] Mbps + -[**] per Mbps
(these rates are [**] on FreeFlow)
COMMITTED
INFORMATION Committed Monthly Usage of [**]
RATE (CIR): FreeFlow service CIR: MPBS
MINIMUM
Monthly Recurring Fees are as STANDARD
MONTHLY indicated in the contract MONTHLY [**]
RECURRING FEES: RECURRING:
</TABLE>
INITIAL TERM: [**], STARTING WITH THE EFFECTIVE DATE (AS DETERMINED UNDER THE
MASTER SERVICE AGREEMENT)
Akamai/Apple Proprietary and Confidential
-27-
<PAGE> 28
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
AKAMAI PRODUCTS & SERVICES DETAILED DESCRIPTIONS
<TABLE>
<CAPTION>
FREEFLOW SERVICE CONFIGURATION Initial Recurring
Fees Charges
---- -------
<S> <C> <C> <C>
FreeFlow -Initial RENAME script consultation and project
Integration plan development [**]
Details and
Requirements
- on-site integration meeting and development
FreeFlow - per chart, page 1 -
Service
Network
Utilization
[**] for usage of [**] + Mbps/month)
Billing to be based on [**] of FreeFlow usage
There will be a [**] minimum commitment for utilization
of Akamai services During this [**] agreement
- Committed Rate fees [**]
- Usage over the CIR [**]
SUB-TOTAL: [**] [**]
ADJUSTMENTS: --- ---
[**]
TOTAL (AT COMMITTED RATE): [**] [**]
SPECIAL
INSTRUCTIONS:
-[**]
</TABLE>
Akamai/Apple Proprietary and Confidential
-28-
<PAGE> 29
SCHEDULE B
FREEFLOW SERVICES
FreeFlow Services consist of all of the following which shall be
provided in accordance with the service level commitments and credits described
on Schedule C and incorporated herein by reference.
1. 24 X 7 MONITORING
All systems on the FreeFlow network are monitored to ensure that key
processes are running, systems have not exceeded capacity, and regions
are interacting in accordance with Akamai's standards.
2. GEOFLOW MONITORING SUITE (as described on Schedule C and incorporated
herein by reference).
3. RENAME APPLICATION AND PROCESS
The RENAME tool allows customers to include content for delivery via
the FreeFlow content delivery service. The RENAME application is a
small, flexible script that is run on URLs or certain pieces of content
to tag them with a customer-specific code ("Content Provider Code"),
and a unique identifier ("Fingerprint"). RENAME is a passive process,
typically run in the staging environment and not in a "live" production
environment. Akamai provides initial and ongoing support for RENAME
planning and integration as described in Section 2 of the Agreement.
4. CONTENT PROVIDER CODE (as described on Schedule E and incorporated
herein by reference).
5. THE "FINGERPRINT"
Another component of the RENAMEd URL is the "Fingerprint". This is a
unique identifier, which ensures that the object or image being served
is the object or image that customer delivers to the FreeFlow network
to be served.
Posted below is an example of an Apple Computer URL followed by the
corresponding RENAMEd URL:
Akamai/Apple Proprietary and Confidential
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<PAGE> 30
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Original URL:
[**](Regular URL)
Format for RENAMEd URL:
[**]
URL after running RENAME:
[**]
6. [**]
As long as [**] for specific [**] then [**] has the ability to [**]
access the [**] request. An [**] can be made only upon prior request by
[**] and during the period of time [**] then any applicable [**]
related to [**] but not commitments related to [**]
7. AKAMAI ACCOUNT MANAGEMENT
Akamai provides Apple Computer with a dedicated account manager who
serves as a single point of contact for all Apple requirements.
8. INVOICES
Invoices are sent on the 5th of the month in which service is
delivered. Initial fees appear on the first bill, as do any fees
associated with custom services and equipment. Fees associated with
[**] for period of usage on the [**] invoice.
9. APPLE COMPUTER IMPLEMENTATION
During the [**] period after execution of the Master Services
Agreement, Akamai will provide [**] to assist Apple Computer with
integration of the RENAME process and other appropriate services,
including providing assistance to Apple in the development of software
tools and applications to monitor the performance of QT-TV [**] as used
to determine stream quality. After execution of the Master Services
Agreement, Apple and Akamai will create a plan for integration of the
process for tagging Apple web content for inclusion on the FreeFlow
service network.
Akamai/Apple Proprietary and Confidential
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<PAGE> 31
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
After the [**], Akamai will provide [**] as mutually agreed.
10. APPLE COMPUTER MONTHLY COMMITTED RATE
Apple Computer will be billed at the [**] FreeFlow network [**]. Apple
Computer will have a Committed Rate of traffic per month. Usage [**] at
any time, [**] for usage [**].
Akamai/Apple Proprietary and Confidential
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<PAGE> 32
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE C
SERVICE LEVEL COMMITMENTS AND CREDITS
Akamai agrees to provide a level of service demonstrating:
a) Measurable Performance Enhancement: The Akamai FreeFlow service will
deliver content measurably faster than Apple's web site using the methodology
described in Section II below.
b) 100% Uptime: The Akamai FreeFlow service will serve content 100% of
the time using the methodology described in Section II below.
c) Service Credits: If the Akamai FreeFlow service fails to meet either
of the above service levels, Apple will receive a credit [**] the failure
occurs; provided, however, that Apple shall only receive one such credit [**]
and, subject to any terminations rights provided to Apple in the Master
Agreement.
II. Metric Methods:
The following methodology will be employed to measure FreeFlow service Uptime
and Performance Enhancement:
1. Agents and Polling Frequency
A. From [**] geographically and network-diverse locations in
major metropolitan areas, Akamai will [**] Sites will include
the following areas:
[**]
B. The [**] will perform [**] operations:
i. [**] operation will be performed on a [**] residing
on the appropriate [**] (e.g.[**]
ii. [**] will be performed from the [**]
[**]
C. The [**] will be a file of [**] or greater in size.
Akamai/Apple Proprietary and Confidential
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<PAGE> 33
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
D. [**] will occur at approximately [**] intervals.
E. Based on the [**] described in B. above, the [**] received
from the two sources, (a) Apple's server, and (b) the Akamai
network, will be compared for the purpose of measuring
performance metrics and outages.
2. Performance Metrics
The performance metric will be based on a [**] of performance for the
FreeFlow service and the Apple's [**], computed from [**]. Each time
will be weighted to reflect peak traffic conditions or "primetime"
usage. The primetime period is 10 AM to 7 PM EST. All times recorded
during this period will be [**]. If on a given day the [**] then the
[**] of service.
3. Outages
An outage is defined as a [**] by a single agent to "get" a file from
the FreeFlow network [**] to "get" the test file from Apple's web site.
If an outage is identified by this method, Apple will receive [**] in
which the [**].
Akamai will not be deemed to have breached its obligations under this
Schedule C to the extent and for the period that QT-TV and other Apple
Content is not available at all due to failure or unavailability of
Apple servers.
Akamai will provide Apple with a means to see [**] data about network
utilization. This data will include at least the following:
- [**] served
- [**] served
- [**] customers
- [**] day
- any [**]
- [**] info [**]
- [**] info
Akamai will provide 24x7 telephone problem escalation. Akamai will respond
within [**] to any problem reported by Apple. In the case of a major outage,
Akamai will notify Apple by telephone within [**]. In addition, [**] any problem
impacting user performance.
Akamai/Apple Proprietary and Confidential
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<PAGE> 34
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE D
NETWORK SECURITY PROTOCOLS
CONTENT INTEGRITY
The Akamai RENAME software contains a feature that can attribute to each
customer content object that has been directed for distribution using the Akamai
Network a unique fingerprint, and it is recommended that Akamai customers use
this feature. The fingerprint is a [**]. The fingerprint helps to ensure that
the Akamai Network does not serve out-of-date objects or serve an incorrect
object, because if a content object [**]. At the prior written request of a
customer, the Akamai Network will [**] In addition, a customer is [**] provided
by the customer. At the prior written request of a customer, servers in the
Akamai Network will [**] those given to Akamai by the customer.
PHYSICAL SECURITY
Several layers of physical security protect servers in the Akamai Network. The
majority of Akamai's servers are [**] that allow for [**] only to authorized
personnel.
CONTROLLING ACCESS
Access to servers deployed in the Akamai Network is controlled [**] logging into
a server must use [**] to access any [**] network. There are [**] to the
servers: [**] which is used by [**] Additionally, any [**] that are [**] on the
servers.
MONITORING
The [**] component of the Akamai Network, which [**] on a [**] provides [**].
The [**] is staffed on a 7x24 basis and monitors the Akamai Network for
performance, stability and observable [**]
ONGOING
Akamai shall monitor vendor-based security alert notifications and ensure that
all appropriate third party security-related patches and upgrades are tested and
applied on servers in the Akamai Network.
Apple may suggest security enhancements intended to ensure integrity of Apple
Akamai/Apple Proprietary and Confidential
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<PAGE> 35
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Content.
In the case of any [**] Akamai will notify Apple [**] to describe the steps
Akamai is taking to correct and prevent a similar situation again.
CERT RECOMMENDATIONS
Akamai shall at a minimum comply promptly with all applicable CERT (Computer
Emergency Response Team) recommendations with regard to specified levels of
integrity, confidentiality, performance, and other quality attributes necessary
to maintain essential service levels in the presence of attack, failure, or
accident.
[**]
[**] Akamai's facilities [**] practices and procedures.
Akamai/Apple Proprietary and Confidential
-35-
<PAGE> 36
SCHEDULE E
DESCRIPTION OF AKAMAI SOFTWARE
AKAMAI SOFTWARE CONSISTS OF ALL OF THE FOLLOWING, INCLUDING ALL REVISIONS
THEREOF MADE AVAILABLE BY AKAMAI DURING THE TERM AND ALL RELATED DOCUMENTATION.
1. GEOFLOW MONITORING SUITE
GeoFlow Monitoring Suite is a set of tools that provide site usage
statistics. The suite includes tools for both real-time and historic
analysis of customer data.
GeoFlow Traffic Analyzer is the real-time component of the GeoFlow
tools suite. Traffic Analyzer's multiple monitoring views enable up to
date access to network and customer-specific traffic information with
the option to export data to other applications which accept the data
in the format provided for more detailed offline analysis.
GeoFlow Log Analyzer allows for full viewing of historical data. Log
Analyzer culls its information from existing web server log files to
provide for exploration of site traffic patterns in the data.
2. RENAME APPLICATION AND PROCESS
The RENAME tool allows customers to include content for delivery via
the FreeFlow content delivery service. The RENAME application is a
small, flexible script that is run on URLs or certain pieces of content
to tag them with a customer-specific code ("Content Provider Code"),
and a unique identifier ("Fingerprint"). RENAME is a passive process,
typically run in the staging environment and not in a "live" production
environment. Akamai provides initial and ongoing support for RENAME
planning and integration as described in Section 2.
3. CONTENT PROVIDER CODE
The Content Provider Code is a numerical account reference within the
serial number portion of a RENAMEd URL. The Content Provider Code is
used by
Akamai/Apple Proprietary and Confidential
-36-
<PAGE> 37
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Akamai to collect and sort customer-specific information. The Content
Provider Code is used by Akamai to represent data on the GeoFlow
Traffic Analyzer real time reporting interface. Content Provider Codes
are also used to aggregate network utilization data for billing and
reporting to customer.
4. [**]
To be determined by the parties.
Akamai/Apple Proprietary and Confidential
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<PAGE> 38
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE F
[**] SOFTWARE
1. GeoFlow Traffic Analyzer (as described on Schedule E)
a. [**]
b. [**]
c. [**]
2. GeoFlow Log Analyzer
a. [**]
Akamai/Apple Proprietary and Confidential
-38-
<PAGE> 1
Exhibit 10.9
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission. Asterisk
denote omission.
STRATEGIC ALLIANCE AND JOINT DEVELOPMENT AGREEMENT
This STRATEGIC ALLIANCE AND JOINT DEVELOPMENT AGREEMENT (the
"Agreement") is made and entered into as of this 6th day of August, 1999, (the
"Effective Date") by and between CISCO SYSTEMS, INC., a California corporation,
with offices at 170 W. Tasman Drive, San Jose, California 95134 ("Cisco"), and
AKAMAI TECHNOLOGIES, INC., a Delaware corporation, with offices at 201 Broadway,
Cambridge, MA 02139 ("Akamai").
RECITALS:
A. Cisco is in the business of developing, manufacturing and selling
routers, switches and other hardware and software products for use in computer
and communications networks ("Cisco Products"), including but not limited to
certain products for the caching and secure transmission of data and certain
protocols for the exchange of information.
B. Akamai has developed proprietary technology to efficiently deliver
content over the Internet and is in the business of providing content
distribution services ("Akamai Services"). To support its Akamai Services,
Akamai has, among other things, deployed a worldwide network dedicated to web
content delivery.
C. The parties wish to enter into a strategic development, integration
and joint marketing arrangement, and wherever practicable, Akamai is [**] and to
undertake such other obligations as are set forth herein, on the terms and
conditions contained in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. DEFINITIONS.
Capitalized terms used in this Agreement are defined throughout the Agreement.
Terms not defined therein shall be given their plain English meaning; provided,
however, that those terms, acronyms and phrases known in the computer software
industry which are not defined shall be interpreted in accordance with their
generally accepted industry meaning.
Page 1
<PAGE> 2
2. INTENT AND PURPOSE OF ALLIANCE; PROJECT PLANS.
2.1 INTENT AND PURPOSE. This Agreement contemplates certain joint
development activities between Cisco and Akamai that are intended to facilitate
and promote faster and more efficient Internet content delivery by, among other
things, developing protocol specifications and algorithms enabling Cisco's
router and switch hardware and equipment technologies and capabilities to
interoperate with Akamai's Internet content delivery technologies, services and
capabilities. Pursuant to the foregoing, it is the current intent of the parties
to undertake the development and integration projects specified in Section 3
below (the "Projects").
2.2 PROJECT PLANS. Notwithstanding the provisions of Section 2.1 above,
the parties understand that the technical and commercial feasibility of the
Projects has not been established. Accordingly, while it is the present intent
of the parties to undertake the Projects, either party may at its sole
discretion decline to agree to undertake any or all of the Projects without
obligation or penalty. It is further understood and agreed that each Project
undertaken pursuant to this Agreement will be subject to the execution and
delivery by the Parties of a separate Project plan for each Project undertaken
(each, a "Project Plan"). When executed, each Project Plan will be attached to
and incorporated by reference into this Agreement, and the terms and conditions
of the Project Plan shall control to the extent inconsistent with the terms
contained herein. The Parties agree that each Project Plan will set forth, among
other things as the parties shall deem appropriate, the following:
- a detailed description of the Project;
- any design documents or specifications (unless the Project
contemplates creation or development of the same);
- Project deliverables, if any, that either or both Parties will
be responsible for creating and developing;
- tasks, responsibilities, covenants and agreements of each
Party relating to the Project;
- deadlines, interim milestones, and other matters relating to
timing and delivery or performance under the Project;
- Intellectual Property rights or licenses to the extent
different from the terms of this Agreement;
- exclusivity rights or other restrictions on use with or
marketing of competing technologies, if any;
- termination rights of the Parties relating to the Project;
- obligations of the Parties to manufacture, market or sell
implementations of the Project; and
- any other terms or conditions that vary from the terms and
conditions set forth in this Agreement.
Page 2
<PAGE> 3
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
3. THE PROJECTS.
3.1 [**] PROJECT. Akamai and Cisco will jointly develop a [**] protocol
("[**] ") which will enable content delivery software (which shall include but
may not be limited to Akamai's proprietary FreeFlow software (the "FreeFlow
Software")) [**] products (the "[**]", which shall include but may not be
limited to Cisco's [**] products), and for the [**] to participate in [**]
Akamai's content delivery service, as follows:
(a) Akamai has delivered to Cisco an initial draft of a [**]
document ("[**] Document"). Engineering teams from both parties agree
to work jointly and negotiate in good faith to agree upon a final [**]
Document and a [**] Project Plan ("[**] Project Plan").
(b) The parties will establish by mutual agreement target
dates for the development of the [**] Document and the [**] Project
Plan.
(c) Akamai shall designate [**] as its Project Manager (as
defined below) for the [**] project, and Cisco shall designate [**] as
its Project Manager. Either Party may change its Project Manager and
appoint a substitute Project Manager for this Project.
(d) Subject to the ownership rights set forth in Section 8,
the Parties agree that all aspects of [**] jointly developed by the
Parties (the "Jointly Developed [**] Property") shall be [**]. Subject
to the provisions of Section 3.1(e) below, with respect to any Cisco
Property expressly incorporated into [**] as finally approved by both
Parties under this Agreement, [**] solely as incorporated into [**] and
any implementations thereof. Subject to the provisions of Section
3.1(e) below, with respect to any Akamai Property and any Jointly
Developed [**] Property expressly incorporated into [**] as finally
approved by both Parties under this Agreement, [**] solely as
incorporated into [**] and any implementations thereof. The parties
further agree that Confidential Information excludes [**] as finally
approved by both Parties.
(e) The parties agree that nothing contemplated in this
Section 3.1 shall prohibit: (i) [**] or other product or service of
Cisco [**] , provided that Cisco does not disclose to such third party
or use any Akamai Property or Akamai Confidential Information in
interfacing with such third party products); and (ii) [**] or other
product or service of Akamai [**], provided that Akamai does not
disclose to such third party or use any Cisco Property or Cisco
Confidential Information in interfacing with such third party
products).
(f) In addition to the foregoing, [**], during the term of
this Agreement and for a period of [**] following its termination,
[**], provided however that, subject to the other restrictions and
limitations provided herein, nothing in this Section 3.1(f) shall [**],
and provided further that the [**] in this Section 3.1(f) shall
terminate immediately upon any termination of this Agreement by Akamai.
[**], during the term of this Agreement
Page 3
<PAGE> 4
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
and for a period of [**] following its termination, [**], provided
however that, subject to the other restrictions and limitations
provided herein, nothing in this Section 3.1(f) shall [**], and
provided further that the [**] in this Section 3.1(f) shall terminate
[**] any termination of this Agreement by Cisco.
3.2 [**]. In consultation with [**] will develop a [**] that will
enable [**] to be used by the each of the Parties to enhance the interoperation
of their products or services. By way of example (but without limitation), it is
anticipated that the following data may be included in such protocols, subject
to such data being available and capable of being readily exposed:
- [**];
- [**];
- [**];
- [**];
- [**];
- [**];
- [**].
(a) The parties will (i) establish by mutual agreement target
dates for the development of [**], and (ii) negotiate in good faith to
agree upon, execute and deliver an 2 Project Plan.
(b) Akamai shall designate [**] as its Project Manager for the
[**] project, and Cisco shall designate [**] as its Project Manager.
Either Party may change its Project Manager and appoint a substitute
Project Manager for this Project.
(c) Unless expressly agreed to in the [**] Project Plan or
otherwise in writing between the Parties with respect to a specific
portion: (i) the [**], including any derivatives, improvements or
modifications created under this Agreement, shall be considered [**]
Property under this Agreement,[**] as delivered to [**] solely to
implement certain of [**], in providing [**], to interoperate with and
fully utilize [**].
(d) [**] may establish and promote the [**] as an [**].
Accordingly, subject to the requirements of confidentiality with
respect to [**] confidential information, [**] may at any time and at
[**] discretion [**]. [**] will notify [**] if it intends to so [**].
3.3 [**] PROJECT. Akamai and Cisco will jointly develop, name and
implement one or more [**] that can be used in connection with, among other
things, [**], and to [**] which will provide the data resulting from [**], as
follows:
(a) The parties will (i) establish by mutual agreement target
dates for the development of the [**], and (ii) negotiate in good faith
to agree upon, execute and deliver a Project Plan relating to the
development of the [**].
Page 4
<PAGE> 5
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
(b) Akamai shall designate [**] as its Project Manager for the
[**] project, and Cisco shall designate [**] as its Project Manager.
Either Party may change its Project Manager and appoint a substitute
Project Manager for this Project.
(c) Subject to the ownership rights set forth in Section 8,
the parties agree that all aspects of the [**] by the parties (the
"[**]") shall be [**]. With respect to the [**], if any, expressly
incorporated by the parties into the [**] as finally approved by the
Parties under this Agreement, [**] solely as incorporated in the [**]
and any implementations thereof. With respect to the [**], if any,
expressly incorporated by the Parties into the [**] as finally approved
by the Parties under this Agreement, [**] solely as incorporated in the
[**] and any implementations thereof. Subject to foregoing, the
foregoing licenses do not grant either Party rights to any [**] created
by the other party subsequent to the version finally approved by the
Parties under this Agreement. The parties further agree that
Confidential Information excludes the [**] as finally approved by both
Parties.
(d) Notwithstanding the provisions of Section 8, the
ownership, license and confidentiality rights of each party with regard
to the [**] shall be set forth as in the Project Plan.
(e) Except as may be otherwise expressly provided in the
Project Plan, [**]. Accordingly, subject to the requirements of
confidentiality with respect to [**] Confidential Information, [**] at
any time and [**] to the [**]. [**] if it intends to [**].
3.4 DEVELOPMENT OF ALGORITHMS AND PROTOCOLS TO CONTROL CISCO SWITCHES
IN COMBINATION WITH AKAMAI'S CONTENT DELIVERY SYSTEM. Akamai and Cisco shall
form a working group to jointly develop, name and implement a next generation
switch with the ability to dynamically adapt to changing network conditions and
distribute content according to more sophisticated algorithms than is possible
with existing routing algorithms ("Switch Algorithms") and to develop protocols
which will provide the data resulting from such algorithms to Cisco Products and
to Akamai's software ("Switch Protocols"), as follows:
(a) The parties will (i) establish by mutual agreement target
dates for the development of the Switch Algorithms and Switch
Protocols, and (ii) negotiate in good faith to agree upon, execute and
deliver a Switch Algorithms and Switch Protocols Project Plan ("Switch
Project Plan").
(b) [**] shall designate [**] as its Project Manager for the
Switch Protocols project, and [**] shall designate as its Project
Manager. Either Party may change its Project Manager and appoint a
substitute Project Manager for this Project.
(c) Subject to the ownership rights set forth in Section 8,
the parties agree that all aspects of the Switch Protocols [**] (the
"[**] Switch Protocol Property") [**]. With
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
respect to the [**], if any, expressly incorporated by the parties into
the Switch Protocols as finally approved by the Parties under this
Agreement, [**] solely as incorporated in the Switch Protocols and any
implementations thereof. With respect to the [**] and the Jointly
Developed Switch Protocol Property, [**] solely as incorporated in the
Switch Protocols and any implementations thereof. Subject to foregoing,
the foregoing licenses do not grant either Party rights to any Switch
Protocols created by the other party subsequent to the version finally
approved by the Parties under this Agreement. The parties further agree
that Confidential Information excludes the Switch Protocol as finally
approved by both Parties.
(d) Notwithstanding the provisions of Section 8, the
ownership, license and confidentiality rights of each party with
respect to any Switch Algorithms shall be set forth as in the Project
Plan.
(e) Except as may be otherwise expressly provided in the
Project Plan, [**]. Accordingly, subject to the requirements of
confidentiality with respect to [**] Confidential Information, [**] may
at any time and [**] the Switch Protocols to the [**].
[**] will notify [**] if it intends to [**].
3.5 [**]. Each party agrees to use commercially reasonable efforts and
explore, assess and investigate the possibility of [**]. Akamai shall designate
[**] to evaluate the project contemplated in this Section 3.5, and Cisco shall
assign [**]. Either Party may change its Project Manager and appoint a
substitute Project Manager for this Project.
3.6 [**]. Each party agrees to use commercially reasonable efforts and
explore, assess and investigate the possibility of developing modifications to
the Cisco Products and Akamai Services to support and enable more efficient
distribution of [**]. Akamai shall designate [**] to evaluate the Project
contemplated in this Section 3.6, and Cisco shall assign [**]. Either Party may
change its Project Manager and appoint a substitute Project Manager for this
Project.
3.7 ADDITIONAL DEVELOPMENT AND INTEGRATION OPPORTUNITIES. During the
term of this Agreement, the parties may explore and assess other possible joint
development or integration opportunities consistent with the intent and purpose
of this Agreement.
4. ADDITIONAL AGREEMENTS OF THE PARTIES.
4.1 STRATEGIC INVESTMENT IN AKAMAI BY CISCO. Concurrent with the
execution and delivery of this Agreement, Cisco and Akamai have executed and
delivered that certain Preferred Stock Purchase Agreement and all documents
ancillary thereto, pursuant to which Cisco has acquired 1,867,480 shares of
Akamai's Series E Preferred Stock, at an aggregate purchase price of
$49,000,807.72.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
4.2 LOGO USAGE; [**]. Cisco hereby grants Akamai the right to use
Cisco's logo, subject to logo usage guidelines to be provided by Cisco to
Akamai. Akamai hereby grants Cisco the right to use Akamai's logo, subject to
logo usage guidelines to be provided by Akamai to Cisco. During the term of this
Agreement, each party also agrees that it will whenever commercially feasible
[**]. Akamai will also notify Cisco from time to time [**]. Each party further
agrees that it shall not, during the term of this Agreement, [**]; provided,
however, that the foregoing restrictions shall not preclude a Party from (i)
providing support comments or quotes to third party press releases,
announcements or other marketing communications (provided the Party does not
initiate the issuance of such press release, announcement or communications);
and (ii) endorsing and promoting a Party's product or service solutions that
rely on or work in conjunction with competing third party products or services
(provided such endorsement is limited to the Party's product or service, and
only mentions or refers to the competing third party's products or services as
reasonably necessary to promote the Party's product or service).
4.3 PUBLICITY; PRESS RELEASES. The parties may by mutual consent agree
to issue a joint press release describing the collaboration of the parties. In
addition, each of Cisco and Akamai may, at such party's discretion: (a) identify
the other as a strategic partner; (b) hyperlink from an appropriate area within
its web site to the other's home page; and (c) display the other party's logo on
the its web site (in accordance with such party's guidelines for the use of such
mark). The parties shall also consult regularly during the term of the Agreement
and issue, as and when appropriate, such further press releases and/or other
publicity materials as may be appropriate. The contents of the any press
releases issued by the parties shall be subject to the approval of each party,
which approval shall not be unreasonably withheld or delayed.
4.4 USE OF NAME IN PROMOTIONAL MATERIALS. Each party shall, with prior
approval of the other party (which will not be unreasonably withheld or
delayed), be permitted to identify the other party as a strategic partner, to
use the other party's name in connection with proposals to prospective
customers, and to refer to the other party in print or electronic form for
marketing or reference purposes, provided however that such proposals and
marketing and reference materials [**].
4.5 MARKETING, DISTRIBUTION AND SUPPORT EFFORTS; PROMOTIONAL
ACTIVITIES. To the extent agreed upon by the Parties pursuant to the applicable
Project Plan or otherwise, each of Cisco and Akamai agree to undertake [**] from
the efforts undertaken pursuant to this Agreement. Each party agrees to serve as
a reference in the other party's proposals for a reasonable number of contacts
by prospective customers of the other party and for industry analysts. Each
party will undertake [**] from the efforts of the parties under this Agreement.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
Under the direction of the Project Managers or the Project Leaders identified in
Section 7.1 below, the parties may by mutual agreement or plan undertake
joint-marketing or co-marketing programs or activities as appropriate to further
the intent of this Agreement and the alliance created hereby.
4.6 FREEDOM OF ACTION. Except as specifically provided herein or in any
Project Plan, either Party may market and offer its own or third party products
or services (through any means) which are the same as or similar to and which
are competitive with the other party's products and services. Neither Party
makes any assurances or representations to the other in connection with any
financial gain or other benefit that may result from the activities contemplated
in this Agreement.
5. PROJECT MANAGEMENT.
5.1 PROJECT MANAGERS; PROJECT LEADERS. Each of the parties agrees to
appoint and keep in place during the term of this Agreement one or more project
managers (individually, a "Project Manager") who will allocate such portion of
his or her working time as may be reasonably necessary to facilitate the
performance, on a timely basis and in accordance with any particular project
plan, of such party's obligations under this Agreement or any particular project
plan, design or development specification or other document contemplated hereby.
In addition, each party will name a Project Leader who will: (i) be the central
point of contact for all matters arising under this Agreement; (ii) oversee
project management and the resource allocations hereunder; and (iii) have
overall responsibility for the facilitation of the performance of the
obligations of the parties contemplated hereby. The Project Leaders for each
respective party shall be the following individuals or their respective
designated successors; provided, however, that it is the intent of the parties
that the Project Leaders named below shall remain assigned to the alliance for
the entire term of this Agreement:
AKAMAI: [**]
CISCO: [**]
5.2 MEETINGS. The Project Leaders agree to meet at least quarterly to
review the overall progress of the projects contemplated hereunder and to
provide overall supervision and oversight. [**] the meetings will be held at
[**] some alternative location, as the parties shall determine.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
6. DEVELOPMENT EFFORTS; RESOURCE COMMITMENT; EXPENSES.
6.1 COST SHARING AND REIMBURSEMENT. Except as may be provided in any
specific Project Plan or as may be otherwise agreed by the parties, each of
Akamai and Cisco agrees that it shall be responsible for its own expenses
incurred in conjunction with this Agreement and any attachments hereto, and with
any undertakings and obligations contemplated hereby. Notwithstanding the
foregoing, in the event development efforts are undertaken at either Cisco or
Akamai, then the host party agrees to provide the necessary office space at no
cost to the other party.
6.2 INDEPENDENT CONTRACTORS. Either party shall have the option to
utilize contractors in order to satisfy its obligation to supply personnel
resources to the projects contemplated hereunder, but only to the extent and
insofar as reasonably required in connection with the performance of the
obligations of the party retaining the Contractor under this Agreement, and
subject to the further requirements and limitations set forth herein.
7. DISPUTE RESOLUTION PROCESS.
7.1 INITIAL CONSULTATION AND NEGOTIATION. In the event a dispute
between Akamai and Cisco arises under the Agreement or a party's performance
thereunder, the matter shall first be escalated to Akamai's Project Leader and
Cisco's Project Leader in an attempt to settle such dispute through consultation
and negotiation in good faith and a spirit of mutual cooperation.
7.2 ESCALATION. If the Project Leaders are unable to resolve the
dispute, it shall be referred to a conflict resolution committee comprised of
one representative designated by each party. The initial members of the conflict
resolution committee shall be:
For Akamai: [**]
For Cisco: [**]
7.3 CONTINUED PERFORMANCE. Except where prevented from doing so by the
matter in dispute, the parties agree to continue performing their obligations
under this Agreement while any good faith dispute is being resolved unless and
until such obligations are terminated by the termination or expiration of any
project or this Agreement.
8. OWNERSHIP; LICENSES.
8.1 OWNERSHIP BY AKAMAI. As between Cisco and Akamai, Akamai shall own
all right, title, and interest in any Intellectual Property [**] under this
Agreement [**] during the term of this Agreement [**] under this Agreement, and
Cisco shall have no ownership interest therein. Cisco hereby irrevocably
transfers, conveys and assigns to Akamai all of its right, title, and interest
therein and in any property owned or to be owned by Akamai under this Agreement.
Cisco shall execute such documents, render such assistance, and take such other
action as Akamai may reasonably request, at Akamai's expense, to apply for,
register, perfect, confirm, and protect
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
Akamai's ownership rights set forth in this Section 8.1 and in Section 3, and
Akamai shall have the exclusive right to apply for or register any patents, mask
work rights, copyrights, and such other proprietary protections with respect
thereto.
8.2 OWNERSHIP BY CISCO. As between Cisco and Akamai, Cisco shall own
all right, title, and interest in any Intellectual Property [**] under this
Agreement [**] during the term of this Agreement [**] under this Agreement, and
Akamai shall have no ownership interest therein. Akamai hereby irrevocably
transfers, conveys and assigns to Cisco all of its right, title, and interest
therein and in any property owned or to be owned by Cisco under this Agreement.
Akamai shall execute such documents, render such assistance, and take such other
action as Cisco may reasonably request, at Cisco's expense, to apply for,
register, perfect, confirm, and protect Cisco's ownership rights set forth in
this Section 8.2 and in Section 3, and Cisco shall have the exclusive right to
apply for or register any patents, mask work rights, copyrights, and such other
proprietary protections with respect thereto.
8.3 WAIVER OF MORAL RIGHTS. Akamai hereby waives any and all moral
rights, including without limitation any right to identification of authorship
or limitation on subsequent modification that Akamai (or its employees, agents
or consultants) has or may have in the Cisco Property or any part thereof. Cisco
hereby waives any and all moral rights, including without limitation any right
to identification of authorship or limitation on subsequent modification that
Cisco (or its employees, agents or consultants) has or may have in the Akamai
Property or any part thereof.
8.4 PARTY AS ATTORNEY IN FACT. Akamai agrees that if Cisco is unable
because of Akamai's dissolution or incapacity, or for any other reason, to
secure Akamai's signature to apply for or to pursue any application for any
United States or foreign patents or mask work or copyright registrations
covering the inventions assigned to Cisco above, then Akamai hereby irrevocably
designates and appoints Cisco and its duly authorized officers and agents as
Akamai's agent and attorney in fact, to act for and in Akamai's behalf and stead
to execute and file any such applications and to do all other lawfully permitted
acts to further the prosecution and issuance of patents, copyright and mask work
registrations thereon with the same legal force and effect as if executed by
Akamai. Cisco agrees that if Akamai is unable because of Cisco's dissolution or
incapacity, or for any other reason, to secure Cisco's signature to apply for or
to pursue any application for any United States or foreign patents or mask work
or copyright registrations covering the inventions assigned to Akamai above,
then Cisco hereby irrevocably designates and appoints Akamai and its duly
authorized officers and agents as Cisco 's agent and attorney in fact, to act
for and in Cisco 's behalf and stead to execute and file any such applications
and to do all other lawfully permitted acts to further the prosecution and
issuance of patents, copyright and mask work registrations thereon with the same
legal force and effect as if executed by Cisco.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
8.5 LICENSES. In addition to any licenses granted elsewhere in this
Agreement, [**] and all Intellectual Property rights with respect thereto solely
in connection with [**] hereunder and as may be reasonably necessary for [**]
its obligations under this Agreement. [**] during the term of this Agreement
[**] and all Intellectual Property Rights with respect thereto solely in
connection with [**] hereunder and as may be reasonably necessary for [**] its
obligations under this Agreement. For purposes of this Agreement, "Intellectual
Property" shall mean all works protectible by copyright, trademark, patent and
trade secret laws or by any other statutory protection obtained or obtainable,
and any Confidential Information (as defined below) of a party that meets on of
the foregoing criteria, including without limitation, any literary works,
pictorial, graphic and sculptural works, architectural works, works of visual
art, and any other work that may be the subject matter of copyright protection;
advertising and marketing concepts; information; data; formulae; designs;
models; drawings; computer programs, including all documentation, related
listings, design specifications, and flowcharts, trade secrets, and any
inventions including all methods, processes, business or otherwise; machines,
manufactures and compositions of matter and any other invention that may be the
subject matter of patent protection; and all statutory protection obtained or
obtainable thereon.
8.6 NO REVERSE ENGINEERING. Each of Cisco and Akamai agrees that it
shall not (i) copy, modify, create any derivative work of, or include in any
other products any Akamai Property (in the case of Cisco) or Cisco Property (in
the case of Akamai) or any portion thereof, or (ii) reverse assemble, decompile,
reverse engineer or otherwise attempt to derive source code (or the underlying
ideas, algorithms, structure or organization) from any such property, except as
specifically authorized in writing by the party owning the same or as
specifically provided under this Agreement.
8.7 COPYRIGHT NOTICES. Each party shall ensure that all copies of any
software or other property in its possession or control incorporates all
copyright and other proprietary notices in the same manner that the party owning
the same incorporates such notices, or in any other manner reasonably requested
by the owner. Each party shall promptly notify the other party in writing upon
its discovery of any unauthorized use of a party's property or the infringement
of such party's proprietary rights therein. Neither party shall license to any
third party the property of the other party if such other party has notified the
party that such third party may be involved in potential unauthorized use of the
property or other infringement of such party's proprietary rights thereunder.
9. TRADEMARKS, TRADE NAMES AND BRANDING.
9.1 USAGE GUIDELINES. Akamai shall comply with Cisco's logo, trademark
and branding usage guidelines, which Cisco shall provide to Akamai, and as the
same may be updated by Cisco from time to time. Cisco shall comply with Akamai's
logo, trademark and branding usage guidelines, which Akamai shall provide to
Cisco, and as the same may be updated by Akamai from time to time. Neither party
shall alter the other party's Marks.
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9.2 OWNERSHIP. All Cisco Marks are and shall remain, as between Akamai
and Cisco, the exclusive property of Cisco or its providers. All Akamai Marks
are and shall remain, as between Akamai and Cisco, the exclusive property of
Akamai or its suppliers. Neither party grants any rights in the Marks or in any
other trademark, trade name, service mark, business name or goodwill of the
other except as expressly permitted hereunder or by separate written agreement
of the parties and all use of a party's Marks shall inure to the benefit of the
owner of such Mark. Each party agrees that it shall not challenge or assist
others to challenge the rights of the other party or its suppliers or licensors
in the Marks or the registration of the Marks, or attempt to register any
trademarks, trade names or other proprietary indicia confusingly similar to the
Marks.
10. CONFIDENTIALITY.
10.1 AGREEMENT AS CONFIDENTIAL INFORMATION. The parties shall treat the
terms and conditions and the existence of this Agreement as Confidential
Information. Each party shall obtain the other's consent prior to any
publication, presentation, public announcement or press release concerning the
existence or terms and conditions of this Agreement.
10.2 DEFINITION OF CONFIDENTIAL INFORMATION. "Confidential Information"
means the terms and conditions of this Agreement, the existence of the
discussions between the parties, any information disclosed in connection with
the development and integration projects being undertaken as described in
Section 2 above, and any proprietary information a party considers to be
proprietary, including but not limited to, information regarding each party's
product plans, product designs, product costs, product prices, finances,
marketing plans, business opportunities, personnel, research and development
activities, know-how and pre-release products; provided that information
disclosed by the disclosing party ("Disclosing Party") in written or other
tangible form will be considered Confidential Information by the receiving party
("Receiving Party") only if such information is conspicuously designated as
"Confidential," "Proprietary" or a similar legend. Information disclosed orally
shall only be considered Confidential Information if: (i) identified as
confidential, proprietary or the like at the time of disclosure, and (ii)
confirmed in writing within thirty (30) days of disclosure. Confidential
Information disclosed to the Receiving Party by any affiliate or agent of the
Disclosing Party is subject to this Agreement.
10.3 NONDISCLOSURE. The Receiving Party shall not disclose or use,
except as permitted under this Agreement, the Confidential Information to any
third party other than employees and contractors of the Receiving Party who have
a need to have access to and knowledge of the Confidential Information solely
for the Purpose authorized above. The Receiving Party shall have entered into
non-disclosure agreements with such employees and contractors having obligations
of confidentiality as strict as those herein prior to disclosure to such
employees and contractors to assure against unauthorized use or disclosure.
10.4 EXCEPTIONS TO CONFIDENTIAL INFORMATION. The Receiving Party shall
have no obligation with respect to information which (i) was rightfully in
possession of or known to the Receiving Party without any obligation of
confidentiality prior to receiving it from the Disclosing Party; (ii) is, or
subsequently becomes, legally and publicly available without breach of this
Agreement; (iii) is rightfully obtained by the Receiving Party from a source
other than the
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Disclosing Party without any obligation of confidentiality; (iv) is developed by
or for the Receiving Party without use of the Confidential Information and such
independent development can be shown by documentary evidence; and (v) becomes
available to the Receiving Party by wholly lawful inspection or analysis of
products offered for sale. Further, the Receiving Party may disclose
Confidential Information pursuant to a valid order issued by a court or
government agency, provided that the Receiving Party provides the Disclosing
Party: (a) prior written notice of such obligation; and (b) the opportunity to
oppose such disclosure or obtain a protective order.
10.5 RETURN OR DESTRUCTION OF CONFIDENTIAL INFORMATION. Upon written
demand by the Disclosing Party, and in any event upon termination of this
Agreement, the Receiving Party shall: (i) cease using the Confidential
Information, (ii) return the Confidential Information and all copies, notes or
extracts thereof to the Disclosing Party within seven (7) days of receipt of
demand; and (iii) upon request of the Disclosing Party, certify in writing that
the Receiving Party has complied with the obligations set forth in this
paragraph.
10.6 INDEPENDENT DEVELOPMENT AND RESIDUALS. The terms of
confidentiality under this Agreement shall not be construed to limit either
party's right to develop independently or acquire products without use of the
other party's Confidential Information. The Disclosing Party acknowledges that
the Receiving Party may currently or in the future be developing information
internally, or receiving information from other parties, that is similar to the
Confidential Information. Accordingly, except as provided in this Agreement,
neither party shall be prohibited from developing or having developed for it
products, concepts, systems or techniques that are similar to or compete with
the products, concepts, systems or techniques contemplated by or embodied in the
Confidential Information provided that the Receiving Party does not violate any
of its obligations under this Agreement in connection with such development.
Further, subject to the other restrictions and limitations contained in this
Agreement, the residuals resulting from access to or work with such Confidential
Information shall not be subject to the confidentiality obligations contained in
this Agreement. The term "residuals" means non-specific information in
non-tangible form, which may be retained by persons who have had access to the
Confidential Information, including general ideas, concepts, know-how or
techniques contained therein. Neither party shall have any obligation to limit
or restrict the assignment of such persons or to pay royalties for any work
resulting from the use of residuals.
11. REPRESENTATIONS AND WARRANTIES.
11.1 AKAMAI'S REPRESENTATIONS AND WARRANTIES. Akamai represents and
warrants to Cisco as follows:
(a) Akamai and its licensors own or possess the necessary rights, title
and licenses necessary to perform its obligations hereunder. Akamai has the
right to enter into this Agreement and to perform its obligations hereunder.
Akamai will perform all of its development obligations in a workmanlike manner.
(b) Akamai warrants that any deliverables that are software will be
Year 2000 Ready. "Year 2000 Ready" means the ability to: (i) accept input and
provide output of data involving dates correctly and without ambiguity as to the
twentieth or twenty-first centuries; (ii) manage,
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store, sort, perform calculations, and otherwise process data involving dates
before, during, and after January 1, 2000 without malfunction, abends or aborts;
and (iii) correctly process leap years including the year 2000. The foregoing
warranty is subject to the condition that all other products (e.g., hardware,
software, and firmware) which interface with or are used with the deliverables
(including any Cisco Products) properly exchange date data with the software. In
the event Akamai becomes aware that any such software is not Year 2000 Ready,
Akamai shall immediately notify Cisco and promptly correct such software to
eliminate such problem. If Akamai fails to correct any such software that does
not meet the foregoing warranty within a reasonable period of time, Cisco shall
have the right to immediately terminate this Agreement.
EXCEPT AS SPECIFICALLY PROVIDED IN THIS SECTION 11.1, AKAMAI EXPRESSLY DISCLAIMS
ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, TO THE FULLEST EXTENT PERMITTED
BY LAW, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.
11.2 CISCO'S REPRESENTATIONS AND WARRANTIES. Cisco represents and
warrants to Akamai as follows:
(a) Cisco and its licensors own or possess the necessary rights, title
and licenses necessary to perform its obligations hereunder. Cisco has the right
to enter into this Agreement and to perform its obligations hereunder. Cisco
will perform all of its development obligations in a workmanlike manner.
(b) Cisco warrants that any deliverables that are software will be Year
2000 Ready. "Year 2000 Ready" means the ability to: (i) accept input and provide
output of data involving dates correctly and without ambiguity as to the
twentieth or twenty-first centuries; (ii) manage, store, sort, perform
calculations, and otherwise process data involving dates before, during, and
after January 1, 2000 without malfunction, abends or aborts; and (iii) correctly
process leap years including the year 2000. The foregoing warranty is subject to
the condition that all other products (e.g., hardware, software, and firmware)
which interface with or are used with the deliverables (including any Akamai
Property) properly exchange date data with the software. In the event Cisco
becomes aware that any such software is not Year 2000 Ready, Cisco shall
immediately notify Akamai and promptly correct such software to eliminate such
problem. If Cisco fails to correct any such software that does not meet the
foregoing warranty within a reasonable period of time, Akamai shall have the
right to immediately terminate this Agreement.
EXCEPT AS SPECIFICALLY PROVIDED IN THIS SECTION 11.2, CISCO EXPRESSLY DISCLAIMS
ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, TO THE FULLEST EXTENT PERMITTED
BY LAW, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.
12. INDEMNITY.
12.1 INDEMNIFICATION BY CISCO. Cisco shall defend, indemnify and hold
harmless Akamai and its officers, directors, employees, shareholders, agents,
successors and assigns from and against any and all loss, damage, settlement,
costs or expense (including legal expenses), as incurred, resulting from, or
arising out of (i) any claim against Akamai which alleges that any
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Cisco Property or Cisco deliverable infringes upon, misappropriates or violates
any patents, copyrights, trademarks or trade secret rights or other proprietary
rights of persons, firms or entities who are not parties to this Agreement; (ii)
any claim relating to negligence, misrepresentation, error or omission by Cisco,
its representatives, distributors, OEMs, VARs or other resellers; and (iii) any
warranties made by Cisco inconsistent with or beyond the scope of any warranties
made by Akamai under this Agreement.
12.2 CISCO EXCLUSIONS. Cisco shall have no obligation under Section
12.1 above to the extent any claim of infringement or misappropriation results
from: (i) use by Akamai of the Cisco Property in combination with any other
product, end item, or subassembly if the infringement would not have occurred
but for such combination; (ii) use or incorporation in the Cisco Property of any
design, technique or specification furnished by Akamai, if the infringement
would not have occurred but for such incorporation or use; or (iii) any claim
based on Akamai's use of the Cisco Property as shipped after Cisco has informed
Akamai of modifications or changes in the Product required to avoid such claims
and offered to implement those modifications or changes, if such claim would
have been avoided by implementation of Cisco's suggestions; (iv) use of the
deliverables other than as permitted under this Agreement, if the infringement
would not have occurred but for such use; or (v) compliance by Cisco with
specifications or instructions supplied by Akamai.
12.3 INDEMNIFICATION BY AKAMAI. Akamai shall defend, indemnify and hold
harmless Cisco and its officers, directors, employees, shareholders, agents,
successors and assigns from and against any and all loss, damage, settlement,
costs or expense (including legal expenses), as incurred, resulting from, or
arising out of (i) any claim against Cisco which alleges that any Akamai
Property or Akamai deliverable infringes upon, misappropriates or violates any
patents, copyrights, trademarks or trade secret rights or other proprietary
rights of persons, firms or entities who are not parties to this Agreement; (ii)
any claim relating to negligence, misrepresentation, error or omission by
Akamai, its representatives, distributors, OEMs, VARs or other resellers; and
(iii) any warranties made by Akamai inconsistent with or beyond the scope of any
warranties made by Akamai under this Agreement.
12.4 AKAMAI EXCLUSIONS. Akamai shall have no obligation under Section
12.3 above to the extent any claim of infringement or misappropriation results
from: (i) use by Cisco of the Akamai Property in combination with any other
product, end item, or subassembly if the infringement would not have occurred
but for such combination; (ii) use or incorporation in the Akamai Property of
any design, technique or specification furnished by Cisco, if the infringement
would not have occurred but for such incorporation or use; or (iii) any claim
based on Cisco's use of the Akamai Property as shipped after Akamai has informed
Cisco of modifications or changes in the Product required to avoid such claims
and offered to implement those modifications or changes, if such claim would
have been avoided by implementation of Akamai's suggestions; (iv) use of the
deliverable other than as permitted under this Agreement, if the infringement
would not have occurred but for such use; or (v) compliance by Akamai with
specifications or instructions supplied by Cisco.
12.5 CONTROL OF DEFENSE. As a condition to such defense and
indemnification, the party seeking indemnification will provide the other party
with prompt written notice of the claim and
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
permit such other party to control the defense, settlement, adjustment or
compromise of any such claim. The party seeking indemnification may employ
counsel at its own expense to assist it with respect to any such claim.
12.6 DISCLAIMER. THE FOREGOING PROVISIONS OF THIS SECTION 12 STATE THE
ENTIRE LIABILITY AND OBLIGATIONS OF THE PARTIES AND THE EXCLUSIVE REMEDY WITH
RESPECT TO ANY VIOLATION OR INFRINGEMENT OF PROPRIETARY RIGHTS, INCLUDING BUT
NOT LIMITED TO ANY PATENT, COPYRIGHT, TRADEMARK, BY THE PRODUCTS OR SERVICES OF
CISCO AND AKAMAI, RESPECTIVELY, OR ANY PART THEREOF. EACH PARTY'S OBLIGATIONS
UNDER THIS SECTION 12 ARE SUBJECT TO THE LIMITATIONS SET FORTH IN SECTION 13.
13. LIMITATION OF LIABILITY.
13.1 LIMITATION OF DAMAGES. EXCEPT FOR BREACH OF THE OBLIGATIONS OF
CONFIDENTIALITY UNDER SECTION 10, NEITHER PARTY SHALL BE LIABLE WITH RESPECT TO
ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, STRICT LIABILITY,
NEGLIGENCE OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR LOST PROFITS, OR COST OF PROCUREMENT OF SUBSTITUTE
GOODS, TECHNOLOGY OR SERVICES.
13.2 LIMITATION OF LIABILITY. EXCEPT FOR BREACH OF THE OBLIGATIONS OF
CONFIDENTIALITY UNDER SECTION 10 AND THE INDEMNIFICATION OBLIGATIONS UNDER
SECTION 12, THE TOTAL DOLLAR LIABILITY OF EITHER PARTY UNDER THIS AGREEMENT OR
OTHERWISE SHALL BE LIMITED TO [**].
14. TERM AND TERMINATION.
14.1 TERM OF AGREEMENT. This Agreement shall be effective upon the
Effective Date and shall remain in force for a period of three (3) years, unless
otherwise terminated as provided herein. However, this Agreement shall continue
to remain in effect with respect to any project already agreed to hereunder at
the time of such termination, until such projects are themselves terminated or
performance thereunder is completed.
14.2 TERMINATION FOR CAUSE. This Agreement may be terminated by a party
for cause immediately upon the occurrence of and in accordance with the
following:
(a) Insolvency Event. Either may terminate this Agreement by
delivering written notice to the other party upon the occurrence of any
of the following events: (i) a receiver is appointed for either party
or its property; (ii) either makes a general assignment for the benefit
of its creditors; (iii) either party commences, or has commenced
against it, proceedings under any bankruptcy, insolvency or debtor's
relief law, which proceedings are not dismissed within sixty (60) days;
or (iv) either party is liquidated or dissolved.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
(b) [**]. In the event [**], Cisco may at its option terminate
this Agreement upon written notice.
(c) Default. Either party may terminate this Agreement
effective upon written notice to the other if the other party violates
any covenant, agreement, representation or warranty contained herein in
any material respect or defaults or fails to perform any of its
obligations or agreements hereunder in any material respect, which
violation, default or failure is not cured within [**] after notice
thereof from the non-defaulting party stating its intention to
terminate this Agreement by reason thereof.
14.3 TERMINATION FOR CONVENIENCE. This Agreement, or any Project except
as may be provided in such Project's Project Plan, may be terminated by either
party without penalty, for any or no reason, by providing [**] prior written
notice of such termination.
14.4 SURVIVAL OF RIGHTS AND OBLIGATIONS UPON TERMINATION. Sections
3.1(d), 3.1(e), 3.1(f), 3.2(c), 3.2(d), 3.3(c), 3.3(d), 3.3(e), 3.4(c), 3.4(d),
3.4(e), 4.6, 6, 8, 10, 11, 12, 13, 15 and this Section 14.4 shall survive any
expiration or termination of this Agreement or any project hereunder.
Furthermore, in the event of any termination or expiration of this Agreement or
such project: (i) all licenses expressly granted herein shall survive; and (ii)
except as otherwise expressly provided herein, any ownership provisions
(including but not limited to Section 8) shall survive.
15. MISCELLANEOUS.
15.1 FORCE MAJEURE. Neither party shall be liable to the other for
delays or failures in performance resulting from causes beyond the reasonable
control of that party, including, but not limited to, acts of God, labor
disputes or disturbances, material shortages or rationing, riots, acts of war,
governmental regulations, communication or utility failures, or casualties.
15.2 EXPORT. Each party hereby acknowledges that one or more
deliverables supplied under the Agreement are or may be subject to export or
import controls under the laws and regulations of the United States (U.S.). Each
shall comply with such laws and regulations, and, agrees not to knowingly
export, re-export, import or re-import, or transfer products without first
obtaining all required U.S. Government authorizations or licenses. Cisco and
Akamai each agree to provide the other such information and assistance as may
reasonably be required by the other in connection with securing such
authorizations or licenses, and to take timely action to obtain all required
support documents. Each party agrees to maintain a record of exports,
re-exports, and transfers of any such deliverables for five (5) years and to
forward within that time period any required records to the party needing the
same or, at such party's request, the U.S. Government. Each party agrees to
permit audits as required under the regulations to ensure compliance with this
Agreement.
15.3 RELATIONSHIP OF PARTIES. The parties are independent contractors
under this Agreement and no other relationship is intended, including a
partnership, franchise, joint venture,
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
agency, employer/employee, fiduciary, master/servant relationship, or other
special relationship. Neither party shall act in a manner which expresses or
implies a relationship other than that of independent contractor, nor bind the
other party.
15.4 NO THIRD PARTY BENEFICIARIES. Unless otherwise expressly provided,
no provisions of this Agreement are intended or shall be construed to confer
upon or give to any person or entity other than Cisco and Akamai any rights,
remedies or other benefits under or by reason of this Agreement.
15.5 EQUITABLE RELIEF. Each party acknowledges that a breach by the
other party of any confidentiality or proprietary rights provision of this
Agreement may cause the non-breaching party irreparable damage, for which the
award of damages would not be adequate compensation. Consequently, the
non-breaching party may institute an action to enjoin the breaching party from
any and all acts in violation of those provisions, which remedy shall be
cumulative and not exclusive, and a party may seek the entry of an injunction
enjoining any breach or threatened breach of those provisions, in addition to
any other relief to which the non-breaching party may be entitled at law or in
equity.
15.6 ATTORNEYS' FEES. In addition to any other relief awarded, the
prevailing party in any action arising out of this Agreement shall be entitled
to its reasonable attorneys' fees and costs.
15.7 NOTICES. Any notice required or permitted to be given by either
party under this Agreement shall be in writing and shall be personally delivered
or sent by a reputable overnight mail service (e.g., Federal Express), or by
first class mail (certified or registered), or by facsimile confirmed by first
class mail (registered or certified), to the Project Manager of other party.
Notices will be deemed effective (i) three (3) working days after deposit,
postage prepaid, if mailed, (ii) the next day if sent by overnight mail, or
(iii) the same day if sent by facsimile and confirmed as set forth above. A copy
of any notice shall be sent to the following:
Cisco Systems, Inc. Akamai Technologies, Inc.
170 West Tasman Drive 201 Broadway
San Jose, CA 95134 Cambridge, MA 02139
Attn: VP Legal and Government Affairs Attn: VP and General Counsel
Fax: (408) 526-7019 Fax: (617) 250-3001
15.8 ASSIGNMENT. Neither party may assign its rights or delegate its
obligations hereunder, either in whole or in part, whether by operation of law
or otherwise, without the prior written consent of the other party. Any
attempted assignment or delegation without consent will be void. The rights and
liabilities of the parties under this Agreement will bind and inure to the
benefit of the parties' respective successors and permitted assigns. For
purposes of this Section, [**].
15.9 WAIVER AND MODIFICATION. Failure by either party to enforce any
provision of this Agreement will not be deemed a waiver of future enforcement of
that or any other provision.
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Any waiver, amendment or other modification of any provision of this Agreement
will be effective only if in writing and signed by the parties.
15.10 SEVERABILITY. If for any reason a court of competent jurisdiction
finds any provision of this Agreement to be unenforceable, that provision of the
Agreement will be enforced to the maximum extent permissible so as to effect the
intent of the parties, and the remainder of this Agreement will continue in full
force and effect.
15.11 CONTROLLING LAW. This Agreement and any action related thereto
shall be governed, controlled, interpreted and defined by and under the laws of
the State of California and the United States, without regard to the conflicts
of laws provisions thereof. The parties specifically disclaim the UN Convention
on Contracts for the International Sale of Goods.
15.12 HEADINGS. Headings used in this Agreement are for ease of
reference only and shall not be used to interpret any aspect of this Agreement.
15.13 ENTIRE AGREEMENT. This Agreement, including all exhibits which
are incorporated herein by reference, constitutes the entire agreement between
the parties with respect to the subject matter hereof, and supersedes and
replaces all prior and contemporaneous understandings or agreements, written or
oral, regarding such subject matter.
15.14 COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall be an original and together which shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
persons duly authorized as of the date and year first above written.
CISCO SYSTEMS, INC. AKAMAI TECHNOLOGIES, INC.
Name: [Illegible] Name: /s/Paul Sagen
Title: Title: President
Date: August 6, 1999 Date: August 6, 1999
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<PAGE> 1
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
EXHIBIT 10.16
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
AND
AKAMAI TECHNOLOGIES, INC.
EXCLUSIVE PATENT AND NON - EXCLUSIVE COPYRIGHT LICENSE
AGREEMENT
THIS OFFER WILL EXPIRE ON NOVEMBER 30, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
RECITALS ......................................................................1
1. Definitions................................................................2
2. Grant of Rights............................................................4
3. Company Diligence Obligations..............................................6
4. Delivery of Materials......................................................8
5. Royalties and Payment Terms................................................9
6. Reports and Record Keeping................................................11
7. Patent Prosecution........................................................13
8. Infringement..............................................................14
9. Copyright.................................................................16
10. Indemnification and Insurance............................................16
11. No Representations or Warranties.........................................17
12. Assignment...............................................................18
13. General Compliance with Laws.............................................18
14. Termination..............................................................19
15. Dispute Resolution.......................................................20
16. Miscellaneous............................................................22
APPENDIX A....................................................................25
APPENDIX B....................................................................26
APPENDIX C....................................................................27
APPENDIX D....................................................................28
</TABLE>
<PAGE> 3
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
EXCLUSIVE PATENT AND NON-EXCLUSIVE COPYRIGHT LICENSE AGREEMENT
This Agreement, effective as of the date set forth above the signatures
of the parties below (the "EFFECTIVE DATE"), is between the Massachusetts
Institute of Technology ("M.I.T."), a Massachusetts corporation, with a
principal place of business at 77 Massachusetts Avenue, Cambridge, MA 02139-4307
and Akamai Technologies, Inc. ("COMPANY"), a Delaware corporation, with a
principal place of business at __________.
RECITALS
WHEREAS, M.I.T. is the owner of certain PATENT RIGHTS and an owner of
certain COPYRIGHTS (as later defined herein) relating to M.I.T. Case No. [**],
[**], et al.; M.I.T. Case [**], et al.; and M.I.T. Case No. [**], et al and has
the right to grant licenses under said PATENT RIGHTS and COPYRIGHTS, subject
only to a royalty-free, nonexclusive non-transferable license to practice the
PATENT RIGHTS and COPYRIGHTS granted to the United States Government for
government purposes;
WHEREAS, the Conflict Avoidance Statement of [**] inventor/equity
participants in COMPANY is Appendix C hereto; the [**] inventor/equity
participants in COMPANY is Appendix D;
WHEREAS, M.I.T.'s Vice President for Research has approved that [**]
the inventors of the PATENT RIGHTS and [**] of the authors of the COPYRIGHTS,
now hold or shall shortly acquire an equity position in COMPANY and that M.I.T.
is accepting equity as partial consideration for the rights and licenses granted
under this Agreement;
WHEREAS, M.I.T. desires to have the PATENT RIGHTS and COPYRIGHTS
developed and commercialized to benefit the public and is willing to grant a
license thereunder;
WHEREAS, COMPANY has represented to M.I.T., to induce M.I.T. to enter
into this Agreement, that COMPANY shall commit itself to a thorough, vigorous
and diligent program of exploiting the PATENT RIGHTS and COPYRIGHTS so that
public utilization shall result therefrom; and
<PAGE> 4
WHEREAS, at least one of the "authors" has assigned his full and
undivided interest in the COPYRIGHT to M.I.T.; and
WHEREAS, COMPANY desires to obtain a license under the PATENT RIGHTS
and COPYRIGHTS upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, M.I.T. and COMPANY hereby agree as follows:
1. DEFINITIONS.
1.1 "AFFILIATE" shall mean any legal entity (such as a corporation,
partnership, or limited liability company) that controls, or is controlled by,
COMPANY. For the purposes of this definition, the term "control" means (i)
beneficial ownership of at least fifty percent (50%) of the voting securities of
a corporation or other business organization with voting securities or (ii) a
fifty percent (50%) or greater interest in the net assets or profits of a
partnership or other business organization without voting securities.
1.2 "COPYRIGHTS" shall mean M.I.T.'s copyrights in the PROGRAM.
1.3 "COPYRIGHT TERM" shall mean the period of time commencing on the
EFFECTIVE DATE and ending with the expiration of the term for which the
COPYRIGHT is granted, unless earlier terminated in accordance with the
provisions of this Agreement.
1.4 "DERIVATIVE(S)" shall mean COMPANY-created computer software which
shall include, in whole or in part, the PROGRAM, including, but not limited to,
translations of the PROGRAM to other foreign or computer languages, adaptations
of the PROGRAM to other hardware platforms, abridgments, condensations,
revisions, and software incorporating all or any part of the PROGRAM. COMPANY
shall be entitled to establish all proprietary rights for itself in the
intellectual property represented by DERIVATIVES, whether in the nature of trade
secrets, copyrights, patents or other rights, subject to COPYRIGHT and PATENT
RIGHTS. Any copyright registration by COMPANY for DERIVATIVES shall give full
attribution to M.I.T.'s COPYRIGHT.
1.5 "END-USER" shall mean a customer authorized to execute the PROGRAM
or its DERIVATIVE for internal purposes only and not for further distribution or
resale, and shall include customers granted site-wide rights to use and not for
resale.
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1.6 "EXCLUSIVE PERIOD" shall mean the period of time set forth in
Section 2.2.
1.7 "FIELD" shall mean all product, process and service categories.
1.8 "LICENSED PRODUCT" shall mean
(a) any product that cannot be
(1) manufactured, used, leased, sold or imported, in
whole or in part, without infringing on one or more claims under the PATENT
RIGHTS or
(2) executed, reproduced, or modified, in whole or in
part, without infringing the COPYRIGHT and
(b) DERIVATIVES.
1.9 "LICENSED PROCESS" shall mean any process or service that cannot be
performed, in whole or in part, without using at least one process that
infringes one or more claims under the PATENT RIGHTS.
1.10 "PATENT RIGHTS" shall mean:
(a) United States and international patent applications listed
on Appendix A and the resulting patents;
(b) any patent applications filed by M.I.T. claiming the
subject matter of the M.I.T. Cases listed in Appendix A;
(c) any divisionals, continuations, continuation-in-part
applications, and continued prosecution applications (and their relevant
international equivalents) of the patent applications described in (a) and (b)
above to the extent the claims are directed to subject matter specifically
described in such patent applications, and the resulting patents;
(d) any patents resulting from reissues, reexaminations, or
extensions (and their relevant international equivalents) of the patents
described in (a), (b), and (c); and
(e) international (non-United States) patent applications
filed after the EFFECTIVE DATE and the relevant international equivalents to
divisionals, continuations, continuation-in-part applications and continued
prosecution applications of such patent applications and any patents resulting
from reissues, reexaminations, or extensions of the patents
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
described in (d) to the extent the claims are directed to subject matter
specifically described in the patents or patent applications referred to in (a),
(b), (c) and (d), above, and the resulting patents.
1.11 "PROGRAM" shall mean the computer software including object code
and source code that is part of M.I.T. Case No. [**] et al and related
documentation, if any, existing as of the EFFECTIVE DATE and any M.I.T. owned
derivative works or improvements to the PROGRAM created within one year of the
EFFECTIVE DATE.
1.12 "REPORTING PERIOD" shall begin on the first day of each calendar
year and end on the last day of such calendar year.
1.13 "SUBLICENSEE" shall mean any non-AFFILIATE sublicensee of the
rights granted COMPANY under Sections 2.1 and 2.3, excluding END-USERS.
1.14 "PATENT TERM" shall mean the period of time commencing on the
EFFECTIVE DATE and ending with the expiration or abandonment of all issued
patents and filed patent applications within the PATENT RIGHTS, unless earlier
terminated in accordance with the provisions of this Agreement.
1.15 "TERRITORY" shall mean worldwide.
2. GRANT OF RIGHTS.
2.1 PATENT RIGHTS License Grant. Subject to Section 2.8 and the terms
of this Agreement, M.I.T. hereby grants to COMPANY a license for the PATENT TERM
under the PATENT RIGHTS to develop, make, have made, use, sell, offer to sell,
lease, distribute, and import LICENSED PRODUCTS and to practice LICENSED
PROCESSES in the TERRITORY and FIELD.
2.2 Exclusivity. In order to establish an EXCLUSIVE PERIOD as to PATENT
RIGHTS for COMPANY, M.I.T. agrees that it shall not grant any other license to
the rights granted in Section 2.1 during the period of time commencing on the
EFFECTIVE DATE and extending to the end of the PATENT TERM, unless sooner
terminated as provided in this Agreement.
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<PAGE> 7
2.3 COPYRIGHT License Grant. Subject to Sections 2.4, 2.5, and 2.8 and
the terms of this Agreement, M.I.T. also hereby grants to COMPANY the following
non-exclusive rights and licenses to M.I.T. COPYRIGHTS in the TERRITORY and
FIELD for the COPYRIGHT TERM, unless this Agreement shall be sooner terminated
as provided herein:
(a) to execute, reproduce and modify the PROGRAM;
(b) to create DERIVATIVES; and
(c) to distribute the PROGRAM and DERIVATIVES.
2.4 Rights of Sponsors to Copyright. The rights granted in Section 2.3,
as they may apply to derivative works or improvements created by M.I.T. after
the EFFECTIVE DATE, shall be subject to the rights of any research sponsors of
the work leading to such derivatives or improvements.
2.5 Exclusivity as to M.I.T.'s Copyright Rights. M.I.T. agrees that it
shall not grant any other licenses to the rights granted in Section 2.3, except
as provided in Section 2.4, and will not retain any rights except those set out
in Section 2.8.
2.6 Sublicenses. COMPANY shall have the right to grant sublicenses of
its rights under Sections 2.1 and 2.3 to SUBLICENSEES and END-USERS. COMPANY
shall incorporate terms and conditions into its sublicense agreements sufficient
to enable COMPANY to comply with this Agreement. COMPANY shall promptly furnish
M.I.T. with a fully signed photocopy of any sublicense agreement used to
sublicense rights to SUBLICENSEE and one copy of the form of the END-USER
Agreement. Upon termination of this Agreement for COMPANY'S failure to fulfill
its obligations under one or all of Sections 3.1 (a), (b), (c), (d), (e), and
(f), any SUBLICENSEES not then in default shall have the right to seek a license
from M.I.T. M.I.T. agrees to negotiate such licenses in good faith under
reasonable terms and conditions. Termination of this Agreement for any other
reason shall not have any affect on licenses granted by COMPANY to SUBLICENSEES,
provided that such licenses comply with the terms and conditions of this
Agreement set forth in Sections 9, 10, 11 and 13.
2.7 U.S. Manufacturing. COMPANY agrees that any LICENSED
PRODUCTS used or sold in the United States will be manufactured substantially in
the United States.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
2.8 Retained Rights.
(a) M.I.T. M.I.T. retains the right to practice under the
PATENT RIGHTS and COPYRIGHTS for non-commercial research, teaching, and
educational purposes.
(b) Federal Government. COMPANY acknowledges that the U.S.
federal government retains a royalty-free, non-exclusive, non-transferable
license to any government funded COPYRIGHTS and to practice any
government-funded inventions claimed in any PATENT RIGHTS and as set forth in 35
U.S.C. Sections 201-211, and the regulations promulgated thereunder, as
amended, or any successor statutes or regulations.
2.9 No Additional Rights. Nothing in this Agreement shall be construed
to confer any rights upon COMPANY by implication, estoppel, or otherwise as to
any technology, copyrights, or patent rights of M.I.T. or any other entity other
than the PATENT RIGHTS or COPYRIGHTS (including such rights in derivative works
or improvements to the PROGRAM created within one year of the EFFECTIVE DATE, as
set forth in Section 1.11), regardless of whether such technology or patent
rights shall be dominant or subordinate to any PATENT RIGHTS or COPYRIGHTS.
2.10 Assignment of Rights to M.I.T. M.I.T. shall make reasonable
efforts to seek to obtain assignment of rights of all M.I.T. professors and all
M.I.T. students who are known to be authors of the PROGRAM as it exists on the
EFFECTIVE DATE of this Agreement.
3. COMPANY DILIGENCE OBLIGATIONS.
3.1 Diligence Requirements. COMPANY shall use diligent efforts, or
shall cause its AFFILIATES and SUBLICENSEES to use diligent efforts, to develop
LICENSED PRODUCTS or LICENSED PROCESSES and to introduce LICENSED PRODUCTS or
LICENSED PROCESSES into the commercial market; thereafter, COMPANY or its
AFFILIATES or SUBLICENSEES shall make LICENSED PRODUCTS or LICENSED PROCESSES
reasonably available to the public. Specifically, COMPANY or AFFILIATE or
SUBLICENSEE, shall fulfill the following obligations:
(a) Within [**] after the EFFECTIVE DATE, COMPANY shall
furnish M.I.T. with a written research and development plan describing the major
tasks to be achieved in order to bring to market a LICENSED PRODUCT or a
LICENSED PROCESS,
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
specifying the number of staff and other resources to be devoted to such
commercialization effort.
(b) Within [**] after the end of each calendar year, COMPANY
shall furnish M.I.T. with a written annual report consistent with Article 6.
(c) COMPANY shall develop a working Beta test and models on or
before March 1, 1999, and permit an on-site inspection of a Beta test site and
models by M.I.T. on or before April 1, 1999, and permit one additional Beta site
inspection by M.I.T. at the conclusion of the Beta trial. Prior to any
inspection, M.I.T. agrees that each inspection will be subject to a
non-disclosure agreement.
(d) COMPANY shall raise at least [**] from the sale of
Company's equity securities for its own account.
(e) In the aggregate, COMPANY shall raise at least [**] from
the sale of Company's equity securities for its own account.
(f) COMPANY shall make a first commercial sale of a LICENSED
PRODUCT and/or a first commercial performance of a LICENSED PROCESS on or before
June 1, 1999.
(g) In any year, COMPANY shall obtain revenue from commercial
activities as follows:
December 31, [**]
December 31, [**]
December 31, [**]
December 31, [**]
December 31, [**]
December 31, [**]
and each year thereafter at least [**]
or shall
obtain cumulative revenue from commercial activities measured
from January 1, [**] as follows:
December 31, [**]
December 31, [**]
December 31, [**]
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<PAGE> 10
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
December 31, [**]
December 31, [**]
December 31, [**]
Each year thereafter cumulative revenue from commercial
activities shall increase by at least [**]
COMPANY satisfies the diligence requirement of this Section
3.1(g) in any given year if it satisfies either the revenue
from commercial activities requirement or the cumulative
revenue from commercial activities requirement as set above
for that year.
In the event that COMPANY fails to fulfill any or all of its
obligations under Sections 3.1(a), (b), (c), (d), (e), and (f), then M.I.T. may
treat such failure as a material breach in accordance with Section 14.3(b).
In the event that COMPANY fails to fulfill its obligations under
Section 3.1(g), and after COMPANY receives written notice from M.I.T. of such
failure, [**]. Upon termination of the restrictions in Sections 2.2 and 2.5,
COMPANY may [**] as outlined in Section 7.3, and M.I.T. may [**] of the PATENT
RIGHTS. M.I.T. will notify COMPANY in writing at least [**] prior to [**], and
COMPANY may [**] of the PATENT RIGHTS.
4. DELIVERY OF MATERIALS.
4.1 Upon execution of this Agreement M.I.T. shall deliver to COMPANY
one (1) copy of the PROGRAM and related documentation, if any.
4.2 COMPANY accepts the PROGRAM on an "AS IS" basis. Accordingly,
M.I.T. shall not be required to load the PROGRAM onto COMPANY's machines; test
for proper operation, perform any debugging; make any corrections; provide
maintenance; provide any updates, enhanced capabilities, or new features; or
assist in the understanding or use of the PROGRAM at any time. The PROGRAM is a
research program, and M.I.T. does not represent that it is free of errors or
bugs or suitable for any particular tasks.
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<PAGE> 11
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
5. ROYALTIES AND PAYMENT TERMS.
5.1 Consideration for Grant of Rights
(a) Equity and Patent Costs. In consideration of the rights
and licenses granted herein, COMPANY agrees to issue equity to M.I.T. as set
forth in Section 5.1(b) and to pay patent filing, prosecution, and maintenance
costs as set forth in Section 7.3. The parties agree that no other monetary
payments are due to M.I.T. hereunder
(b) Issuance of Common Stock to M.I.T.
(i) Equity Financings.
(A) If (x) the COMPANY sells Common Stock or
securities convertible into or exchangeable for Common Stock ("Convertible
Securities") resulting in gross proceeds to the COMPANY of at least [**] (an
"Equity Financing"), and (y) the Value (as defined below) of the COMPANY
immediately after such Equity Financing is equal to or greater than [**], then
the COMPANY shall issue to M.I.T. promptly after such Equity Financing such
number of whole shares of the COMPANY's Common Stock that is determined by
subtracting that number of shares of Common Stock, if any, issued pursuant to
clause (B) below from the quotient obtained by dividing [**] by the Equity
Financing Price (as defined below). Except as provided in subsection (b)(ii)
below, the COMPANY shall have no further obligation to issue shares of capital
stock to M.I.T. under this subsection (b) upon the satisfaction of its
obligation to issue shares to M.I.T. after the first Equity Financing where the
Value of the COMPANY immediately thereafter is equal to or greater than [**].
For purposes hereof the Value of the COMPANY shall be determined by multiplying
the Equity Financing Price by the total number of shares of Common Stock
outstanding on a fully-diluted common stock-equivalent basis. "Equity Financing
Price" shall mean, with respect to any Equity Financing, the quotient obtained
by dividing (a) [**] the COMPANY in the Equity Financing by (b) [**] Common
Stock (i) [**], as the case may be. For purposes hereof, an Equity Financing
shall not include money borrowed by the COMPANY pursuant to a bridge loan or
loans in an aggregate amount not to exceed [**] where such bridge loan or loans
is in anticipation of Equity Financing.
(B) If (x) there is an Equity Financing, and
(y) the Value of the COMPANY (as defined below) immediately after such Equity
Financing is less than [**]
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
then the COMPANY shall issue to M.I.T. promptly after such Equity Financing such
number of whole shares of the COMPANY's Common Stock such that [**]. Except as
provided in subsection (b)(ii) below, the COMPANY shall have no further
obligation to issue shares of capital stock to M.I.T. under this subsection (b)
upon the satisfaction of its obligations to issue shares to M.I.T. after the
first Equity Financing where the Value of the COMPANY immediately thereafter is
equal to or greater than [**].
(ii) Certain Dilutive Financings. If, after M.I.T.
receives its shares of COMPANY Common Stock pursuant to subsection (b)(i) above,
COMPANY sells Common Stock or Convertible Securities in an Equity Financing (a
"Dilutive Equity Financing") [**] (subject to appropriate adjustment in the
event of stock splits, recapitalizations and similar events) [**] Equity
Financing Price (the "Dilutive Financing Price"), and if M.I.T. was issued
shares of capital stock of the COMPANY pursuant to such recent Equity Financing,
[**] at the Dilutive Financing Price, [**] in the COMPANY (calculated based on
shares acquired pursuant to this subsection (b) as calculated immediately prior
to such Dilutive Equity Financing; provided, however, that this subsection
(b)(ii) shall not apply to issuances by the COMPANY of (a) shares of capital
stock pursuant to a stock option or stock incentive plan approved by the Board
of Directors of the COMPANY, (b) shares of capital stock upon conversion or
exchange of Convertible Securities, (c) shares of capital stock in consideration
for the acquisition by merger or otherwise by the COMPANY or any of its
subsidiaries of any other entity, (d) shares of capital stock as a stock
dividend to holders of capital stock or upon any subdivision or combination of
shares of capital stock, or (e) shares of capital stock to the public in an
initial public offering ("IPO") pursuant to a registration statement filed with
the Securities and Exchange Commission. The rights of M.I.T. under this
subsection (b)(ii) shall terminate upon an IPO.
(iii) Representation and Warranty. COMPANY represents
and warrants to M.I.T. that all shares of Common Stock issued by COMPANY to
M.I.T. pursuant to this subsection (b) shall be fully paid and nonassessable
5.2 Payments.
(a) Method of Payment. All payments under this Agreement
should be made payable to "Massachusetts Institute of Technology" and sent to
the address identified in
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
Section 16.1. Each payment should reference this Agreement and identify the
obligation under this Agreement that the payment satisfies.
(b) Payments in U.S. Dollars. All payments due under this
Agreement shall be payable in United States dollars. Conversion of foreign
currency to U.S. dollars shall be made at the conversion rate existing in the
United States (as reported in the Wall Street Journal) on the first working day
of the month in which any invoice from M.I.T. is dated. Such payments shall be
without deduction of exchange, collection, or other charges, and, specifically,
without deduction of withholding or similar taxes or other government imposed
fees or taxes.
(c) Late Payments. Any payments by COMPANY that are not paid
on or before the date such payments are due under this Agreement shall bear
interest, to the extent permitted by law, at [**] on the date
payment is due.
6. REPORTS AND RECORD KEEPING.
6.1 Frequency of Reports.
(a) Upon First Commercial Sale of a LICENSED PRODUCT or
Commercial Performance of a LICENSED PROCESS. COMPANY shall report to M.I.T. the
date of first commercial sale of a LICENSED PRODUCT and the date of first
commercial performance of a LICENSED PROCESS within [**] of occurrence in each
country for which PATENT RIGHTS exist.
(b) Before and After First Commercial Sale. COMPANY shall
deliver reports to M.I.T. within [**] of the end of each REPORTING PERIOD,
containing information concerning the immediately preceding REPORTING PERIOD, as
further described in Section 6.2.
(c) Financing. COMPANY shall deliver written reports to M.I.T.
within [**] meeting the financing diligence requirements set forth in Sections
3.1 (d) and (e). Reports shall provide a description of the financing event and
the amount of funds received.
6.2 Content of Reports. Each report delivered by COMPANY to M.I.T.
pursuant to Section 6.1(a) or 6.1(b) shall contain at least the following
information for the immediately preceding REPORTING PERIOD:
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
(i) the number Beta test sites operated by COMPANY and the
status of the test sites;
(ii) the total capitalization of the COMPANY and the new
financing received during the REPORTING PERIOD;
(iii) the COMPANY'S annual revenues from commercial activities
and the cumulative revenues from commercial activities measured from January 1,
1999 for LICENSED PRODUCTS and LICENSED PROCESSES.
After COMPANY fulfills the requirement of Section 3.1(c) and the
reporting requirement of Section 6.2(i) with respect to such complying with Beta
test sites, the reporting requirement of Section 6.2(i) is deleted from this
Section 6.2. After COMPANY fulfills the requirements of Sections 3.1(d) and (e)
and the reporting requirement of this Section 6.2(ii)with respect to such
complying financing activities, the reporting requirement of Section 6.2(ii) is
deleted from this Section 6.2.
6.3 Financial Statements. On or before the ninetieth (90th) day
following the close of COMPANY's fiscal year, COMPANY shall provide M.I.T. with
COMPANY's financial statements for the preceding fiscal year including, at a
minimum, a balance sheet and an income statement, certified by COMPANY's
treasurer or chief financial officer or by an independent auditor.
6.4 Record keeping. COMPANY shall maintain, and shall cause its
AFFILIATES to maintain, complete and accurate records relating to the rights and
obligations under this Agreement, which records shall contain sufficient
information to permit M.I.T. to confirm the accuracy of any reports delivered to
M.I.T. and compliance in other respects with this Agreement. The relevant party
shall retain such records for at least [**] following the end of the calendar
year to which they pertain, during which time M.I.T., or M.I.T.'s appointed
agents, shall have the right, at M.I.T.'s expense, to inspect such records
during normal business hours to verify any reports made or compliance in other
respects under this Agreement. Such inspections shall be conducted at the
COMPANY'S place of business, with reasonable notice, and no more than once every
12 months.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
7. PATENT PROSECUTION.
7.1 Responsibility for PATENT RIGHTS. M.I.T. shall prepare, file,
prosecute, and maintain all of the PATENT RIGHTS, except as noted below for
M.I.T. Case No. [**]. COMPANY shall have reasonable opportunities to advise
M.I.T. and shall cooperate with M.I.T. in such filing, prosecution and
maintenance.
COMPANY shall prepare, file, prosecute, and maintain any patents, patent
applications, continuations, continuations-in-part and divisionals having claims
covering the subject matter of M.I.T. Case No. [**]. The attorney handling the
filing, prosecution, and maintenance of this M.I.T. Case shall be notified that
M.I.T. is the owner of all patents, patent applications, continuations,
continuations-in-part and divisionals, that all prosecution shall be conducted
in the best interests of M.I.T., and that M.I.T shall be copied on all
correspondence.
7.2 International (non-United States) Filings. Appendix B is a list of
countries in which patent applications corresponding to the United States patent
applications listed in Appendix A shall be filed, prosecuted, and maintained.
Appendix B may be amended by COMPANY. COMPANY agrees to notify M.I.T.
within 30 days of such an amendment.
7.3 Payment of Expenses. Payment of all fees and costs, including
attorney's fees, relating to the filing, prosecution and maintenance of the
PATENT RIGHTS shall be the responsibility of [**], whether such amounts were
incurred before or after the EFFECTIVE DATE. For information purposes, as of the
EFFECTIVE DATE, [**] has incurred approximately [**] for such patent-related
fees and costs. Upon the date when the total COMPANY financing is at least [**],
but no later than on June 30, 1999, [**] through such date relating to the
filing, prosecution and maintenance of the PATENT RIGHTS. Thereafter, [**] all
amounts due pursuant to this Section within [**] of invoicing, except as
indicated below for M.I.T. Case No. [**], late payments shall accrue interest
pursuant to Section 5.2(c). In all instances, M.I.T. shall pay the fees
prescribed for large entities to the United States Patent and Trademark Office.
[**] shall be invoiced directly by the attorney for all fees and costs relating
to M.I.T. Case No. [**] shall be responsible paying these invoices directly to
the attorney.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
7.4 Termination of Rights. Anytime after [**] through such date of
written notice, as outlined in Section 7.3, and [**] all of the PATENT RIGHTS
for which such payments have been [**] the filing, prosecution and maintenance,
and [**] of any patents or patent applications having claims covering the
subject matter of M.I.T. Case No. [**], and [**] all of such PATENT RIGHTS for
which the filing, prosecution or maintenance [**]. In the event that [**] any or
all PATENT RIGHTS as outlined in Section 7.3 or [**] prosecute or maintain
patents and patent applications arising out of M.I.T. Case No. [**], all as
provided above, the licenses granted with respect to the applicable patents to
which such election applied shall [**] notice period specified in this Section
7.4. Nothing in this Section 7.4 shall [**] under Article 14.
8. INFRINGEMENT.
8.1 Notification of Infringement. Each party agrees to provide written
notice to the other party promptly after becoming aware of any infringement of
the PATENT RIGHTS or COPYRIGHTS.
8.2 Right to Prosecute Infringements of the PATENT RIGHTS.
(a) COMPANY Right to Prosecute. So long as COMPANY remains the
exclusive licensee of the PATENT RIGHTS in the FIELD in the TERRITORY, COMPANY,
to the extent permitted by law, shall have the right, under its own control and
at its own expense, to prosecute any third party infringement of the PATENT
RIGHTS in the FIELD in the TERRITORY, subject to Section 8.4. If required by
law, M.I.T. shall permit any action under this Section to be brought in its
name, including being joined as a party-plaintiff, provided that COMPANY shall
hold M.I.T. harmless from, and indemnify M.I.T. against, any costs, expenses, or
liability that M.I.T. incurs in connection with such action.
Prior to commencing any such action, COMPANY shall
consult with M.I.T. and shall consider the views of M.I.T. regarding the
advisability of the proposed action and its effect on the public interest.
COMPANY shall not enter into any settlement, consent judgment, or other
voluntary final disposition of any infringement action under this Section
without the prior written consent of M.I.T, which will not be materially
withheld or delayed.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
(b) M.I.T. Right to Prosecute. In the event that COMPANY is
unsuccessful in persuading the alleged infringer to desist or fails to have
initiated an infringement action within a reasonable time after COMPANY first
becomes aware of the basis for such action, M.I.T. shall have the right, at its
sole discretion, to prosecute such infringement under its sole control and at
its sole expense, and any recovery obtained shall belong to M.I.T. M.I.T. will
indemnify COMPANY for any order for costs that may be made against COMPANY in
such proceedings.
8.3 Declaratory Judgment Actions. In the event that a declaratory
judgment action is brought against M.I.T. or COMPANY by a third party alleging
invalidity or unenforceability of the PATENT RIGHTS, M.I.T., at its option,
shall have the right within [**] after commencement of such action to take over
the sole defense of the action at its own expense. If M.I.T. does not exercise
this right, COMPANY may take over the sole defense of the action at COMPANY's
sole expense, subject to Section 8.4.
8.4 Recovery. Any recovery obtained in an action brought by COMPANY
under Sections 8.2 or 8.3 shall be distributed as follows: (i) each party shall
be reimbursed for any expenses incurred in the action, (ii) as to ordinary
damages, COMPANY shall receive [**] of any award, and (iii) as to special or
punitive damages (including any damages in excess of "single damages"), M.I.T.
shall receive [**] and the COMPANY [**] of any award.
8.5 Cooperation. Each party agrees to cooperate in any action under
this Article which is controlled by the other party, provided that the
controlling party reimburses the cooperating party promptly for any costs and
expenses incurred by the cooperating party in connection with providing such
assistance.
8.6 Right to Sublicense. So long as COMPANY remains the exclusive
licensee of the PATENT RIGHTS in the FIELD in the TERRITORY, COMPANY shall have
the sole right to sublicense any alleged infringer in the FIELD in the TERRITORY
for future use of the PATENT RIGHTS in accordance with the terms and conditions
of this Agreement relating to sublicenses.
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9. COPYRIGHT.
COMPANY, SUBLICENSEES and END-USERS acknowledge that title to the
COPYRIGHTS shall remain with M.I.T. and that any copies of the PROGRAM and
related documentation, or portions thereof, made by COMPANY, SUBLICENSEES and
END-USERS hereunder, shall include an M.I.T. copyright notice thereon in either
of the following forms: "Copyright 1998, Massachusetts Institute of Technology.
All Rights Reserved." or "(C) 1998 M.I.T. All Rights Reserved." The notice shall
be affixed to all copies or portions thereof in such manner and location as to
give reasonable notice of M.I.T.'s claim of copyright.
10. INDEMNIFICATION AND INSURANCE.
10.1 Indemnification.
(a) Indemnity. COMPANY shall indemnify, defend, and hold
harmless M.I.T. and its trustees, officers, faculty, students, employees, and
agents and their respective successors, heirs and assigns (the "Indemnitees"),
against any liability, damage, loss, or expense (including reasonable attorneys
fees and expenses) incurred by or imposed upon any of the Indemnitees in
connection with any claims, suits, actions, demands or judgments arising out of
any theory of liability (including without limitation actions in the form of
tort, warranty, or strict liability and regardless of whether such action has
any factual basis) concerning any product, process, or service that is made,
used, sold, imported, or performed pursuant to any right or license granted
under this Agreement.
(b) Procedures. The Indemnitees agree to provide COMPANY with
prompt written notice of any claim, suit, action, demand, or judgment for which
indemnification is sought under this Agreement. COMPANY agrees, at its own
expense, to provide attorneys reasonably acceptable to M.I.T. to defend against
any such claim. The Indemnitees shall cooperate fully with COMPANY in such
defense and will permit COMPANY to conduct and control such defense and the
disposition of such claim, suit, or action (including all decisions relative to
litigation, appeal, and settlement); provided, however, that any Indemnitee
shall have the right to retain its own counsel, at the expense of COMPANY, if
representation of such Indemnitee by the counsel retained by COMPANY would be
inappropriate because of actual or potential differences in the interests of
such Indemnitee and any other party represented by such counsel. Notwithstanding
the above, the COMPANY shall not be obligated to pay the expenses of more than
one additional counsel. COMPANY agrees to keep M.I.T. informed of the
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
progress in the defense and disposition of such claim and to consult with M.I.T.
with regard to any proposed settlement.
10.2 Insurance. Prior to first Beta test of a LICENSED PRODUCT or
LICENSED PROCESS, COMPANY shall obtain and carry in full force and effect
commercial general liability insurance, including product liability and errors
and omissions insurance which shall protect COMPANY and Indemnitees with respect
to events covered by Section 10.1(a) above. Such insurance (i) shall be issued
by an insurer licensed to practice in the Commonwealth of Massachusetts or an
insurer pre-approved by M.I.T., such approval not to be unreasonably withheld,
(ii) shall list M.I.T. as an additional named insured thereunder, (iii) shall be
endorsed to include product liability coverage, and (iv) shall require thirty
(30) days written notice to be given to M.I.T. prior to any cancellation or
material change thereof. The limits of such insurance shall not be less than
[**] per occurrence with an aggregate of [**] for bodily injury including death;
[**] per occurrence with an aggregate of [**] for property damage; and [**] per
occurrence with an aggregate of [**] for errors and omissions. In the
alternative, COMPANY may self-insure subject to prior approval of M.I.T. COMPANY
shall provide M.I.T. with Certificates of Insurance evidencing compliance with
this Section. COMPANY shall continue to maintain such insurance or
self-insurance after the expiration or termination of this Agreement during any
period in which COMPANY or any AFFILIATE or SUBLICENSEE, continues (i) to make,
use, or sell a product that was a LICENSED PRODUCT under this Agreement or (ii)
to perform a service that was a LICENSED PROCESS under this Agreement, and
thereafter for a period of [**].
11. NO REPRESENTATIONS OR WARRANTIES.
EXCEPT AS MAY OTHERWISE BE EXPRESSLY SET FORTH IN THIS AGREEMENT,
M.I.T. MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND CONCERNING THE PATENT
RIGHTS AND COPYRIGHTS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT, VALIDITY OF PATENT RIGHTS CLAIMS, WHETHER ISSUED OR PENDING,
AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE.
Specifically, and not to limit the foregoing, M.I.T. makes no warranty or
representation (i) regarding the validity or scope of the PATENT RIGHTS, (ii)
that the exploitation of the PATENT RIGHTS or COPYRIGHTS or any LICENSED PRODUCT
or LICENSED PROCESS
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will not infringe any patents. copyrights or other intellectual property rights
of M.I.T. or of a third party, and (iii) that a third party is not currently
infringing or will not infringe the PATENT RIGHTS or COPYRIGHTS.
Except as provided in Section 10.1 (a), IN NO EVENT SHALL EITHER PARTY,
ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES BE LIABLE TO THE
OTHER PARTY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING
ECONOMIC DAMAGES OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER
SUCH PARTY SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL
KNOW OF THE POSSIBILITY OF THE FOREGOING.
12. [**]
This Agreement is [**], which will not be [**] will be required to [**]
this Agreement to a successor of the COMPANY's business to which this Agreement
pertains or to a purchaser of substantially all of the COMPANY's assets related
to this Agreement, so long as such successor or purchaser shall agree in writing
to be bound by the terms and conditions hereof prior to such [**]. Failure of
such [**] to so agree [**] of this agreement under Section 14.3.
13. GENERAL COMPLIANCE WITH LAWS
13.1 Export Control. With regard to all technology licensed from M.I.T.
hereunder, COMPANY and its AFFILIATES and SUBLICENSEES shall comply with all
United States laws and regulations controlling the export of certain commodities
and technical data, including without limitation all Export Administration
Regulations of the United States Department of Commerce. Among other things,
these laws and regulations prohibit or require a license for the export of
certain types of commodities and technical data to specified countries. COMPANY
hereby gives written assurance that it will comply with, and will require that
its AFFILIATES and SUBLICENSEES comply with, all United States export control
laws and regulations with regard to PROGRAMS, DERIVATIVES and any other
technology obtained from M.I.T., that it bears sole responsibility for any
violation of such laws and regulations by itself or its AFFILIATES or
SUBLICENSEES, and that it will indemnify, defend, and hold M.I.T. harmless (in
accordance with Section 10.1) for the consequences of any such violation.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
13.2 [**]. COMPANY and its AFFILIATES and SUBLICENSEES shall [**] or
any variation, adaptation, or abbreviation thereof, or of any of its trustees,
officers, [**], employees, or agents (other than COMPANY employees), or any
[**], or any terms of this Agreement in any promotional material or other public
announcement or disclosure [**]. The foregoing, notwithstanding, [**], COMPANY
may state that it is licensed [**] under one or more of the patents and/or
patent applications comprising the PATENT RIGHTS and under the COPYRIGHTS.
13.3 Marking of LICENSED PRODUCTS. To the extent commercially feasible
as consistent with prevailing business practices, COMPANY shall mark, and shall
cause its AFFILIATES and SUBLICENSEES to mark, all LICENSED PRODUCTS that are
manufactured or sold under this Agreement with the number of each issued patent
under the PATENT RIGHTS that applies to such LICENSED PRODUCT.
14. TERMINATION.
14.1 Voluntary Termination by COMPANY. COMPANY shall have the right to
terminate this Agreement, for any reason, (i) upon at least six (6) months prior
written notice to M.I.T., such notice to state the date at least six (6) months
in the future upon which termination is to be effective, and (ii) upon payment
of all amounts due to M.I.T. through such termination effective date.
14.2 Cessation of Business. If COMPANY ceases to carry on its business
related to this Agreement due to insolvency, M.I.T. shall have the right to
terminate this Agreement immediately upon written notice to COMPANY.
14.3 Termination for Default.
(a) Nonpayment. In the event COMPANY fails to pay any amounts
due and payable to M.I.T. hereunder, and fails to make such payments within [**]
after receiving written notice of such failure, M.I.T. may terminate this
Agreement immediately upon written notice to COMPANY.
(b) Material Breach. In the event COMPANY commits a material
breach of its obligations under this Agreement, except for breach as described
in Section 14.3(a), and
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
to cure that breach within [**] after receiving written notice thereof, M.I.T.
may terminate this Agreement immediately upon written notice to COMPANY.
14.4 Effect of Termination.
(a) Survival.
(i) The following provisions shall survive the
expiration or termination of this Agreement:
Articles 1, 10, 11, 15 and 16, and Sections
5.1(b), 6.2 (obligation to provide final
report), 6.4, 13.1, and 14.4.
(ii) If, upon termination COMPANY has fulfilled
all of its obligations under Sections
3.1(a), (b), (c), (d), (e), and (f), then
COMPANY shall retain the following license:
COMPANY shall have the non-exclusive right
and license under the COPYRIGHTS to use,
reproduce, modify, and distribute the
PROGRAM solely for the purpose of using,
reproducing, modifying, and distributing the
PROGRAM and DERIVATIVES.
(b) Pre-termination Obligations. In no event shall termination
of this Agreement release COMPANY from the obligation to pay any amounts that
became due on or before the effective date of termination.
14.5 Effect of Termination on Software: Upon termination of this
Agreement in accordance with Section 14.3, COMPANY shall provide M.I.T.
with written assurance that the original and all copies of the PROGRAM
have been destroyed, except that, upon prior written authorization from
M.I.T., COMPANY may retain a copy of the PROGRAM for archival and
maintenance purposes.
Upon termination of this Agreement for any reason, the rights of
END-USERS to the execution and enjoyment of the PROGRAM and its DERIVATIVES
shall not be abridged or diminished in any way.
15. DISPUTE RESOLUTION.
15.1 Mandatory Procedures. The parties agree that any dispute arising
out of or relating to this Agreement shall be resolved solely by means of the
procedures set forth in this Article, and that such procedures constitute
legally binding obligations that are an essential provision of
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
this Agreement. If either party fails to observe the procedures of this Article,
as may be modified by their written agreement, the other party may bring an
action for specific performance of these procedures in any court of competent
jurisdiction.
15.2 Equitable Remedies. Although the procedures specified in this
Article are the sole and exclusive procedures for the resolution of disputes
arising out of or relating to this Agreement, either party may seek a
preliminary injunction or other provisional equitable relief if, in its
reasonable judgment, such action is necessary to avoid irreparable harm to
itself or to preserve its rights under this Agreement.
15.3 Dispute Resolution Procedures.
(a) Mediation. In the event any dispute arising out of or
relating to this Agreement remains unresolved within [**] from the date the
affected party notified the other party of such dispute, either party may
initiate mediation upon written notice to the other party ("Notice Date"),
whereupon both parties shall be obligated to engage in a mediation proceeding
under the then current Center for Public Resources ("CPR") Model Procedure for
Mediation of Business Disputes (http://www.cpradr.org/medmodel.htm), except that
specific provisions of this Article shall override inconsistent provisions of
the CPR Model Procedure. The mediator will be selected from the CPR Panels of
Neutrals. If the parties cannot agree upon the selection of a mediator within
fifteen (15) business days after the Notice Date, then upon the request of
either party, the CPR shall appoint the mediator. The parties shall attempt to
resolve the dispute through mediation until the first of the following occurs:
(i) the parties reach a written settlement; (ii) the mediator notifies the
parties in writing that they have reached an impasse; (iii) the parties agree in
writing that they have reached an impasse; or (iv) the parties have not reached
a settlement within [**] after the Notice Date.
(b) Trial Without Jury. If the parties fail to resolve the
dispute through mediation, or if neither party elects to initiate mediation,
each party shall have the right to pursue any other remedies legally available
to resolve the dispute, provided, however, that the parties expressly waive any
right to a jury trial in any legal proceeding under this Article.
15.4 Performance to Continue. Each party shall continue to perform its
undisputed obligations under this Agreement pending final resolution of any
dispute arising out of or relating to this Agreement; provided, however, that a
party may suspend performance of its undisputed obligations during any period in
which the other party fails or refuses to perform its
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undisputed obligations. Nothing in this Article is intended to relieve COMPANY
from its obligation to make undisputed payments pursuant to Articles 5 and 7 of
this Agreement.
15.5 Statute of Limitations. The parties agree that all applicable
statutes of limitation and time-based defenses (such as estoppel and laches)
shall be tolled while the procedures set forth in Sections 15.3(a) are pending.
The parties shall cooperate in taking any actions necessary to achieve this
result.
16. MISCELLANEOUS.
16.1 Notice. Any notices required or permitted under this Agreement
shall be in writing, shall specifically refer to this Agreement, and shall be
sent by hand, recognized national overnight courier, confirmed facsimile
transmission, confirmed electronic mail, or registered or certified mail,
postage prepaid, return receipt requested, to the following addresses or
facsimile numbers of the parties:
If to M.I.T.: Technology Licensing Office, Room NE25-230
Massachusetts Institute of Technology
77 Massachusetts Avenue
Cambridge, MA 02139-4307
Attention: Director
Tel: 617-253-6966
Fax: 617-258-6790
If to COMPANY: Akamai Technologies, Inc.
205 Hampshire Street
Cambridge, MA 02139
Attention: President
Tel: 617-253-5876
Fax: 617-258-5429
With a copy to: Hale and Dorr LLP.
60 State Street
Boston, MA 02109
Attention: Michael J. Bevilacqua
Tel: 617-905-6329
Fax: 617-244-9625
All notices under this Agreement shall be deemed effective upon
receipt. A party may change its contact information immediately upon written
notice to the other party in the manner provided in this Section.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
16.2 Governing Law. This Agreement and all disputes arising out of or
related to this Agreement, or the performance, enforcement, breach or
termination hereof, and any remedies relating thereto, shall be construed,
governed, interpreted and applied in accordance with the laws of the
Commonwealth of Massachusetts, U.S.A., without regard to conflict of laws
principles, except that questions affecting the construction and effect of any
patent shall be determined by the law of the country in which the patent shall
have been granted.
16.3 Force Majeure. Neither party will be responsible for delays
resulting from causes beyond the reasonable control of such party, including
without limitation fire, explosion, flood, war, strike, or riot, provided that
the nonperforming party uses commercially reasonable efforts to avoid or remove
such causes of nonperformance and continues performance under this Agreement
with reasonable dispatch whenever such causes are removed.
16.4 Amendment and Waiver. This Agreement may be amended, supplemented,
or otherwise modified only by means of a written instrument signed by both
parties. Any waiver of any rights or failure to act in a specific instance shall
relate only to such instance and shall not be, construed as an agreement to
waive any rights or fail to act in any other instance, whether or not similar.
16.5 Severability. In the event that any provision of this Agreement
shall be held invalid or unenforceable for any reason, such invalidity or
unenforceability shall not affect any other provision of this Agreement, and the
parties shall negotiate in good faith to modify the Agreement to preserve (to
the extent possible) their original intent. If the parties fail to reach a
modified agreement within [**] after the relevant provision is held invalid or
unenforceable, then the dispute shall be resolved in accordance with the
procedures set forth in Article 15. While the dispute is pending resolution,
this Agreement shall be construed as if such provision were deleted by agreement
of the parties.
16.6 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective permitted successors and
assigns.
16.7 Headings. All headings are for convenience only and shall not
affect the meaning of any provision of this Agreement.
16.8 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to its subject matter and supersedes all prior
agreements or understandings between the parties relating to its subject matter.
- 23 -
<PAGE> 26
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
THE EFFECTIVE DATE OF THIS AGREEMENT IS Oct. 26, 1998.
MASSACHUSETTS INSTITUTE OF AKAMAI TECHNOLOGIES, INC.
TECHNOLOGY
Technology Licensing Office
By: /s/ Lita Nelsen By: /s/ Daniel Lewin
Name: Lita L. Nelsen, Director Name: Daniel Lewin
Title: Technology Licensing Office Title: President
MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
Vice President for Research
By: /s/ J.D. Litster
Name: J.D. Litster
Title: Vice President for Research
- 24 -
<PAGE> 27
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
APPENDIX A
I. List of United States Patent Applications and Patents and Other M.I.T.
Intellectual Property
1. M.I.T. Case No. [**] Patent application [**] and Continuation-in-Part
application [**]
2. M.I.T. Case No. [**] and any patent application having claims covering
the subject matter of such M.I.T. Case No.
3. M.I.T. Case No. [**] and any patent application having claims covering
the subject matter of such M.I.T. Case No.
4. M.I.T. Case No. [**] and any patent application having claims covering
the subject matter of such M.I.T. Case No.
II. International (non-U.S.) Patents and Applications
- 25 -
<PAGE> 28
APPENDIX B
List of Countries (excluding United States) for which
PATENT RIGHTS Applications Will Be Filed, Prosecuted and Maintained
[To be determined between COMPANY and M.I.T.]
- 26 -
<PAGE> 29
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
APPENDIX D
WAIVER
For good and valuable consideration, including the grant of a license
to Akamai Technologies ("COMPANY"), the undersigned, [**] hereby releases all
rights, title and interest he, his heirs, and assigns may have as an
inventor/author under M.I.T.'s Guide to the Ownership, Distribution and
Commercial Development of M.I.T. Technology, as that policy may be amended from
time to time, to receive his inventor's share of M.I.T.'s institutional equity
received in partial consideration for a License to:
M.I.T. Case No. [**]
M.I.T. Case No. [**]
M.I.T. Case No. [**]
to Akamai Technologies.
Witness: /s/ Susan Wellsy Signed: /s/ [**]
Name: [**]
Date: 9/21/98
<PAGE> 30
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
CONFLICT AVOIDANCE STATEMENT
Name: [**]
Dept. or Lab: Math Dept. & LCS
Company: Akamai Technologies
Address: [**]
[**]
Licensed Technology: MIT Case Nos:
[**]
Because of the M.I.T. license granted to the above company and my equity*
position and continuing relationship with this firm, I acknowledge the potential
for a possible conflict of interest between the performance of research at
M.I.T. and my contractual or other obligations to this firm. Therefore, I will
not:
1) use students at M.I.T. for research and development
projects for the company;
2) restrict or delay access to information from my
M.I.T. research; or
3) take direct or indirect research support from the
company in order to support my activities at M.I.T.
In addition, in order to avoid the appearance of a conflict, I will attempt to
differentiate clearly between the intellectual directions of my M.I.T. research
and my contributions to the firm. To that end, I will expressly inform my
department head annually of the general nature of my activities on behalf of the
firm.
Signed: /s/ [**]
Date: 9/2/98
*"Equity" includes stock, options, warrants or other financial instruments
convertible into Equity, which are directly or indirectly controlled by the
inventor.
<PAGE> 31
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
APPENDIX D
WAIVER
For good and valuable consideration, including the grant of a license
to Akamai Technologies ("COMPANY"), the undersigned, David R. Karger hereby
releases all rights, title and interest he, his heirs, and assigns may have as
an inventor/author under MIT.'s Guide to the Ownership, Distribution and
Commercial Development of M.I.T. Technology, as that policy may be amended from
time to time, to receive his inventor's share of M.I.T.'s institutional equity
received in partial consideration for a License to:
MIT. Case No. [**]
MIT. Case No. [**]
to Akamai Technologies
Witness: /s/ [Illegible] Signed: /s/ [**]
Name: [**]
Date: 10/21/98
<PAGE> 32
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
CONFLICT AVOIDANCE STATEMENT
Name: [**]
Dept. or Lab: EECS
Company: Akamai Technologies
Address:__________________________________
__________________________________________
Licensed Technology: M.I.T. Case Nos.
[**]
__________________________________________
Because of the M.I.T. license granted to the above company and my equity*
position and continuing relationship with this firm, I acknowledge the potential
for a possible conflict of interest between the performance of research at
M.I.T. and my contractual or other obligations to this firm. Therefore, I will
not:
1) use students at M.I.T. for research and development
projects for the company;
2) restrict or delay access to information from my
M.I.T. research; or
3) take direct or indirect research support from the
company in order to support my activities at M.I.T.
In addition, in order to avoid the appearance of a conflict, I will attempt to
differentiate clearly between the intellectual directions of my M.I.T. research
and my contributions to the firm. To that end, I will expressly inform my
department head annually of the general nature of my activities on behalf of the
firm.
Signed: /s/ [**]
Date: 10/19/98
*"Equity" includes stock, options, warrants or other financial instruments
convertible into Equity, which are directly or indirectly controlled by the
inventor.
<PAGE> 33
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
ASSIGNMENT
This Assignment, effective as of the date set forth above the
signatures of the parties below (the "EFFECTIVE DATE"), is between AKAMAI
TECHNOLOGIES ("ASSIGNOR"), a Delaware corporation, with a principal place of
business at 205 Hampshire Street, Cambridge, MA 02139, and the Massachusetts
Institute of Technology ("ASSIGNEE"), a Massachusetts corporation, with a
principal place of business at 77 Massachusetts Avenue, Cambridge, MA
02139-4307.
WHEREAS, M.I.T.'s "Waiver of M.I.T. Ownership Rights" of September 8,
1998 waived to F.T. Leighton any rights it may have to the invention described
in United State Provisional Patent Application No. [**] and entitled [**], ("the
Invention") because the Invention was developed without sponsored research funds
and without significant use of M.I.T. facilities or funds;
WHEREAS, [**] and certain other inventors have assigned their entire
right, title and interest relating to the Invention to AKAMAI TECHNOLOGIES;
WHEREAS, ASSIGNOR is an owner by assignment of the Invention, and has
the right to assign all of its rights to ASSIGNEE;
WHEREAS, ASSIGNOR hereby desires to assign its entire right, title and
interest in the Invention to ASSIGNEE;
NOW, THEREFORE, in consideration of the foregoing said agreements, and
of other good and valuable consideration, the receipt of which is hereby
acknowledged, ASSIGNOR intending to be legally bound, does hereby sell, assign
and transfer to the ASSIGNEE, its successors and assigns, its entire right,
title and interest in the Invention [**], for the United States of America, its
territories and possessions, and for all foreign countries, in said Invention,
including all patent applications, all divisions and continuations thereof, all
rights to claim priority based thereon, all rights to file foreign applications
of said Invention, and all Letters Patents and reissues thereof, issuing for
said Invention, in the United States of America and in any and all foreign
countries.
<PAGE> 34
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
It is agreed that ASSIGNOR shall be legally bound, upon reasonable
request of the ASSIGNEE or its successors or assigns or a legal representative
thereof, to execute all instruments proper to patent and maintain the Invention
in the United States of America and all foreign countries in the name of the
ASSIGNEE and to execute all instruments proper to carry out the intent of this
instrument.
ASSIGNOR hereby covenants that no assignment, sale, agreement or
encumbrance has been or will be made or entered into which would conflict with
this Assignment.
ASSIGNOR hereby authorizes and requests the Commissioner of Patents and
Trademarks to issue any and all such United States Letters Patent to ASSIGNEE,
its successors and assigns, as the owner of all right, title and interest
therein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
THE EFFECTIVE DATE OF THIS AGREEMENT IS OCTOBER 26, 1998
MASSACHUSETTS INSTITUTE OF AKAMAI TECHNOLOGIES
TECHNOLOGY
By: /s/ Lita Nelsen By: /s/ Daniel Lewin
Name: Lita L. Nelsen, Director Name: Daniel Lewin
Title: Technology Licensing Office Title: President
Acknowledged by: /s/ [**]
[**]
<PAGE> 1
EXHIBIT 10.20
AKAMAI TECHNOLOGIES, INC.
15% SENIOR SUBORDINATED NOTES
AND
WARRANTS TO PURCHASE COMMON STOCK
PURCHASE AGREEMENT
DATED AS OF MAY 7, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
PURCHASE AGREEMENT................................................................................................1
ARTICLE I PURCHASE, SALE AND TERMS OF SHARES......................................................................1
1.01 The Senior Subordinated Notes and Warrants to Purchase Common Stock......................................1
1.02 The Warrant Shares.......................................................................................1
1.03 Sale of Securities.......................................................................................2
1.04 The Closing..............................................................................................2
1.05 Second Closing...........................................................................................2
1.06 Use of Proceeds..........................................................................................3
1.07 Representations and Warranties by the Purchasers.........................................................3
ARTICLE II CONDITIONS TO THE PURCHASERS' OBLIGATION...............................................................4
2.01 Representations and Warranties...........................................................................4
2.02 Documentation at Closing.................................................................................4
2.03 Consents, Waivers, Etc...................................................................................5
2.04 Registration Rights......................................................................................5
2.05 Bring-Down Certificate...................................................................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................5
3.01 Organization and Standing................................................................................5
3.02 Corporate Action.........................................................................................6
3.03 Governmental Approvals...................................................................................6
3.04 Litigation...............................................................................................6
3.05 Certain Agreements of Officers and Key Employees.........................................................7
3.06 Compliance with Other Instruments........................................................................7
3.07 Material Contracts.......................................................................................8
3.08 ERISA....................................................................................................8
3.09 Transactions with Affiliates.............................................................................9
3.10 Assumptions or Guaranties of Indebtedness of Other Persons...............................................9
3.11 Investments in Other Persons; Subsidiaries...............................................................9
3.12 Securities Laws..........................................................................................9
3.13 Disclosure...............................................................................................9
3.14 Brokers or Finders......................................................................................10
3.15 Capitalization; Status of Capital Stock.................................................................10
3.16 Registration Rights.....................................................................................10
3.17 Books and Records.......................................................................................11
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
3.18 Title to Assets; Patents................................................................................11
3.19 The Year 2000...........................................................................................12
3.20 Financial Statements....................................................................................12
3.21 No Undisclosed Liabilities..............................................................................12
3.22 Technology..............................................................................................13
ARTICLE IV COVENANTS OF THE COMPANY..............................................................................13
4.01 Affirmative Covenants of the Company Other Than Reporting Requirements..................................13
4.02 Negative Covenants of the Company.......................................................................15
4.03 Reporting Requirements..................................................................................17
ARTICLE V REMEDIES ON DEFAULT....................................................................................18
5.01 Acceleration............................................................................................18
5.02 No Waivers or Election of Remedies, Expenses, etc.......................................................18
ARTICLE VI DEFINITIONS AND ACCOUNTING TERMS......................................................................19
6.01 Certain Defined Terms...................................................................................19
6.02 Accounting Terms........................................................................................22
6.03 Knowledge. ............................................................................................23
ARTICLE VII MISCELLANEOUS........................................................................................23
7.01 No Waiver; Cumulative Remedies..........................................................................23
7.02 Amendments, Waivers and Consents........................................................................23
7.03 Addresses for Notices...................................................................................23
7.04 Costs, Expenses and Taxes...............................................................................24
7.05 Binding Effect; Assignment..............................................................................24
7.06 Survival of Representations and Warranties..............................................................24
7.07 Prior Agreements........................................................................................24
7.08 Severability............................................................................................24
7.09 Governing Law...........................................................................................25
7.10 Headings................................................................................................25
7.11 Counterparts............................................................................................25
7.12 Further Assurances......................................................................................25
7.13 Confidentiality.........................................................................................25
</TABLE>
<PAGE> 4
SCHEDULE I List of Purchasers
EXHIBITS
- --------
2.02B Opinion of Counsel
3.01 Foreign Qualifications
3.04 Litigation
3.07 Material Contracts
3.08 ERISA
3.09 Transactions with Affiliates
3.11 Investments in Other Persons; Subsidiaries
3.15 Capitalization; Status of Capital Stock
3.16 Registration Rights
3.18(a) Title to Assets
3.18(b) Intellectual Property
3.18(c) Compensation for use of Intellectual Property Rights
3.20 Financial Statements
3.21 Undisclosed Liabilities
3.22 Technology
A - Form of Note
B - Form of Warrant
<PAGE> 5
AKAMAI TECHNOLOGIES, INC.
201 Broadway
Cambridge, Massachusetts 02139
As of May 7, 1999
TO: The Persons listed on SCHEDULE I
RE: 15% SENIOR SUBORDINATED NOTES AND WARRANTS TO PURCHASE COMMON STOCK
Ladies and Gentlemen:
Akamai Technologies, Inc., a Delaware corporation (the "COMPANY"), agrees
with each of you as follows:
ARTICLE I
PURCHASE, SALE AND TERMS OF SECURITIES
1.01 THE SENIOR SUBORDINATED NOTES AND WARRANTS TO PURCHASE COMMON STOCK.
The Company has authorized the issuance and sale of (i) up to $15,000,000 in
aggregate principal amount of its 15% Senior Subordinated Notes (the "NOTES"),
which are to have the terms and provisions set forth in the form of Note
attached hereto as EXHIBIT A and (ii) warrants for the purchase of Common Stock,
$.01 par value per share, of the Company ("COMMON STOCK"), which are to have the
terms and provisions set forth in the form of Warrant attached hereto as EXHIBIT
B (the "WARRANTS"). All of the Notes shall be identical in all respects other
than their respective principal amounts, the date of issuance and the names of
the registered holders. All of the Warrants shall be identical in all respects
other than the number of shares of Common Stock which may be purchased
thereunder, the date of issuance and the names of the registered holders. The
Notes and the Warrants are sometimes referred to herein as the "SECURITIES."
1.02 THE WARRANT SHARES. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other
preferential rights, a sufficient number of its previously authorized but
unissued shares of Common Stock issuable upon exercise of the Warrants. Any
shares of Common Stock issuable upon exercise of the Warrants, and such shares
when issued, are herein referred to as the "WARRANT SHARES."
<PAGE> 6
1.03 SALE OF SECURITIES. Subject to the terms and conditions in this
Agreement, at the Closing (as hereinafter defined), the Company agrees to issue
to each person listed on SCHEDULE I attached hereto (individually, a "PURCHASER"
and, collectively, the "PURCHASERS"), and each Purchaser, severally and not
jointly, agrees to acquire from the Company the Securities set forth opposite
such Purchaser's name on Schedule I hereto. The aggregate purchase price of the
Securities being purchased by each Purchaser is set forth opposite such
Purchaser's name on SCHEDULE I.
1.04 THE CLOSING. The purchase and sale of the Securities shall take place
at a closing (the "CLOSING") to be held on or about May 7, 1999 at such location
and at such time as may be mutually agreed upon, subject to the satisfaction of
all of the conditions to the Closing specified in Article II herein. At the
Closing the Company will issue and deliver the Notes and Warrants to be sold at
the Closing to each of the Purchasers (or its nominee) against payment of the
full purchase price therefor by (i) wire transfer of immediately available funds
to an account designated by the Company, (ii) check payable to the order of the
Company or its designee, or (iii) any combination of (i) and (ii) above.
1.05 SECOND CLOSING.
(a) In the event that the Company shall not have sold all of the
Securities at the Closing, the Company and the Purchasers agree that at a second
closing to occur within 30 days of the Closing (the "SECOND CLOSING"), the
Company may issue and sell any of the unsold Securities ("ADDITIONAL
SECURITIES") to one or more person who becomes a party to this Agreement (the
"ADDITIONAL PURCHASERS"). The Company and the Purchasers further agree that (i)
the Company shall amend this Agreement solely to provide for the issuance of the
Additional Securities to the Additional Purchasers at the same price and under
the terms and conditions of this Agreement and (ii) the Additional Purchasers
shall become parties to this Agreement as amended by executing counterparts
hereof. The terms "SECURITIES", "NOTES", "WARRANT SHARES", "PURCHASER" and
"PURCHASERS", when used in this Agreement, shall respectively be deemed to
include such Additional Securities as are issued and such Additional Purchaser
and Additional Purchasers as exist from time to time and the term "CLOSING"
shall include the Second Closing where appropriate.
(b) The Second Closing shall be held at such location and at such
times and dates, as shall be specified by the Company and the Additional
Purchasers. At the Second Closing, the Company will issue and deliver the Notes
and Warrants to be sold at the Second Closing to each of the Purchasers (or its
nominee) against payment of the full purchase price therefor by (i) wire
transfer of immediately available funds to an account designated by the Company,
(ii) check payable to the order of the Company or its designee, or (iii) any
combination of (i) and (ii) above. At the Second Closing, the Additional
Purchasers purchasing Additional Securities shall have received a certificate
from the President of the Company stating that the representations and
warranties of the
-2-
<PAGE> 7
Company contained in Article III hereof and otherwise made by the Company in
writing in connection with the transactions contemplated hereby are true and
correct (giving effect to updates, if any, to the Exhibits setting forth
exceptions to the representations and warranties of the Company) and that all
conditions required to be performed prior to or at the Second Closing have been
performed as of such Second Closing.
1.06 USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Securities for working capital and general corporate purposes.
1.07 REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS. Each of the
Purchasers represents and warrants, severally, but not jointly, that (a) it will
acquire the Securities to be acquired by it for its own account and that the
Securities are being and will be acquired by it for the purpose of investment
and not with a view to distribution or resale thereof; (b) the execution of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of such Purchaser, and this
Agreement has been duly executed and delivered, and constitutes a valid, legal,
binding and enforceable agreement of such Purchaser; (c) it has taken no action
which would give rise to any claim by any other person for any brokerage
commissions, finders' fees or the like relating to this Agreement or the
transactions contemplated hereby; (d) such Purchaser has had the opportunity to
ask questions of and receive answers from representatives of the Company
concerning the terms of the offering of the Securities and to obtain additional
information concerning the Company and its business; (e) such Purchaser has the
ability to evaluate the merits and risks of an investment in the Securities and
can bear the economic risks of such investment and (f) such Purchaser is an
"Accredited Investor" as such term is defined in Rule 501(a) promulgated under
the Securities Act. The acquisition by each Purchaser of the Securities acquired
by it shall constitute a confirmation of the representations and warranties made
by each such Purchaser as at the date of such acquisition. Each of the
Purchasers further represents that it understands and agrees that, until
registered under the Securities Act or transferred pursuant to the provisions of
Rule 144 as promulgated by the Commission, all Securities and certificates
evidencing any of the Warrant Shares, whether upon initial issuance or upon any
transfer thereof, shall bear a legend, prominently stamped or printed thereon,
reading substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND
-3-
<PAGE> 8
APPLICABLE STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM
THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS."
ARTICLE II
CONDITIONS TO THE PURCHASERS' OBLIGATION
The obligation of any Purchaser to purchase and pay for the Securities to
be purchased by it at the Closing is subject to the satisfaction of the
following conditions:
2.01 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company set forth in Article III hereof shall be true and
correct on the date of the Closing.
2.02 DOCUMENTATION AT CLOSING. The Purchasers shall have received prior to
or at the Closing all of the following documents or instruments, or evidence of
completion thereof, each in form and substance satisfactory to the Purchasers
and their counsel:
(a) A copy of the Certificate of Incorporation of the Company (the
"CERTIFICATE OF INCORPORATION"), certified by the Secretary of State of the
State of Delaware, a copy of the resolutions of the Board of Directors
evidencing approval of this Agreement, the issuance of the Notes and the
Warrants and the other matters contemplated hereby, and a copy of the By-laws of
the Company, all of which shall have been certified by the Secretary of the
Company to be true, complete and correct in every particular, and certified
copies of all documents evidencing other necessary corporate or other action and
governmental approvals, if any, with respect to this Agreement and the
Securities.
(b) The opinion of Hale and Dorr LLP, counsel to the Company, in the
form of EXHIBIT 2.02B attached hereto.
(c) A certificate of the Secretary of the Company which shall certify
the names of the officers of the Company authorized to sign this Agreement, the
certificates for the Notes and the Warrants and the other documents, instruments
or certificates to be delivered pursuant to this Agreement by the Company or any
of its officers, together with the true signatures of such officers. The
Purchasers may conclusively rely on such certificate until they shall receive a
further certificate of the Secretary or an Assistant Secretary of the Company
canceling or amending the prior certificate and submitting the signatures of the
officers named in such further certificate.
(d) A certificate of the President of the Company stating that the
representations and warranties of the Company contained in Article III hereof
and
-4-
<PAGE> 9
otherwise made by the Company in writing in connection with the transactions
contemplated hereby are true and correct and that all conditions required to be
performed prior to or at the Closing have been performed as of the Closing.
(e) Certificates of Good Standing for the Company from the
Secretaries of State of the States of Delaware and California, and the
Commonwealth of Massachusetts.
(f) The Company shall have paid costs and expenses identified in
Section 7.04.
2.03 CONSENTS, WAIVERS, ETC. Prior to the Closing, the Company shall have
obtained all consents or waivers, if any, necessary to execute and deliver this
Agreement, issue the Notes and the Warrants and to carry out the transactions
contemplated hereby and thereby, and all such consents and waivers shall be in
full force and effect. All corporate and other action and governmental filings
necessary to effectuate the terms of this Agreement, the Notes and the Warrants
and other agreements and instruments executed and delivered by the Company in
connection herewith shall have been made or taken, except for any post-sale
filing that may be required under federal or state securities laws. In addition
to the documents set forth above, the Company shall have provided to the
Purchasers any other information or copies of documents that they may reasonably
request.
2.04 REGISTRATION RIGHTS. The Company shall have obtained all consents and
waivers, if any, necessary under Section 11(d) of that certain Amended and
Restated Registration Rights Agreement dated April 16, 1999 among the Company
and the individuals and entities named therein (the "REGISTRATION RIGHTS
AGREEMENT") in order that the grant by the Company of registration rights with
respect to the Warrant Shares does not violate Section 11(h) of the Registration
Rights Agreement.
2.05 BRING-DOWN CERTIFICATE. At the Second Closing the Purchaser(s)
purchasing Notes and Warrants shall have received a bring-down certificate and
shall be entitled to receive such other certificates, opinions and other
documents as shall be reasonably requested.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants as follows as of the date hereof
and as of the date of the Closing:
3.01 ORGANIZATION AND STANDING. The Company is a duly organized and validly
existing corporation in good standing under the corporate laws of the State of
Delaware
-5-
<PAGE> 10
and has all requisite corporate power and authority for the ownership and
operation of its properties and for the carrying on of its business as now
conducted or as now proposed to be conducted. The Company is duly licensed or
qualified and in good standing as a foreign corporation authorized to do
business in all jurisdictions wherein the character of the property owned or
leased, or the nature of the activities conducted, by it makes such licensing or
qualification necessary as set forth in EXHIBIT 3.01, except where the failure
to so qualify would not have a material adverse effect on the business,
operations, affairs or condition of the Company or in its properties or assets
taken as a whole, or which might call into question the validity of this
Agreement, any of the Securities, or any action taken or to be taken pursuant
hereto or thereto (a "MATERIAL ADVERSE EFFECT").
3.02 CORPORATE ACTION. The Company has all necessary corporate power and
has taken all corporate action required to enter into and perform this
Agreement, the Notes, the Warrants and any other agreements and instruments
executed in connection herewith (collectively, the "FINANCING DOCUMENTS"). The
Financing Documents are valid and binding obligations of the Company,
enforceable in accordance with their terms. The issuance, sale and delivery of
the Securities in accordance with this Agreement and the issuance, sale and
delivery of the Warrant Shares have been duly authorized and reserved for
issuance by all necessary corporate action on the part of the Company.
Sufficient authorized but unissued shares of Common Stock have been reserved by
appropriate corporate action in connection with the prospective exercise of the
Warrants, and the issuance of the Securities is not, and the issuance of the
Warrant Shares upon the exercise of the Warrants will not be, subject to
preemptive rights or other preferential rights in any present stockholders of
the Company and will not conflict with any provision of any agreement or
instrument to which the Company is a party or by which it or its property is
bound.
3.03 GOVERNMENTAL APPROVALS. Except for the filing of any notice subsequent
to the Closing that may be required under applicable state and/or federal
securities laws (which, if required, shall be filed on a timely basis and a copy
of which shall be provided to the Purchasers and their counsel), no
authorization, consent, approval, license, exemption of or filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for the execution and delivery by the Company of this Agreement, for the offer,
issue, sale and delivery of the Securities and the Warrant Shares, or for the
performance by the Company of its obligations under this Agreement.
3.04 LITIGATION. Except as set forth in EXHIBIT 3.04, there is no
litigation or governmental proceeding or investigation pending or, to the
knowledge of the Company, threatened against the Company affecting any of its
respective properties or assets, or against any officer or Key Employee relating
to such person's performance of duties for the Company or relating to his stock
ownership in the Company or otherwise relating to the business of the Company,
nor to the knowledge of the Company has there occurred
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any event or does there exist any condition on the basis of which any such
litigation, proceeding or investigation might properly be instituted. Neither
the Company nor, to the knowledge of the Company, any officer, Key Employee or
holder of more than 5% of the Common Stock of the Company (other than any
Purchaser) is in default with respect to any order, writ, injunction, decree,
ruling or decision of any court, commission, board or other governmental agency
specifically naming the Company or an officer of the Company. Except as set
forth in EXHIBIT 3.04, there are no actions or proceedings pending or, to the
knowledge of the Company, threatened against the Company or against any officer
or Key Employee which could reasonably be expected to result, either in any case
or in the aggregate, in any Material Adverse Effect. The foregoing sentences
include, without limiting their generality, actions pending or, to the knowledge
of the Company, threatened (or any basis therefor), involving the prior
employment of any of the Company's officers or employees (including any Key
Employees) or their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers.
3.05 CERTAIN AGREEMENTS OF OFFICERS AND KEY EMPLOYEES.
(a) To the knowledge of the Company, no officer or Key Employee of
the Company is in violation of any term of any employment contract, patent
disclosure agreement, proprietary information agreement, noncompetition
agreement, or any other contract or agreement or any restrictive covenant
relating to the employment of any such officer or Key Employee by the Company,
the nature of the business conducted or to be conducted by the Company or
relating to the use of trade secrets or proprietary or confidential information
of others. The Company has no reason to believe that the employment of the
Company's officers and Key Employees will subject the Company or any Purchaser
to any liability to third-parties. The Company has entered into Noncompetition
and Nonsolicitation Agreements and Invention and Nondisclosure Agreements with
each of its employees.
(b) To the knowledge of the Company, no officer of the Company nor
any Key Employee of the Company whose termination, either individually or in the
aggregate, would have a Material Adverse Effect, has expressed any present
intention of terminating his employment with the Company.
3.06 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is in compliance in all
respects with the terms and provisions of this Agreement and of its Certificate
of Incorporation and By-laws, and in all material respects with the terms and
provisions of all mortgages, indentures, leases, agreements and other
instruments by which it is bound or to which it or any of its respective
properties or assets are subject. The Company is in compliance with all
judgments specifically naming the Company or any of the Founders, decrees,
governmental orders specifically naming the Company or any of the Founders,
statutes, rules or regulations by which it is bound or to which any of its
properties or assets
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are subject. Neither the execution and delivery of this Agreement or the
issuance of the Securities, nor the consummation of any transaction contemplated
by this Agreement, has constituted or resulted in or will constitute or result
in a default or violation of any term or provision of any of the foregoing
documents, instruments, judgments, agreements, decrees, orders, statutes, rules
and regulations.
3.07 MATERIAL CONTRACTS.
(a) Except as set forth on EXHIBIT 3.07, neither the Company nor any
of its properties or assets is a party to or bound by any (i) contract not made
in the ordinary course of business, or involving a commitment or payment by the
Company in excess of $50,000 or, in the Company's belief, otherwise material to
the business of the Company; (ii) contract among stockholders or granting a
right of first refusal or for a partnership or a joint venture or for the
acquisition, sale or lease of any assets or capital stock of the Company or any
other Person or involving a sharing of profits; (iii) mortgage, pledge,
conditional sales contract, security agreement, factoring agreement or other
similar contract with respect to any real or tangible personal property of the
Company; (iv) loan agreement, credit agreement, promissory note, guarantee,
subordination agreement, letter of credit or any other similar type of contract;
(v) contract with any governmental agency; or (vi) binding commitment or
agreement to enter into any of the foregoing. The Company has delivered or
otherwise made available to the Purchasers true, correct and complete copies of
the contracts listed on EXHIBIT 3.07 (except as noted thereon), together with
all amendments, modifications, supplements or side letters affecting the
obligations of any party thereunder.
(b) (i) Each of the contracts listed on EXHIBIT 3.07 is valid and
enforceable in accordance with its terms, and there is no default under any
contract listed on EXHIBIT 3.07 by the Company or, to the knowledge of the
Company, by any other party thereto, and no event has occurred that with the
lapse of time or the giving of notice or both would constitute a default
thereunder except where such default, individually or in the aggregate, is not
reasonably expected to have a Material Adverse Effect and (ii) no previous or
current party to any contract has given written notice to the Company of or made
a written claim with respect to any breach or default thereunder and the Company
has no knowledge of any notice of or claim with respect to any such breach or
default.
(c) With respect to the contracts listed on EXHIBIT 3.07 that were
assigned to the Company by a third party, all necessary consents to such
assignment have been obtained.
3.08 ERISA. Except as set forth on EXHIBIT 3.08, the Company does not make
and has no present intentions to make any contributions to any employee pension
benefit plans for its employees that are subject to ERISA.
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3.09 TRANSACTIONS WITH AFFILIATES. Except as set forth on EXHIBIT 3.09, as
contemplated hereby or consented to by the Purchasers in accordance with this
Agreement, there are no loans, leases, royalty agreements or other continuing
transactions between any Founder, officer, employee or director of the Company
or any Person owning 5% or more of any class of capital stock of the Company or
any member of the immediate family of such Founder, officer, employee, director
or stockholder or any corporation or other entity controlled by such officer,
employee, director or stockholder or a member of the immediate family of such
officer, employee, director or stockholder.
3.10 ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS. Except as
contemplated hereby or consented to by the Purchasers in accordance with this
Agreement, the Company has not assumed, guaranteed, endorsed or otherwise become
directly or contingently liable on (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss), any Indebtedness of any other Person.
3.11 INVESTMENTS IN OTHER PERSONS; SUBSIDIARIES. Except as set forth on
EXHIBIT 3.11 or consented to by the Purchasers in accordance with this
Agreement, the Company has not made any loan or advance to any Person which is
outstanding on the date of this Agreement, nor is it committed or obligated to
make any such loan or advance, nor does the Company own any capital stock,
assets comprising the business of, obligations of, or any interest in, any
Person except as disclosed in this Agreement. The Company has no Subsidiaries.
3.12 SECURITIES LAWS. The Company has complied with all applicable federal
and state securities laws in connection with the offer, issuance and sale of the
Securities. Prior to the Closing, neither the Company nor anyone acting on its
behalf has sold, offered to sell or solicited offers to buy the Securities or
similar securities to, or solicit offers with respect thereto from, or entered
into any preliminary conversations or negotiations relating thereto with, any
Person, so as to bring the issuance and sale of the Securities under the
registration provisions of the Securities Act, and applicable state securities
laws.
3.13 DISCLOSURE. Neither this Agreement nor any other agreement, document,
certificate or written statement furnished to the Purchasers or their counsel by
or on behalf of the Company in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a
material fact relating directly to the Company necessary in order to make the
statements contained herein or therein not misleading. There is no fact within
the knowledge of the Company which has not been disclosed herein or in writing
to the Purchasers and which taken by itself would constitute a circumstance
having a Material Adverse Effect. Without limiting the generality of the
foregoing, the Company does not have any knowledge that there exists, or there
is pending
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or planned, any statute, rule, law, regulation, standard or code which would
have a Material Adverse Effect on the Company's business.
3.14 BROKERS OR FINDERS. No Person has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or valid claim
against or upon the Company for any commission, fee or other compensation as a
finder or broker because of any act or omission by the Company or any of their
respective agents.
3.15 CAPITALIZATION; STATUS OF CAPITAL STOCK. The Company has a total
authorized capitalization consisting of (i) 22,000,000 shares of Common Stock,
par value $.01 per share, of which 7,080,885 shares are issued and outstanding
and (ii) 5,000,000 shares of Preferred Stock, par value $.01 per share, of which
(A) 1,100,000 shares are designated as Series A Convertible Preferred Stock, (B)
1,327,500 shares are designated as Series B Convertible Preferred Stock, and (C)
145,195 shares are designated as Series C Convertible Preferred Stock. The
number of shares of each class or series of the capital stock of the Company
that is issued and outstanding is set forth in EXHIBIT 3.15 hereto. All the
outstanding shares of capital stock of the Company have been duly authorized,
and are validly issued, fully paid and non-assessable. The Warrant Shares, when
issued and delivered in accordance with the terms hereof and after payment of
the purchase price therefor, will be duly authorized, validly issued, fully-paid
and non-assessable. Except as otherwise set forth in EXHIBIT 3.15, no options,
warrants, subscriptions or purchase rights of any nature to acquire from the
Company shares of capital stock or other securities are authorized, issued or
outstanding, nor is the Company obligated in any other manner to issue shares of
its capital stock or other securities except as contemplated by this Agreement.
Except as set forth in EXHIBIT 3.15, there are no restrictions on the transfer
of shares of capital stock of the Company other than those imposed by relevant
federal and state securities laws and as otherwise contemplated by this
Agreement, the Certificate of Incorporation, the Amended and Restated
Stockholders Agreement dated April 16, 1999 by and among the Company and certain
stockholders of the Company (the "STOCKHOLDERS AGREEMENT"), the Registration
Rights Agreement and certain stock restriction and right of first refusal
agreements by and among the Company and certain stockholders of the Company.
Other than as provided in this Section and in the Stockholders Agreement, there
are no agreements, understandings, trusts or other collaborative arrangements or
understandings concerning the voting of the capital stock of the Company. The
offer and sale of all capital stock and other securities of the Company issued
before the Closing complied with or were exempt from all applicable federal and
state securities laws and no stockholder has a right of rescission with respect
thereto.
3.16 REGISTRATION RIGHTS. Except as set forth in EXHIBIT 3.16 and except
for the rights granted to the Purchasers and certain other parties pursuant to
the Registration Rights Agreement, no Person has demand or other rights to cause
the Company to file any registration statement under the Securities Act relating
to any securities of the Company or any right to participate in any such
registration statement.
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3.17 BOOKS AND RECORDS. The books of account, ledgers, order books, records
and documents of the Company accurately and completely reflect all material
information relating to the business of the Company, the location and collection
of its assets, and the nature of all transactions giving rise to the obligations
or accounts receivable of the Company.
3.18 TITLE TO ASSETS; PATENTS.
(a) The Company has good and marketable title in fee to such of its
fixed assets, if any, as are real property, and good and marketable title to all
of its other assets and properties, free of any mortgages, pledges, charges,
liens, security interests or other encumbrances, except those occurring in the
ordinary course of business and those indicated on EXHIBIT 3.18(a). The Company
enjoys peaceful and undisturbed possession under all leases under which it is
operating, and all said leases are valid and subsisting and in full force and
effect.
(b) The Company does not know of any claim, previously asserted,
pending, threatened or which may otherwise be asserted ("CLAIM") that would
interfere with, or adversely impact upon, the Company's unencumbered right to
use, make, sell, license, distribute, promote, apply, develop and make
derivative works of ("USE"), the patents, patent rights, permits, licenses,
trade secrets, trademarks (registered or unregistered), trademark rights, trade
names, trade name rights, franchises, copyrights (registered or unregistered),
inventions (regardless of whether patentable or not), software, confidential
information, innovations and other intellectual property rights being used to
conduct its business as now operated and as now proposed to be operated, or in
the development, manufacture, use, distribution or licensing of the Company's
proprietary technology, information, products, processes, or services
(collectively, the "INTELLECTUAL PROPERTY RIGHTS") (a list of all material
patents, trademarks, trade names, permits, and licenses Used by the Company is
attached hereto as EXHIBIT 3.18(b)); and the Company does not have any reason to
believe that the Use of the Intellectual Property Rights infringes, conflicts or
will conflict with valid rights of any other Person. No claim is known by the
Company to be pending or threatened to the effect that, and the Company has no
reason to believe that, any such Intellectual Property Right is invalid or
unenforceable by the Company or its licensor. Except as set forth in EXHIBIT
3.18(c), the Company has no obligation known by the Company to compensate any
Person for the use of any such Intellectual Property Rights, and except in the
ordinary course of business or as set forth in EXHIBIT 3.18(c), the Company has
not granted any Person any license or other rights to use in any manner any of
the Intellectual Property Rights of the Company, whether requiring the payment
of royalties or not.
3.19 THE YEAR 2000. Each item of hardware, software, information
technology, embedded, or processor based system and/or any combination thereof,
used, developed, manufactured, distributed, licensed, transferred or delivered,
by the Company
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(collectively, the "SYSTEM"), shall be able to correctly function, operate,
process data or perform date related calculations, including, but not limited
to, calculating, comparing and sequencing, from, into and between the years 1999
and 2000, accurately process, provide and/or receive date data, including leap
year calculations, into and between the years 1999, 2000 and beyond, shall
otherwise function as per the specifications thereof both before, during and
following January 1, 2000. Neither performance nor functionality of the System
shall be affected by dates prior to, during and after January 1, 2000. A System
containing or calling on a calendar function including, without limitation, any
function indexed to the CPU clock, and any function providing specific dates or
days, or calculating spans of dates or days shall record, store, process,
provide and, where appropriate, insert, true and accurate dates and calculations
for dates and spans, before, during and following January 1, 2000. The System
shall have no lesser functionality or operability with respect to records
containing dates, before, during or after January 1, 2000 than heretofore with
respect to dates prior to January 1, 2000.
3.20 FINANCIAL STATEMENTS. Attached hereto as EXHIBIT 3.20 are copies of
the unaudited balance sheet of the Company as of December 31, 1998, the
statements of income and retained earnings of the Company for the period ended
December 31, 1998, and the statements of cash flows of the Company for the
period ended December 31, 1998 (the "Financial Statements"). Each of the
Financial Statements was prepared in good faith, is complete and correct in all
material respects, has been prepared in accordance with generally accepted
accounting principles and in conformity with the practices consistently applied
by the Company and presents fairly the financial position, results of operations
and cash flows of the Company as of the dates and for the periods indicated.
3.21 NO UNDISCLOSED LIABILITIES. Except as set forth on EXHIBIT 3.21, the
Company has no liabilities (whether accrued, absolute, contingent or otherwise,
and whether due or to become due or asserted or unasserted), except (a)
obligations under contracts described in EXHIBIT 3.07 or under contracts that
are not required to be disclosed thereon as a result of dollar thresholds
therein; (b) liabilities provided for in the Financial Statements (other than
liabilities which, in accordance with generally accepted accounting principles,
need not be disclosed); (c) liabilities (other than accounts payable) incurred
since the Financial Statements, in the ordinary course of business consistent
with past practice, the sum of which is, in the aggregate, no greater than
$200,000; and (d) accounts payable in excess of those shown on the Financial
Statements, incurred in the ordinary course of business consistent with past
practice, the sum of which is, in the aggregate, not greater than $200,000.
3.22 TECHNOLOGY. Except as set forth in EXHIBIT 3.22 and other than the
Intellectual Property Rights licensed to the Company pursuant to the License
Agreement, the products, processes, proprietary technology and other proprietary
know-how owned or used by the Company were completely developed by the Company's
full-time employees only; the concepts, inventions and original works of
authorship owned or used by the Company
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were developed or conceived by employees within the scope of their employment by
the Company and are connected with the Company's underlying products, processes
and proprietary technology. No independent contractors or consultants were used
or employed by the Company in the development of the products, processes,
proprietary technology and other proprietary know-how owned or used by the
Company.
ARTICLE IV
COVENANTS OF THE COMPANY
4.01 AFFIRMATIVE COVENANTS OF THE COMPANY OTHER THAN REPORTING
REQUIREMENTS. Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that until the payment of the unpaid principal
amount of the Notes, it will perform and observe the following covenants and
provisions, and will cause each Subsidiary, if and when such Subsidiary exists,
to perform and observe such of the following covenants and provisions as are
applicable to such Subsidiary:
(a) PAYMENT OF TAXES AND TRADE DEBT. Pay and discharge, and cause
each Subsidiary to pay and discharge, all taxes, assessments and governmental
charges or levies imposed upon it or upon its income, profits or business, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a lien or charge
upon any properties of the Company or any Subsidiary, provided that neither the
Company nor any Subsidiary shall be required to pay any such tax, assessment,
charge, levy or claim which is being contested in good faith and by appropriate
proceedings if the Company or any Subsidiary shall have set aside on its books
sufficient reserves, if any, with respect thereto.
(b) MAINTENANCE OF INSURANCE. Obtain and maintain from reputable
insurance companies or associations a term life insurance policy on the lives of
each of F. Thomson Leighton and Daniel Lewin the face amount equal to $2,000,000
each (so long as each remains an employee of the Company), which proceeds will
be payable to the order of the Company, and maintain insurance with a reputable
insurance company or association in such amount and covering such risks as is
customary coverage covering its properties and businesses customarily carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or any Subsidiary operates for the type
and scope of its properties and businesses and maintain, and cause each
Subsidiary to maintain, such insurance. Except as may be required by holders of
Senior Indebtedness, the Company will not cause or permit any assignment of the
proceeds of the life insurance policies specified in the first sentence of this
paragraph and will not borrow against such policies.
(c) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain, and,
unless the Company deems it not to be in its best interests, cause each
Subsidiary to
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preserve and maintain, its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each Subsidiary to qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
or lease of its properties. Use commercially reasonable best efforts to secure,
preserve and maintain, and cause each Subsidiary to use commercially reasonable
best efforts to secure, preserve and maintain, all licenses and other rights to
use patents, processes, licenses, permits, trademarks, trade names, inventions,
intellectual property rights or copyrights owned or possessed by it and deemed
by the Company to be material to the conduct of its business or the business of
any Subsidiary.
(d) COMPLIANCE WITH LAWS. Comply, and cause each Subsidiary to
comply, with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, where noncompliance would have a Material
Adverse Effect.
(e) MAINTENANCE OF PROPERTIES; MATERIAL ASSETS. Use commercially
reasonable best efforts to maintain and preserve, and cause each Subsidiary to
use commercially reasonable best efforts to maintain and preserve, all of its
properties and assets, necessary for the proper conduct of its business, in good
repair, working order and condition, ordinary wear and tear excepted, including,
without limitation, the maintenance and preservation of any material patents,
licenses, permits or agreements being used by the Company in its business as now
operated and as now proposed to be operated, including that certain patent and
license agreement dated October 26, 1998 by and between the Massachusetts
Institute of Technology ("MIT") and the Company (the "LICENSE AGREEMENT").
(f) REQUIRED PREPAYMENT UPON CHANGE OF CONTROL. At the option of the
holders of 50% of the unpaid principal amount of the Notes then outstanding
exercised by delivery to the Company no later than 15 days prior to a Change of
Control or, if later, five (5) days after receipt of written notice from the
Company of a pending Change of Control, the Company shall prepay in cash in full
all principal then outstanding under the Notes concurrently with the
consummation of any such Change of Control, together with accrued and unpaid
interest thereon to the prepayment date, and any or all other amounts payable to
the holders of the Notes under or in respect of the Notes.
(g) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep, and cause each
Subsidiary to keep, adequate records and books of account in which complete
entries will be made in accordance with generally accepted accounting principles
consistently applied, reflecting all financial transactions of the Company and
any Subsidiary, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, returns of merchandise, obsolescence, amortization,
taxes, bad debts and other purposes in connection with its business shall be
made.
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4.02 NEGATIVE COVENANTS OF THE COMPANY. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that until the
payment of the unpaid principal amount of the Notes, it will comply with and
observe the following covenants and provisions, and will cause each Subsidiary,
if and when such Subsidiary exists, to comply with and observe such of the
following covenants and provisions as are applicable to such Subsidiary, and
will not:
(a) LIMITATION ON INDEBTEDNESS. At any time permit the aggregate
amount of Indebtedness for Borrowed Money (including Senior Indebtedness but
excluding amounts owed under the Notes) to exceed $15,000,000.
(b) DISTRIBUTIONS. Declare or pay any dividends, purchase,
repurchase, redeem, retire, or otherwise acquire for value any of its capital
stock (or rights, options or warrants to purchase such shares) now or hereafter
outstanding, return any capital to its stockholders as such, or make any
distribution of assets to its stockholders as such, and will not make any
payment in cash, securities or other property or purchase on or in respect of,
or repurchase, redeem, retire or otherwise acquire for value, any indebtedness
of the Company that is subordinated by its express terms in right of payment to
the Notes, or permit any Subsidiary to do any of the foregoing (such
transactions being hereinafter referred to as "DISTRIBUTIONS"), except that any
such Subsidiary may declare and make payment of cash and stock dividends, return
capital and make distributions of assets to the Company, and EXCEPT as
specifically provided for in the Company's Certificate of Incorporation or if
such dividend, purchase, repurchase, redemption, retirement or other acquisition
for value is solely in the form of capital stock (or rights, options or warrants
to purchase such shares) of the Company; PROVIDED, HOWEVER, that nothing herein
contained shall prevent the Company from:
(i) effecting a stock split or declaring or paying any dividend
consisting of shares of any class of capital stock to the holders of shares of
such class of capital stock, or
(ii) redeeming any stock of a deceased stockholder out of
insurance held by the Company on that stockholder's life, or
(iii) repurchasing the shares of Common Stock at the original
cost thereof held by officers, employees, directors or consultants of the
Company which are subject to restrictive stock purchase agreements under which
the Company has the option to repurchase such shares upon the occurrence of
certain events, including the termination of employment,
if in the case of any such transaction the payment can be made in compliance
with the other terms of this Agreement.
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(c) DEALINGS WITH AFFILIATES AND OTHERS. Other than as contemplated
by this Agreement, and other than transactions in the ordinary course of
business involving less than $50,000, enter into any transaction, including,
without limitation, any loans or extensions of credit or royalty agreements,
with any officer or director of the Company or any Subsidiary or holder of any
class of capital stock of the Company, or any member of their respective
immediate families or any corporation or other entity directly or indirectly
affiliated with one or more of such officers, directors or stockholders or
members of their immediate families unless such transaction is approved in
advance by a majority of disinterested members of the Board of Directors, or
absent such Board of Directors approval, by a majority in interest of holders of
the Notes.
(d) MERGER, CONSOLIDATION, ETC. Consolidate with or merge with or
into any other entity or sell, convey, transfer or lease all or substantially
all of its assets in a single transaction or a series of related transactions to
any Person unless:
(i) the successor formed by such consolidation or the survivor
of such merger or the Person that acquires by sale, conveyance, transfer or
lease all or substantially all of the assets of the Company shall have executed
and delivered to each holder of a Note its assumption of the due and punctual
performance and observance of each covenant and condition of this Agreement and
the Notes; and
(ii) immediately after giving effect to such transaction, no
Event of Default shall have occurred and be continuing.
(e) LIMITATION ON LIENS. Directly or indirectly create, incur, assume
or suffer to exist any Lien directly or indirectly securing Indebtedness for
Borrowed Money other than Senior Indebtedness.
(f) LAYERED DEBT. The Company will not create, assume, incur,
guarantee or suffer to exist any indebtedness, other than indebtedness evidenced
by the Notes, that is subordinate by its terms in right of payment to any Senior
Indebtedness unless such indebtedness, by its terms or the terms of the
instrument creating or evidencing it, is pari passu with the Notes or
subordinate in right of payment to the Notes pursuant to subordination
provisions substantially similar to those contained in the Note.
(g) RESTRICTED PAYMENTS. Make payments on, or purchase, repurchase,
redeem, retire or otherwise acquire for value, Indebtedness for Borrowed Money
that, by the express terms governing its repayment, is junior to, or pari passu
with, the Notes, without making a simultaneous payment, purchase, repurchase,
redemption, retirement or other acquisition for value to the holder of the Notes
in an amount which is in the same proportion to the unpaid balance of the Notes
as the amount of the payment, purchase, repurchase, redemption, retirement or
other acquisition for value bears to the unpaid principal amount of such
Indebtedness for Borrowed Money.
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4.03 REPORTING REQUIREMENTS. The Company will furnish the following to each
Purchaser who holds Notes with at least $1,000,000 in principal amount
outstanding:
(a) QUARTERLY REPORTS: as soon as available and in any event within
45 days after the end of each of the first three quarters of each fiscal year of
the Company, unaudited consolidated balance sheets of the Company and its
Subsidiaries as of the end of such quarter and consolidated statements of income
and cash flows of the Company and its Subsidiaries for such quarter and for the
period commencing at the end of the previous fiscal year and ending with the end
of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
and including comparisons to quarterly budgets and a summary discussion of the
Company's principal functional areas, all in reasonable detail and duly
certified (subject to year-end audit adjustments) by the chief financial officer
of the Company as having been prepared in accordance with generally accepted
accounting principles consistently applied;
(b) ANNUAL REPORTS: as soon as available and in any event within 120
days after the end of each fiscal year of the Company, a copy of the annual
audit report for such year for the Company and its Subsidiaries, including
therein consolidated balance sheets of the Company and its Subsidiaries as of
the end of such fiscal year and consolidated statements of income of the Company
and its Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all
such consolidated statements to be duly certified by the chief financial officer
of the Company and by such independent public accountants of recognized national
standing approved by a majority of the Board of Directors;
(c) NOTICES UNDER SENIOR DEBT: promptly after delivery thereof, a
copy of any notice provided by the Company to holders of Senior Indebtedness;
(d) STOCKHOLDERS' AND COMMISSION REPORTS: promptly upon sending,
making available, or filing the same, such reports and financial statements as
the Company or any Subsidiary shall send or make available to the stockholders
of the Company or file with the Commission.
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ARTICLE V
REMEDIES ON DEFAULT
5.01 ACCELERATION.
(a) If an Event of Default with respect to the Company described in
paragraph (a), (f) or (g) of the definition of Event of Default in Section 6.01
of this Agreement has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 50% in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.
Upon any Notes becoming due and payable under this Section 5.01, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus all accrued and unpaid interest
thereon (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived.
If any Event of Default has occurred and is continuing, and irrespective of
whether any Notes have become or have been declared immediately due and payable
under this Section 5.01, the holder of any Note at the time outstanding may
proceed to protect and enforce the rights of such holder by an action at law,
suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
5.02 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No course of
dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. The Company will pay to
the holder of each Note on demand such further amount as shall be sufficient to
cover all costs and expenses of such holder incurred in any enforcement or
collection under this Article V, including, without limitation, reasonable
attorneys' fees, expenses and disbursements.
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ARTICLE VI
DEFINITIONS AND ACCOUNTING TERMS
6.01 CERTAIN DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"AGREEMENT" means this Purchase Agreement as from time to time amended and
in effect between the parties, including all Exhibits hereto.
"BOARD OF DIRECTORS" means the board of directors of the Company as
constituted from time to time.
"CAPITAL LEASE" means leases required to be capitalized in accordance with
applicable Statements of Financial Accounting Standards, determined by
discounting all such payments at the interest rate determined in accordance with
applicable Statements of Financial Accounting Standards.
"CHANGE OF CONTROL" shall mean (a) any merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto representing immediately thereafter (either by remaining outstanding or
by being converted into voting securities of the surviving or acquiring entity)
less than 50% of the combined voting power of the voting securities of the
Company or such surviving or acquiring entity outstanding immediately after such
merger or consolidation; (b) the acquisition by an individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (for purposes of this definition,
a "Person") of beneficial ownership of any capital stock of the Company if,
after such acquisition, such Person beneficially owns (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) 50% or more of either (i) the
then-outstanding shares of Common Stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (b), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (ii) any acquisition by any corporation pursuant to
a transaction which results in all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such transaction
beneficially owning, directly or indirectly, more than 50% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election
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<PAGE> 24
of directors, respectively, of the resulting or acquiring corporation in such
transaction (which shall include, without limitation, a corporation which as a
result of such transaction owns all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such transaction, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
respectively; (c) any sale of all or substantially all of the assets of the
Company; or (d) the complete liquidation of the Company.
"CLOSING" shall have the meaning attributable to it in Section 1.04 of this
Agreement.
"COMMISSION" means the Securities and Exchange Commission (or any other
federal agency administering the securities laws).
"COMMON STOCK" shall have the meaning attributable to it in Section 1.01 of
this Agreement.
"COMPANY" means and shall include Akamai Technologies, Inc., a Delaware
corporation, and its successors and assigns.
"CONSOLIDATED" and "CONSOLIDATING" when used with reference to any term
defined herein mean that term as applied to the accounts of the Company and its
Subsidiaries consolidated in accordance with generally accepted accounting
principles.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
An "EVENT OF DEFAULT" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any amounts due under the
Notes when due;
(b) the Company defaults in observance of any covenants contained in
Sections 4.01, 4.02 and 4.03 which continue unremedied 20 days after written
notice thereof;
(c) the Company or any Subsidiary defaults (after any applicable
grace period) in the payment of any principal or interest or any other amount in
respect of Indebtedness for Borrowed Money (other than the Notes) of the Company
with an aggregate amount outstanding in excess of $2,000,000;
(d) a final judgment or final order of a court of competent
jurisdiction for the payment of money aggregating in excess of $2,000,000 is
rendered against the Company or its Subsidiary which judgment or order remains
uncontested, unappealed, unpaid, unstayed and uninsured for a period of 45 days;
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<PAGE> 25
(e) any representation or warranty in this Agreement or in any
certificate, financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect in any material respect when made
where such failure to be correct has a Material Adverse Effect;
(f) the Company or any Subsidiary shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing; and
(g) an involuntary case or other proceeding shall be commenced
against the Company or any Subsidiary seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Company or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect.
"FOUNDERS" shall mean F. Thomson Leighton, Daniel Lewin, Jonathan Seelig,
Randall Kaplan, Gilbert Friesen and David Karger.
"INDEBTEDNESS FOR BORROWED MONEY" means all obligations, contingent and
otherwise, for borrowed money including liabilities secured by any mortgage on
property owned or acquired subject to such mortgage, whether or not the
liability secured thereby shall have been assumed, and also including (a) all
guaranties, endorsements and other contingent obligations, in respect of
Indebtedness for Borrowed Money of others, whether or not the same are or should
be so reflected in said balance sheet (or the notes thereto), except guaranties
by endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business and (b) the present value of any
lease payments due under Capital Leases.
"KEY EMPLOYEE" means any Founder, the President, chief executive officer,
chief financial officer, chief operating officer, vice president of operations,
research, development, sales or marketing, or any other individual who performs
a significant role in the operations of the Company or a Subsidiary as may be
reasonably designated by the Board of Directors.
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<PAGE> 26
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholders' agreements, voting trust agreements and all similar
arrangements).
"PERSON" means an individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"NOTES" shall have the meaning attributable to it in Section 1.01 of this
Agreement.
"PURCHASER" and "PURCHASERS" shall have that meaning attributable to those
words in Section 1.01 of this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
"SENIOR INDEBTEDNESS" shall have the meaning attributable to it in the
Notes.
"SUBSIDIARY" or "SUBSIDIARIES" means any corporation, partnership, trust or
other entity of which the Company and/or any of its other Subsidiaries (as
herein defined) directly or indirectly owns at the time a majority of the
outstanding shares of every class of equity securities of such corporation,
partnership, trust or other entity.
"WARRANT" shall have the meaning attributable to it in Section 1.01 of this
Agreement.
"WARRANT SHARES" shall have that meaning attributable to it in Section 1.02
of this Agreement.
6.02 ACCOUNTING TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting principles
consistently applied, and all financial data submitted pursuant to this
Agreement shall be prepared in accordance with such principles.
6.03 KNOWLEDGE. All references to the knowledge or awareness of the Company
shall mean the knowledge of any director or Key Employee of the Company.
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<PAGE> 27
ARTICLE VII
MISCELLANEOUS
7.01 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of any
party to this Agreement in exercising any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
7.02 AMENDMENTS, WAIVERS AND CONSENTS. Subject to the provisions of Section
6(c) of the Notes, any provision in this Agreement to the contrary
notwithstanding, and except as hereinafter provided, changes in or additions to
this Agreement may be made, and compliance with any covenant or provision set
forth herein may be omitted or waived, if the Company (i) shall obtain consent
thereto in writing from the holder or holders of at least 50% of the then
outstanding aggregate principal amount of the Notes, and (ii) shall deliver
copies of such consent in writing to any holders who did not execute such
consent. Any waiver or consent may be given subject to satisfaction of
conditions stated therein and any waiver or consent shall be effectively only in
the specific instance and for the specific purpose for which given.
Notwithstanding anything to the contrary contained herein, no consent of any
holder of the Notes shall be required to amend this Agreement to provide for the
issuance of Additional Securities to Additional Purchasers as provided in
Section 1.05 hereof.
7.03 ADDRESSES FOR NOTICES. All notices, requests, demands and other
communications provided for hereunder shall be in writing and mailed, faxed or
delivered to each applicable party at the address set forth in SCHEDULE I hereto
or at such other address as to which such party may inform the other parties in
writing in compliance with the terms of this Section:
If to any other holder of the Securities: at such holder's address for
notice as set forth in the register maintained by the Company, or, as to each of
the foregoing, at the addresses set forth on SCHEDULE I hereto or at such other
address as shall be designated by such Person in a written notice to the other
parties complying as to delivery with the terms of this Section.
If to the Company: at the address set forth on page 1 hereof, or at such
other address as shall be designated by the Company in a written notice to the
other parties complying as to delivery with the terms of this Section, with a
copy to: Hale and Dorr LLP, 60 State Street, Boston, MA 02109, Attention: John
H. Chory, Esq.
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<PAGE> 28
All such notices, requests, demands and other communications shall, when
mailed (which mailing must be accomplished by first class mail, postage prepaid;
express overnight courier service; or registered mail, return receipt requested)
or transmitted by facsimile, be effective three days after deposited in the
mails or upon transmission by facsimile, respectively, addressed as aforesaid,
unless otherwise provided herein.
7.04 COSTS, EXPENSES AND TAXES. The Company agrees to pay in connection
with the preparation, execution and delivery of this Agreement and the issuance
of the Securities, the reasonable out-of-pocket expenses of Baker Communications
Fund, L.P. (including legal, accounting and other expenses), up to a maximum of
$15,000. In addition, the Company shall pay any and all stamp and other taxes
payable or determined to be payable in connection with the execution and
delivery of this Agreement, the issuance of the Securities and the other
instruments and documents to be delivered hereunder or thereunder, and agrees to
save the Purchasers harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes.
7.05 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Company and the Purchasers and their respective
heirs, successors and assigns, except that the Company shall not have the right
to delegate any of its respective obligations hereunder or to assign its
respective rights hereunder or any interest herein without the prior written
consent of the holders of at least a majority in interest of the Notes.
7.06 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties and agreements made in this Agreement, or any other instrument or
document delivered in connection herewith, shall survive the execution and
delivery hereof or thereof and until the payment of all amounts due under the
Notes.
7.07 PRIOR AGREEMENTS. This Agreement and the Notes constitute the entire
agreement between the parties and supersedes any prior understandings or
agreements concerning the purchase and sale of the Securities.
7.08 SEVERABILITY. The provisions of this Agreement and the Securities are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of a provision
contained in this Agreement or the Securities shall, for any reason, be held to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision or part of a provision
of this Agreement or the terms of the Securities; but this Agreement and the
terms of the Securities, as the case may be, shall be reformed and construed as
if such invalid or illegal or unenforceable provision, or part of a provision,
had never been contained herein, and such provisions or part reformed so that it
would be valid, legal and enforceable to the maximum extent possible.
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<PAGE> 29
7.09 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the General Corporation Law of the State of
Delaware as to matters within the scope thereof, and as to all other matters
shall be governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts.
7.10 HEADINGS. Article, Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
7.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
7.12 FURTHER ASSURANCES. From and after the date of this Agreement, upon
the request of any Purchaser or the Company, the Company and the Purchasers
shall execute and deliver such instruments, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement and the Securities.
7.13 CONFIDENTIALITY. Each Purchaser agrees that he or it will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information which such Purchaser may obtain from the Company pursuant to
this Agreement and which the Company has advised the Purchaser is protected
information, unless such information is known, or until such information becomes
known, to the public; provided, however, that such information may be disclosed
by the Purchaser to comply with applicable laws or governmental regulations, in
any court proceeding, in any action the Purchaser must take to protect and
enforce its rights under this Agreement if any Event of Default shall occur and
be continuing, provided that the Purchaser provides prior written notice of such
disclosure to the Company and takes reasonable and lawful action to avoid or
minimize the extent of such disclosure.
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<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
THE COMPANY: AKAMAI TECHNOLOGIES, INC.
/s/ Daniel Lewin
By:____________________________________
Name: Daniel Lewin
Title: President
PURCHASERS: BAKER COMMUNICATIONS FUND, L.P.
By: Baker Capital Partners, LLC
its General Partner
/s/ Edward Scott
By:____________________________________
Name: Edward Scott
Title: Manager
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW Investment Management Company,
as investment Advisor
/s/ Mark L. Attanasio
By:____________________________________
Name: Mark L. Attanasio
Title: Group Managing Director
By: TCW Advisors (Bermuda), Ltd., as
general partner
/s/ Nicholas W. Tell, Jr.
By:____________________________________
Name: Nicholas W. Tell, Jr.
Title: Managing Director
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<PAGE> 31
TCW LEVERAGED INCOME TRUST II, L.P.
By: TCW Investment Management Company,
as Investment Advisor
/s/ Mark L. Attanasio
By:____________________________________
Name: Mark L. Attanasio
Title: Group Managing Director
By: TCW (LINC II), L.P., as general
partner
By: TCW Advisors (Bermuda), Ltd., as
its general partner
/s/ Nicholas W. Tell, Jr.
By:____________________________________
Name: Nicholas W. Tell, Jr.
Title: Managing Director
TCW SHARED OPPORTUNITY FUND III, L.P.
By: TCW Asset Management Company, its
Investment Advisor
/s/ Mark L. Attanasio
By:____________________________________
Name: Mark L. Attanasio
Title: Group Managing Director
/s/ Nicholas W. Tell, Jr.
By:____________________________________
Name: Nicholas W. Tell, Jr.
Title: Managing Director
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<PAGE> 32
SHARED OPPORTUNITY FUND IIB, LLC
By: TCW Asset Management Company, its
Investment Advisor
/s/ Mark L. Attanasio
By:____________________________________
Name: Mark L. Attanasio
Title: Group Managing Director
/s/ Nicholas W. Tell, Jr.
By:____________________________________
Name: Nicholas W. Tell, Jr.
Title: Managing Director
TCW SHARED OPPORTUNITY FUND II, L.P.
By: TCW Investment Management Company,
its Investment Advisor
/s/ Mark L. Attanasio
By:____________________________________
Name: Mark L. Attanasio
Title: Group Managing Director
/s/ Nicholas W. Tell, Jr.
By:____________________________________
Name: Nicholas W. Tell, Jr.
Title: Managing Director
POLARIS VENTURE PARTNERS II L.P.
[Illegible]
By:____________________________________
Name:
Title:
POLARIS VENTURE PARTNERS FOUNDERS FUND
II L.P.
[Illegible]
By:____________________________________
Name:
Title:
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<PAGE> 33
AT INVESTORS LLC
/s/ Arthur H. Bilger
By:____________________________________
Name: Arthur H. Bilger
Title:
/s/ David F. Callan
__________________________________
David F. Callan
/s/ George Conrades
__________________________________
George Conrades
DAVID ALLAN KAPLAN REVOCABLE TRUST
DATED DECEMBER 19, 1980
/s/ David Allan Kaplan
By:____________________________________
Name: David Allan Kaplan
Title: Trustee
/s/ Earl P. Galleher III
__________________________________
Earl P. Galleher III
/s/ Thomas A. Herring
__________________________________
Thomas A. Herring
/s/ Randall Kaplan
__________________________________
Randall Kaplan
/s/ Scott Morrisse
__________________________________
Scott Morrisse
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<PAGE> 34
/s/ Linda Eder Ross
__________________________________
Linda Eder Ross
/s/ Paul Sagan
__________________________________
Paul Sagan
/s/ Jonathan Seelig
__________________________________
Jonathan Seelig
/s/ Michael Seelig
__________________________________
Michael Seelig
/s/ Julie Seelig
__________________________________
Julie Seelig
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<PAGE> 35
EXHIBIT A
FORM OF NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT OR THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS
UNDER SAID ACT OR STATE SECURITIES LAWS.
No. ______
Akamai Technologies, Inc.
15% Senior Subordinated Note
$____________ Cambridge, Massachusetts
May 7, 1999
---------------------
Akamai Technologies, Inc., a Delaware corporation (the "Company"), for
value received, hereby promises to pay to __________________ __________________,
or registered assigns, the principal sum of ____________________ Dollars
($_________) on May 6, 2004 or such earlier date as provided herein (the
"Maturity Date"), and to pay interest (computed on the basis of a 365-day year)
from the date hereof on the unpaid balance of such principal amount from time to
time outstanding at the rate of fifteen percent (15%) per annum. Such interest
is to be compounded annually and added to the principal amount of the Note on
May 6 of each year commencing May 6, 2000 and is due and payable on the Maturity
Date.
This Note is one of a series of the Company's Notes known as its 15% Senior
Subordinated Notes (collectively referred to herein as the "Notes"), all of like
tenor, except as to the date of issuance, identifying number and principal
amount thereof. The Notes are limited in aggregate original principal amount to
$15,000,000 and are issued or to be issued by the Company pursuant to the 15%
Senior Subordinated Notes and Warrants to Purchase Common Stock Purchase
Agreement dated May 7, 1999 among the Company, the original holder of this Note
and other purchasers of Notes (collectively referred to herein as the "Purchase
Agreement"), to which reference is made for a statement of certain additional
rights and benefits to which the holder of this Note is entitled.
<PAGE> 36
1. SUBORDINATION.
(a) SUBORDINATION TO SENIOR INDEBTEDNESS. The indebtedness evidenced by
this Note, and the payment of the principal hereof, and any interest hereon, is
wholly subordinated, junior and subject in right of payment, to the extent and
in the manner hereinafter provided, to the prior payment of all Senior
Indebtedness of the Company now outstanding or hereinafter incurred. "Senior
Indebtedness" means the principal of, and premium, if any, and interest on (i)
all indebtedness of the Company for monies borrowed from banks, trust companies,
insurance companies and other financial institutions, including commercial paper
and accounts receivable sold or assigned by the Company to such institutions,
(ii) obligations of the Company as lessee under leases of real or personal
property, which obligations have been or should be, in accordance with generally
accepted accounting principles, capitalized on the books of the lessee, (iii)
principal of, and premium, if any, and interest on any indebtedness or
obligations of others of the kinds described in (i) and (ii) above assumed or
guaranteed in any manner by the Company, and (iv) deferrals, renewals,
extensions and refundings of any such indebtedness or obligations described in
(i), (ii) and (iii) above, unless such indebtedness, by its terms or the terms
of the instrument creating or evidencing it, is subordinate or pari passu in
right of payment to the Notes; PROVIDED that the aggregate principal amount of
Senior Indebtedness shall not in any event exceed $15,000,000 at any time
outstanding. Notwithstanding the foregoing, "Senior Indebtedness" shall not
include indebtedness of the Company evidenced by the other Notes, which shall
rank equally and ratably with this Note.
(b) NO PAYMENT UPON PAYMENT DEFAULT OR ACCELERATION OF SENIOR
INDEBTEDNESS. No payment on account of principal of or interest on the Notes
shall be made, and no Notes shall be redeemed or purchased directly or
indirectly by the Company (or any of its subsidiaries), if at the time of such
payment or purchase or immediately after giving effect thereto, there shall
exist or shall have occurred (i) any default by the Company in the payment of
principal of or interest on any Senior Indebtedness (a "Payment Default") or
(ii) an event of default (other than a Payment Default) with respect to any
Senior Indebtedness with an outstanding amount of at least $1,000,000, as
defined in the instrument under which the same is outstanding, permitting the
holders thereof to accelerate the maturity thereof (a "Covenant Default"), which
has resulted in the actual acceleration of such Senior Indebtedness; in each
case, of which the holders of the Notes shall have been given written notice and
such event of default or default shall not have been cured or waived or shall
not have ceased to exist.
<PAGE> 37
(c) RESTRICTIONS ON PAYMENT UPON COVENANT DEFAULT IN SENIOR INDEBTEDNESS.
No payment on account of principal of or interest on the Notes shall be made,
and no Notes shall be redeemed or purchased directly or indirectly by the
Company (or any of its subsidiaries) during the period commencing with the date
on which a holder of Senior Indebtedness gives written notice to the holders of
the Notes of the occurrence of any Covenant Default and ending on the earlier of
(i) the date which is 180 days after the commencement of such period, and (ii)
the first date after the commencement of such period on which all such Covenant
Defaults are cured or waived ("Payment Blockage Period"); PROVIDED that (x) the
holders of Senior Indebtedness shall not be entitled to institute a Payment
Blockage Period more often than once within any period of three hundred sixty
(360) consecutive days and (y) no Covenant Default or event which, with the
giving of notice and/or lapse of time, would become a Covenant Default which
existed on the date of the commencement of any such Payment Blockage Period may
be used as the basis for any subsequent payment blockage notice unless such
Covenant Default or event, as the case may be, shall in the interim have been
cured or waived for a period of not less than ninety (90) consecutive days.
(d) PAYMENT UPON DISSOLUTION, ETC.
(i) Any bankruptcy, insolvency, reorganization, receivership,
composition, assignment for benefit of creditors or other similar proceeding
initiated by or against the Company or any dissolution or winding up or total or
partial liquidation or reorganization of the Company is hereinafter referred to
as a "Proceeding". Upon payment or distribution to creditors in a Proceeding of
assets of the Company of any kind or character, whether in cash, property or
securities, all principal and interest (including any interest accruing after
the commencement of the Proceeding, whether or not allowable), and any or all
other amounts payable to the holders of Senior Indebtedness under the Senior
Indebtedness, due upon any Senior Indebtedness shall first be paid in full, or
payment thereof in full duly provided for, before any holders of the Notes shall
be entitled to receive or, if received, to retain any payment or distribution on
account of the Notes; and upon any such Proceeding, any payment or distribution
of assets of the Company of any kind or character, whether in cash, property or
securities, to which any holders of the Notes would be entitled except for the
provisions of this Section 1 shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by any holders of the Notes who shall have received
such payment or distribution, directly to the holders of the Senior Indebtedness
(pro rata to each such holder on the basis of the respective amounts of such
Senior Indebtedness held by such holder) or their representatives to the extent
necessary to pay all such Senior Indebtedness in full after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to any holders of the
Notes. In the event of any Proceeding, the holders of Notes shall be entitled to
be paid one hundred percent (100%) of the principal amount thereof and accrued
interest thereon (including any interest accruing after the commencement of the
Proceeding, whether or not allowable), and any or all other amounts payable to
the
<PAGE> 38
holders of the Notes under the Notes, before any distribution of assets shall be
made among the holders of debt subordinated to the Notes or any class of shares
of the capital stock of the Company in their capacities as holders of such
shares.
(ii) The holders of the Notes also agree that they shall take all
reasonable actions necessary to file and prove the full amount of all their
claims in any Proceeding, and the holders of the Notes shall not expressly, by
implication or by inaction waive any claim in any Proceeding without the written
consent of such holders of Senior Indebtedness.
(iii) For purposes of this Section 1(d), the words "assets" and "cash,
property or securities" shall not be deemed to include shares of Common Stock of
the Company as reorganized or readjusted, or securities of the Company or any
other person provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this Section
1 with respect to the Notes to the payment of all Senior Indebtedness which may
at the time be outstanding, if (x) the Senior Indebtedness is assumed by the new
person, if any, resulting from any such reorganization or readjustment, and (y)
the rights of the holders of Senior Indebtedness are not, without the consent of
such holders, altered by such reorganization or readjustment.
(e) SUBROGATION. Subject to payment in full of all Senior Indebtedness,
the holders of the Notes shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of the assets of the
Company made on such Senior Indebtedness until all principal and interest on the
Notes shall be paid in full; and for purposes of such subrogation, no payments
or distributions to the holders of Senior Indebtedness of any cash, property or
securities to which any holders of the Notes would be entitled except for the
subordination provisions of this Section 1 shall, as between the holders of the
Notes and the Company and/or its creditors other than the holders of the Senior
Indebtedness, be deemed to be a payment on account of the Senior Indebtedness.
(f) RIGHTS OF HOLDERS UNIMPAIRED. The provisions of this Section 1 are and
are intended solely for the purposes of defining the relative rights of the
holders of the Notes and the holders of Senior Indebtedness and nothing in this
Section 1 shall impair, as between the Company and any holders of the Notes, the
obligation of the Company, which is unconditional and absolute, to pay to the
holders of the Notes the principal thereof and interest thereon, and any or all
other amounts payable to the holders of the Notes under the Notes, in accordance
with the terms of the Notes, nor shall anything herein prevent any holders of
the Notes from exercising all remedies otherwise permitted by applicable law or
hereunder upon default, subject to the rights set forth above of holders of
Senior Indebtedness to receive cash, property or securities otherwise payable or
deliverable to the holders of the Notes.
<PAGE> 39
(g) HOLDERS OF SENIOR INDEBTEDNESS. These provisions regarding
subordination will constitute a continuing offer to all persons who, in reliance
upon such provisions, become holders of, or continue to hold, Senior
Indebtedness; such provisions are made for the benefit of the holders of Senior
Indebtedness, and such holders are hereby made obligees under such provisions to
the same extent as if they were named therein, and they or any of them may
proceed to enforce such subordination. The holder of this Note shall execute and
deliver to any holder of Senior Indebtedness any such instrument as such holder
of Senior Indebtedness may request in order to confirm the subordination of this
Note to such Senior Indebtedness upon the terms set forth in this Note.
2. PREPAYMENT OF PRINCIPAL. Subject to the subordination provisions of Section
1, the principal indebtedness represented by this Note may be prepaid in whole
or in part by the Company at any time without premium or penalty upon 10 days'
prior written notice to the holder of this Note. Partial prepayments shall first
be applied to accrued and unpaid interest, and then principal. Any prepayment
shall be allocated among the Notes so that the amount prepaid with respect to
the Notes is pro rata based upon the aggregate outstanding principal on the
Notes.
3. EVENT OF DEFAULT.
Subject to the subordination provisions of Section 1, in case an Event of
Default, as defined in the Purchase Agreement shall occur and be continuing, the
outstanding principal and interest of this Note, and any or all other amounts
payable to the holders of the Notes under the Notes may be declared immediately
due and payable in the manner and with the effect provided in the Purchase
Agreement.
4. CERTAIN ADDITIONAL COVENANTS. The Company covenants to the holder of this
Note that, so long as the Company has or may have any obligation under this
Note:
(a) It will comply in all material respects with all applicable laws and
orders to which it may be subject, if failure so to comply would materially
impair its ability to perform its obligations under this Note.
(b) It will notify holder of this Note immediately upon the occurrence of
an Event of Default or any event or action which constitutes or is likely to
give rise to a Change of Control (as defined in the Purchase Agreement).
(c) It will not use the proceeds of the Notes in any manner that would
cause such borrowing or the application of such proceeds to violate any
applicable law, rule or regulation.
(d) This Note will rank pari passu with or senior to all other
indebtedness of the Company which is not Senior Indebtedness.
<PAGE> 40
5. NOTE REGISTER.
(a) The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary.
(b) Each holder of a Note shall be deemed to have agreed by acceptance of
such Note, not to transfer Notes except in minimum denominations of $500,000 (or
if less with respect to any Note, the entire unpaid principal amount of such
Note).
(c) Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Note and of indemnity
reasonably satisfactory to it, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Note (in case of mutilation) the Company will make and deliver in lieu of
this Note a new Note of like tenor and unpaid principal amount and dated as of
the date to which interest has been paid on the unpaid principal amount of this
Note in lieu of which such new Note is made and delivered.
6. GENERAL.
(a) SUCCESSORS AND ASSIGNS. This Note, and the obligations and rights of
the Company hereunder, shall be binding upon and inure to the benefit of the
Company, the holder of this Note, and their respective heirs, successors and
assigns.
(b) RECOURSE. Recourse under this Note shall be to the general assets of
the Company only and in no event to the officers, directors or stockholders of
the Company.
(c) CHANGES. Changes in or additions to this Note may be made and
compliance with any term, covenant, agreement, condition or provision set forth
herein may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively), upon written consent of the Company
and the holders of at least 50% of the principal amount of the Notes then
outstanding; PROVIDED, HOWEVER, that no change, addition, omission or waiver
which causes any change in or extension of the time of payment of the principal
amount or interest, or the reduction of the rate of interest on, or in any way
affects or impairs the obligation of the Company in respect of the principal of
or interest on, any Note, or causes any change in the provisions of Section 2 of
any Note, or impairs or affects the right to institute suit for payment of the
Note or causes any change in this Section 6(c), shall be made without the
written consent of the holder of such Note.
<PAGE> 41
(d) CURRENCY. All payments shall be made in such coin or currency of the
United States of America as at the time of payment shall be legal tender therein
for the payment of public and private debts.
(e) NOTICES. All notices, requests, consents and demands shall be made in
writing and shall be mailed postage prepaid, or delivered by hand, to the
Company or to the holder hereof at their respective addresses in accordance with
the notice provisions of the Purchase Agreement.
(f) SATURDAYS, SUNDAYS, HOLIDAYS. If any date that may at any time be
specified in this Note as a date for the making of any payment of principal or
interest under this Note shall fall on Saturday, Sunday or on a day which in
Boston, Massachusetts shall be a legal holiday, then the date for the making of
that payment shall be the next subsequent day which is not a Saturday, Sunday or
legal holiday.
(g) GOVERNING LAW. This Note shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the
Commonwealth of Massachusetts.
(h) All payments made by the Company in respect of principal of, and
interest on, this Note will be made without set-off, counterclaim or other
defense. The Company shall pay on demand all stamp, documentary and other
similar duties and taxes, if any, to which this Note from time to time may be
subject or give rise.
(i) The Company agrees to pay on demand all of the costs and expenses of
the holder of this Note, including, without limitation, reasonable attorneys'
fees, in connection with the collection of any sums due to the holder of this
Note and the enforcement, protection or perfection of its rights or interests
hereunder.
(j) The Company may not assign any of its rights or delegate any of its
obligations under this Note (or any part thereof) without the prior written
consent of the holder of this Note.
(k) The Company hereby waives diligence, presentment, protest, demand, and
notice of every kind other than notices expressly provided herein or by the
Purchase Agreement or required by applicable law and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
<PAGE> 42
IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed
instrument on the date first above written by the duly authorized representative
of the Company.
AKAMAI TECHNOLOGIES, INC.
By:________________________________
Name:
Title:
ATTEST:________________________
Secretary
<PAGE> 43
EXHIBIT B
FORM OF WARRANT
THIS WARRANT IS NON-TRANSFERRABLE.
THE SHARES OF COMMON STOCK ISSUED UPON
EXERCISE OF THIS WARRANT ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 4
OF THIS WARRANT.
-----------------------------------------------
Warrant No. ___ Number of Shares: _________
(subject to adjustment)
Date of Issuance: May 7, 1999
AKAMAI TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
(Void after May 7, 2004)
Akamai Technologies, Inc., a Delaware corporation (the "Company"), for
value received, hereby certifies that ________________________________, or its
registered assigns (the "Registered Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company, at any time or from time to time
on or after the date of issuance and on or before May 7, 2004 at not later than
5:00 p.m. (Boston, Massachusetts time), ______ shares of Common Stock, $0.01 par
value per share, of the Company, at a purchase price of $14.979 per share. The
shares purchasable upon exercise of this Warrant, and the purchase price per
share, each as adjusted from time to time pursuant to the provisions of this
Warrant, are hereinafter referred to as the "Warrant Shares" and the "Purchase
Price," respectively.
1. EXERCISE.
(a) This Warrant may be exercised by the Registered Holder, in whole or in
part, by surrendering this Warrant, with the purchase form appended hereto as
EXHIBIT I duly executed by such Registered Holder or by such Registered Holder's
duly authorized attorney, at the principal office of the Company, or at such
other office or agency as the Company may
<PAGE> 44
designate, accompanied by payment in full, in lawful money of the United States,
of the Purchase Price payable in respect of the number of Warrant Shares
purchased upon such exercise; PROVIDED, HOWEVER, that this Warrant may not be
exercised unless such exercise and the issuance of the Warrant Shares pursuant
thereto shall comply with all applicable federal and state securities laws.
(b) The Registered Holder may, at its option, elect to pay some or all of
the Purchase Price payable upon an exercise of this Warrant by cancelling a
portion of this Warrant exercisable for such number of Warrant Shares as is
determined by dividing (i) the total Purchase Price payable in respect of the
number of Warrant Shares being purchased upon such exercise by (ii) the excess
of the Fair Market Value per share of Common Stock as of the effective date of
exercise, as determined pursuant to subsection 1(c) below (the "Exercise Date")
over the Purchase Price per share. If the Registered Holder wishes to exercise
this Warrant pursuant to this method of payment with respect to the maximum
number of Warrant Shares purchasable pursuant to this method, then the number of
Warrant Shares so purchasable shall be equal to the total number of Warrant
Shares, minus the product obtained by multiplying (x) the total number of
Warrant Shares by (y) a fraction, the numerator of which shall be the Purchase
Price per share and the denominator of which shall be the Fair Market Value per
share of Common Stock as of the Exercise Date. The Fair Market Value per share
of Common Stock shall be determined as follows:
(i) If the Common Stock is listed on a national securities exchange,
the NASDAQ National Market System, the NASDAQ system, or another nationally
recognized exchange or trading system as of the Exercise Date, the Fair Market
Value per share of Common Stock shall be deemed to be the last reported sale
price per share of Common Stock thereon on the Exercise Date; or, if no such
price is reported on such date, such price on the next preceding business day
(provided that if no such price is reported on the next preceding business day,
the Fair Market Value per share of Common Stock shall be determined pursuant to
clause (ii)).
(ii) If the Common Stock is not listed on a national securities
exchange, the NASDAQ National Market System, the NASDAQ system or another
nationally recognized exchange or trading system as of the Exercise Date, the
Fair Market Value per share of Common Stock shall be deemed to be the amount
most recently determined by the Board of Directors to represent the fair market
value per share of the Common Stock (including without limitation a
determination for purposes of granting Common Stock options or issuing Common
Stock under an employee benefit plan of the Company); and, upon request of the
Registered Holder, the Board of Directors (or a representative thereof) shall
promptly notify the Registered Holder of the Fair Market Value per share of
Common Stock. In the event this Warrant is being exercised in connection with a
merger, sale or other transaction in which consideration is payable to the
holders of Common Stock, then the Fair Market Value per share of Common Stock
shall be the per share value of such consideration payable to such holders, as
determined in good faith by the Board of Directors. Notwithstanding the
foregoing, if the Board of Directors has not made such a determination within
the three-month period prior to the Exercise Date, then (A) the Fair Market
Value per share of Common Stock shall be the amount next determined by the Board
of Directors to represent the fair market value per share of the Common Stock
(including without limitation a determination for purposes of granting Common
Stock options or issuing Common Stock under an employee benefit plan of the
<PAGE> 45
Company), (B) the Board of Directors shall make such a determination within 15
days of a request by the Registered Holder that it do so, and (C) the exercise
of this Warrant pursuant to this subsection 1(b) shall be delayed until such
determination is made.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
shall have been surrendered to the Company as provided in subsection 1(a) above.
At such time, the person or persons in whose name or names any certificates for
Warrant Shares shall be issuable upon such exercise as provided in subsection
1(d) below shall be deemed to have become the holder or holders of record of the
Warrant Shares represented by such certificates.
(d) As soon as practicable after the exercise of this Warrant in full or
in part, and in any event within 10 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof; and
(ii) in case such exercise is in part only, a new warrant or warrants
(dated the date hereof) of like tenor, calling in the aggregate on the face or
faces thereof for the number of Warrant Shares equal (without giving effect to
any adjustment therein) to the number of such shares called for on the face of
this Warrant minus the sum of (a) the number of such shares purchased by the
Registered Holder upon such exercise plus (b) the number of Warrant Shares (if
any) covered by the portion of this Warrant cancelled in payment of the Purchase
Price payable upon such exercise pursuant to subsection 1(b) above.
2. ADJUSTMENTS.
(a) If outstanding shares of the Company's Common Stock shall be
subdivided into a greater number of shares or a dividend in Common Stock shall
be paid in respect of Common Stock, the Purchase Price in effect immediately
prior to such subdivision or at the record date of such dividend shall
simultaneously with the effectiveness of such subdivision or immediately after
the record date of such dividend be proportionately reduced. If outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Purchase Price in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be proportionately
increased. When any adjustment is required to be made in the Purchase Price, the
number of Warrant Shares purchasable upon the exercise of this Warrant shall be
changed to the number determined by dividing (i) an amount equal to the number
of shares issuable upon the exercise of this Warrant immediately prior to such
adjustment, multiplied by the Purchase Price in effect immediately prior to such
adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(b) If there shall occur any capital reorganization or reclassification of
the Company's Common Stock (other than a change in par value or a subdivision or
combination as provided for in subsection 2(a) above), or any consolidation or
merger of the Company with
<PAGE> 46
or into another corporation, or a transfer of all or substantially all of the
assets of the Company, then, as part of any such reorganization,
reclassification, consolidation, merger or sale, as the case may be, lawful
provision shall be made so that the Registered Holder of this Warrant shall have
the right thereafter to receive upon the exercise hereof the kind and amount of
shares of stock or other securities or property which such Registered Holder
would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number of shares of Common Stock which
were then purchasable upon the exercise of this Warrant. In any such case,
appropriate adjustment (as reasonably determined in good faith by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.
(c) When any adjustment is required to be made in the Purchase Price, the
Company shall promptly mail to the Registered Holder a certificate setting forth
the Purchase Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Such certificate shall also set forth the
kind and amount of stock or other securities or property into which this Warrant
shall be exercisable following the occurrence of any of the events specified in
subsection 2(a) or (b) above.
3. FRACTIONAL SHARES. The Company shall not be required upon the exercise of
this Warrant to issue any fractional shares, but shall make an adjustment
therefor in cash on the basis of the fair market value per share of Common
Stock, as determined in good faith by the Board of Directors of the Company.
4. REQUIREMENTS FOR TRANSFER.
(a) This Warrant and the Warrant Shares may be sold or transferred to any
person who, immediately after the sale or transfer, holds or will hold (i) in
the case of a sale or transfer of this Warrant, a portion of this Warrant
covering at least 10,000 Warrant Shares, and (ii) in the case of a sale or
transfer of Warrant Shares, at least 10,000 Warrant Shares. Notwithstanding the
foregoing, this Warrant and the Warrant Shares may not be sold or transferred
unless either (i) they first shall have been registered under the Securities Act
of 1933, as amended (the "Act"), or (ii) if requested by the Company, the
Company first shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Company, to the effect that such sale or transfer
is exempt from the registration requirements of the Act.
(b) Notwithstanding the foregoing, no registration or opinion of counsel
shall be required for a sale or transfer made in accordance with Rule 144 under
the Act.
(c) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended, and may
<PAGE> 47
not be offered, sold or otherwise transferred, pledged
or hypothecated unless and until such securities are
registered under such Act or an opinion of counsel
satisfactory to the Company is obtained to the effect
that such registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
5. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
6. REGISTRATION RIGHTS. The Registered Holder and the holder of Warrant Shares
issued upon exercise of this Warrant shall have the same rights and obligations
with respect to registration under the Act and with respect to indemnification
in connection with any such registration as if (i) such Registered Holder or
holder were one of the Series B Purchasers under that certain Amended and
Restated Registration Rights Agreement dated as of April 16, 1999 among the
Company and the individuals and entities named therein (the "Registration Rights
Agreement") and (ii) the Warrant Shares were Series B Conversion Shares under
the Registration Rights Agreement. The rights of the Registered Holder and the
holder of Warrant Shares issued upon exercise of this Warrant shall continue
until not more than one year after the expiration or earlier exercise of this
Warrant.
7. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
8. TRANSFERS, ETC.
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, upon surrender of this
Warrant with a properly executed assignment (in the form of EXHIBIT II hereto)
at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant register,
the Company may treat the Registered Holder of this Warrant as the absolute
owner hereof for all purposes; PROVIDED, HOWEVER, that if and when this Warrant
is properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
<PAGE> 48
9. MAILING OF NOTICES, ETC. All notices and other communications from the
Company to the Registered Holder of this Warrant shall be mailed by first-class
certified or registered mail, postage prepaid, to the address furnished to the
Company in writing by the last Registered Holder of this Warrant who shall have
furnished an address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in connection
herewith to the Company shall be mailed by first-class certified or registered
mail, postage prepaid, to the Company at its principal office set forth below.
If the Company should at any time change the location of its principal office to
a place other than as set forth below, it shall give prompt written notice to
the Registered Holder of this Warrant and thereafter all references in this
Warrant to the location of its principal office at the particular time shall be
as so specified in such notice.
10. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
11. CHANGE OR WAIVER. This Warrant is one of a series of Warrants, all of like
tenor except as to the number of shares of Common Stock subject thereto, issued
by the Company pursuant to that certain 15% Senior Subordinated Notes and
Warrants to Purchase Common Stock Purchase Agreement dated as of May 7, 1999
among the Company and the individuals and entities named therein (collectively,
the "Company Warrants"). Any term of this Warrant may be amended or waived only
upon the written consent of the Company and the holders of Company Warrants
representing at least 50% of the number of shares of Common Stock then subject
to outstanding Company Warrants; provided that any such amendment or waiver must
apply to all Company Warrants then outstanding; and provided further that the
number of Warrant Shares subject to this Warrant and the Purchase Price of this
Warrant may not be amended, and the right to exercise this Warrant may not be
waived, without the written consent of the holder of this Warrant.
12. HEADINGS. The headings in this Warrant are for purposes of reference only
and shall not limit or otherwise affect the meaning of any provision of this
Warrant.
13. GOVERNING LAW. This Warrant will be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
AKAMAI TECHNOLOGIES, INC.
By:________________________________
Title:______________________________
Address: 201 Broadway
Cambridge, MA 02139
WITNESS:
_________________________
<PAGE> 1
EXHIBIT 10.21
-------------
PROMISSORY NOTE
---------------
July 23, 1999
$2,619,750 New York, New York
FOR VALUE RECEIVED, Timothy Weller (the "Maker"), promises to pay to Akamai
Technologies, Inc. (the "Company"), or order, at its offices or at such other
place as the holder of this Note may designate, the principal sum of $
2,619,750, together with interest on the unpaid principal balance of this Note
from time to time outstanding at the rate of 6.1% per year, compounded annually,
until paid in full. Principal and interest shall be paid in full on July 23,
2009; provided, however, if the Maker sells any shares of the Company, he shall
make a prepayment on this Note equal to the proceeds of such sale (net of
taxes), such payment applied first to accrued and unpaid interest and then to
principal until paid in full.
Interest on this Note shall be computed on the basis of a year of 365 days
for the actual number of days elapsed. All payments by the Maker under this Note
shall be in immediately available funds.
This Note shall become immediately due and payable without notice (except
as provided in paragraph (1) below) or demand upon the occurrence at any time of
any of the following events of default (individually, "an Event of Default" and
collectively, "Events of Default"):
(1) default in the payment or performance of this or any other liability
or obligation of the Maker under a written contract to the holder that
is not cured within 30 days after written notice of default thereof,
including the payment when due of any principal, premium or interest
under this Note;
(2) the insolvency of the Maker, or the appointment of a receiver or
custodian for the Maker or any part of its property if such
appointment is not terminated or dismissed within thirty (30) days;
(3) the institution against the Maker or any indorser or guarantor of this
Note of any proceedings under the United States Bankruptcy Code or any
other federal or state bankruptcy, reorganization, receivership,
insolvency or other similar law affecting the rights of creditors
generally, which proceeding is not dismissed within thirty (30) days
of filing; or
(4) the institution by the Maker or any indorser or guarantor of this Note
of any proceedings under the United States Bankruptcy Code or any
other federal or state bankruptcy, reorganization, receivership,
insolvency or other similar law affecting the rights of creditors
generally or the making by the Maker or any indorser or guarantor of
this Note of a composition or an assignment or trust mortgage for the
benefit of creditors.
<PAGE> 2
Upon the occurrence of an Event of Default, the holder shall have then, or
at any time thereafter, all of the rights and remedies afforded by the Uniform
Commercial Code as from time to time in effect in the Commonwealth of
Massachusetts or afforded by other applicable law.
All payments by the Maker under this Note shall be made without set-off or
counterclaim and be free and clear and without any deduction or withholding for
any taxes or fees of any nature whatever, unless the obligation to make such
deduction or withholding is imposed by law. The Maker shall pay and save the
holder harmless from all liabilities with respect to or resulting from any delay
or omission to make any such deduction or withholding required by law.
No reference in this Note to any guaranty or other document shall impair
the obligation of the Maker, which is absolute and unconditional, to pay all
amounts under this Note strictly in accordance with the terms of this Note.
The Maker agrees to pay on demand all costs of collection, including
reasonable attorneys' fees, incurred by the holder in enforcing the obligations
of the Maker under this Note.
No delay or omission on the part of the holder in exercising any right
under this Note shall operate as a waiver of such right or of any other right of
such holder, nor shall any delay, omission or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any future occasion.
The Maker and every indorser or guarantor of this Note regardless of the time,
order or place of signing waives presentment, demand, protest and notices of
every kind and assents to any extension or postponement of the time of payment
or any other indulgence, to any substitution, exchange or release of collateral,
and to the addition or release of any other party or person primarily or
secondarily liable.
This Note may be prepaid in whole or in part at any time or from time to
time. Any such prepayment shall be without premium or penalty.
None of the terms or provisions of this Note may be excluded, modified or
amended except by a written instrument duly executed on behalf of the holder
expressly referring to this Note and setting forth the provision so excluded,
modified or amended.
All rights and obligations hereunder shall be governed by the laws of the
Commonwealth of Massachusetts and this Note is executed as an instrument under
seal.
/s/ Timothy Weller
-------------------------------
Timothy Weller
-2-
<PAGE> 1
EXHIBIT 10.22
AKAMAI TECHNOLOGIES, INC.
SERIES F CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 20, 1999
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I PURCHASE, SALE AND TERMS OF SHARES.....................................................................1
1.01 THE PREFERRED SHARES....................................................................................1
1.02 THE CONVERTED SHARES....................................................................................1
1.03 THE SHARES..............................................................................................1
1.04 PURCHASE PRICE AND CLOSING..............................................................................1
1.05 RESTRICTIONS ON TRANSFER AND STANDSTILL AGREEMENT.......................................................2
1.06 USE OF PROCEEDS.........................................................................................4
1.07 Representations and Warranties by the Purchaser.........................................................4
ARTICLE II CONDITIONS TO THE PURCHASER'S OBLIGATION..............................................................5
2.01 REPRESENTATIONS AND WARRANTIES..........................................................................5
2.02 DOCUMENTATION AT CLOSING................................................................................5
2.03 ADDITIONAL CLOSING CONDITIONS...........................................................................6
2.04 CONSENTS, WAIVERS, ETC..................................................................................6
2.05 PERFORMANCE.............................................................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................7
3.01 ORGANIZATION AND STANDING...............................................................................7
3.02 CORPORATE ACTION........................................................................................7
3.03 GOVERNMENTAL APPROVALS..................................................................................8
3.04 LITIGATION..............................................................................................8
3.05 CERTAIN AGREEMENTS OF OFFICERS, FOUNDERS AND KEY EMPLOYEES..............................................8
3.06 COMPLIANCE WITH OTHER INSTRUMENTS.......................................................................9
3.07 MATERIAL CONTRACTS......................................................................................9
3.08 ERISA..................................................................................................10
3.09 TRANSACTIONS WITH AFFILIATES...........................................................................10
3.10 ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS.............................................10
3.11 INVESTMENTS IN OTHER PERSONS; SUBSIDIARIES.............................................................10
3.12 SECURITIES LAWS........................................................................................11
3.13 DISCLOSURE.............................................................................................11
3.14 BROKERS OR FINDERS.....................................................................................11
3.15 CAPITALIZATION; STATUS OF CAPITAL STOCK................................................................11
3.16 REGISTRATION RIGHTS....................................................................................12
3.17 BOOKS AND RECORDS......................................................................................12
3.18 TITLE TO ASSETS; PATENTS...............................................................................12
3.19 THE YEAR 2000..........................................................................................13
3.20 FINANCIAL STATEMENTS...................................................................................13
3.21 CHANGES................................................................................................13
3.22 NO UNDISCLOSED LIABILITIES.............................................................................15
3.23 TECHNOLOGY.............................................................................................15
3.24 PERMITS................................................................................................15
3.25 ENVIRONMENTAL AND SAFETY LAWS..........................................................................15
3.26 CORPORATE DOCUMENTS; MINUTE BOOKS......................................................................15
3.27 LABOR AGREEMENTS AND ACTIONS...........................................................................16
3.28 SERIES E AGREEMENT.....................................................................................16
ARTICLE IV COVENANTS OF THE COMPANY.............................................................................16
4.01 AFFIRMATIVE COVENANTS OF THE COMPANY OTHER THAN REPORTING REQUIREMENTS.................................16
4.02 NEGATIVE COVENANTS OF THE COMPANY......................................................................18
4.03 REPORTING REQUIREMENTS.................................................................................20
ARTICLE V DEFINITIONS AND ACCOUNTING TERMS......................................................................22
5.01 CERTAIN DEFINED TERMS..................................................................................22
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5.02 ACCOUNTING TERMS.......................................................................................25
5.03 KNOWLEDGE..............................................................................................25
ARTICLE VI MISCELLANEOUS........................................................................................25
6.01 NO WAIVER; CUMULATIVE REMEDIES.........................................................................25
6.02 AMENDMENTS, WAIVERS AND CONSENTS.......................................................................25
6.03 ADDRESSES FOR NOTICES..................................................................................25
6.04 COSTS, EXPENSES AND TAXES..............................................................................26
6.05 BINDING EFFECT; ASSIGNMENT.............................................................................26
6.06 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............................................................26
6.07 PRIOR AGREEMENTS.......................................................................................26
6.08 SEVERABILITY...........................................................................................26
6.09 GOVERNING LAW..........................................................................................27
6.10 HEADINGS...............................................................................................27
6.11 COUNTERPARTS...........................................................................................27
6.12 FURTHER ASSURANCES.....................................................................................27
6.13 INDEMNIFICATION........................................................................................27
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EXHIBITS
- --------
1.01 Designation of Series F Convertible Preferred Stock
2.02B Opinion of Counsel
2.03B Fourth Amended and Restated Stockholders Agreement
2.03D Fourth Amended and Restated Registration Rights Agreement
3.01 Foreign Qualifications
3.04 Litigation
3.07 Material Contracts
3.08 ERISA
3.09 Transactions with Affiliates
3.11 Investments in Other Persons; Subsidiaries
3.15 Capitalization; Status of Capital Stock
3.16 Registration Rights
3.18(a) Title to Assets
3.18(b) Intellectual Property
3.18(c) Compensation for use of Intellectual Property Rights
3.20 Financial Statements
3.21 Changes
3.22 Undisclosed Liabilities
3.23 Technology
3.27 Labor Agreements and Actions
3.28 Series E Agreements
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AKAMAI TECHNOLOGIES, INC.
201 Broadway
Cambridge, Massachusetts 02139
As of September 20, 1999
TO: Microsoft Corporation
Re: SERIES F CONVERTIBLE PREFERRED STOCK
Ladies and Gentlemen:
Akamai Technologies, Inc., a Delaware corporation (the "COMPANY"), agrees
with you as follows:
ARTICLE I
PURCHASE, SALE AND TERMS OF SHARES
1.01 THE PREFERRED SHARES. The Company has authorized the issuance and sale
of up to 985,545 shares of its previously authorized but unissued shares of
Series F Convertible Preferred Stock, par value $.01 per share (the "SERIES F
PREFERRED STOCK"), at a purchase price of $15.22 per share to Microsoft
Corporation. (the "PURCHASER"). The designation, rights, preferences and other
terms and conditions relating to the Series F Preferred Stock are as set forth
on EXHIBIT 1.01 hereto. The Series F Preferred Stock is sometimes referred to
herein as the "PREFERRED SHARES."
1.02 THE CONVERTED SHARES. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other
preferential rights, a sufficient number of its previously authorized but
unissued shares of Common Stock to satisfy the rights of conversion of the
holders of the Preferred Shares. Any shares of Common Stock issuable upon
conversion of the Preferred Shares, and such shares when issued, are herein
referred to as the "CONVERTED SHARES."
1.03 THE SHARES. The Preferred Shares and the Converted Shares are
sometimes collectively referred to herein as the "SHARES."
1.04 PURCHASE PRICE AND CLOSING. The Company agrees to issue and sell to
the Purchaser and, subject to and in reliance upon the representations,
warranties, covenants, terms and conditions of this Agreement, the Purchaser
agrees to purchase 985,545 shares of Series F Preferred Stock for an aggregate
purchase price of $14,999,994.90. The purchase and sale shall take place at a
closing (the "CLOSING") to be held on or before September 20, 1999, at 10:00
A.M., at such location and at such time as may be mutually agreed upon, subject
to the satisfaction of all of the conditions to the Closing specified in Article
II herein. At the Closing the Company will issue and deliver certificates
evidencing the shares of Series F Preferred
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Stock to be sold at the Closing to the Purchaser (or its nominee) against
payment of the full purchase price therefor by (i) wire transfer of immediately
available funds to an account designated by the Company, (ii) check payable to
the order of the Company or its designee, or (iii) any combination of (i) and
(ii) above.
1.05 RESTRICTIONS ON TRANSFER AND STANDSTILL AGREEMENT.
(a) TRANSFER RESTRICTIONS. Without the prior written permission of
the Company, no more than 25% of the Shares may be sold or transferred by the
Purchaser (except to a wholly-owned subsidiary or a wholly-owned subsidiary of a
wholly-owned subsidiary of the Purchaser, or the like); provided, however, that
if the Purchaser wishes to sell or transfer any of such 25% of the Shares to a
third party, it shall first submit a written offer to sell such Shares to the
Company on terms and conditions, including price, not less favorable to the
Company than those on which it proposes to sell such Shares to such third party
(the "OFFER"), PROVIDED, HOWEVER, nothing in the foregoing shall restrict the
Purchaser from entering into a bonafide transaction with a nationally recognized
investment banking firm which constitutes a hedge against changes in the market
price of the Company's Common Stock. The Offer shall disclose the identity of
the proposed purchaser or transferee, the Shares proposed to be sold or
transferred and the agreed terms of the sale or transfer. If the Offer provides
that the purchase price for the Shares shall be paid other than in cash, then
the per-Share purchase price for the Shares subject to the Offer shall be deemed
to be the Market Price (as defined below). Within five days after receipt of the
Offer, the Company shall give written notice to the Purchaser of its intent to
purchase all or none of the offered Shares on the same terms and conditions as
set forth in the Offer. The Company can pay the cash equivalent of any non-cash
consideration based on the Market Price. If the Company does not purchase all of
the Shares offered by the Purchaser pursuant to the Offer, such Shares may be
sold by the Purchaser at any time within 90 days after the date of the Offer at
not less than the price and upon other terms and conditions, if any, not more
favorable to such proposed purchaser or transferee than those specified in the
Offer. All restrictions set forth in this Section 1.05(a) shall terminate upon
the earlier of the date one year after the date of (i) closing of a Qualified
Public Offering (as defined in Section 5.01 of the Agreement) or (ii)
registration of a class of the Company's securities under the Securities
Exchange Act of 1934, as amended (the "1934 ACT"). For purposes of this Section
1.05(a), the "MARKET PRICE" shall be determined as follows:
(i) If the Company's Common Stock is listed on a national
securities exchange, the NASDAQ National Market System, the NASDAQ system, or
another nationally recognized exchange or trading system (an "EXCHANGE") as of
the date of the Offer, then the Market Price shall be deemed to be the average
closing price per share of the Company's Common Stock on such Exchange for the
20 trading days ending on the trading day prior to the date of the Offer;
provided that if the Company's Common Stock has been listed on an Exchange for
fewer than 21 trading days, the Market Price shall be deemed to be the average
closing price per share of the Company's Common Stock since it has been listed
on such Exchange.
(ii) If the Company's Common Stock is not listed on an Exchange
as of the date of the Offer, then the Market Price shall be the fair market
value per share of the Shares as of the date of the Offer as determined in good
faith by the Purchaser's Board of Directors; provided, however, that the Company
shall have the right to contest such
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determination by giving notice thereof to the Purchaser within ten days of such
determination, and in such event the Market Price shall be the fair market value
per share of the Shares as of the date of the Offer as determined by an
independent appraiser to be selected by the Purchaser and approved by the
Company, which approval shall not be unreasonably withheld. The independent
appraiser's fees and expenses shall be paid as follows:
(A) If the Market Price as determined by the independent
appraiser is less than or equal to 110% of the Market Price determined by the
Purchaser's Board of Directors, then the independent appraiser's fees and
expenses shall be paid by the Company.
(B) If the Market Price as determined by the independent
appraiser is greater than 110% of the Market Price determined by the Purchaser's
Board of Directors, then the independent appraiser's fees and expenses shall be
paid by the Purchaser.
(b) STANDSTILL AGREEMENT. The Purchaser hereby agrees that from and after
the date hereof until the earlier of the date one year after the date of (i)
closing of a Qualified Public Offering (as defined in Section 5.01 of this
Agreement) or (ii) registration of a class of the Company's securities under the
1934 Act, unless such shall have been specifically invited in writing by the
Company, neither Purchaser nor any of its affiliates (as such term is defined
under the 1934 Act) or agents will in any manner, directly or indirectly, (a)
effect or seek, offer or propose (whether publicly or otherwise) to effect, or
cause or participate in or in any way assist any other Person to effect or seek,
offer or propose (whether publicly or otherwise) to effect or participate in,
(i) any acquisition of any securities (or beneficial ownership thereof) or
assets of the Company, except that during the one-year period from and after a
Qualified Public Offering, the Purchaser may acquire capital stock of the
Company provided that after any such acquisition, the Purchaser and its
affiliates shall beneficially own no more than 10% of each class of the
Company's voting securities; (ii) any tender or exchange offer, merger or other
business combination involving the Company; (iii) any recapitalization,
restructuring, liquidation, dissolution or other extraordinary transaction with
respect to the Company; or (iv) any "solicitation" of "proxies" (as such terms
are used in the proxy rules of the Commission) or consents to vote any voting
securities of the Company; (b) otherwise act, alone or in concert with others,
to seek control of the Company's Board of Directors; or (c) take any action
which might require the Company to make a public announcement regarding any of
the types of matters set forth in (a) above. Notwithstanding the above in this
Section 1.05(b), if (i) following the Company's initial public offering a bona
fide tender offer that seeks to acquire more than 50% of the outstanding voting
securities of the Company is commenced by a third party unaffiliated with the
Purchaser, or (ii) prior to the Company's initial public offering any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the 1934 Act) other than the Purchaser and its affiliates acquires more than
50% of the Company's outstanding voting securities, then any above restriction
contained in this Section 1.05(b) imposed on the Purchaser will immediately
terminate, and the Purchaser shall be free to acquire or offer to acquire any or
all outstanding shares of the Company. Prior to the Company's initial public
offering, the Company will provide written notice to the Purchaser immediately
after the Company learns of any such individual, entity or group acquiring more
than 25% of the Company's outstanding voting securities. Notwithstanding
anything to the contrary in this Section, the Purchaser shall be entitled to
acquire securities of the Company
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<PAGE> 8
pursuant to Section 4.1 of the Amended and Restated Stockholders' Agreement (as
defined in Section 2.03(b) below).
(c) "MOST FAVORED NATION" If (i) the Company sells securities to a
Strategic Investor (as defined in Section 4.6(l) of the Amended and Restated
Stockholders' Agreement) and (ii) in connection with its purchase of such
securities, such Strategic Investor is subject to provisions less restrictive
than those set forth in Sections 1.05(a) or 1.05(b) above to purchase and/or
sell securities of the Company, then the Company shall amend such sections,
and/or take such other actions as may be required (including releasing
restrictions imposed by Sections 1.05(a) or 1.05(b)), in order that the
Purchaser obtains rights no less favorable than those obtained by such Strategic
Investor to purchase and/or sell securities of the Company.
1.06 USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Preferred Shares under this Agreement for working capital and general
corporate purposes.
1.07 Representations and Warranties by the Purchaser. The Purchaser
represents and warrants that (a) it will acquire the Preferred Shares for its
own account and that the Preferred Shares are being acquired by it for the
purpose of investment and not with a view to distribution or resale thereof; (b)
the execution of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of the Purchaser, and this Agreement has been duly executed and delivered,
and constitutes a valid, legal, binding and enforceable agreement of the
Purchaser, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) to the extent the indemnification provisions contained in the
Fourth Amended and Restated Registration Rights Agreement (as defined in Section
2.04(b)) may be limited by applicable federal or state securities laws; (c) it
has taken no action which would give rise to any claim by any other person for
any brokerage commissions, finders' fees or the like relating to this Agreement
or the transactions contemplated hereby; (d) the Purchaser has had the
opportunity to ask questions of and receive answers from representatives of the
Company concerning the terms of the offering of the Preferred Shares and to
obtain additional information concerning the Company and its business; and (e)
the Purchaser has the ability to evaluate the merits and risks of an investment
in the Preferred Shares and can bear the economic risks of such investment. The
acquisition by the Purchaser of the Preferred Shares shall constitute a
confirmation of the representations and warranties made by the Purchaser as at
the date of such acquisition. The Purchaser further represents that it
understands and agrees that, until registered under the Securities Act or
transferred pursuant to the provisions of Rule 144 as promulgated by the
Commission, all certificates evidencing any of the Shares, whether upon initial
issuance or upon any transfer thereof, shall bear a legend, prominently stamped
or printed thereon, reading substantially as follows:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION
PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS."
The Purchaser further represents that it understands and agrees that all
certificates evidencing any of the Shares, whether upon initial issuance or upon
any transfer thereof, shall bear legends, prominently stamped or printed
thereon, reading substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER UNDER A SERIES F CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT."
ARTICLE II
CONDITIONS TO THE PURCHASER'S OBLIGATION
The obligation of the Purchaser to purchase and pay for the Preferred
Shares at the Closing is subject to the satisfaction of the following
conditions:
2.01 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company set forth in Article III hereof shall be true and
correct on the date of the Closing.
2.02 DOCUMENTATION AT CLOSING. The Purchaser shall have received prior to
or at the Closing all of the following documents or instruments, or evidence of
completion thereof, each in form and substance satisfactory to the Purchaser:
(a) A copy of the Certificate of Incorporation of the Company (the
"CERTIFICATE OF INCORPORATION"), certified by the Secretary of State of the
State of Delaware together with a certified copy of the Certificate of
Designation of the Series F Preferred Stock, a copy of the resolutions of the
Board of Directors and, if required, the stockholders of the Company evidencing
the adoption of the Company's Certificate of Designation of the Series F
Preferred Stock, the approval of this Agreement, the issuance of the Preferred
Shares and the other matters contemplated hereby, and a copy of the By-laws of
the Company, all of which shall have been certified by the Secretary of the
Company to be true, complete and correct in every particular, and certified
copies of all documents evidencing other necessary corporate or other action and
governmental approvals, if any, with respect to this Agreement and the Shares.
(b) The opinion of Hale and Dorr LLP, counsel to the Company, in the
form of EXHIBIT 2.02B attached hereto.
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(c) A certificate of the Secretary of the Company which shall certify
the names of the officers of the Company authorized to sign this Agreement, the
certificates for the Preferred Shares and the other documents, instruments or
certificates to be delivered pursuant to this Agreement by the Company or any of
its officers, together with the true signatures of such officers. The Purchaser
may conclusively rely on such certificate until it shall receive a further
certificate of the Secretary or an Assistant Secretary of the Company canceling
or amending the prior certificate and submitting the signatures of the officers
named in such further certificate.
(d) A certificate of the President of the Company stating that the
representations and warranties of the Company contained in Article III hereof
and otherwise made by the Company in writing in connection with the transactions
contemplated hereby are true and correct and that all covenants and conditions
required to be performed prior to or at the Closing have been performed as of
the Closing.
(e) Certificates of Good Standing for the Company from the
Secretaries of State of the States of Delaware and California, and the
Commonwealth of Massachusetts shall have been provided to the Purchaser.
(f) The Company and the Purchaser shall have entered into Broadband
Streaming Initiative Agreement.
2.03 ADDITIONAL CLOSING CONDITIONS. The Purchaser shall have received
prior to or at the Closing evidence of satisfaction or completion of the
following, in form and substance satisfactory to the Purchaser:
(a) The Certificate of Designation of the Series F Preferred Stock
shall provide for the designation of the rights and preferences of the Series F
Preferred Stock in the forms set forth in EXHIBIT 1.01A attached hereto (the
"SERIES F CERTIFICATE OF DESIGNATION").
(b) A Fourth Amended and Restated Stockholders' Agreement in the form
set forth in EXHIBIT 2.03B (the "AMENDED AND RESTATED STOCKHOLDERS 'AGREEMENT")
shall have been executed by the parties named therein.
(c) The Company, the Purchaser and the other parties named therein
shall have entered into a Fourth Amended and Restated Registration Rights
Agreement in the form set forth in EXHIBIT 2.03D (the "AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT").
(d) The Company shall have paid the costs, expenses, taxes and filing
fees identified in Section 6.04.
2.04 CONSENTS, WAIVERS, ETC. Prior to the Closing, the Company shall have
obtained all consents or waivers, if any, necessary to execute and deliver this
Agreement, issue the Preferred Shares and to carry out the transactions
contemplated hereby and thereby, including without limitation the waivers and/or
consents of the holders of preferred stock of the Company in connection with the
transactions contemplated hereby, and all such consents and waivers shall be in
full force and effect. All corporate and other action and governmental filings
necessary to effectuate the terms of this Agreement, the Preferred Shares and
other
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agreements and instruments executed and delivered by the Company in connection
herewith shall have been made or taken, except for any post-sale filing that may
be required under federal or state securities laws. In addition to the documents
set forth above, the Company shall have provided to the Purchaser any other
information or copies of documents that they may reasonably request.
2.05 PERFORMANCE. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants as follows as of the date hereof
and as of the date of the Closing:
3.01 ORGANIZATION AND STANDING. The Company is a duly organized and validly
existing corporation in good standing under the corporate laws of the State of
Delaware and has all requisite corporate power and authority for the ownership
and operation of its properties and for the carrying on of its business as now
conducted or as now proposed to be conducted. The Company is duly licensed or
qualified and in good standing as a foreign corporation authorized to do
business in all jurisdictions wherein the character of the property owned or
leased, or the nature of the activities conducted, by it makes such licensing or
qualification necessary as set forth in EXHIBIT 3.01, except where the failure
to so qualify would not have a material adverse effect on the business,
operations, affairs or condition of the Company or in its properties or assets
taken as a whole, or which might call into question the validity of this
Agreement, any of the Shares, or any action taken or to be taken pursuant hereto
or thereto (a "MATERIAL ADVERSE EFFECT").
3.02 CORPORATE ACTION. The Company has all necessary corporate power and
has taken all corporate action required to enter into and perform this
Agreement, the Amended and Restated Registration Rights Agreement, the Amended
and Restated Stockholders Agreement and any other agreements and instruments
executed in connection herewith (collectively, the "FINANCING DOCUMENTS"). The
Financing Documents are valid and legally binding obligations of the Company,
enforceable in accordance with their terms. The issuance, sale and delivery of
the Preferred Shares in accordance with this Agreement, and the issuance, sale
and delivery of the Converted Shares, have been duly authorized by all necessary
corporate action on the part of the Company. Sufficient authorized but unissued
shares of Common Stock have been reserved by appropriate corporate action in
connection with the prospective conversion of the Preferred Shares at the
initial conversion price, and the issuance of the Preferred Shares is not, and
the issuance of the Converted Shares upon the conversion of the Preferred Shares
will not be, subject to preemptive rights or other preferential rights in any
present stockholders of the Company and will not conflict with any provision of
any agreement or instrument to which the Company is a party or by which it or
its property is bound.
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3.03 GOVERNMENTAL APPROVALS. Except for the filing of any notice subsequent
to the Closing that may be required under applicable state and/or federal
securities laws (which, if required, shall be filed on a timely basis and a copy
of which shall be provided to the Purchaser), no authorization, consent,
approval, license, exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for the execution and delivery by
the Company of this Agreement, for the offer, issue, sale and delivery of the
Preferred Shares, or for the performance by the Company of its obligations under
this Agreement or the Shares.
3.04 LITIGATION. Except as set forth in EXHIBIT 3.04, there is no
litigation or governmental proceeding or investigation pending or, to the
knowledge of the Company, threatened against the Company affecting any of its
respective properties or assets, or against any officer or Key Employee relating
to such person's performance of duties for the Company or relating to his stock
ownership in the Company or otherwise relating to the business of the Company,
nor to the knowledge of the Company has there occurred any event or does there
exist any condition on the basis of which any such litigation, proceeding or
investigation might properly be instituted. Neither the Company nor, to the
knowledge of the Company, any officer or Key Employee of the Company is in
default with respect to any order, writ, injunction, decree, ruling or decision
of any court, commission, board or other governmental agency specifically naming
the Company or an officer or Key Employee of the Company. Except as set forth in
EXHIBIT 3.04, there are no actions or proceedings pending or, to the knowledge
of the Company, threatened against the Company or against any officer or Key
Employee which could reasonably be expected to result, either in any case or in
the aggregate, in any Material Adverse Effect. The foregoing sentences include,
without limiting their generality, actions pending or, to the knowledge of the
Company, threatened (or any basis therefor), involving the prior employment of
any of the Company's officers or employees (including any Key Employees) or
their use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers. Except as set
forth in EXHIBIT 3.04, there is no action, suit, proceeding or investigation by
the Company currently pending or that the Company intends to initiate.
3.05 CERTAIN AGREEMENTS OF OFFICERS, FOUNDERS AND KEY EMPLOYEES.
(a) To the knowledge of the Company, no officer or Key Employee of
the Company is in violation of any term of any employment contract, patent
disclosure agreement, proprietary information agreement, noncompetition
agreement, or any other contract or agreement or any restrictive covenant
relating to the employment of any such officer or Key Employee by the Company,
the nature of the business conducted or to be conducted by the Company or
relating to the use of trade secrets or proprietary or confidential information
of others. The Company has no reason to believe that the employment of the
Company's officers and Key Employees will subject the Company or the Purchaser
to any liability to third-parties. The Company has entered into noncompetition
and nonsolicitation agreements and invention and nondisclosure agreements with
each of its employees.
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(b) To the knowledge of the Company, no officer of the Company nor
any Key Employee of the Company whose termination, either individually or in the
aggregate, would have a Material Adverse Effect, has expressed any present
intention of terminating his employment with the Company.
3.06 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is in compliance in all
respects with the terms and provisions of this Agreement and of its Certificate
of Incorporation and By-laws, and in all material respects with the terms and
provisions of all mortgages, indentures, leases, agreements and other
instruments by which it is bound or to which it or any of its respective
properties or assets are subject. The Company is in compliance with all
judgments specifically naming the Company or any of the Founders, decrees,
governmental orders specifically naming the Company or any of the Founders,
statutes, rules or regulations by which it is bound or to which any of its
properties or assets are subject. Neither the execution and delivery of this
Agreement or the issuance of the Shares, nor the consummation of any transaction
contemplated by this Agreement, has constituted or resulted in or will
constitute or result in a default or violation of any term or provision of any
of the foregoing documents, instruments, judgments, agreements, decrees, orders,
statutes, rules and regulations.
3.07 MATERIAL CONTRACTS.
(a) Except as set forth on EXHIBIT 3.07, there are no (i) contracts
not made in the ordinary course of business, or involving a commitment or
payment by the Company in excess of $100,000 or, in the Company's belief,
otherwise material to the business of the Company; (ii) contracts among
stockholders or granting a right of first refusal or for a partnership or a
joint venture or for the acquisition, sale or lease of any assets or capital
stock of the Company or any other Person or involving a sharing of profits;
(iii) mortgages, pledges, conditional sales contracts, security agreements,
factoring agreements or other similar contracts with respect to any real or
tangible personal property of the Company; (iv) loan agreements, credit
agreements, promissory notes, guarantees, subordination agreements, letters of
credit or any other similar type of contracts; (v) contracts with any
governmental agency; (vi) licenses of any patent, copyright, trade secret or
other proprietary right to or from the Company, other than licenses arising from
the purchase of "off the shelf" or other standard products; (vii) provisions
restricting or affecting the development, manufacture or distribution of the
Company's products or services; or (viii) binding commitments or agreements to
enter into any of the foregoing (collectively, the "MATERIAL CONTRACTS"). The
Company has delivered or otherwise made available to the Purchaser true, correct
and complete copies of the Material Contracts, other than those specifically
agreed upon by the Company and the Purchaser to not be delivered, together with
all amendments, modifications, supplements or side letters affecting the
obligations of any party thereunder.
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(b) (i) Each of the Material Contracts is valid and enforceable in
accordance with its terms, and there is no default under any Material Contract
by the Company or, to the knowledge of the Company by any other party thereto,
and no event has occurred with respect to any of the Material Contracts that
with the lapse of time or the giving of notice or both would constitute a
default by the Company thereunder except where such default is not reasonably
expected to have a Material Adverse Effect and (ii) no previous or current party
to any Material Contract has given written notice to the Company of or made a
written claim with respect to any breach or default thereunder and the Company
has no knowledge of any notice of or claim with respect to any such breach or
default.
(c) With respect to the Material Contracts that were assigned to the
Company by a third party, all necessary consents to such assignment have been
obtained.
(d) The Company has not engaged in the past three (3) months in any
discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up of the
Company.
3.08 ERISA. Except as set forth on EXHIBIT 3.08, the Company does not make
and has no present intentions to make any contributions to any employee pension
benefit plans for its employees that are subject to ERISA.
3.09 TRANSACTIONS WITH AFFILIATES. Except as set forth on EXHIBIT 3.09, as
contemplated hereby or consented to by the Purchaser in accordance with this
Agreement, there are no loans, leases, royalty agreements or other continuing
transactions between any Founder, officer, employee or director of the Company
or any Person owning 5% or more of any class of capital stock of the Company or
any member of the immediate family of such Founder, officer, employee, director
or stockholder or any corporation or other entity controlled by such officer,
employee, director or stockholder or a member of the immediate family of such
officer, employee, director or stockholder.
3.10 ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS. Except as
contemplated hereby or consented to by the Purchaser in accordance with this
Agreement, the Company has not assumed, guaranteed, endorsed or otherwise become
directly or contingently liable on (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss), any Indebtedness of any other Person.
3.11 INVESTMENTS IN OTHER PERSONS; SUBSIDIARIES. Except as set forth on
EXHIBIT 3.11 or consented to by the Purchaser in accordance with this Agreement,
the Company has not made any loan or advance to any Person which is outstanding
on the date of this Agreement, nor is it committed or obligated to make any such
loan or advance, nor does the Company own
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any capital stock, assets comprising the business of, obligations of, or any
interest in, any Person except as disclosed in this Agreement. The Company has
no Subsidiaries.
3.12 SECURITIES LAWS. The Company has complied with all applicable federal
and state securities laws in connection with the offer, issuance and sale of the
Shares. Prior to the Closing, neither the Company nor anyone acting on its
behalf has sold, offered to sell or solicited offers to buy the Shares or
similar securities to, or solicited offers with respect thereto from, or entered
into any preliminary conversations or negotiations relating thereto with, any
Person, so as to bring the issuance and sale of the Shares under the
registration provisions of the Securities Act, and applicable state securities
laws.
3.13 DISCLOSURE. Neither this Agreement nor any other agreement, document,
certificate or written statement furnished to the Purchaser by or on behalf of
the Company in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact relating
directly to the Company necessary in order to make the statements contained
herein or therein not misleading. There is no fact within the knowledge of the
Company which has not been disclosed herein or in writing to the Purchasers and
which taken by itself would constitute a circumstance having a Material Adverse
Effect. Without limiting the generality of the foregoing, the Company does not
have any knowledge that there exists, or there is pending or planned, any
statute, rule, law, regulation, standard or code which would have a Material
Adverse Effect on the Company's business.
3.14 BROKERS OR FINDERS. No Person has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or valid claim
against or upon the Company for any commission, fee or other compensation as a
finder or broker because of any act or omission by the Company or any of their
respective agents.
3.15 CAPITALIZATION; STATUS OF CAPITAL STOCK. The Company has a total
authorized capitalization consisting of (i) 300,000,000 shares of Common Stock,
par value $.01 per shares of which 44,832,810 shares are issued and outstanding
and (ii) 10,000,000 shares of Preferred Stock, par value $.01 per share, of
which (A) 1,100,000 shares are designated as Series A Convertible Preferred
Stock, all of which shares are issued and outstanding on the date hereof, (B)
1,327,500 shares are designated as Series B Convertible Preferred Stock, all of
which shares are issued and outstanding on the date hereof, (C) 145,195 shares
are designated as Series C Convertible Preferred Stock, of which shares are
issued and outstanding on the date hereof, (D) 685,194 shares are designated as
Series D Convertible Preferred Stock, all of which shares are issued and
outstanding on the date hereof, (D) 1,867,480 shares are designated as Series E
Convertible Preferred Stock, all of which no shares are issued and outstanding
on the date hereof, and (E) 985,545 shares are designated Series F Convertible
Preferred Stock, of which no shares are issued and outstanding on the date
hereof, prior to giving effect to the transactions contemplated hereby. Set
forth on EXHIBIT 3.15 is the number of issued and outstanding shares of the
capital stock of the Company. All the outstanding shares of capital stock of the
Company have been duly authorized, and are validly issued, fully paid and
non-assessable. The Preferred Shares, when issued and delivered in accordance
with the terms hereof and after payment of the purchase price therefor and the
Converted Shares, when issued and delivered upon conversion of the Preferred
Shares, will be duly authorized, validly issued, fully-paid and non-assessable.
Except as otherwise set forth in EXHIBIT 3.15, no options, warrants,
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subscriptions or purchase rights of any nature to acquire from the Company
shares of capital stock or other securities are authorized, issued or
outstanding, nor is the Company obligated in any other manner to issue shares of
its capital stock or other securities except as contemplated by this Agreement.
Except as set forth in EXHIBIT 3.15, there are no restrictions on the transfer
of shares of capital stock of the Company other than those imposed by relevant
federal and state securities laws and as otherwise contemplated by this
Agreement, the Amended and Restated Stockholders Agreement, the Amended and
Restated Registration Rights Agreement, the Certificate of Incorporation and
stock restriction and right of first refusal agreements between the Company and
certain of its employees. Other than as provided in this Section and in the
Amended and Restated Stockholders Agreement, there are no agreements,
understandings, trusts or other collaborative arrangements or understandings
concerning the voting of the capital stock of the Company. The offer and sale of
all capital stock and other securities of the Company issued before the Closing
complied with or were exempt from all applicable federal and state securities
laws and no stockholder has a right of rescission with respect thereto.
3.16 REGISTRATION RIGHTS. Except as set forth in EXHIBIT 3.16 and except
for the rights granted to the Purchaser and certain other parties pursuant to
the Amended and Restated Registration Rights Agreement, no Person has demand or
other rights to cause the Company to file any registration statement under the
Securities Act relating to any securities of the Company or any right to
participate in any such registration statement.
3.17 BOOKS AND RECORDS. The books of account, ledgers, order books, records
and documents of the Company accurately and completely reflect all material
information relating to the business of the Company, the location and collection
of its assets, and the nature of all transactions giving rise to the obligations
or accounts receivable of the Company.
3.18 TITLE TO ASSETS; PATENTS.
(a) The Company has good and marketable title in fee to such of its
fixed assets, if any, as are real property, and good and marketable title to all
of its other assets and properties, free of any mortgages, pledges, charges,
liens, security interests or other encumbrances, except those occurring in the
ordinary course of business and those indicated on EXHIBIT 3.18(a). The Company
enjoys peaceful and undisturbed possession under all leases under which it is
operating, and all said leases are valid and subsisting and in full force and
effect.
(b) The Company does not know of any claim, previously asserted,
pending, threatened or which may otherwise be asserted ("CLAIM") that would
interfere with, or adversely impact upon, the Company's unencumbered right to
use, make, sell, license, distribute, promote, apply, develop and make
derivative works of ("USE"), the patents, patent rights, permits, licenses,
trade secrets, trademarks (registered or unregistered), trademark rights, trade
names, trade name rights, franchises, copyrights (registered or unregistered),
inventions (regardless of whether patentable or not), software, confidential
information, innovations and other intellectual property rights being used to
conduct its business as now operated and as now proposed to be operated, or in
the development, manufacture, use, distribution or licensing of the Company's
proprietary technology, information, products, processes, or services
(collectively, the "INTELLECTUAL PROPERTY RIGHTS") (a list of all patents,
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trademarks, trade names, permits, and licenses Used by the Company is attached
hereto as EXHIBIT 3.18(b)); and the Company does not have any reason to believe
that the Use of the Intellectual Property Rights infringes, conflicts or will
conflict with valid rights of any other Person. No claim is known by the Company
to be pending or threatened to the effect that, and the Company has no reason to
believe that, any such Intellectual Property Right is invalid or unenforceable
by the Company or its licensor. The Company has taken all reasonable and
customary actions to maintain and protect its Intellectual Property Rights.
Except as set forth in EXHIBIT 3.18(c), the Company has no obligation known by
the Company to compensate any Person for the use of any such Intellectual
Property Rights, and the Company has not granted any Person any license or other
rights to use in any manner any of the Intellectual Property Rights of the
Company, whether requiring the payment of royalties or not.
3.19 THE YEAR 2000. Each item of hardware, software, or processor based
system and/or any combination thereof, developed, manufactured, distributed,
licensed or delivered, by the Company (collectively, the "System"), shall in all
material respects be able to correctly function, operate, process data or
perform date related calculations, including, but not limited to, calculating,
comparing and sequencing, from, into and between the years 1999 and 2000,
accurately process, provide and/or receive date data, including leap year
calculations, into and between the years 1999, 2000 and beyond, shall otherwise
function as per the specifications thereof both before, during and following
January 1, 2000. Neither performance nor functionality of the System shall be
affected by dates prior to, during and after January 1, 2000. A System
containing or calling on a calendar function including, without limitation, any
function indexed to the CPU clock, and any function providing specific dates or
days, or calculating spans of dates or days shall record, store, process,
provide and, where appropriate, insert, true and accurate dates and calculations
for dates and spans, before, during and following January 1, 2000. The System
shall have no lesser functionality or operability with respect to records
containing dates, before, during or after January 1, 2000 than heretofore with
respect to dates prior to January 1, 2000.
3.20 FINANCIAL STATEMENTS. Attached hereto as EXHIBIT 3.20 are copies of
the unaudited balance sheets of the Company as of December 31, 1998 and June 30,
1999, the statements of income and retained earnings of the Company for the
period ended December 31, 1998 and for the six months ended June 30, 1999, and
the statements of cash flows of the Company for the period ended December 31,
1998 and for the six months ended June 30, 1999 (the "FINANCIAL STATEMENTS").
Each of the Financial Statements was prepared in good faith, is complete and
correct in all material respects, has been prepared in accordance with generally
accepted accounting principles and in conformity with the practices consistently
applied by the Company and presents fairly the financial position, results of
operations and cash flows of the Company as of the dates and for the periods
indicated.
3.21 CHANGES. Except as set forth in EXHIBIT 3.21, since June 30, 1999,
there has not been:
(a) any adverse change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
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(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results or business of the Company;
(c) any waiver by the Company of any valuable right or of a debt owed
to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the assets, properties, financial
condition, operating results or business of the Company;
(e) any change or amendment to a material contract or arrangement by
which the Company or any of its assets or properties is bound or subject;
(f) any change in any compensation arrangement or agreement with any
employee;
(g) any sale, assignment or transfer of any patents or patent
applications, trademarks or trademark applications, service marks, trade names,
corporate names, copyrights or copyright registrations, trade secrets or other
intangible assets, or disclosure of any proprietary information to any person;
(h) any resignation or termination of employment of any key officer
of the Company; and the Company, to the best of its knowledge, does not know of
the impending resignation or termination of employment of any such officer;
(i) any declaration, payment, setting aside or other distribution of
cash or other property to its holders with respect to its capital stock or other
equity securities (including without limitation any warrants, options or other
rights to acquire its capital stock or other equity securities;
(j) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its properties or assets,
except liens for taxes not yet due or payable;
(k) receipt of notice that there has been a loss of, or order
cancellation by, any major customer of the Company;
(l) made any charitable contributions or pledges;
(m) make capital expenditures or commitments (other than with respect
to the deployment of servers) therefor that aggregate in excess of $100,000;
(n) make any loans or advances to, guarantees for the benefit of, or
any investments in, any person (including but not limited to any of the
Company's employees, officers or directors, or any members of their immediate
families), corporation, partnership, joint venture or other entity;
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(o) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
assets, properties, financial condition, operating results or business of the
Company; or any agreement or commitment by the Company to do any of the things
described in this Section 3.21.
3.22 NO UNDISCLOSED LIABILITIES. Except as set forth on EXHIBIT 3.22, the
Company has no liabilities (whether accrued, absolute, contingent or otherwise,
and whether due or to become due or asserted or unasserted), except (a)
obligations under contracts described in EXHIBIT 3.07 or under contracts that
are not required to be disclosed thereon as a result of dollar thresholds
therein; (b) liabilities provided for in the Financial Statements (other than
liabilities which, in accordance with generally accepted accounting principles,
need not be disclosed); (c) liabilities (other than accounts payable) incurred
since the Financial Statements, in the ordinary course of business consistent
with past practice, the sum of which is, in the aggregate, no greater than
$300,000; and (d) accounts payable in excess of those shown on the Financial
Statements, incurred in the ordinary course of business consistent with past
practice, the sum of which is, in the aggregate, not greater than $300,000.
3.23 TECHNOLOGY. Except as set forth in EXHIBIT 3.23, the proprietary
technology, information, products, processes and services and other proprietary
know-how owned or used by the Company were completely developed by the Company's
full-time employees only; the concepts, inventions and original works of
authorship owned or used by the Company were developed or conceived by employees
within the scope of their employment by the Company and are connected with
Company's underlying proprietary products, processes and technology. No
independent contractors or consultants were used or employed by the Company in
the development of proprietary technology and other proprietary know-how owned
or used by the Company.
3.24 PERMITS. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business, and the Company
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses or any other similar authority.
3.25 ENVIRONMENTAL AND SAFETY LAWS. The Company, the operation of its
business and any real property that the Company owns or has owned, leases or has
leased or otherwise occupies or uses or has occupied or used (the "Premises")
are, to the best of the Company's knowledge, in compliance with all applicable
Environmental Laws (as defined below) and orders or directives of any
governmental authorities having jurisdiction over such Environmental Laws. The
Company has not received any citation, directive, letter or other communication,
written or oral, or any notice of any proceeding, claim or lawsuit, from any
person arising out of the ownership or occupation of the Premises, or the
conduct of its operations, and the Company is not aware of any basis therefor.
To the best of the Company's knowledge, no material expenditures are or will be
required in order to comply with any Environmental Laws. For purposes of this
Agreement, the term "Environmental Laws" shall mean any Federal, state, local or
foreign law, ordinance, rule, regulation, permit and authorization pertaining to
the protection of human health or the environment.
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3.26 CORPORATE DOCUMENTS; MINUTE BOOKS. Except for amendments necessary to
satisfy representations and warranties or conditions contained herein (the forms
of which amendments have been approved by the Purchaser or its counsel), the
Company's Certificate of Incorporation, as amended, and By-laws, as amended, are
in the forms previously provided to counsel to the Purchaser. The minute books
of the Company provided to the Purchaser or its counsel contain a summary of all
meetings of directors and stockholders since the time of incorporation and
reflect all transactions referred to in such minutes accurately in all material
respects.
3.27 LABOR AGREEMENTS AND ACTIONS. Except as set forth in EXHIBIT 3.27, the
Company is not aware that any officer or key employee, or that any group of
employees of the Company, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. The employment of each officer and employee
of the Company is terminable at the will of the Company. The Company has
complied in all material respects with all applicable state and federal equal
employment opportunity and other laws related to employment (including without
limitation provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes), and
the Company is not aware that it has any labor relations problems (including
without limitation any union organization activities, threatened or actual
strikes or work stoppages or material grievances). The Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union.
3.28 SERIES E AGREEMENT. True and correct copies of the Series E
Convertible Preferred Stock Purchase Agreement between the Company and Cisco
Systems, Inc. (the "Series E Agreement") have been provided to the Purchaser,
and (i) the Series E Agreement, together with the Third Amended and Restated
Registration Rights and the Third Amended and Restated Stockholders' Agreement
are the only agreements between the Company and Cisco Systems, Inc. relating to
the Company's securities (including derivative securities), and (ii) the terms
and conditions of this Agreement are identical in all material respects with the
Series E Agreement except as otherwise set forth in Exhibit 3.28.
ARTICLE IV
COVENANTS OF THE COMPANY
4.01 AFFIRMATIVE COVENANTS OF THE COMPANY OTHER THAN REPORTING
REQUIREMENTS. Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that until the consummation of a Qualified Public
Offering, it will perform and observe the following covenants and provisions,
and will cause each Subsidiary, if and when such Subsidiary exists, to perform
and observe such of the following covenants and provisions as are applicable to
such Subsidiary:
(a) PAYMENT OF TAXES AND TRADE DEBT. Pay and discharge, and cause
each Subsidiary to pay and discharge, all taxes, assessments and governmental
charges or levies imposed upon it or upon its income, profits or business, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid,
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might become a lien or charge upon any properties of the Company or any
Subsidiary, provided that neither the Company nor any Subsidiary shall be
required to pay any such tax, assessment, charge, levy or claim which is being
contested in good faith and by appropriate proceedings if the Company or any
Subsidiary shall have set aside on its books sufficient reserves, if any, with
respect thereto. Pay and cause each Subsidiary to pay, when due, or in
conformity with customary trade terms, all lease obligations, all trade debt,
and all other Indebtedness incident to the operations of the Company or its
Subsidiaries, except such as are being contested in good faith and by proper
proceedings if the Company or Subsidiary concerned shall have set aside on its
books sufficient reserves, if any, with respect thereto.
(b) MAINTENANCE OF INSURANCE. Obtain and maintain from reputable
insurance companies or associations a term life insurance policy on the lives of
each of F. Thomson Leighton and Daniel Lewin the face amount equal to $2,000,000
each (so long as each remains an employee of the Company), which proceeds will
be payable to the order of the Company, and maintain insurance with a reputable
insurance company or association in such amount and covering such risks as is
customary coverage covering its properties and businesses customarily carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or any Subsidiary operates for the type
and scope of its properties and businesses and maintain, and cause each
Subsidiary to maintain, such insurance. The Company will not cause or permit any
assignment of the proceeds of the life insurance policies specified in the first
sentence of this paragraph and will not borrow against such policies.
(c) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain, and,
unless the Company deems it not to be in its best interests, cause each
Subsidiary to preserve and maintain, its corporate existence, rights, franchises
and privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each Subsidiary to qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
or lease of its properties. Use commercially reasonable best efforts to secure,
preserve and maintain, and cause each Subsidiary to use commercially reasonable
best efforts to secure, preserve and maintain, all licenses and other rights to
use patents, processes, licenses, permits, trademarks, trade names, inventions,
intellectual property rights or copyrights owned or possessed by it and deemed
by the Company to be material to the conduct of its business or the business of
any Subsidiary.
(d) COMPLIANCE WITH LAWS. Comply, and cause each Subsidiary to
comply, with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, where noncompliance would have a Material
Adverse Effect.
(e) INSPECTION. Permit, upon reasonable request and notice to the
President of the Company, the Purchaser (provided the Purchaser holds at least
35,000 shares of the outstanding Preferred Shares (as equitably adjusted for
stock splits, stock dividends and the like)) or any authorized agents or
representatives thereof to examine and make copies of and extracts from the
financial and employment records and books of the Company, to visit and inspect
the properties of the Company and any Subsidiary, to discuss the finances and
other matters of the Company and any Subsidiary not related to the Company's
customers, licensees, licensors, strategic partners and suppliers with any of
its officers, directors or Key Employees
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and independent accountants, and to consult with and advise the management of
the Company and any Subsidiary as to their finances and other matters not
related to the Company's customers, licensees, licensors, strategic partners and
suppliers, all at reasonable times and upon reasonable notice to the President
of the Company. The Purchaser agrees that it will maintain the confidentiality
of any information so obtained by it which is not otherwise available from other
sources.
(f) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep, and cause each
Subsidiary to keep, adequate records and books of account in which complete
entries will be made in accordance with generally accepted accounting principles
consistently applied, reflecting all financial transactions of the Company and
any Subsidiary, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, returns of merchandise, obsolescence, amortization,
taxes, bad debts and other purposes in connection with its business shall be
made.
(g) MAINTENANCE OF PROPERTIES; MATERIAL ASSETS. Use commercially
reasonable best efforts to maintain and preserve, and cause each Subsidiary to
use commercially reasonable best efforts to maintain and preserve, all of its
properties and assets, necessary for the proper conduct of its business, in good
repair, working order and condition, ordinary wear and tear excepted, including,
without limitation, the maintenance and preservation of any material patents,
licenses, permits or agreements being used by the Company in its business as now
operated and as now proposed to be operated.
(h) COMPLIANCE WITH ERISA. Comply, and cause each Subsidiary to
comply, with all minimum funding requirements applicable to any pension,
employee benefit plans or employee contribution plans which are subject to ERISA
or to the Internal Revenue Code of 1986, as amended (the "CODE"), and comply,
and cause each Subsidiary to comply, in all other material respects with the
provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any Subsidiary
will permit any event or condition to exist which could permit any such plan to
be terminated under circumstances which would cause the lien provided for in
Section 4068 of ERISA to attach to the assets of the Company or any Subsidiary.
(i) PUBLIC ANNOUNCEMENTS. Subject to applicable laws that may require
disclosure by the Company, any public announcements by the Company relating to
this Series F Preferred Stock financing shall be mutually agreed upon by the
Company and the Purchaser.
4.02 NEGATIVE COVENANTS OF THE COMPANY. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that, for so
long as at least 50% of the shares of Series F Preferred Stock which were issued
pursuant to this Agreement remain outstanding, it will comply with and observe
the following covenants and provisions, and will cause each Subsidiary, if and
when such Subsidiary exists, to comply with and observe such of the following
covenants and provisions as are applicable to such Subsidiary, and will not,
without the consent of at least 50% in interest of the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred Stock, voting
together as a single class on a Common Stock equivalent basis:
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(a) RESTRICTIONS ON INDEBTEDNESS. Create, incur, assume or suffer to
exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any
liability with respect to any Indebtedness for money borrowed except the
following:
(i) Indebtedness for money borrowed by the Company, not to
exceed, in the aggregate, $25,000,000; and
(ii) Indebtedness of the Company in respect of Capital
Expenditures subject to Section 4.02(i) herein.
(b) MERGER OR SALE. Merge with or into any other entity (except a
merger with a Subsidiary or a consolidation or merger in which the Company is
the surviving Company and the holders of Company voting stock outstanding
immediately prior to the transaction constitute a majority of the holders of
voting stock outstanding immediately following the transaction or a
consolidation or merger pursuant to which the aggregate consideration
definitively and unconditionally payable to all of the stockholders of the
Company is greater than $1.2 billion), sell to any person or entity any assets
constituting all or substantially all of the assets of the Company, or agree to
do or permit any Subsidiary to do any of the foregoing (unless the aggregate
consideration definitively and unconditionally payable to the Company or all of
the stockholders as a result of any such transaction is greater than $1.2
billion).
(c) ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS.
Assume, guarantee, endorse or otherwise become directly or contingently liable
on, or permit any Subsidiary to assume, guarantee, endorse or otherwise become
directly or contingently liable on (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss) any Indebtedness of any other Person, except
for guaranties by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business, and except for the guaranties of
the permitted obligations of any wholly-owned Subsidiary.
(d) DISTRIBUTIONS. Declare or pay any dividends, purchase, redeem,
retire, or otherwise acquire for value any of its capital stock (or rights,
options or warrants to purchase such shares) now or hereafter outstanding,
return any capital to its stockholders as such, or make any distribution of
assets to its stockholders as such, or permit any Subsidiary to do any of the
foregoing (such transactions being hereinafter referred to as "DISTRIBUTIONS"),
EXCEPT that any such Subsidiary may declare and make payment of cash and stock
dividends, return capital and make distributions of assets to the Company, and
EXCEPT as specifically provided for in the Company's Certificate of
Incorporation or the Series F Certificate of Designation; PROVIDED, HOWEVER,
that nothing herein contained shall prevent the Company from:
(i) effecting a stock split (except for a reverse stock split)
or declaring or paying any dividend consisting of shares of any class of capital
stock to the holders of shares of such class of capital stock, or
(ii) redeeming any stock of a deceased stockholder out of
insurance held by the Company on that stockholder's life, or
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(iii) repurchasing the shares of Common Stock at the original
cost thereof (in accordance with stock restriction and right of first refusal
agreements or similar agreements) held by officers, employees, directors or
consultants of the Company which are subject to restrictive stock purchase
agreements under which the Company has the option to repurchase such shares upon
the occurrence of certain events, including the termination of employment, if in
the case of any such transaction the payment can be made in compliance with the
other terms of this Agreement.
(e) CHANGE IN NATURE OF BUSINESS. Make or permit any Subsidiary to
make any material change in the nature of its business as contemplated in
written materials delivered to the Purchaser prior to the date hereof.
(f) OWNERSHIP OF SUBSIDIARIES. Purchase or hold beneficially any
stock, other securities or evidences of Indebtedness in, or make any investment
in any other Person, excluding a wholly-owned subsidiary of the Company.
(g) ISSUANCE OF RESERVED EMPLOYEE SHARES. Grant to any of its
employees awards, options or other rights to purchase Reserved Employee Shares
unless authorized by vote of a majority of the Board of Directors which shall
include at least two members designated by holders of Preferred Stock of the
Company.
(h) DEALINGS WITH AFFILIATES AND OTHERS. Other than as contemplated
by this Agreement, and other than transactions in the ordinary course of
business involving less than $50,000, enter into any transaction, including,
without limitation, any loans or extensions of credit or royalty agreements,
with any officer or director of the Company or any Subsidiary or holder of any
class of capital stock of the Company, or any member of their respective
immediate families or any corporation or other entity directly or indirectly
affiliated with one or more of such officers, directors or stockholders or
members of their immediate families unless such transaction is approved in
advance by a majority of disinterested members of the Board of Directors, or
absent such Board of Directors approval, by the Purchaser.
(i) CAPITAL EXPENDITURES. Incur any Capital Expenditures in any
fiscal year in excess of the agreed upon budget therefor.
4.03 REPORTING REQUIREMENTS. For as long as at least 35,000 of the
Preferred Shares remain outstanding (as equitably adjusted for stock splits,
stock dividends and the like), the Company will furnish the Purchaser:
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(a) MONTHLY REPORTS: as soon as available and in any event within 30
days after the end of each calendar month, unaudited consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the end
of such month and consolidated and consolidating statements of income and
retained earnings of the Company and its Subsidiaries for such month and for the
period commencing at the end of the previous fiscal year and ending with the end
of such month, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, and including
comparisons to monthly budgets, a cash flow analysis for such month, a schedule
showing each expenditure of a capital nature during such month, and a summary
discussion of the Company's principal functional areas, all in reasonable detail
and duly certified (subject to year-end audit adjustments) by the chief
financial officer of the Company as having been prepared in accordance with
generally accepted accounting principles consistently applied;
(b) QUARTERLY REPORTS: as soon as available and in any event within
45 days after the end of each of the first three quarters of each fiscal year of
the Company, unaudited consolidated balance sheets of the Company and its
Subsidiaries as of the end of such quarter and consolidated statements of income
and cash flows of the Company and its Subsidiaries for such quarter and for the
period commencing at the end of the previous fiscal year and ending with the end
of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
and including comparisons to quarterly budgets and a summary discussion of the
Company's principal functional areas, all in reasonable detail and duly
certified (subject to year-end audit adjustments) by the chief financial officer
of the Company as having been prepared in accordance with generally accepted
accounting principles consistently applied;
(c) ANNUAL REPORTS: as soon as available and in any event within 120
days after the end of each fiscal year of the Company, a copy of the annual
audit report for such year for the Company and its Subsidiaries, including
therein consolidated balance sheets of the Company and its Subsidiaries as of
the end of such fiscal year and consolidated statements of income of the Company
and its Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all
such consolidated statements to be duly certified by the chief financial officer
of the Company and by such independent public accountants of recognized national
standing approved by a majority of the Board of Directors;
(d) BUDGETS FOR THE FORTHCOMING FISCAL YEAR: as soon as available
after approval by the Board of Directors;
(e) NOTICE OF ADVERSE CHANGES: promptly after the occurrence thereof
and in any event within 10 days after each occurrence, notice of any material
adverse change in the operations or financial condition of the Company or any
material default in any other material agreement to which the Company is a
party;
(f) WRITTEN REPORTS: promptly upon receipt or publication thereof,
any written reports submitted to the Company by independent public accountants
in connection with an annual or interim audit of the books of the Company and
its Subsidiaries made by such accountants or by consultants or other experts in
connection with such consultant's or
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other expert's review of the Company's operations or industry, and written
reports prepared by the Company to comply with other investment or loan
agreements;
(g) NOTICE OF PROCEEDINGS: promptly after the commencement thereof,
notice of all material actions, suits and proceedings of the type described in
Section 3.04 before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, affecting the Company or
any Subsidiary; and
(h) STOCKHOLDERS' AND COMMISSION REPORTS: promptly upon sending,
making available, or filing the same, such reports and financial statements as
the Company or any Subsidiary shall send or make available to the stockholders
of the Company or file with the Commission.
ARTICLE V
DEFINITIONS AND ACCOUNTING TERMS
5.01 CERTAIN DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"AGREEMENT" means this Series F Convertible Preferred Stock Purchase
Agreement as from time to time amended and in effect between the parties,
including all Exhibits hereto.
"BOARD OF DIRECTORS" means the board of directors of the Company as
constituted from time to time.
"CAPITAL EXPENDITURES" for any period shall mean all amounts debited or
required to be debited to the fixed asset accounts on the balance sheet of the
Company during such period in accordance with generally accepted accounting
principles in respect of (a) the acquisition, construction, improvement,
replacement or betterment of land, buildings, machinery, equipment or of any
other fixed assets or leaseholds, and (b) to the extent related to and not
included in (a) above, materials, contract labor and direct labor (excluding
expenditures properly chargeable to repairs or maintenance in accordance with
generally accepted accounting principles).
"CLOSING" shall have the meaning attributable to it in Section 1.04 of this
Agreement.
"COMMISSION" means the Securities and Exchange Commission (or any other
federal agency administering the securities laws).
"COMMON STOCK" includes (a) the Company's Common Stock, par value $.01 per
share, as authorized on the date of this Agreement, (b) any other capital stock
of any class or classes (however designated) of the Company, authorized on or
after the date hereof, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies or in the absence of any
provision to the contrary in the
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Company's Certificate of Incorporation, be entitled to vote for the election of
a majority of directors of the Company (even though the right so to vote has
been suspended by the happening of such a contingency or provision), and (c) any
other securities into which or for which any of the securities described in (a)
or (b) may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
"COMPANY" means and shall include Akamai Technologies, Inc., a Delaware
corporation, and its successors and assigns.
"CONSOLIDATED" and "CONSOLIDATING" when used with reference to any term
defined herein mean that term as applied to the accounts of the Company and its
Subsidiaries consolidated in accordance with generally accepted accounting
principles.
"CONVERTED SHARES" shall have that meaning attributable to it in Section
1.02 of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FOUNDERS" shall mean F. Thomson Leighton, Daniel Lewin, Jonathan Seelig,
Randall Kaplan, Gilbert Friesen and David Karger.
"INDEBTEDNESS" means all obligations, contingent and otherwise, for
borrowed money which should, in accordance with generally accepted accounting
principles, be classified upon the obligor's balance sheet (or the notes
thereto) as liabilities, but in any event including liabilities secured by any
mortgage on property owned or acquired subject to such mortgage, whether or not
the liability secured thereby shall have been assumed, and also including (a)
all guaranties, endorsements and other contingent obligations, in respect of
Indebtedness of others, whether or not the same are or should be so reflected in
said balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and (b) the present value of any lease payments due
under leases required to be capitalized in accordance with applicable Statements
of Financial Accounting Standards, determined by discounting all such payments
at the interest rate determined in accordance with applicable Statements of
Financial Accounting Standards.
"KEY EMPLOYEE" means and includes any Founder, the President, chief
executive officer, chief financial officer, chief operating officer, vice
president of operations, research, development, sales or marketing, or any other
individual who performs a significant role in the operations of the Company or a
Subsidiary as may be reasonably designated by the Board of Directors.
"PERSON" means an individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"PREFERRED SHARES" shall have the meaning attributable to it in Section
1.01 of this Agreement.
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"PREFERRED STOCK" means the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the
Series E Preferred Stock and the Series F Preferred Stock.
"PURCHASER" shall have that meaning attributable to it in Section 1.01 of
this Agreement.
"QUALIFIED PUBLIC OFFERING" means a fully underwritten, firm commitment
public offering pursuant to an effective registration under the Securities Act
covering the offer and sale by the Company of its Common Stock in which (i) the
aggregate gross proceeds from such offering to the Company shall be at least
$20,000,000 and (ii) the price paid by the public for such shares shall be at
least (x) 2.0 times the then Series B Conversion Price if the public offering
occurs prior to October 16, 2000, or (y) 3.0 times the then Series B Conversion
Price if the public offering occurs on or after October 16, 2000.
"RESERVED EMPLOYEE SHARES" means shares of Common Stock, not to exceed in
the aggregate 28,755,600 shares (appropriately adjusted to reflect stock splits,
stock dividends, combinations of shares and the like with respect to the Common
Stock and subject to the provisions of the Section 4.02(g) hereof), reserved by
the Company for issuance pursuant to the Company's 1998 Stock Incentive Plan,
PROVIDED that such number may be increased by up to 15,118,452 additional shares
of Common Stock (the "FOUNDERS' SHARES") (appropriately adjusted to reflect
stock splits, stock dividends, combinations of shares and the like with respect
to the Common Stock and subject to the provisions of the Section 4.02(g) hereof
and INCLUDING 4,264,200 shares previously issued or subject to options prior to
the date hereof) held by the Founders upon the repurchase of such Founders
Shares by the Company from the Founders pursuant to contractual rights held by
the Company. The foregoing numbers of Reserved Employee Shares may be increased
by the affirmative vote or written consent of a majority of the directors
elected solely by the holders of Series A Preferred Stock and Series B Preferred
Stock or the affirmative vote or written consent of the holders of at least 50%
of the then outstanding shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock, voting together as a single class on a
Common Stock equivalent basis.
"SECURITIES ACT" means the Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
"SERIES B CONVERSION PRICE" shall have the meaning attributable to it in
the Series B Certificate of Designation.
"SERIES A PREFERRED STOCK" means the Series A Convertible Preferred Stock
of the Company, par value $.01 per share.
"SERIES B PREFERRED STOCK" means the Series B Convertible Preferred Stock
of the Company, par value $.01 per share.
"SERIES C PREFERRED STOCK" means the Series C Convertible Preferred Stock
of the Company, par value $.01 per share.
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"SERIES D PREFERRED STOCK" means the Series D Convertible Preferred Stock
of the Company, par value $.01 per share.
"SERIES E PREFERRED STOCK" means the Series E Convertible Preferred Stock
of the Company, par value $.01 per share.
"SERIES F PREFERRED STOCK" means the Series F Convertible Preferred Stock
of the Company, par value $.01 per share, having the rights, powers, privileges
and preferences set forth in Exhibit 1.01 hereto.
"SHARES" shall have that meaning attributable to it in Section 1.03 of this
Agreement.
"SUBSIDIARY" or "SUBSIDIARIES" means any corporation, partnership, trust or
other entity of which the Company and/or any of its other Subsidiaries (as
herein defined) directly or indirectly owns at the time a majority of the
outstanding shares of every class of equity securities of such corporation,
partnership, trust or other entity.
5.02 ACCOUNTING TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting principles
consistently applied, and all financial data submitted pursuant to this
Agreement shall be prepared in accordance with such principles.
5.03 KNOWLEDGE. All references to the knowledge or awareness of the Company
shall mean the knowledge of any director or Key Employee of the Company.
ARTICLE VI
MISCELLANEOUS
6.01 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of any
party to this Agreement in exercising any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
6.02 AMENDMENTS, WAIVERS AND CONSENTS. Any provision in this Agreement to
the contrary notwithstanding, and except as hereinafter provided changes in or
additions to this Agreement may be made, and compliance with any covenant or
provision set forth herein may be omitted or waived, if the Company (i) shall
obtain consent thereto in writing from the holder or holders of at least 60% of
the then outstanding shares of Series E Preferred Stock, and (ii) shall deliver
copies of such consent in writing to any holders who did not execute such
consent; PROVIDED, HOWEVER, that any provision set forth in Section 4.02 of this
Agreement may be amended or waived with the written consent of more than 50% in
interest of the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and
Series F Preferred Stock, voting together as a single class on a Common Stock
equivalent basis. Notwithstanding the foregoing proviso, no amendment or waiver
approved in accordance herewith shall be effective if and to the extent such
amendment or waiver treats the holders of any series of preferred stock of the
Company differently than the
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holders of any other series of preferred stock of the Company, unless the
written consent of a majority of such series shall have been obtained. Any
waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
6.03 ADDRESSES FOR NOTICES. All notices, requests, demands and other
communications provided for hereunder shall be in writing and mailed, faxed or
delivered to each applicable party at the address set forth below or at such
other address as to which such party may inform the other parties in writing in
compliance with the terms of this Section.
If to the Purchaser: at One Microsoft Way, Redmond, Washington 98052-6399,
Attention: General Counsel, Finance and Administration, or at such other address
as shall be designated by the Purchaser in a written notice to the Company
complying as to delivery with the terms of this Section 6.03.
If to the Company: at the address set forth on page 1 hereof, or at such
other address as shall be designated by the Company in a written notice to the
Purchaser complying as to delivery with the terms of this Section, with a copy
to: Hale and Dorr LLP, 60 State Street, Boston, MA 02109, Attention: John H.
Chory, Esq.
All such notices, requests, demands and other communications shall, when
mailed (which mailing must be accomplished by first class mail, postage prepaid;
express overnight courier service; or registered mail, return receipt requested)
or transmitted by facsimile, be effective three days after deposited in the
mails or upon transmission by facsimile, respectively, addressed as aforesaid,
unless otherwise provided herein.
6.04 COSTS, EXPENSES AND TAXES. The Company agrees to pay in connection
with the preparation, execution and delivery of this Agreement and the issuance
of the Preferred Shares, the reasonable out of pocket expenses of the Purchaser,
including legal, accounting and other expenses, up to a maximum of $20,000. The
Company shall pay any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of this Agreement, the
issuance of the Preferred Shares and the other instruments and documents to be
delivered hereunder or thereunder, and agrees to save the Purchaser harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes.
6.05 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Company and the Purchaser and their respective
heirs, successors and assigns, except that the Company shall not have the right
to delegate any of its respective obligations hereunder or to assign its
respective rights hereunder or any interest herein without the prior written
consent of the holders of at least a majority in interest of the Shares. Any
transfer of Shares by the Purchaser shall be in accordance with Section 1.05(a)
and shall be subject to the concurrent assumption by the transferee of all the
rights and obligations of the Purchaser hereunder. The rights and obligations of
the parties hereunder (including without limitation the rights and obligations
under Section 1.05) shall remain in effect indefinitely unless terminated in
accordance with their terms or upon written agreement of the Company and the
Purchaser.
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6.06 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in this Agreement, the Shares, or any other instrument or
document delivered in connection herewith or therewith, shall survive the
execution and delivery hereof or thereof.
6.07 PRIOR AGREEMENTS. This Agreement and the documents referred to herein
constitute the entire agreement between the parties and supersedes any prior
understandings or agreements concerning the purchase and sale of the Shares.
6.08 SEVERABILITY. The provisions of this Agreement and the terms of the
Series F Preferred Stock are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of a provision contained in this Agreement or the Series F Preferred Stock
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement or the terms of the
Series F Preferred Stock; but this Agreement and the terms of the Series F
Preferred Stock, shall be reformed and construed as if such invalid or illegal
or unenforceable provision, or part of a provision, had never been contained
herein, and such provisions or part reformed so that it would be valid, legal
and enforceable to the maximum extent possible.
6.09 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the General Corporation Law of the State of
Delaware as to matters within the scope thereof, and as to all other matters
shall be governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts.
6.10 HEADINGS. Article, Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
6.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.12 FURTHER ASSURANCES. From and after the date of this Agreement, upon
the request of the Purchaser or the Company, the Company and the Purchaser shall
execute and deliver such instruments, documents and other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement and the Shares.
6.13 INDEMNIFICATION.
(a) The Company shall, with respect to the representations,
warranties and agreements made by it herein, indemnify, defend and hold the
Purchaser harmless against all liability, loss or damage, together with all
reasonable costs and expenses related thereto (including legal and accounting
fees and expenses (collectively, "LOSSES" and individually, a "LOSS")), arising
from the untruth, inaccuracy or breach of any such representations, warranties
or agreements of the Company. Without limiting the generality of the foregoing,
the Purchaser shall be deemed to have suffered a Loss as a result of the
untruth, inaccuracy or breach of any such representations or warranties if a
Loss shall be suffered by the Company as a result of, or
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in connection with, such untruth, inaccuracy or breach of any facts or
circumstances constituting such untruth, inaccuracy or breach. To claim a Loss,
the Purchaser shall deliver to the Company a notice (the "LOSS NOTICE")
specifying in reasonable detail the nature and estimated amount of the Loss. A
determination as to the existence and amount of the Loss claimed in the Loss
Notice shall be made in accordance with Section 6.13(c) below. Any dispute
regarding a Loss shall be determined as set forth in Section 6.13(c) herein.
(b) The representations and warranties of the Company set forth in
this Agreement shall survive the Closing until September 20, 2001 and be of no
further force or effect as of such date, except that (i) the representations and
warranties set forth in Sections 3.13 and 3.18 shall survive the Closing until
September 20, 2000, and (ii) the representations and warranties set forth in
Section 3.15 shall survive the Closing forever and shall not terminate.
(c) Beginning 10 days after delivery of the Loss Notice, the Company
and the Purchaser shall attempt in good faith for 30 days to agree upon the
amount of the Loss claimed in the Loss Notice (the "LOSS AMOUNT") and the then
fair market value of one share of Series F Preferred Stock after giving effect
to the Loss (the "CURRENT SERIES F VALUE"). If no such agreement can be reached,
the Company and the Purchaser shall each promptly select an arbitrator and
thereafter the two arbitrators shall select a third arbitrator. The three
arbitrators shall thereafter determine, by majority vote and pursuant to the
then rules of the American Arbitration Association, the Loss Amount and the
Current Series F Value. Each of the arbitrators shall be a member in good
standing of the American Arbitration Association. The Company and the Purchaser
shall each be permitted to submit written positions and arguments to the
arbitrators concerning the matters at issue before the arbitrators. The fees and
expenses of the arbitrators shall be borne (i) 100% by the Company, if the Loss
Amount as determined by the arbitrators is greater than or equal to 50% of the
estimated amount of the Loss as set forth in the Loss Notice, or (ii) 100% by
the Purchaser submitting the Loss Notice, if the Loss Amount as determined by
the arbitrators is less than 50% of the estimated amount of the Loss as set
forth in the Loss Notice.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
THE COMPANY: AKAMAI TECHNOLOGIES, INC.
By: /s/ Paul Sagan
------------------------------
Paul Sagan
President
PURCHASER:
MICROSOFT CORPORATION
By: /s/ Gregory Maffei
------------------------------
Name: Gregory Maffei
Title: Chief Financial Officer
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Amendment No. 1 to this Registration
Statement on Form S-1 (No. 333-85679) of our report dated August 10, 1999,
except as to the stock split described in Note 8 which is as of September 8,
1999, relating to the financial statements of Akamai Technologies, Inc. which
appear in such Registration Statement. We also consent to the reference to us
under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
September 24, 1999
