<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1999
REGISTRATION NO. 333-85679
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 6
TO
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
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:
<TABLE>
<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>
------------------------
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value per
share................................ 9,200,000 $22.00 $202,400,000 (3)
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</TABLE>
(1) Includes 1,200,000 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) Previously paid.
------------------------
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 October , 1999
8,000,000 Shares
[AKAMAI LOGO]
COMMON STOCK
------------------------
AKAMAI TECHNOLOGIES, INC. IS OFFERING 8,000,000 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 $21
AND $23 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 7.
------------------------
PRICE $ A SHARE
------------------------
<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
1,200,000 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
PAGE
----
PROSPECTUS SUMMARY..................... 3
RISK FACTORS........................... 7
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS........................... 17
USE OF PROCEEDS........................ 18
DIVIDEND POLICY........................ 18
CAPITALIZATION......................... 19
DILUTION............................... 20
SELECTED FINANCIAL DATA................ 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................... 22
PAGE
----
BUSINESS............................... 26
MANAGEMENT............................. 38
RELATED PARTY TRANSACTIONS............. 43
PRINCIPAL STOCKHOLDERS................. 46
DESCRIPTION OF CAPITAL STOCK........... 48
SHARES ELIGIBLE FOR FUTURE SALE........ 50
UNDERWRITERS........................... 52
LEGAL MATTERS.......................... 54
EXPERTS................................ 54
WHERE YOU CAN FIND MORE INFORMATION.... 54
INDEX TO FINANCIAL STATEMENTS.......... F-1
------------------------
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, video and audio streaming 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 October 5, 1999, we had 1,475 Akamai
servers deployed in 24 countries across 55 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.
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3
<PAGE> 6
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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 31.
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4
<PAGE> 7
THE OFFERING
Common stock offered................ 8,000,000 shares
Common stock to be outstanding after
this offering....................... 90,441,851 shares
Use of proceeds..................... For working capital and general
corporate purposes. For more detailed
information, see "Use of Proceeds" on
page 18.
Proposed Nasdaq National Market
symbol.............................. AKAM
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(AUGUST 20, 1998) THROUGH NINE MONTHS ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
------------------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.............................................. $ -- $ 1,287
Total operating expenses............................. 900 29,601
Operating loss....................................... (900) (28,314)
Net loss............................................. (890) (28,324)
Net loss attributable to common stockholders......... (890) (29,969)
Basic and diluted net loss per share................. $ (0.06) $ (1.47)
Weighted average common shares outstanding........... 15,015 20,445
Pro forma basic and diluted net loss per share....... $ (0.05) $ (0.59)
Pro forma weighted average common shares
outstanding........................................ 19,262 48,369
</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 September 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 September 30,
1999 into common stock upon the closing of this offering and the sale of the
8,000,000 shares of common stock in this offering at an assumed initial public
offering price of $22.00, after deducting the estimated underwriting discounts
and commissions and estimated offering expenses payable by us. Total
stockholders' equity could change as a result of potential redeemable common
stock as described in "Risk Factors -- There is a substantial likelihood that
some shares in this offering have been offered or sold in violation of the
Securities Act of 1933 and therefore the purchaser of those shares may have the
right to recovery of the amount paid for those shares."
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
-------------------------
PRO FORMA
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 91,759 $254,289
Working capital............................................. 83,846 246,376
Total assets................................................ 109,947 272,477
Long-term liabilities....................................... 12,255 12,255
Convertible preferred stock................................. 106,233 --
Total stockholders' equity (deficit)........................ $(18,275) $250,488
</TABLE>
5
<PAGE> 8
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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
into an aggregate of 37,519,041 shares of common stock; and
- 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.
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.
- --------------------------------------------------------------------------------
6
<PAGE> 9
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. In addition, to the extent we
promote any portion of our technology as an industry standard by making it
readily available to users for little or no charge, we may not receive revenue
that might otherwise have been received by us.
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.
7
<PAGE> 10
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 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 October 5, 1999, our network consisted of
1,475 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.
8
<PAGE> 11
As competition in the Internet content delivery market continues to
intensify, new solutions will come to market. We are aware of other companies
that are focusing or may in the future focus 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.
We entered into a strategic alliance with Apple Computer effective as of
April 1, 1999. Sales of our service to Apple Computer represented approximately
45% of our revenue for the nine-month period ended September 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 effective as of
April 1, 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.
9
<PAGE> 12
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 and service
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 may now or in the future
promote or 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 September
30, 1999, we had an accumulated deficit of $29.3 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
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<PAGE> 13
expenses increase more than we expect or cannot be reduced in the event of lower
revenue, our business will be materially and adversely affected.
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.
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<PAGE> 14
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 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 227 on
September 30, 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
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<PAGE> 15
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.
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.
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<PAGE> 16
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 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
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<PAGE> 17
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 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 LITIGATION AGAINST
AKAMAI AND 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 in the public market 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.
Volatility in the market price of our common stock may prevent investors
from being able to sell their common stock at or above our initial public
offering price.
In the past, class action litigation has often been brought against
companies following periods of volatility in the market price of those
companies' common stock. We may become involved in this type of litigation in
the future. Litigation is often expensive and diverts management's attention and
resources which could materially adversely affect our business and results of
operations.
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.
THERE IS A SUBSTANTIAL LIKELIHOOD THAT SOME SHARES IN THIS OFFERING HAVE BEEN
OFFERED OR SOLD IN VIOLATION OF THE SECURITIES ACT OF 1933 AND THEREFORE THE
PURCHASER OF THOSE SHARES MAY HAVE THE RIGHT TO RECOVERY OF THE AMOUNT PAID FOR
THOSE SHARES.
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<PAGE> 18
In April 1999, prior to the filing of the registration statement covering
the shares of our common stock being sold in this offering, we entered into an
agreement with Baker Communications Fund, L.P. granting Baker an option to
purchase up to five percent of the shares of our common stock sold by us in our
initial public offering. There is a substantial likelihood that this agreement
constitutes an offer to purchase shares of common stock in a public offering
prior to the filing of a registration statement in violation of the requirements
of the Securities Act of 1933. We have requested that the underwriters reserve
for sale to Baker, at the initial public offering price, up to an aggregate of
400,000 shares of our common stock.
If a court determines that a violation of the Securities Act of 1933
occurred, Baker would have the right, for a period of one year from the date of
its purchase of common stock in this offering, to obtain recovery of the
consideration paid in connection with its purchase of common stock offered in
violation of the Securities Act of 1933 or, if Baker had already sold the stock,
sue us for damages resulting from its purchase of common stock. These damages
could total up to approximately $8.8 million plus interest, based on an initial
public offering price of $22.00 per share, if Baker seeks recovery or damages
after an entire loss of its investment. If this occurs, our business, results of
operations and financial condition will be harmed.
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
64.2% 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.
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;
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<PAGE> 19
- 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 continue to 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.
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.
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<PAGE> 20
USE OF PROCEEDS
We estimate that the net proceeds from our sale of the 8,000,000 shares of
common stock will be approximately $162.5 million, assuming an initial public
offering price of $22.00 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 $187.1 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> 21
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999.
The pro forma information gives effect to the conversion of all of our
outstanding convertible preferred stock outstanding as of September 30, 1999.
The pro forma as adjusted information reflects the issuance and sale of the
8,000,000 shares of common stock offered by us in this offering at an assumed
initial public offering price of $22.00 per share. Total stockholders' equity
could change as a result of potential redeemable common stock as described in
"Risk Factors--There is a substantial likelihood that some shares in this
offering have been offered or sold in violation of the Securities Act of 1933
and therefore the purchaser of those shares may have the right to recovery of
the amount paid for those shares." The outstanding share information excludes:
- 13,311,750 shares of common stock issuable upon exercise of options and
warrants outstanding as of September 30, 1999;
- 3,968,250 shares of common stock reserved for future issuance under our
1998 Stock Incentive Plan as of September 30, 1999; and
- 145,195 shares of Series C convertible preferred stock issuable upon
exercise of an outstanding option as of September 30, 1999, which are
convertible into 908,339 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 SEPTEMBER 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term liabilities....................................... $ 12,255 $ 12,255 $ 12,255
-------- -------- --------
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................................. 8,297 -- --
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................................. 20,610 -- --
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......................................... 12,748 -- --
Series E convertible preferred stock, $0.01 par value;
1,867,480 shares authorized, issued and outstanding
actual; none authorized, issued and outstanding pro forma
and pro forma as adjusted................................. 49,558 -- --
Series F convertible preferred stock, $0.01 par value;
985,545 shares authorized, issued and outstanding actual;
none authorized, issued and outstanding pro forma and pro
forma as adjusted......................................... 15,020 -- --
-------- -------- --------
Total convertible preferred stock.................. 106,233 -- --
-------- -------- --------
Stockholders' equity (deficit):
Common stock, $0.01 par value; 300,000,000 shares
authorized, 44,832,310 shares issued and outstanding,
actual; 82,351,851 shares issued and outstanding, on a pro
forma basis; 90,351,851 shares issued and outstanding, on
a pro forma as adjusted basis............................. 448 823 903
Additional paid-in capital.................................. 48,106 153,964 316,414
Note receivable from officers for stock..................... (5,723) (5,723) (5,723)
Deferred compensation....................................... (31,759) (31,759) (31,759)
Accumulated deficit......................................... (29,347) (29,347) (29,347)
-------- -------- --------
Total stockholders' equity (deficit)............... (18,275) 87,958 250,488
-------- -------- --------
Total capitalization............................... $100,213 $100,213 $262,743
======== ======== ========
</TABLE>
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DILUTION
Akamai's pro forma net tangible book value as of September 30, 1999, giving
effect to the conversion of all shares of convertible preferred stock
outstanding as of September 30, 1999 into common stock on the closing of this
offering, was approximately $87.5 million, or $1.06 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 82,351,851 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 $22.00
per share, Akamai's pro forma net tangible book value at September 30, 1999
would have been $250.0 million, or $2.77 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 $19.23 per share. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $22.00
Pro forma net tangible book value per share before this
offering............................................... $1.06
Increase in pro forma net tangible book value per share
attributable to new investors.......................... 1.71
-----
Pro forma net tangible book value per share after this
offering.................................................. 2.77
------
Dilution per share to new investors......................... $19.23
======
</TABLE>
The following table summarizes on a pro forma basis as of September 30,
1999, giving effect to the conversion of all shares of convertible preferred
stock outstanding as of September 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 $22.00 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................ 82,351,851 91.1% $111,443,048 38.8% $ 1.35
New investors........................ 8,000,000 8.9 176,000,000 61.2 22.00
---------- ----- ------------ -----
Total...................... 90,351,851 100.0% $287,443,048 100.0%
========== ===== ============ =====
</TABLE>
The tables above assume no exercise of stock options and warrants
outstanding at September 30, 1999. As of September 30, 1999, there were options
and warrants outstanding to purchase 14,220,089 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
$3.53 per share and 3,968,250 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 September 30,
1999, net tangible book value per share after this offering would be $2.87 and
total dilution per share to new investors would be $19.13. If the underwriters'
over-allotment option is exercised in full, the number of shares held by new
investors will increase to 9,200,000 shares, or 10.0% of the total number of
shares of common stock outstanding after this offering.
20
<PAGE> 23
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 are derived from audited financial statements included elsewhere in this
prospectus. The statement of operations data for the nine months ended September
30, 1999 and the balance sheet data as of September 30, 1999 are derived from
unaudited financial statements included elsewhere in this prospectus. Operating
results for the nine months ended September 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 NINE MONTHS ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
--------------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.................................................. $ -- $ 1,287
------ --------
Operating expenses:
Cost of service........................................ 31 4,533
Engineering and development............................ 228 5,374
Sales, general and administrative...................... 435 12,075
Equity related compensation............................ 206 7,619
------ --------
Total operating expenses....................... 900 29,601
------ --------
Operating loss........................................... (900) (28,314)
Interest income (expense), net........................... 10 (10)
------ --------
Net loss................................................. (890) (28,324)
Dividends and accretion to preferred stock redemption
value.................................................. -- (1,645)
------ --------
Net loss attributable to common stockholders............. $ (890) $(29,969)
====== ========
Basic and diluted net loss per share..................... $(0.06) $ (1.47)
Weighted average common shares outstanding............... 15,015 20,445
Pro forma basic and diluted net loss per share
(unaudited)............................................ $(0.05) $ (0.59)
Pro forma weighted average common shares outstanding
(unaudited)............................................ 19,262 48,369
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
-------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 91,759 $254,289
Working capital............................................. 83,846 246,376
Total assets................................................ 109,947 272,477
Long-term liabilities....................................... 12,255 12,255
Convertible preferred stock................................. 106,233 --
Total stockholders' equity (deficit)........................ $(18,275) $250,488
</TABLE>
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<PAGE> 24
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.
Akamai commenced operations in August 1998 and had no significant activity
for the quarter ended September 30, 1998. As a result, the financial statements
for the quarter ended September 30, 1998 have been omitted.
Since our inception, we have incurred significant losses, and as of
September 30, 1999, we had an accumulated deficit of $29.3 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. We entered into a
strategic alliance with Apple Computer effective as of April 1, 1999. For the
nine-month period ended September 30, 1999, Apple Computer accounted for 45% of
our revenue, Yahoo! accounted for 18% of our revenue, and Artisan Entertainment
accounted for 11% 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 Akamai accelerated networks 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.
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<PAGE> 25
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.
RESULTS OF OPERATIONS
PERIOD FROM INCEPTION (AUGUST 20, 1998) THROUGH DECEMBER 31, 1998 AND THE
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999
Revenue. We recorded no revenue for the period from inception (August 20,
1998) to December 31, 1998. Revenue was $1,287,145 for the nine months ended
September 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 $4.5 million
for the nine months ended September 30, 1999 and represented 15.3% of total
operating expenses for the nine months ended September 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 nine months ended September 30, 1999 were $5.4
million and represented 18.2% of total operating expenses for the nine months
ended September 30, 1999. Approximately $4.3 million of the 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 nine months ended
September 30, 1999 were $12.1 million and represented 40.8% of total operating
expenses for the period. Approximately $5.1 million of the increase was due to
sales, general and administrative personnel and payroll related expenses.
Approximately $3.1 million of the increase was attributable to advertising and
marketing campaigns.
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 September 30, 1999, deferred stock compensation, which is a
component of stockholders' equity, was $31.8 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
$9.8 million in 1999, $8.7 million in 2000, $8.7 million in 2001, $8.7 million
in 2002 and $3.5 million in 2003.
Interest Income (Expense), Net. Interest income (expense), net was $9,600
and $(10,624) for the period from inception (August 20, 1998) through December
31, 1998 and the nine months ended September 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 nine months ended September 30, 1999 due to the issuance of the
senior subordinated notes and borrowings for the purchase of equipment.
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 $120.0 million in net proceeds through September 30, 1999. We have
also financed our operations through borrowings on long-term debt agreements
23
<PAGE> 26
for the purchase of capital equipment in the amount of $1.5 million. At
September 30, 1999, cash, cash equivalents and short-term investments totaled
$92.0 million.
Cash provided by (used in) operating activities was $1,600 for the period
from inception (August 20, 1998) to December 31, 1998 and $(14.9) million for
the nine months ended September 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 $12.8 million for the nine
months ended September 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 $112.8 million for the
nine months ended September 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 September 30, 1999,
approximately $1.2 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 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
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<PAGE> 27
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 Statement of
Financial Accounting Standards ("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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<PAGE> 28
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 October 5, 1999, we had 1,475 Akamai
servers deployed in 24 countries across 55 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
26
<PAGE> 29
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, video and audio streaming 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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<PAGE> 30
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 1,475 servers deployed in 24 countries across 55 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 and Compatibility. 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 all types of
Web content and applications 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 introduced a program designed for the resale of our FreeFlow
service by qualified resellers such as major Internet hosting providers. 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 and Enhance 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 Akamai accelerated networks 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 enhancing 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 companies with an Internet focus, will help to create a competitive
advantage in our market.
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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
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. We also plan to actively participate in the
development and promotion of Internet industry standards.
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 and expand and enhance our global
network. To date, we have entered into three major strategic alliances.
Effective as of April 1, 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, network 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
SERVICES
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. FreeFlow service 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.
This FreeFlow service is backed by a 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;
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- 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.
We have recently begun to introduce a service that enables the delivery of
streaming audio and video over our network.
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.
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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.
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 and to expand and enhance our global network. 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
We entered into a strategic alliance with Apple Computer effective as of
April 1, 1999 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.
The term of our strategic alliance agreement with Apple extends through
April 1, 2001. We have agreed on the fees to be paid by Apple for our services
through the first 16 months of the agreement. Thereafter, we will negotiate with
Apple the fees for our services for the remainder of the term of the agreement.
Apple has agreed to pay to us minimum aggregate fees of $12.36 million under the
agreement. The minimum fees are based in part on Apple continuing to provide
QuickTime TV, which is a service to be provided by Apple for transmitting over
the Internet through computer networks owned or operated by Apple live streams
of Web content in QuickTime format. If Apple ceases to provide QuickTime TV for
any reason, the minimum fees to be paid by Apple under the agreement may, at
Apple's option, be adjusted to an amount equal to 50% of the amount of our
services purchased by Apple for QuickTime TV in the 12-month period immediately
preceding the date that Apple discontinued QuickTime TV. Minimum fees owed by
Apple will also be reduced by fees paid by third parties directly to us for
distribution of QuickTime TV.
Sales to Apple Computer were approximately $573,800, or 45% of revenue, for
the nine-month period ended September 30, 1999. We expect that sales to Apple
Computer will increase for the foreseeable future.
Apple purchased shares of our Series D convertible preferred stock for an
aggregate purchase price of approximately $12.5 million in June 1999.
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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.
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 has agreed to pay to us prepayment fees totaling $1,000,000 for
services that we will provide.
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 E-COMMERCE
About.com Furniture.com
Citysearch/Ticketmaster Gomez.com
GO Network and Infoseek Corp. HomePortfolio.com
Looksmart J.Crew.com
Monster.com Wrenchead.com
Yahoo! VerticalNet
Wine.com
MEDIA, ENTERTAINMENT & TECHNOLOGY
Apple Computer FINANCIAL SERVICES
Artisan Entertainment CCBN
CNN Interactive The Motley Fool
Discovery Channel Online
Hard Rock Hotel
The Washington Post
</TABLE>
Sales to these customers represented more than 90% of our revenue for the
six months ended June 30, 1999. As of October 12, 1999, we had 49 customers.
The following case studies illustrate how some of our customers are using
our service.
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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.
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 May 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 bandwidth 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 our reseller program and
other indirect distribution channels. As of September 30, 1999, we had 65
employees in our sales and distribution organization, of whom 19 are in direct
sales. 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
September 30, 1999, we had four employees in our partner program group and one
employee in our reseller 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 September 30, 1999, we had 22 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 September 30, 1999, we had seven employees in our customer
service and support organization and 12 employees in our account management
organization. We are seeking to hire
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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 September 30, 1999, we had 15 employees in our marketing
organization.
NETWORK DEPLOYMENT
As of October 5, 1999, our network was comprised of 1,475 servers in 24
countries across 55 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 Akamai accelerated networks
program. Under this program, we offer use of our servers to Internet service
providers. In exchange, we typically do not pay for rack space to house our
servers or bandwidth to deliver 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 and enhance our network by entering into
strategic relationships with network providers and 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. We are also seeking to expand our network through the development of
technology designed to facilitate communications between our global network of
servers and third-party caching systems. If this technology is successfully
developed, third-party caches could effectively function as additional servers
on our network. We have established relationships with cache vendors Cacheflow,
Cisco, InfoLibria, Network Appliance and Novell, to develop interfaces to
facilitate communications between their caching products and our network.
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.
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As of September 30, 1999, we had 64 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 to develop new services. From
our inception in August 1998 through September 30, 1999, our engineering and
development expenses were approximately $5.6 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.
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
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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.
EMPLOYEES
As of September 30, 1999, we had a total of 193 full-time employees and 34
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.
Our board of advisors includes:
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.
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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.
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.
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 30, 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......................... 54 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.
38
<PAGE> 41
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 was employed by BBN Corporation where he served as the Vice
President of Human Resources from March 1993 to October 1997.
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.
39
<PAGE> 42
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 acting Chief Technology Officer of the NetCache group at 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.
40
<PAGE> 43
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.
41
<PAGE> 44
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 for more than five months in a calendar
year; and
- Who have been employed by us for at least seven calendar days prior to
enrolling
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.
42
<PAGE> 45
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 46.
<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 30, 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
43
<PAGE> 46
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 30, 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>
------------------------
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
44
<PAGE> 47
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> 48
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of our common stock as of September 30, 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 41; 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% 11.1%
20 William Street
Wellesley, MA 02481
F. Thomson Leighton..................................... 9,609,750 11.7% 10.6%
Daniel M. Lewin......................................... 9,556,750 11.6% 10.6%
Baker Communications Fund, L.P.(2)...................... 7,418,471 8.9% 8.0%
c/o Baker Capital Partners, LLC
540 Madison Avenue
New York, NY 10022
George H. Conrades(3)................................... 6,557,402 8.0% 7.3%
Entities affiliated with Polaris Venture Management Co.
II, L.L.C.(4)......................................... 6,507,037 7.9% 7.2%
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% 11.1%
c/o Battery Ventures IV, L.P.
20 William Street
Wellesley, MA 02481
Terrance G. McGuire(7).................................. 6,507,037 7.9% 7.2%
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% 8.0%
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% 64.2%
</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.
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<PAGE> 49
(2) Includes 1,843,007 shares issuable upon the exercise of options and
warrants exercisable within 60 days after September 30, 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 30, 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 30, 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 30, 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 30,
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 30, 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 30, 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 30, 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 30, 1999.
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<PAGE> 50
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 30, 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 14,220,089 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 90,441,851 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
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<PAGE> 51
- 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.
49
<PAGE> 52
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 90,441,851 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 82,441,851 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 30, 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
15,114,900 shares of common stock issuable under our 1998 Stock Incentive Plan,
including the 11,236,650 shares of common stock subject to outstanding options
as of September 30, 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 agreed not to
consent to any offer for sale, sale or other disposition, or any transaction
which is designed or
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<PAGE> 53
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.
The underwriters intend to enter into similar lock-up agreements for up to
180 days with those individuals and entities who purchase approximately 89% of
the shares under our directed share program.
REGISTRATION RIGHTS
After this offering, the holders of approximately 68,463,019 shares of
common stock and the holders of warrants to purchase approximately 2,077,191
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.
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<PAGE> 54
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............................................. 8,000,000
=========
</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 1,200,000
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, at the initial
public offering price, up to an aggregate of 2,600,000 shares of common stock
offered in this offering under a directed share program. We currently expect
that 300,000 of these shares will be offered to directors, officers, employees,
business associates and related persons of Akamai, and that 1,900,000 of these
shares will be offered to Internet-related companies, including strategic
network, technology and content providers, with whom we have or may seek to
establish a business relationship. We currently expect the remaining 400,000
shares under the directed share program to be offered to 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> 55
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.
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<PAGE> 56
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 for the period from
inception (August 20, 1998) to December 31, 1998 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.
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<PAGE> 57
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-5
Statements of Convertible Preferred Stock and
Stockholders' Deficit.................................. F-6
Statements of Cash Flows.................................. F-7
Notes to Financial Statements............................. F-8
</TABLE>
F-1
<PAGE> 58
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Akamai Technologies, Inc.:
In our opinion, the accompanying balance sheet 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 the results of its
operations and its cash flows for the period from inception (August 20, 1998) to
December 31, 1998, 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 audit. We conducted our audit 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 audit provides 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> 59
AKAMAI TECHNOLOGIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1999
------------ ------------- -------------
(NOTE 2)
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 6,579,909 $ 91,758,732 $ 91,758,732
Short-term investments.................................... 224,880 224,880 224,880
Accounts receivable....................................... -- 553,804 553,804
Prepaid expenses and other current assets................. 56,589 1,043,858 1,043,858
----------- ------------ ------------
Total current assets............................... 6,861,378 93,581,274 93,581,274
Property and equipment, net (Note 4)........................ 1,522,980 12,793,579 12,793,579
Other assets................................................ -- 3,126,179 3,126,179
Intangible assets, net...................................... 481,282 446,391 446,391
----------- ------------ ------------
Total assets....................................... $ 8,865,640 $109,947,423 $109,947,423
=========== ============ ============
LIABILITIES, CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses..................... $ 665,483 $ 6,158,376 $ 6,158,376
Accrued payroll and benefits.............................. 27,514 2,192,317 2,192,317
Accrued interest.......................................... -- 904,110 904,110
Current portion of obligations under capital lease and
equipment loan.......................................... 12,350 480,309 480,309
----------- ------------ ------------
Total current liabilities.......................... 705,347 9,735,112 9,735,112
Obligations under capital leases and equipment loan, net of
current portion........................................... 24,859 838,041 838,041
Senior subordinated notes (Note 5).......................... -- 11,416,562 11,416,562
----------- ------------ ------------
Total long-term liabilities........................ 24,859 12,254,603 12,254,603
----------- ------------ ------------
Total liabilities.................................. 730,206 21,989,715 21,989,715
----------- ------------ ------------
Convertible preferred stock:
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 September 30, 1999,
no shares issued and outstanding pro forma September 30,
1999 (liquidation preference $8,360,000 at September 30,
1999)..................................................... 8,283,758 8,296,667 --
Series B convertible preferred stock; $0.01 par value;
1,327,500 shares authorized, 1,327,500 issued and
outstanding at September 30, 1999; no shares issued and
outstanding pro forma September 30, 1999 (liquidation
preference $20,723,407 at September 30, 1999)............. -- 20,609,708 --
Series C convertible preferred stock; $0.01 par value;
145,195 shares authorized, none issued and outstanding at
September 30, 1999; no shares issued and outstanding pro
forma September 30, 1999.................................. -- -- --
Series D convertible preferred stock; $0.01 par value;
685,194 shares authorized, 685,194 issued and outstanding
at September 30, 1999; no shares issued and outstanding
pro forma September 30, 1999 (liquidation preference
$12,771,233 at September 30, 1999)........................ -- 12,747,589 --
Series E convertible preferred stock; $0.01 par value;
1,867,480 shares authorized, 1,867,480 issued and
outstanding at September 30, 1999; no shares issued and
outstanding pro forma September 30, 1999 (liquidation
preference $49,591,503 at September 30, 1999)............. -- 49,558,067 --
Series F convertible preferred stock; $0.01 par value;
985,545 shares authorized, 985,545 issued and outstanding
at September 30, 1999; no shares issued and outstanding
pro forma September 30, 1999 (liquidation preference
$15,032,872 at September 30, 1999)........................ -- 15,020,545 --
----------- ------------ ------------
Total convertible preferred stock (Note 7)......... 8,283,758 106,232,576 --
----------- ------------ ------------
</TABLE>
F-3
<PAGE> 60
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1999
------------ ------------- -------------
(NOTE 2)
(UNAUDITED)
<S> <C> <C> <C>
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; 44,832,810 shares issued and
outstanding at September 30, 1999; 82,351,851 shares
issued and outstanding pro forma September 30, 1999..... 345,653 448,328 823,519
Additional paid-in capital................................ 2,034,248 48,106,288 153,963,673
Notes receivable from officers for stock.................. -- (5,723,500) (5,723,500)
Deferred compensation..................................... (1,505,975) (31,759,351) (31,759,351)
Accumulated deficit....................................... (1,022,250) (29,346,633) (29,346,633)
----------- ------------ ------------
Total stockholders' equity (deficit)............... (148,324) (18,274,868) 87,957,708
----------- ------------ ------------
Total liabilities, convertible preferred stock and
stockholders' equity (deficit)................... $ 8,865,640 $109,947,423 $109,947,423
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 61
AKAMAI TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 20, 1998) NINE-MONTH
THROUGH PERIOD ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
Revenue.................................................... $ -- $ 1,287,145
----------- ------------
Operating expenses:
Cost of service.......................................... 30,623 4,533,153
Engineering and development.............................. 228,553 5,373,737
Sales, general and administrative........................ 435,283 12,075,257
Equity related compensation.............................. 205,617 7,618,757
----------- ------------
Total operating expenses......................... 900,076 29,600,904
----------- ------------
Operating loss............................................. (900,076) (28,313,759)
Interest income............................................ 19,993 1,336,401
Interest expense........................................... (10,407) (1,347,025)
----------- ------------
Net loss................................................... (890,490) (28,324,383)
Dividends and accretion to preferred stock redemption
value.................................................... -- 1,644,826
----------- ------------
Net loss attributable to common stockholders............... $ (890,490) $(29,969,209)
=========== ============
Basic and diluted net loss per share....................... $ (0.06) $ (1.47)
Weighted average common shares outstanding................. 15,014,868 20,444,669
Pro forma basic and diluted net loss per share
(unaudited).............................................. $ (0.05) $ (0.59)
Pro forma weighted average common shares outstanding
(unaudited).............................................. 19,262,156 48,368,795
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 62
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 NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE SERIES B CONVERTIBLE SERIES D CONVERTIBLE SERIES E CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
---------------------- ----------------------- --------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ---------- --------- ----------- ------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock to founders....
Issuance of common
stock for technology
license..............
Sales of restricted
common stock.........
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
Sale of restricted
common stock.........
Sale of restricted
common stock in
exchange for notes...
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
Sale of Series E
convertible preferred
stock................ 1,867,480 48,966,282
Sale of Series F
convertible preferred
stock................
Dividends and
accretion to
preferred stock
redemption value..... 12,909 734,593 272,589 591,785
Issuance of
warrants.............
Deferred compensation
related to grant of
stock options........
Amortization of
deferred
compensation.........
Issuance of common
stock upon exercise
of stock options.....
Net loss..............
--------- ---------- --------- ----------- ------- ----------- --------- -----------
Balance at September
30, 1999............. 1,100,000 $8,296,667 1,327,500 $20,609,708 685,194 $12,747,589 1,867,480 $49,558,067
========= ========== ========= =========== ======= =========== ========= ===========
<CAPTION>
SERIES F CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------------- --------------------- PAID-IN DEFERRED NOTES ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION RECEIVABLE DEFICIT
------- ----------- ---------- -------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock to founders.... 29,646,000 $296,460 $ (131,760)
Issuance of common
stock for technology
license.............. 682,110 6,821 $ 281,179
Sales of restricted
common stock......... 4,237,200 42,372 1,753,069 $ (1,711,591)
Sale of Series A
convertible preferred
stock................
Amortization of
deferred
compensation......... 205,616
Net loss.............. (890,490)
---------- -------- ----------- ------------ ------------
Balance at December
31, 1998............. 34,565,310 345,653 2,034,248 (1,505,975) (1,022,250)
Sale of restricted
common stock......... 1,980,000 19,800 895,200 (622,500)
Sale of restricted
common stock in
exchange for notes... 7,840,000 78,400 20,985,090 (15,339,990) $(5,723,500)
Sale of Series B
convertible preferred
stock................
Sale of Series D
convertible preferred
stock................
Sale of Series E
convertible preferred
stock................
Sale of Series F
convertible preferred
stock................ 985,545 14,987,595
Dividends and
accretion to
preferred stock
redemption value..... 32,950 (1,644,826)
Issuance of
warrants............. 3,901,828
Deferred compensation
related to grant of
stock options........ 21,909,643 (21,909,643)
Amortization of
deferred
compensation......... 7,618,757
Issuance of common
stock upon exercise
of stock options..... 447,500 4,475 25,105
Net loss.............. (28,324,383)
------- ----------- ---------- -------- ----------- ------------ ----------- ------------
Balance at September
30, 1999............. 985,545 $15,020,545 44,832,810 $448,328 $48,106,288 $(31,759,351) $(5,723,500) $(29,346,633)
======= =========== ========== ======== =========== ============ =========== ============
<CAPTION>
TOTAL
SHAREHOLDERS'
DEFICIT
-------------
<S> <C>
Issuance of common
stock to founders.... $ 164,700
Issuance of common
stock for technology
license.............. 288,000
Sales of restricted
common stock......... 83,850
Sale of Series A
convertible preferred
stock................
Amortization of
deferred
compensation......... 205,616
Net loss.............. (890,490)
------------
Balance at December
31, 1998............. (148,324)
Sale of restricted
common stock......... 292,500
Sale of restricted
common stock in
exchange for notes... --
Sale of Series B
convertible preferred
stock................
Sale of Series D
convertible preferred
stock................
Sale of Series E
convertible preferred
stock................
Sale of Series F
convertible preferred
stock................
Dividends and
accretion to
preferred stock
redemption value..... (1,644,826)
Issuance of
warrants............. 3,901,828
Deferred compensation
related to grant of
stock options........ --
Amortization of
deferred
compensation......... 7,618,757
Issuance of common
stock upon exercise
of stock options..... 29,580
Net loss.............. (28,324,383)
------------
Balance at September
30, 1999............. $(18,274,868)
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 63
AKAMAI TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION NINE-MONTH PERIOD
(AUGUST 20, 1998) ENDED
THROUGH DECEMBER 31, SEPTEMBER 30,
1998 1999
--------------------- -----------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................... $ (890,490) $(28,324,383)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation and amortization....................... 50,069 1,579,111
Amortization of discount on senior subordinated
notes and equipment loan.......................... -- 339,939
Amortization of deferred compensation............... 205,617 7,618,757
Loss on disposal of fixed asset..................... -- 33,006
Changes in operating assets and liabilities:
Accounts receivable............................... -- (553,804)
Prepaid expenses and other assets................. (56,588) (4,119,218)
Accounts payable and accrued expenses............. 692,997 8,561,806
----------- ------------
Net cash provided by (used in) operating activities...... 1,605 (14,864,786)
----------- ------------
Cash flows from investing activities:
Purchases of property and equipment.................... (1,522,981) (12,767,684)
Purchases of short-term investments.................... (224,880) --
----------- ------------
Net cash used in investing activities.................... (1,747,861) (12,767,684)
----------- ------------
Cash flows from financing activities:
Proceeds from equipment financing loan................. -- 1,500,000
Payment on capital leases and equipment financing
loan................................................ (3,943) (284,779)
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 Series E convertible
preferred stock, net................................ -- 48,966,282
Proceeds from issuance of Series F convertible
preferred stock, net................................ -- 14,987,595
Proceeds from exercise of stock options................ -- 29,580
Proceeds from issuance of restricted common stock...... 46,350 292,500
----------- ------------
Net cash provided by financing activities................ 8,326,165 112,811,293
----------- ------------
Net increase in cash and equivalents..................... 6,579,909 85,178,823
Cash and cash equivalents, beginning of the period....... -- 6,579,909
----------- ------------
Cash and cash equivalents, end of the period............. $ 6,579,909 $ 91,758,732
=========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE> 64
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
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 September 30, 1999, had an accumulated deficit of $29.3 million. 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-8
<PAGE> 65
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
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 Akamai
accelerated networks program, the Company provides Akamai 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 Standards ("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 September 30, 1999, the Company
had cash balances at certain financial institutions in excess of federally
insured limits. However,
F-9
<PAGE> 66
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
the Company does not believe that it is subject to unusual credit risk beyond
the normal credit risk associated with commercial banking relationships.
As of September 30, 1999, four customers accounted for 33%, 26%, 17% and
13% of accounts receivable. Three of these customers also accounted for 45%, 18%
and 11% of total revenue for the nine-month period ended September 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 December 31,
1998 and September 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
the nine-month period ended September 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.
INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Data and information as of September 30, 1999 and for the nine months ended
September 30, 1999 is unaudited. In the opinion of Akamai's management, the
September 30, 1999 unaudited interim financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations for that
period. The results of operations for the nine-month period ended September 30,
1999 are not necessarily indicative of the results of operations for the year
ending December 31, 1999.
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 September 30, 1999 will
automatically convert into approximately 37,519,041 shares of
F-10
<PAGE> 67
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
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 September 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 potential common stock. Potential common
stock consists 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 nine-month period ended September 30, 1999, options
to purchase 1,287,000 and 11,236,650 shares of common stock, respectively,
unvested restricted common stock of 18,049,104 and 20,268,742, respectively,
preferred stock convertible into 19,800,000 and 37,519,041 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 NINE-MONTH PERIOD
(AUGUST 20, 1998) TO ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
-------------------- ------------------
<S> <C> <C>
Basic and diluted:
Net loss............................................ $ (890,490) $(28,324,383)
=========== ============
Weighted average number of common shares............ 15,014,868 20,444,669
Weighted average assumed number of common shares
upon conversion of preferred stock................ 4,247,288 27,924,126
----------- ------------
Total weighted average number of shares used in
computing pro forma net loss per share............ 19,262,156 48,368,795
=========== ============
Basic and diluted pro forma net loss per common
share............................................. $ (0.05) $ (0.59)
=========== ============
</TABLE>
F-11
<PAGE> 68
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
ESTIMATED
DECEMBER 31, SEPTEMBER 30, USEFUL
1998 1999 LIVES IN YEARS
------------ ------------- --------------
<S> <C> <C> <C>
Computer and networking equipment............ $1,384,582 $12,415,007 3
Purchased software........................... -- 332,568 3
Furniture and fixtures....................... 104,942 711,027 5
Office equipment............................. 44,608 429,257 3
Leasehold improvements....................... 30,000 478,966 5
---------- -----------
1,564,132 14,366,825
Accumulated depreciation and amortization.... (41,152) (1,573,246)
---------- -----------
Property and equipment, net.................. $1,522,980 $12,793,579
========== ===========
</TABLE>
Depreciation and amortization expense on property and equipment for the
period from inception (August 20, 1998) to December 31, 1998 and the nine-month
period ended September 30, 1999 was $41,152 and $1,538,450, respectively.
Equipment under capital leases at:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DEPRECIABLE
1998 1999 LIVES IN YEARS
------------ ------------- --------------
<S> <C> <C> <C>
Office equipment............................. $40,056 $114,427 3
Accumulated amortization..................... (1,873) (17,711)
------- --------
Capital leases, net.......................... $38,183 $ 96,716
======= ========
</TABLE>
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 nine months ended
September 30, 1999, interest expense of $323,039 related to the fair value of
the warrants was recognized.
6. COMMITMENTS AND CONTINGENCIES:
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 was $36,023. 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
F-12
<PAGE> 69
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
aggregate future obligations under noncancelable leases and equipment loans as
of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
CAPITAL
LEASES
(INCLUDING
OPERATING EQUIPMENT
YEAR ENDING LEASES LOAN)
- ----------- ---------- ----------
<S> <C> <C>
1999........................................................ $ 232,098 $ 16,641
2000........................................................ 217,124 16,641
2001........................................................ 217,124 12,323
2002........................................................ 217,124 --
2003........................................................ 72,375 --
---------- ----------
Total....................................................... $ 955,845 45,605
==========
Less interest............................................... (8,396)
----------
Total principal obligation.................................. 37,209
Less current portion........................................ (12,350)
----------
Noncurrent portion of principal obligation.................. $ 24,859
==========
</TABLE>
During the nine months ended September 30, 1999, the Company entered into
additional operating leases that expire at various dates through January 17,
2006. As a result, for the years ending December 31, 2000, 2001 and 2002,
minimum future obligations under noncancelable leases are approximately
$4,437,000, $5,113,000 and $5,261,000, respectively. The Company also obtained
additional equipment under capital leases and an equipment loan during the nine
months ended September 30, 1999. As a result, minimum future obligations under
capital leases and the equipment loan for the years ending December 31, 2000,
2001 and 2002 are $594,000, $590,000 and $173,000, respectively.
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.
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 0%,
volatility of 100%, risk free interest rate of 5.1% and an expected life of
three 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 years ending December 31, 1999, 2000,
2001 and 2002, the minimum commitments are approximately $5,742,000, $5,664,000,
$3,385,000, and $1,149,000, respectively. Some of these agreements may be
amended to either increase or decrease the minimum commitments during the life
of the contract.
F-13
<PAGE> 70
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
CONTINGENCY (UNAUDITED)
In April 1999, prior to the filing of the registration statement covering
the shares of the Company's common stock being sold in the Company's anticipated
initial public offering, the Company entered into an agreement with Baker
Communications Fund, L.P. ("Baker") granting Baker an option to purchase up to
five percent of the shares of the Company's common stock sold by the Company in
its initial public offering. There is a substantial likelihood that this
agreement constitutes an offer to purchase shares of common stock in a public
offering prior to the filing of a registration statement in violation of the
requirements of the Securities Act of 1933. The Company has requested that the
underwriters reserve for sale to Baker, at the initial public offering price, up
to an aggregate of 400,000 shares of the Company's common stock.
If a court determines that a violation of the Securities Act of 1933
occurred, Baker would have the right, for a period of one year from the date of
its purchase of common stock in the Company's anticipated initial public
offering, to obtain recovery of the consideration paid in connection with its
purchase of common stock offered in violation of the Securities Act of 1933 or,
if Baker has already sold the stock, sue the Company for damages resulting from
its purchase of common stock. As a result, these shares may be reclassified as
redeemable common stock on the balance sheet of future financial statements.
These damages could total up to approximately $8.8 million plus interest, based
on an initial public offering price of $22.00 per share, if Baker seeks recovery
or damages after an entire loss of its investment. If this occurs, the Company's
business, results of operations and financial condition will be harmed.
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"), 685,194 shares are designated as Series D convertible
preferred stock ("Series D preferred stock"), 1,867,480 shares are designated as
Series E convertible preferred stock ("Series E preferred stock") and 985,545
shares are designated as Series F convertible preferred stock ("Series F
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;
18.838-to-1 at September 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.
F-14
<PAGE> 71
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
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 September 30, 1999) adjusted for certain events including stock splits. The
Series B preferred stock is redeemable, as defined, subject to the approval of
the holders of 66% of the then outstanding shares of Series B preferred stock
beginning April 16, 2004 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 September 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
September 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
F-15
<PAGE> 72
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
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 September 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 September 30, 1999. Revenue
recognized from this customer for the nine-month period ended September 30, 1999
was $303,795.
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
$48,966,282 (net of offering costs of $34,526).
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.
SERIES F CONVERTIBLE PREFERRED STOCK (UNAUDITED)
In September 20, 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 $14,987,595 (net of offering costs of $12,400).
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.
As of September 30, 1999, all outstanding shares of preferred stock will
automatically convert into shares of common stock upon the closing of the
anticipated public offering as follows:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
------------
<S> <C>
Series A preferred stock.................................... 20,722,372
Series B preferred stock.................................... 7,965,000
Series C preferred stock.................................... --
Series D preferred stock.................................... 4,111,164
Series E preferred stock.................................... 3,734,960
Series F preferred stock.................................... 985,545
----------
37,519,041
==========
</TABLE>
F-16
<PAGE> 73
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
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 September
30, 1999, the Company had reserved 51,739,130 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, Series E preferred stock,
Series F 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,
President, Chief Financial Officer and the General Counsel of the Company in the
amounts of $1,980,000, $500,000, $2,619,750 and $623,750, respectively. These
notes bear interest at 5.3%, and are payable in full by March 26, 2009, May 18,
2009, July 23, 2009 and July 23, 2009, respectively.
9. STOCK PLANS:
1998 OPTION PLAN
In 1998, the Board of Directors adopted the 1998 Stock Incentive Plan (the
"1998 Option 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 Option 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 Option 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.
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 September 30, 1999, the Company had the right to repurchase up to 3,283,200
and 10,039,000 unvested shares, respectively. Such shares may be repurchased at
the original purchase prices ranging from $0.01 to $13.12 per share.
F-17
<PAGE> 74
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
A summary of activity under the Company's 1998 Option Plan for the period
from inception (August 20, 1998) to December 31, 1998 and the nine-month period
ended September 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.................................................... 9,820,000 0.62
Repurchased............................................... -- --
---------- -----
Outstanding at September 30, 1999........................... 13,103,200 $0.21
========== =====
Vested restricted common stock at September 30, 1999........ 3,064,200 $0.12
========== =====
</TABLE>
There were 954,000 shares of restricted common stock issued outside of the
plan in the period ended December 31, 1998.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
---------- ---------
<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................................................... 11,851,550 3.40
Exercised................................................. (447,500) 0.07
Forfeited................................................. (1,454,400) 0.15
---------- -----
Outstanding at September 30, 1999........................... 11,236,650 $3.57
========== =====
</TABLE>
The following table summarizes information about stock options outstanding
at September 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 5,442,900 9.3 $ 0.04 12,000 $0.04
$ 0.34 - $ 0.50 702,000 9.5 $ 0.42 -- --
$ 0.84 - $ 1.00 1,368,600 9.7 $ 0.90 140,000 $0.84
$ 2.50 1,028,000 9.8 $ 2.50 20,000 $2.50
$13.12 - $15.22 2,695,150 9.9 $13.28 -- --
---------- -------
$ 0.01 - $15.22 11,236,650 9.5 $ 3.57 172,000 $0.98
========== =======
</TABLE>
F-18
<PAGE> 75
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
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, the Company recorded $1,711,591 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 was recognized during the
period from inception (August 20, 1998) through December 31, 1998.
For the nine months ended September 30, 1999, the Company recorded
$37,872,133 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 common stock. Compensation expense of $7,618,757 was
recognized during the nine months ending September 30, 1999.
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 is estimated to be $0.01 per share.
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 would have been
$890,890 under SFAS No. 123. Basic and diluted net loss per share would have
been $(0.06) on a pro forma basis for the period from inception (August 20,
1998) to December 31, 1998. The effects of applying SFAS No. 123 in this pro
forma disclosure are not indicative of future amounts.
EMPLOYEE STOCK PURCHASE PLAN
In August 1999, the Board of Directors adopted the 1999 Employee Stock
Purchase Plan. The 1999 Employee Stock Purchase Plan provides for the issurance
of up to 600,000 shares of common stock to participating employees.
10. INCOME TAXES:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 20, 1998)
TO DECEMBER 31,
1998
-----------------
<S> <C>
Current tax expense......................................... $ --
Deferred tax expense/(benefit).............................. (288,000)
Valuation allowance......................................... 288,000
---------
$ --
=========
</TABLE>
F-19
<PAGE> 76
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
The Company's effective tax rate varies from the statutory rate as follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 20, 1998)
TO DECEMBER 31,
1998
-----------------
<S> <C>
U.S. Federal income tax rate................................ (34.0)%
State taxes................................................. (6.3)
Deferred compensation amortization.......................... 3.2
Other....................................................... (0.9)
Valuation allowance......................................... 38.0
-----
--%
=====
</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
-----------------
<S> <C>
Net operating loss carryforwards............................ $ 16,000
Capitalized start-up costs.................................. 207,000
Capitalized research and development expenses............... 70,000
Depreciation................................................ (13,000)
Other....................................................... 8,000
---------
288,000
Valuation allowance......................................... (288,000)
---------
Net deferred tax assets..................................... $ --
=========
</TABLE>
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-20
<PAGE> 77
AKAMAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
The following is the supplemental cash flow information for all periods
presented:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE-MONTH
(AUGUST 20, 1998) PERIOD ENDED
TO DECEMBER 31, SEPTEMBER 30,
1998 1999
----------------- -------------
<S> <C> <C>
Cash paid during the period for interest............... $ 10,407 $ 102,977
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................................... -- 5,723,500
Dividends accrued, not paid on convertible preferred
stock............................................. -- 1,618,097
Acquisition of equipment through capital lease....... 40,056 74,371
</TABLE>
F-21
<PAGE> 78
[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> 79
[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:
"24 Countries
55 Communications Networks
1,475 Servers
[Akamai Logo]
As of October 5, 1999"
<PAGE> 80
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........................................ $ 46,037
NASD filing fee............................................. 17,060
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............................................... 24,903
----------
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> 81
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> 82
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> 83
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.
28. On October 7, 1999, the Registrant issued and sold 90,000 shares
of its common stock at a purchase price of approximately $0.011 per share
to Scott Smith pursuant to the exercise of a stock option.
(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.
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<PAGE> 84
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 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>
II-5
<PAGE> 85
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<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.
**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> 86
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 6 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Cambridge,
Massachusetts, on this 28th day of October, 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. 6 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 October 28, 1999
- --------------------------------------------------- Officer (principal executive
George H. Conrades officer)
* Chief Financial Officer and October 28, 1999
- --------------------------------------------------- Treasurer (principal financial
Timothy Weller and accounting officer)
* Director October 28, 1999
- ---------------------------------------------------
Arthur H. Bilger
* Director October 28, 1999
- ---------------------------------------------------
Todd A. Dagres
* Director October 28, 1999
- ---------------------------------------------------
F. Thomson Leighton
* Director October 28, 1999
- ---------------------------------------------------
Daniel M. Lewin
* Director October 28, 1999
- ---------------------------------------------------
Terrance G. McGuire
* Director October 28, 1999
- ---------------------------------------------------
Edward W. Scott
*By: /s/ ROBERT O. BALL III
-----------------------------------------------
Robert O. Ball III
Attorney-In-Fact
</TABLE>
II-7
<PAGE> 87
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 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.
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
**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.
**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.
**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 10.8
CONFIDENTIAL MATERIALS OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE OMISSION
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")
Akamai/Apple Proprietary and Confidential
<PAGE> 2
<TABLE>
<S> <C>
APPLE CONTACT AKAMAI CONTACT
Name: Eddy Cue Name: Paul Sagan
Title: Director of Internet Services Title: President and Chief Operating Officer
Phone: (408) 974-3484 Phone: (617) 250-3006
Fax: Fax: (617) 250-3001
Email: [email protected] Email: [email protected]
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
-2-
<PAGE> 3
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.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration, the
receipt and
Akamai/Apple Proprietary and Confidential
- 3 -
<PAGE> 4
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) August 1, 1999;
or (b) 60 days after completion of the Linux Port under Section 3.3;
and ending on April 1, 2001, unless earlier terminated in accordance
with this Agreement (the "Exclusivity Period"), Apple shall not
purchase from any third party services equivalent to the FreeFlow
Services for use by Apple to distribute Apple Content promoted as QT-TV
("QT-TV Content"), where distribution is provided by Apple, but such
restriction shall not apply to the purchase by QT-TV Content Providers
of third party services (whether equivalent to the FreeFlow Services or
not) for the distribution of QT-TV Content, where distribution is by a
party other than Apple.
1.2.2 CONDITIONS. The Exclusivity Period will continue only until any of the
following conditions occur:
(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
Akamai/Apple Proprietary and Confidential
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
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 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 greater than [**] 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 purchase from third parties services similar to the
FreeFlow Services.
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,
all minimum usage commitments by Apple under Section 7.3 end with the
termination of exclusivity. Upon a Change of Control to any other
entity, exclusivity under Section 1.2 shall terminate but Apple's
minimum usage commitment under Section 7.3 shall continue if assignment
of this Agreement to such entity is approved by Apple under Section
14.3.
1.2.4 SCALABILITY: If at any time Akamai fails to provide all of the FreeFlow
Services used or requested by Apple in accordance with Section 1.3,
1.4, 1.5 or 1.6 hereof and such failure is not rectified within 24
hours, Apple may purchase services from a third party, without any
penalty or breach of this Section 1.2 for the duration of the failure,
and Apple may credit any amounts so paid to its minimum commitment
under Section 7.3. Once Akamai is able to continue providing the
required FreeFlow Services, then the exclusivity period resumes but is
not extended beyond the exclusivity 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 an unexpected surge in demand, and Akamai is unable to
provide the necessary FreeFlow Services to meet said demand, Apple
shall have the right to obtain additional network services from a third
party for the duration of the event causing the surge in demand. The
amounts paid to Apple to accommodate the surge in demand may not be
credited toward Apple's minimum usage commitments under Section 7.3. If
at any time Akamai fails to provide any portion of the FreeFlow
Services requested by Apple in accordance with the performance criteria
described in Section 1.6, Apple may contract with other parties for
services similar to the FreeFlow Services to supply service that Akamai
does not
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provide, 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.
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 and for no additional
consideration, 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, at no additional cost to Apple, (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
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other Akamai customers. Akamai shall use reasonable efforts to deploy Akamai
servers on network backbones most critical to Apple (such as, and by way of
illustration only, Earthlink), 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 "soft launch" of QT-TV by
Apple (on or about July 1, 1999), cause the Akamai Network to have the capacity
to serve a minimum of 10,000 concurrent users at an average rate of 50 Kb/second
on a continuous basis, and within ninety (90) days after the soft launch date
(anticipated to be on or about October 1, 1999), cause the Akamai Network to
have the capacity to support a minimum of 60,000 concurrent users at an average
rate of 50 Kb/second on a continuous basis. The Akamai Network will remain
geographically distributed, and Akamai shall provide to Apple a listing of the
locations of the Akamai Network servers, which listing shall be updated monthly.
Akamai shall also promptly notify Apple in the event of a loss or elimination of
any major network connection or material Akamai Network server point of
presence. Without limiting the above, to support Apple's worldwide customers, on
or before October 1, 1999 Akamal will locate Akamai Network servers in the
United States, Canada, Japan, Australia, United Kingdom, France and Germany.
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 objects or source data created by Apple or
originating or transmitted from 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 to
Akamai for alterations, deletions or changes to Apple Content that result from
unauthorized access to such content through breaches of Akamai's network
security.
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
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
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 MONITORING TOOLS FOR QT-TV. At no additional charge to Apple, Akamai agrees
to provide a reasonable amount of engineering assistance to Apple to assist in
Apple's development of software tools and applications to monitor the
performance of QT-TV and to enable Apple to develop [**] for Apple Content
source suppliers and providers to QT-TV.
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, at no additional
cost to Apple, certain Akamai proprietary computer software source code
which will provide network status and performance information helpful
to maximize the Akamai Network's ability to serve QuickTime content
("Akamai Embedded Software"). Apple agrees to evaluate the Akamai
Embedded Software within thirty (30) days after delivery of source code
and related documentation for possible inclusion of the Akamai Embedded
Software into the QuickTime Player, in order to determine whether
incorporating such code (i) provides meaningful measurements of network
status and performance information relative to the ability of the
Akamai Network to serve QuickTime content, and (ii) does not adversely
affect QuickTime, the QuickTime Player or the operating system(s) or
hardware on which QuickTime is operating. In the event Apple elects in
its sole discretion not to include the Akamai Embedded Software in the
QuickTime Player, it will notify Akamai of its reasons for excluding
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
the Akamai Embedded Software and provide Akamai an opportunity to
correct any deficiencies or problems identified by Apple in the Akamai
Embedded Software. In the event Apple elects in its sole discretion to
include the Akamai Embedded Software in the QuickTime Player, Akamai
hereby grants to Apple the perpetual, irrevocable royalty-free,
non-exclusive license to embed such proprietary source code in all
versions of QuickTime Player, to prepare derivative works of such
source code, and to distribute, sublicense through multiple tiers and
to publicly perform and display such code in object code format, and
any derivative works thereof created by Apple under this Section 3.2.1,
as part of the QuickTime Player. Apple will notify Akamai of, and
provide Akamai an opportunity to make available changes or
modifications required in the Akamai Embedded Software. All Akamai
proprietary source code disclosed to Apple shall be considered
"Confidential Information" as defined in Section 9 below.
3.2.2 Apple hereby grants to Akamai, at no cost but subject to the terms and
conditions of this Agreement, a non-transferable, non-exclusive license
during the Term to use: (a) portions of the source code for Apple's
QuickTime Streaming Server Software ("QuickTime Streaming Server
Software Source Code"), in accordance with the terms of Apple's Public
Source Code license for such software currently available at URL :
http://www.publicsource.apple.com/apsl, unless otherwise specified in
this Agreement; and (b) such portions of the [**] for the[**] 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 return to Apple, or at Apple's option destroy,
all copies of the [**] in Akamai's possession.
3.3 PORTING OF QUICKTIME TO LINUX. Each party shall use commercially
reasonable efforts and provide sufficient resources, at its own expense, to port
QuickTime Streaming Server Software to operate on a Linux operating system as
specified by Akamai within the Akamai Network (the results thereof, the "Linux
Port"). Each party agrees to require that all employees and independent
contractors participating in this endeavor sign or
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
otherwise have in effect such confidentiality and ownership/invention assignment
agreements as may be reasonably required by either party. Such port will be
deemed complete only when the parties have had an opportunity to perform
appropriate acceptance testing and have reasonably determined that the Linux
Port is complete.
3.4 PAY-PER-VIEW SUPPORT; OTHER APPLICATIONS. It is understood and
acknowledged that QT-TV currently does not support pay-per-view functionality
("PPV"). The parties shall, as may be mutually agreed from time to time, explore
the possibility of PPV 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 OPTION TO PURCHASE EQUITY IN QT-TV. The following provisions will
apply only after completion of the Linux Port as contemplated under Section 3.3
above.
3.6.1 In the event that, during the Term: (x) [**] transfers the [**] to an
entity ("Entity") 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") other than (i) [**], (ii) a person or entity
that was an affiliate of [**] prior to such transaction or (iii) an
employee of [**] or any such affiliate or, prior to any initial public
offering of securities in such Entity, [**] or any of its affiliates
subsequently transfers for consideration to any Third Party any shares
of Capital Stock of such Entity (each, a "Qualifying Transfer"); or (y)
any Entity to which [**] has previously transferred the [**]
subsequently issues for consideration Capital Stock (including any
securities convertible into or exchangeable for capital stock or its
equivalent, "New Securities") (a "Qualifying Issuance"), provided there
is no outstanding uncured breach of [**] obligations hereunder at the
time [**] proposes to engage in a Qualifying Transfer or Qualifying
Issuance, [**] (or any subsidiary of [**] shall have, in connection
with the first such Qualifying Transfer or Qualifying Issuance, the
nontransferable right and option (the "Prior Right"), exercisable in
[**] sole discretion, to purchase [**] of 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, for a [**] of Capital Stock
equal to [**] in such Qualifying
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
Transfer or Qualifying Issuance; provided, that the Prior Right shall
not apply to (1) any initial public offering of Capital Stock of the
Entity by the Entity, [**] or any other person controlling the Entity
or (2) any transaction in which [**] nor any such affiliate retains any
continuing equity interest in the Entity or any other person
controlling the Entity. The Prior Right shall not apply to, and this
Section 3.6 grants no rights to [**] to participate in any transaction,
transfer, sale or exclusive license of any products or software (such
as [**] or any technology or rights therein) that do not constitute a
service intended principally for transmitting over the Internet,
through computer networks owned or operated by or for [**].
3.6.2 [**] shall (or shall cause the Entity to) promptly notify [**] of 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 number of shares of Capital Stock for which the Prior Right would
be exercisable and the anticipated purchase price therefor (the
"Selling Notice"). [**] may only exercise such Prior Right as to all
the shares of Capital Stock available to it. If [**] desires to
exercise such Prior Right pursuant to the Selling Notice, [**] shall
notify [**] (or the Entity, if the Selling Notice was issued by the
Entity) by written notice within thirty (30) days after receipt of the
Selling Notice whether it desires to exercise its Prior Right. If [**]
does not elect to exercise its Prior Right or fails to provide notice
within such thirty (30) days, [**] and the Entity shall have up to one
hundred twenty (120) days from the date of the Selling Notice to
complete the Qualifying Transfer or Qualifying Issuance upon the same
terms specified in the Selling Notice, whereupon [**] Prior Right shall
be void and of no further effect. If [**] or the Entity later changes
the terms of the Qualifying Transfer or Qualifying Issuance in any
material respect, [**] or the Entity shall first notify [**] of the
revised terms of such proposed transaction by delivery of a new Selling
Notice pursuant to the procedure set forth above. In the event that any
Capital Stock or New Securities which are offered or sold (or issued)
by [**] or the Entity and are not offered or sold for cash, [**] will
provide a cash equivalent valuation therefor and provide [**] with the
option of purchasing such Capital Stock or New Securities for the cash
equivalent of the consideration if other than cash.
3.6.3 The obligations of this Section 3.6 will cease immediately in the event
(i) the Entity undergoes an initial public offering; or (ii) [**]
undergoes a Change of Control (as defined in Section 1.2.2(v)). [**]
rights under this Section 3.6 shall not survive any termination of this
Agreement.
Akamai/Apple Proprietary and Confidential
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
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 at no additional charge
to Apple a limited, worldwide, nontransferable and nonexclusive license to use,
during, the Term, the Akamai Embedded Software, 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 Akamai Embedded Software), 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;
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) developing [**] for QT-TV 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.
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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 thirty (30) days after the Effective Date, the
parties shall enter into a source code escrow agreement with an escrow agent
reasonably acceptable to both parties, pursuant to which Akamai shall make Apple
the beneficiary of source code and source materials embodying the Akamai
Software that are deposited by Akamai with such agent. Akamai shall deposit each
revision to the Akamai Software that it is required to deliver under this
Agreement, in source code format, into such escrow. In the event of a permitted
release of the source code to Apple, Akamai agrees to grant, and does hereby
grant to Apple, the nonexclusive right and license to use, reproduce, prepare
derivative works of, perform, display and transmit the source code and source
materials for the Akamai Software and derivative works thereof and to
distribute, sublicense through multiple tiers and to publicly perform and
display such code in object code format only, for the limited purpose of
enabling Apple to support QT-TV and distribute of Apple Content on its own in a
manner consistent with the manner in which Akamai is supporting QT-TV and
serving Apple Content under this Agreement and any derivative works thereof
created by Apple; provided that Apple may exercise such rights only in the event
of a release of such materials pursuant to such source code escrow agreement.
Akamai shall pay all related escrow fees. The escrow agreement will provide that
the escrow agent will deliver the deposited source code package to Apple upon
the occurrence of any one or more of the following events:
a. Akamai ceases to do business in the ordinary course, makes an
assignment for the benefit of creditors, has appointed a
receiver or trustee in bankruptcy, or makes a filing under any
federal or state insolvency or similar law; and
b. Apple exercises its right to purchase a license to the source
code under Section 7.4.2.
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
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, the [**] and QuickTime
Streaming Server Software Source Code, 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
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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 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,
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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.
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
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
to the benefit of the owner of such Mark.
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
sixteen (16) months after the Effective Date. Thereafter, the parties shall
negotiate the fees payable for 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 forty-five (45) days after receipt of invoice.
In the event that Akamai grants to any other party "low price assurance" or
similar type arrangement with respect to the FreeFlow Services provided by
Akamai to Apple hereunder, or any portion thereof, then Akamai shall immediately
disclose and offer such more favorable terms or pricing to Apple, provided
however, in order to receive more favorable prices or terms, Apple must accept
all of the same material aspects of the terms and conditions offered to such
third party (monetary and non-monetary).
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 MINIMUM USAGE COMMITMENT. 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 April 1, 1999 and continuing through July 31, 1999, Apple
agrees to commit to purchase FreeFlow Services at a rate of a minimum
of [**] per month usage of the Akamai Network, measured based on
Akamai's [**] convention, or [**] per month.
7.3.2 Commencing on August 1, 1999 and continuing through July 31, 2000
provided that the Linux port is completed pursuant to section 3.3 Apple
agrees to commit to purchase an aggregate minimum of $12 million of
FreeFlow Services.
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
7.3.3 Apple's commitments under this Section 7.3 are cumulative, and any
Apple Content, whether relating to QT-TV or otherwise, originated by
Apple and distributed through the Akamai Network will be deemed used by
Apple for purposes of such commitment. For avoidance of doubt, any
FreeFlow Services used by Apple in any one month in excess of its
committed minimum for such month may be credited to prior months (to
the extent there exists a prior month where Apple did not meet the
minimum) or future months, in Apple's sole discretion. Moreover, in the
event that a third party company who provides content to QT-TV elects
to provide for its own distribution through Akamai, Apple will receive
a credit in the amount of the total monthly fees of said third party
paid to Akamai toward Apple's minimum fees, or other additional monthly
fees due for the corresponding month. If Apple, at and as of July 31,
2000, has not paid Akamai fees equal to at least $12.360 million in the
aggregate, then Apple shall pay to Akamai the difference between
$12.360 million and the fee amounts actually paid by Apple.
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 minimum purchase obligations of Apple under
this Section 7.3 will immediately cease in effect.
7.4 DISCONTINUATION OF QT-TV; 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) elects to discontinue
QT-TV at any time during the Exclusivity Period for any reason (other
than a breach hereunder by Akamai), Apple agrees to use, or cause such
successor to use, a modified minimum amount of Akamai FreeFlow Services
as follows. For avoidance of doubt, Apple will be deemed to have
"elected to discontinue QT-TV" if it or its successor in interest no
longer offers QT-TV, but will not be deemed to have "elected to
discontinue QT-TV" if the business and assets of QT-TV are transferred
to a new entity affiliated with Apple but otherwise continue to be
offered, or if Apple elects to no longer receive and distribute content
for QT-TV but instead directs all content providers which previously
provided content for QT-TV directly to Akamai (Akamai acknowledges that
Apple provides no guarantee that said content providers will elect to
use the Akamal services). During the period following discontinuation
of QT-TV and for the duration of the Exclusivity Period, Apple will be
obligated to purchase monthly a minimum of FreeFlow Services equal to
50% of the average monthly amount Apple actually purchased for QT-TV
(but not for other
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
Apple Content) during the twelve (12) months (or any shorter period
preceding such discontinuance) immediately preceding the end of
beginning of the month in which Apple elects to discontinue QT-TV;
provided however, that Akamai agrees that Apple's minimum usage
commitment, as adjusted pursuant to this Section 7.4.1, shall be offset
and reduced by any increases in distributing QuickTime content and
media that Akamai acquires as a result of transfers to Akamai from
Apple of QT-TV customers, who actually provided content to QT-TV 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 Akamai is purchased by an unaffiliated
third party, then Akamai agrees as follows:
(a) Akamai shall require such successor to continue
to provide Apple with the same level of services and support
for QT-TV and the distribution of QuickTime media as Akamai
was providing immediately prior to such acquisition, for a
period of at least one year from the date of acquisition, at
the [**] as Akamai provided such services during the
immediately preceding 12 months, or such lower price as shall
be generally available to Akamai or its successors' customers;
and
(b) In the event Akamai is acquired by either Real
Networks or Microsoft Corporation, Akamai hereby grants to
Apple an option to purchase for $1 a non-exclusive license to
the Akamai proprietary source code licensed to Apple
hereunder, for Apple's use solely to support the QT-TV network
and Apple's distribution of other Apple Content over the
Internet.
The foregoing obligation of Akamai is subject to the
understanding that Akamai retains the right to grant upon
request the same or similar protections as described in this
Section 7.4.2 [**] in the event that [**] of the other [**]
acquires Akamai.
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. If any such audit discloses that
Akamai has overcharged Apple for such fees by five per cent (5%) or more for the
period under audit, Akamai shall pay, in addition to such deficiency, the
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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
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
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
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 Akamai Embedded Software,
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 Akamai [**] Software 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.
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
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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."
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 thirty (30) days
following written notice of default.
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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 all customers or other parties for a period of 60
days, provided that if such election is made during the Exclusivity Period,
Akamai shall give Apple at least twelve (12) months advance notice of such
intent to terminate. If such election is made after the Exclusivity Period,
Akamai shall give Apple at least three (3) months 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 the right to seek equitable relief for any breach of the
confidentiality or license provisions of this Agreement.
12. INDEMNIFICATION.
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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, Akamai
Embedded Software, 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, Akamai Embedded Software, or
FreeFlow Services free of the infringement claim; or (ii) replace or
modify the Akamai Software, Akamai Embedded 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.
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)
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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 QT-TV or any Apple Content or Akamai's
transmission of Apple Content pursuant to this Agreement which has been
formatted in the QuickTime file format (a) infringes any copyright,
trade secret, or other intellectual property right, or (b) contains any
libelous, defamatory, or obscene material, or otherwise violates any
laws or regulations relating to content or content distribution;
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) Akamai's transmission of
QT-TV other than in accordance with the terms of this Agreement.
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.
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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 $12 MILLION.
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
address for notice by means of notice to the other party given in accordance
with this Section 14.2.
14.3 ASSIGNMENT. Apple may, without the prior written consent of Akamai, 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. Akamai may not, without the prior written consent of Apple,
assign this Agreement, in whole or in part, either
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
voluntarily or by operation of law. Apple shall not unreasonably withhold or
delay its consent to any proposed assignment by Akamai to a third party (other
then [**] or any successor in interest to the business or assets of either
entity) if such entity agrees in writing to assume all obligations of Akamai
hereunder and demonstrates that it can and will perform all such obligations at
or above the commitments made by Akamai 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.
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.
Akamai/Apple Proprietary and Confidential
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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.
APPLE COMPUTER, INC. AKAMAI TECHNOLOGIES, INC.
By: /s/ Eddy Cue By: /s/ Paul Sagan
------------------------------ ----------------------------------
Name: Eddy Cue Name: Paul Sagan
Title: Director of Internet Services Title: President and COO
Akamai/Apple Proprietary and Confidential
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<PAGE> 29
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
SCHEDULE A - FREEFLOW ORDER FORM 1
CONTRACT
EFFECTIVE 4/1/99
DATE:
---------------------------
TYPE: /X/ New / / Upgrade / / Renewal
SALES
REP:
CUSTOMER INFORMATION:
Company
Name: Apple Computer
Billing
Address: 1 Infinite Loop
Cupertino, CA 95014
CUSTOMER CONTACT:
Name: Eddy Cue
Phone: 408.974.3484
Fax:
E-Mail: [email protected]
BILLING CONTACT: (if different than Customer
Contact)
Name: Same
Phone:
Fax:
E-Mail:
TECHNICAL CONTACT:
Name: Phil LaMar
Phone: 408.974.0703
Fax:
E-Mail: [email protected]
UPGRADE/ACCOUNT CHANGE AUTHORITY:
(Check contacts with authority to upgrade contract)
X Customer Billing
Contact Contact
----- -----
Technical Other (See Special
Contact Instructions)
----- -----
TOTAL CHARGES SUMMARY:
(SEE ATTACHED DETAILED PRODUCTS AND SERVICES DESCRIPTIONS)
INITIAL FEE: One-time fee after installation is
complete
INITIAL FEE: WAIVED
PRICE PER mbps: Rate per Mbps for FreeFlow services:
[**] Mbps - [**] per Mbps
[**]
[**] Mbps + - [**] per Mbps
(these rates are [**] on FreeFlow)
COMMITTED
INFORMATION Committed Monthly Usage of
RATE (CIR): FreeFlow service
[**]
CIR: MPBS
Akamai/Apple Proprietary and Confidential
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
MONTHLY Monthly fees billed in advance
RECURRING FEES: (based on CIR),
= Price per Mbps x CIR
STANDARD
MONTHLY
RECURRING: [**]
INITIAL TERM: [**] , STARTING WITH THE EFFECTIVE DATE
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 are billed in advance
- Usage over the CIR is billed in arrears
SUB-TOTAL: [**] [**]
ADJUSTMENTS: [**] --
(INITIAL FEES WAIVED)
TOTAL (AT COMMITTED RATE): [**] [**]
</TABLE>
SPECIAL
INSTRUCTIONS:
[**]
Akamai/Apple Proprietary and Confidential
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
SCHEDULE A - FREEFLOW ORDER FORM 2
CONTRACT
EFFECTIVE 8/1/99
DATE:
---------------------------
TYPE: /X/ New / / Upgrade / / Renewal
SALES
REP:
CUSTOMER INFORMATION:
Company
Name: Apple Computer
Billing
Address: 1 Infinite Loop
Cupertino, CA 95014
CUSTOMER CONTACT:
Name: Eddy Cue
Phone: 408.974.3484
Fax:
E-Mail: [email protected]
BILLING CONTACT: (if different than Customer
Contact)
Name: Eddy Cue
Phone:
Fax:
E-Mail:
TECHNICAL CONTACT:
Name: Phil LaMar
Phone: 408.974.0703
Fax:
E-Mail: [email protected]
UPGRADE/ACCOUNT CHANGE AUTHORITY:
(Check contacts with authority to upgrade contract)
X Customer Billing
Contact Contact
----- -----
Technical Other (See Special
Contact Instructions)
----- -----
TOTAL CHARGES SUMMARY:
(SEE ATTACHED DETAILED PRODUCTS AND SERVICES DESCRIPTIONS)
INITIAL FEE: One-time fee after installation is
complete
INITIAL FEE: [**]
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
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
MONTHLY
RECURRING FEES: Monthly Recurring Fees are as
indicated in the contract
MINIMUM
STANDARD
MONTHLY
RECURRING: $1,000,000
INITIAL TERM: 12 months, STARTING WITH THE EFFECTIVE DATE (AS DETERMINED UNDER
THE MASTER SERVICE AGREEMENT)
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 $1,000,000 minimum commitment for
utilization of Akamai services During this 12 month
agreement
- Committed Rate fees are billed in advance
- Usage over the CIR is billed in arrears
SUB-TOTAL: [**] $1,000,000
ADJUSTMENTS: -- --
(INITIAL FEES WAIVED)
TOTAL (AT COMMITTED RATE): [**] $1,000,000
</TABLE>
SPECIAL
INSTRUCTIONS:
[**]
Akamai/Apple Proprietary and Confidential
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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:
Original URL:
http://www.apple.com/home/media/menace_640qt4.mov (Regular URL)
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
Format for RENAMEd URL:
http://serial#.akamai.com/serial#/type_code/cpc_code/fingerprint//
www.apple.com/home/media/menace_640qt4.mov
URL after running RENAME:
http://a941.akamai.com/7/941/51/256097340036aa/www.apple.com/home/
media/menace_640qt4.mov
6. LIMITER
As long as Akamai is hosting the source page for specific Apple content
object(s), then Akamai has the ability to limit the amount of bandwidth
used to access the object(s) at Apple's request. An access limitation
can be made only upon prior request by Apple, and during the period of
time that such limitations on access are imposed then any applicable
Service Level Commitments related to performance enhancements (but not
commitments related to uptime, outages and problem escalation) will be
excused.
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
bursting above the Committed Rate are billed in arrears for period of
usage on the following month's invoice.
9. APPLE COMPUTER IMPLEMENTATION
During the initial three-month period after execution of the Master
Services Agreement, Akamai will provide at no additional cost the
consulting and engineering resources necessary 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 including
the [**] as used to determine stream quality. After execution of the
Master Services Agreement, Apple and Akamai will create a plan
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
for integration of the process for tagging Apple web content for
inclusion on the FreeFlow service network.
After the initial three-month period, Akamai will provide any agreed
upon consulting and engineering services on a time and materials or
project plan basis as mutually agreed.
10. APPLE COMPUTER MONTHLY COMMITTED RATE
Apple Computer will be billed at the [**] of aggregate FreeFlow network
utilization on a monthly basis. Apple Computer will have a Committed
Rate of traffic per month. Usage above the committed rate [**] at any
time, with [**] for usage by Apple.
Akamai/Apple Proprietary and Confidential
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<PAGE> 36
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 equal to fees for the
day in which the failure occurs; provided, however, that Apple shall only
receive one such credit per day 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 six (6) geographically and network-diverse locations in
major metropolitan areas, Akamai will simultaneously poll a
test file residing on Apple's production servers and on
Akamai's network. Sites will include the following areas:
Northern Virginia
New Jersey
Chicago
Houston
Los Angeles
Palo Alto
(International sites to be added as mutually agreed
for polling purposes)
B. The polling mechanism will perform two (2) simultaneous http
GET operations:
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<PAGE> 37
i. one GET operation will be performed on a test file residing on
the appropriate Apple server (e.g., http://www.customerxyz.com/
images/testgif.gif)
ii. the other GET operation will be performed from the Akamai Free
Flow Service:
http://a564.g.akamaitech.net/7/564/24/2c1db486/www.customerxy
z.com/images/testgif.gif)
C. The test GIF will be a file of 80 Kbytes or greater in size.
D. Polling will occur at approximately 12-minute intervals.
E. Based on the http GET operations described in B. above, the
response times 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 daily average of performance
for the FreeFlow service and the Apple's production web server,
computed from data captured across all regions and hits. 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 weighted by a factor of three. If on a given day
the Akamai weighted daily average time exceeds Apple's weighted daily
average time, then the Apple will receive a credit equivalent to fees
for that day of service.
3. Outages
An outage is defined as a 12-minute period of consecutive failed
attempts by a single agent to "get" a file from the FreeFlow network
while succeeding to "get" the test file from Apple's web site. If an
outage is identified by this method, Apple will receive a credit
equivalent to the fees for the day in which the failure occurred.
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/Apple Proprietary and Confidential
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<PAGE> 38
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
Akamai will provide Apple with a means to see daily, weekly and monthly data
about network utilization. This data will include at least the following:
- total bytes served
- what files/objects were served
- avg k per second delivered to customers
- breakdown by hours of day
- any server performance
- non-personal user info (e.g. domains, zip)
- month to day Apple billing info
Akamai will provide 24x7 telephone problem escalation. Akamai will respond
within 24 hours to any problem reported by Apple. In the case of a major outage,
Akamai will notify Apple by telephone within [**]. In addition, Akamai will
notify Apple within [**] of any problem impacting user performance.
Akamai/Apple Proprietary and Confidential
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
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 cryptographic hash of the object itself. 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 is changed in
any way the fingerprint will no longer match the fingerprint of a content object
itself. At the prior written request of a customer, the Akamai Network will not
serve objects that do not match their fingerprints. 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 housed in locking racks, and those racks are
located in locked cages at data centers that allow for restricted facility
access only to authorized personnel.
CONTROLLING ACCESS
Access to servers deployed in the Akamai Network is controlled using industry
standard [**]. Akamai personnel logging into a server must use a cryptographic
"key" that has been authorized by the [**] to access any physical server in the
network. There are [**] to the servers: [**], which is limited to [**] and [**]
for server maintenance; and read-only access, which is used by Akamai personnel
to [**]. Additionally, any [**] that are unessential are disabled on the
servers.
MONITORING
The "query" component of the Akamai Network, which runs automatically on a
continuous basis, provides system-level monitoring for events and anomalies. The
Akamai Network Operations Center is staffed on a 7x24 basis and monitors the
Akamai Network for performance, stability and observable security anomalies.
Akamai/Apple Proprietary and Confidential
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<PAGE> 40
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
Content.
In the case of any security disturbance, Akamai will notify Apple immediately 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.
INSPECTION
Apple shall, at any time upon reasonable notice, have the right to conduct
on-site inspections of Akamai's facilities and review Akamai's security
practices and procedures.
Akamai/Apple Proprietary and Confidential
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<PAGE> 41
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 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
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
network utilization data for billing and reporting to customer.
4. AKAMAI EMBEDDED SOFTWARE
To be determined by the parties.
Akamai/Apple Proprietary and Confidential
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
SCHEDULE F
THIRD PARTY SOFTWARE
1. GeoFlow Traffic Analyzer (as described on Schedule E)
a. [**]
b. [**]
c. [**]
2. GeoFlow Log Analyzer
a. [**]
Akamai/Apple Proprietary and Confidential
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<PAGE> 1
Exhibit 10.9
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
AKAMAI TECHNOLOGIES, INC.
HAS REQUESTED THAT THE MARKED PORTIONS OF THIS AGREEMENT BE GRANTED
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933
STRATEGIC ALLIANCE AND JOINT DEVELOPMENT AGREEMENT
This STRATEGIC ALLIANCE AND JOINT DEVELOPMENT AGREEMENT (the
"Agreement") is made and entered into as of this ___ 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 willing
standardize Akamai's hardware infrastructure on Cisco Products 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.
3. THE PROJECTS.
3.1 CACHE INTERFACE PROJECT. Akamai and Cisco will jointly develop a
cache interface protocol ("CIP") which will enable content delivery software
(which shall include but may not be limited to Akamai's proprietary FreeFlow
software (the "FreeFlow Software")) to interface with cache engine
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<PAGE> 3
products (the "Cache Engine", which shall include but may not be limited to
Cisco's cache engine products), and for the Cache Engine to participate in and
integrate with Akamai's content delivery service, as follows:
(a) Akamai has delivered to Cisco an initial draft of a Cache
Engine interface design document ("Cache Engine Interface Design
Document"). Engineering teams from both parties agree to work jointly
and negotiate in good faith to agree upon a final Cache Engine
Interface Design Document and a Cache Engine interface Project Plan
("Cache Engine Interface Project Plan").
(b) The parties will establish by mutual agreement target
dates for the development of the Cache Engine Interface Design Document
and the Cache Engine Interface Project Plan.
(c) Akamai shall designate Sef Kloninger ([email protected]) as
its Project Manager (as defined below) for the Cache Engine interface
project, and Cisco shall designate Krish Ramakrishnan ([email protected])
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 CIP jointly developed by the
Parties (the "Jointly Developed CIP Property") shall be owned by
Akamai. Subject to the provisions of Section 3.1(e) below, with respect
to any Cisco Property expressly incorporated into CIP as finally
approved by both Parties under this Agreement, Cisco hereby grants
Akamai a nonexclusive, worldwide, perpetual, irrevocable, fully
paid-up, royalty free license, with the right to sublicense and
authorize the granting of sublicenses, to make, have made, use, import,
copy, modify, offer to sell, sell, lease and otherwise distribute such
Cisco Property solely as incorporated into CIP and any implementations
thereof. Subject to the provisions of Section 3.1(e) below, with
respect to any Akamai Property and any Jointly Developed CIP Property
expressly incorporated into CIP as finally approved by both Parties
under this Agreement, Akamai hereby grants Cisco a non-exclusive,
worldwide, perpetual, irrevocable, full paid-up, royalty free license,
with the right to sublicense and authorize the granting of sublicenses,
to make, have made, use, import, copy, modify, offer to sell, sell,
lease and otherwise distribute such Akamai Property and Jointly
Developed CIP Property solely as incorporated into CIP and any
implementations thereof. The parties further agree that Confidential
Information excludes CIP as finally approved by both Parties.
(e) The parties agree that nothing contemplated in this
Section 3.1 shall prohibit: (i) Cisco from enabling its Cache Engine to
interface with any content delivery services or other product or
service of Cisco or any third party (including enabling such interface
through creation of a new version of CIP, 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) Akamai from interfacing or offering its content
delivery services with cache products or other product or service of
Akamai or any third party (including enabling such interface through
creation of a new version of CIP, provided that Akamai does not
disclose to such third party or
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
use any Cisco Property or Cisco Confidential Information in interfacing
with such third party products).
(f) In addition to the foregoing, Cisco agrees that it will
not, during the term of this Agreement and for a period of [**]
following its termination, [**] or [**] services that [**] with Akamai
Services that utilize any of the [**] , provided however that, subject
to the other restrictions and limitations provided herein, nothing in
this Section 3.1(f) shall [**] Cisco from [**] products which [**] to
provide such services, and provided further that the restrictions on
Cisco contemplated in this Section 3.1(f) shall terminate immediately
upon any termination of this Agreement by Akamai. Akamai agrees that it
will not, during the term of this Agreement and for a period of [**]
following its termination, [**] or [**] any products that [**] with any
Cisco Product that utilizes any of the [**], provided however that,
subject to the other restrictions and limitations provided herein,
nothing in this Section 3.1(f) shall [**] Akamai from [**] its software
or services to [**] or [**] products, and provided further that the
restrictions on Akamai contemplated in this Section 3.1(f) shall
terminate immediately upon any termination of this Agreement by Cisco.
3.2 ROUTING, FLOW AND CAPACITY INFORMATION PROTOCOL DEVELOPMENT
PROJECT. In consultation with Akamai and third parties, Cisco will develop a
protocol specification (possibly to be named the Flow Information Protocol, or
"FIP") that will enable the exchange and secure transmission of routing, flow
and capacity data and other information between Cisco's routers and switches and
the products and services of Akamai and other third parties ("FIP") 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:
- [**] that would [**] a router is [**];
- [**] of each [**];
- [**] on each [**];
- [**] on each [**];
- [**] on each [**];
- [**] ([**] etc.); and
- [**] information ([**], etc.).
(a) The parties will (i) establish by mutual agreement target
dates for the development of the FIP, and (ii) negotiate in good faith
to agree upon, execute and deliver an FIP Project Plan.
(b) Akamai shall designate Bruce Maggs ([email protected]) as its
Project Manager for the Routing Protocols project, and Cisco shall
designate David Rossetti ([email protected]) as its Project Manager.
Either Party may change its Project Manager and appoint a substitute
Project Manager for this Project.
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(c) Unless expressly agreed to in the FIP Project Plan or
otherwise in writing between the Parties with respect to a specific
portion: (i) the FIP, including any derivatives, improvements or
modifications created under this Agreement, shall be considered Cisco
Property under this Agreement, Cisco hereby grants Akamai a
nonexclusive, worldwide, perpetual, irrevocable, fully paid-up, royalty
free license to use FIP as delivered to Akamai by Cisco solely to
implement certain of Akamai's software to enable Akamai, in providing
Akamai Services, to interoperate with and fully utilize Cisco Products.
(d) Akamai acknowledges that Cisco may establish and promote
the FIP as an "industry standard". Accordingly, subject to the
requirements of confidentiality with respect to Akamai's confidential
information, Cisco may at any time and at Cisco's discretion submit the
FIP to the IETF and other standards bodies. Cisco will notify Akamai if
it intends to so submit the FIP to the IETF or other standards bodies.
3.3 EMBEDDING METRIC COMPUTATION INTO ROUTERS PROJECT. Akamai and Cisco
will jointly develop, name and implement one or more algorithms to enable Cisco
routers and switches to compute measurable cost metrics that can be used in
connection with, among other things, making content routing decisions and
tracking accurate and relevant cost metric data ("Metrics Algorithms"), and to
develop protocols which will provide the data resulting from such algorithms to
Cisco Products and to Akamai's software ("Metrics Protocols"), as follows:
(a) The parties will (i) establish by mutual agreement target
dates for the development of the Metrics Algorithms and Metrics
Protocols, and (ii) negotiate in good faith to agree upon, execute and
deliver a Project Plan relating to the development of the Metrics
Algorithms and Metrics Protocols ("Metrics Project Plan").
(b) Akamai shall designate Bruce Maggs ([email protected]) as its
Project Manager for the Metrics Protocols project, and Cisco shall
designate David Rossetti ([email protected]) 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 Metrics Protocols jointly
developed by the parties (the "Jointly Developed Metrics Protocol
Property") shall be owned by Cisco. With respect to the Akamai
Property, if any, expressly incorporated by the parties into the
Metrics Protocols as finally approved by the Parties under this
Agreement, Akamai hereby grants Cisco a nonexclusive, worldwide,
perpetual, irrevocable, fully paid-up, royalty free license, with the
right to sublicense and authorize the granting of sublicenses, to make,
have made, use, import, copy, modify, offer to sell, sell, lease and
otherwise distribute such Akamai Property solely as incorporated in the
Metrics Protocols and any implementations thereof. With respect to the
Jointly Developed Metrics Protocol Property and the Cisco Property, if
any, expressly incorporated by the Parties into the Metrics Protocols
as finally approved by the Parties under this Agreement, Cisco hereby
grants Akamai a non-exclusive, worldwide, perpetual, irrevocable, full
paid-up, royalty free license, with the right to sublicense and
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authorize the granting of sublicenses, to make, have made, use, import,
copy, modify, offer to sell, sell, lease and otherwise distribute the
Cisco Property and the Jointly Developed Metrics Protocol Property
solely as incorporated in the Metrics Protocols and any implementations
thereof. Subject to foregoing, the foregoing licenses do not grant
either Party rights to any Metrics 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 Metrics Protocol 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 Metrics Algorithms shall be set forth as in the Project Plan.
(e) Except as may be otherwise expressly provided in the
Project Plan, Akamai acknowledges that Cisco may establish and promote
the Metrics Protocol as an industry standard. Accordingly, subject to
the requirements of confidentiality with respect to Akamai's
Confidential Information, Cisco may at any time and at Cisco's
discretion submit the Metrics Protocols to the IETF and other standards
bodies. Cisco will notify Akamai if it intends to so submit the FIP to
the IETF or other standards bodies.
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) Akamai shall designate Bruce Maggs ([email protected]) as its
Project Manager for the Switch Protocols project, and Cisco shall
designate John Wakerly ([email protected]) 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 jointly
developed by the parties (the "Jointly Developed Switch Protocol
Property") shall be owned by Cisco. With respect to the Akamai
Property, if any, expressly incorporated by the parties into the Switch
Protocols as finally approved by the Parties under this Agreement,
Akamai hereby grants Cisco a nonexclusive, worldwide, perpetual,
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irrevocable, fully paid-up, royalty free license sublicense and
authorize the granting of sublicenses, to make, have made, use, import,
copy, modify, offer to sell, sell, lease and otherwise distribute such
Akamai Property solely as incorporated in the Switch Protocols and any
implementations thereof. With respect to the Cisco Property and the
Jointly Developed Switch Protocol Property, Cisco hereby grants Akamai
a non-exclusive, worldwide, perpetual, irrevocable, full paid-up,
royalty free license, with the right to sublicense and authorize the
granting of sublicenses, to make, have made, use, import, copy, modify,
offer to sell, sell, lease and otherwise distribute the Cisco Property
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, Akamai acknowledges that Cisco may establish and promote
the Switch Protocol as an industry standard. Accordingly, subject to
the requirements of confidentiality with respect to Akamai's
Confidential Information, Cisco may at any time and at Cisco's
discretion submit the Switch Protocols to the IETF and other standards
bodies. Cisco will notify Akamai if it intends to so submit the FIP to
the IETF or other standards bodies.
3.5 POSSIBLE DEVELOPMENT OF FREEFLOW SERVER ENABLED LINUX SERVICE CARD.
Each party agrees to use commercially reasonable efforts and explore, assess and
investigate the possibility of enabling the FreeFlow Software to operate on a
Linux router card. Akamai shall designate Danny Lewin ([email protected]) to
evaluate the project contemplated in this Section 3.5, and Cisco shall assign
Andy Bechtolsheim ([email protected]). Either Party may change its Project Manager
and appoint a substitute Project Manager for this Project.
3.6 DEVELOPMENT OF HARDWARE SUPPORT FOR EFFICIENT STREAMING. 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
streaming audio, video and other content. Akamai shall designate Danny Lewin
([email protected]) to evaluate the Project contemplated in this Section 3.6, and
Cisco shall assign Andy Bechtolsheim ([email protected]). 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.
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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.
4.2 LOGO USAGE; AKAMAI EQUIPMENT PURCHASES. 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 promote to its customers the use of the other party's
products and services. In addition, Akamai agrees that a majority of its
purchases of network equipment will be Cisco Products, provided Cisco offers a
product of the type required by Akamai and such product is priced competitively.
Akamai will also notify Cisco from time to time of upcoming product needs so
that Cisco will have the opportunity to develop a product to meet Akamai's
requirements. Each party further agrees that it shall not, during the term of
this Agreement, actively promote any third party products or services that
compete with the other Party's products or services; 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 shall not promote any third party or the
products of any third party.
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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
commercial reasonable steps to actively and aggressively promote, any products
and services (including Cisco Products and Akamai Services) that result 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 all reasonable and diligent efforts to cause its customers,
resellers and/or licensees to install and/or deploy enhancements or upgrades to
existing products if such enhancements or upgrades result from the efforts of
the parties under this Agreement. 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: Daniel Lewin, Chief Technology Officer
CISCO: Krish Ramakrishnan, Director
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. At least one-third of the meetings
will be held at Cisco, one-third at Akamai, and one-third at Cisco, Akamai, or
some alternative location, as the parties shall determine.
6. DEVELOPMENT EFFORTS; RESOURCE COMMITMENT; EXPENSES.
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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: Paul Sagan, President and COO
For Cisco: JayShree Ullal, General Manager, VPGM
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 provided by Akamai
to Cisco under this Agreement and owned by Akamai as of the Effective Date or
independently developed by Akamai during the term of this Agreement (the "Akamai
Property"), including any derivatives, improvements or modifications of the
Akamai Property created by either party 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
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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 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 provided by Cisco to
Akamai under this Agreement and owned by Cisco as of the Effective Date or
independently developed by Cisco during the term of this Agreement (the "Cisco
Property"), including any derivatives, improvements or modifications of the
Cisco Property created by either party 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.
8.5 LICENSES. In addition to any licenses granted elsewhere in this
Agreement, Akamai hereby grants to Cisco during the term of this Agreement a
paid up, royalty-free, nontransferable and nonexclusive license to use such of
the Akamai Property (in both source code and object code form, as necessary) and
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all Intellectual Property rights with respect thereto solely in connection with
Cisco's performance hereunder and as may be reasonably necessary for Cisco to
perform its obligations under this Agreement. Cisco hereby grants to Akamai
during the term of this Agreement a paid up, royalty-free, nontransferable and
nonexclusive license to use such of the Cisco Property (in both source code and
object code form, as necessary) and all Intellectual Property Rights with
respect thereto solely in connection with Akamai's performance hereunder and as
may be reasonably necessary for Akamai to perform 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.
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
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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 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
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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, 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
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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 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,
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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 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
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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 THREE MILLION DOLLARS ($3,000,000.00).
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.
(b) Change of Control. In the event any competitor of Cisco in
the network industry acquires thirty-three percent (33%) or more of the
equity ownership of Akamai, Cisco may at its option terminate this
Agreement upon written notice.
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(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 thirty (30) days
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 thirty (30) days 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, 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
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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, a thirty-three percent (33%) change in control to any
competitor of Cisco in the network industry shall constitute an assignment.
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. 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
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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: Name:
Title: Title:
Date: Date:
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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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<PAGE> 5
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
- 3 -
<PAGE> 6
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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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 Five Hundred Thousand Dollars
($500,000) by June 30, 1999 from the sale of Company's equity securities for its
own account.
(e) In the aggregate, COMPANY shall raise at least Two Million
Dollars ($2,000,000) by April 1, 2000 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, 2003 One Million Dollars ($1,000,000);
December 31, 2004 Two Million Dollars ($2,000,000);
December 31, 2005 Three Million Dollars ($3,000,000);
December 31, 2006 Four Million Dollars ($4,000,000);
December 31, 2007 Five Million Dollars ($5,000,000);
December 31, 2008 Six Million Dollars ($6,000,000);
and each year thereafter at least Six Million Dollars
($6,000,000);
or shall
obtain cumulative revenue from commercial activities measured
from January 1, 1999 as follows:
December 31, 2003 One Million Dollars ($1,000,000);
December 31, 2004 Three Million Dollars ($3,000,000);
December 31, 2005 Six Million Dollars ($6,000,000);
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<PAGE> 10
December 31, 2006 Ten Million Dollars ($10,000,000);
December 31, 2007 Fifteen Million Dollars ($15,000,000);
December 31, 2008 Twenty Million Dollars ($20,000,000).
Each year thereafter cumulative revenue from commercial
activities shall increase by at least Six Million Dollars
($6,000,000).
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, M.I.T.'s obligations under Sections 2.2 and 2.5 shall terminate and
M.I.T. shall be free to grant other licenses to the PATENT RIGHTS and
COPYRIGHTS. Upon termination of the restrictions in Sections 2.2 and 2.5,
COMPANY may elect not to continue paying patent fees and costs as outlined in
Section 7.3, and M.I.T. may at its own discretion continue or abandon any or all
of the PATENT RIGHTS. M.I.T. will notify COMPANY in writing at least 30 days
prior to aforementioned discontinuance or abandonment, and COMPANY may elect to
resume coverage of patent fees and costs and direct M.I.T. not to discontinue or
abandon any or all 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
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 $500,000
(an "Equity Financing"), and (y) the Value (as defined below) of the COMPANY
immediately after such Equity Financing is equal to or greater than $6,000,000,
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 $288,000 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
$6,000,000. 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 gross proceeds paid to the COMPANY in the Equity
Financing by (b) the aggregate number of shares of Common Stock (i) sold in the
Equity Financing or (ii) into or for which Convertible Securities sold in the
Equity Financing may be converted or exchanged, 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
$1,500,000 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 $6,000,000.
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<PAGE> 12
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 M.I.T. holds 4.8%
of the total number of shares of Common Stock outstanding on a fully-diluted
common stock-equivalent basis. 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 $6,000,000.
(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") at a per share purchase price (subject to
appropriate adjustment in the event of stock splits, recapitalizations and
similar events) less than 75% of the most recent 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, then the COMPANY shall
offer to M.I.T., at the Dilutive Financing Price, such additional number of
shares of Common Stock as is necessary to maintain M.I.T.'s pro rata ownership
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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<PAGE> 13
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 two percentage points above the
Prime Rate of interest as reported in the Wall Street Journal 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 sixty (60) days 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 sixty (60) days 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 20 days of 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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<PAGE> 14
(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 five (5) years 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 COMPANY, whether such amounts were
incurred before or after the EFFECTIVE DATE. For information purposes, as of the
EFFECTIVE DATE, M.I.T. has incurred approximately $18,000 for such
patent-related fees and costs. Upon the date when the total COMPANY financing is
at least Five Hundred Thousand Dollars ($500,000), but no later than on June 30,
1999, COMPANY shall pay to M.I.T. all fees and costs incurred by M.I.T. through
such date relating to the filing, prosecution and maintenance of the PATENT
RIGHTS. Thereafter, COMPANY shall reimburse all amounts due pursuant to this
Section within thirty (30) days 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.
COMPANY 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 June 30, 1999, COMPANY may
elect, on thirty (30) days prior written notice, not to continue paying patent
fees and costs incurred by M.I.T. through such date of written notice, as
outlined in Section 7.3, and M.I.T. may at its own discretion continue or
abandon any or all of the PATENT RIGHTS for which such payments have been
discontinued. COMPANY may also elect, on thirty (30) days prior written notice,
to discontinue the filing, prosecution and maintenance and payment of all
related fees and costs of any patents or patent applications having claims
covering the subject matter of M.I.T. Case No. [**], and M.I.T. may at its own
discretion and expense, continue or abandon any or all of such PATENT RIGHTS for
which the filing, prosecution or maintenance was discontinued. In the event that
COMPANY elects not to continue to pay the patent fees and costs for any or all
PATENT RIGHTS as outlined in Section 7.3 or elects not to continue to file,
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 terminate at the
expiration of the thirty (30) day notice period specified in this Section 7.4.
Nothing in this Section 7.4 shall release COMPANY from its obligations 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 twenty (20) days 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 100% of any award, and (iii) as to special or
punitive damages (including any damages in excess of "single damages"), M.I.T.
shall receive thirty percent (30%) and the COMPANY seventy percent (70%) 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 One
Million Dollars ($1,000,000) per occurrence with an aggregate of Three Million
Dollars ($3,000,000) for bodily injury including death; One Million Dollars
($1,000,000) per occurrence with an aggregate of Three Million Dollars
($3,000,000) for property damage; and One Million Dollars ($1,000,000) per
occurrence with an aggregate of Three Million Dollars ($3,000,000) 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 five (5) years.
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
- 17 -
<PAGE> 20
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. ASSIGNMENT.
This Agreement is personal to the COMPANY and no rights or obligations
may be assigned by COMPANY without the prior written consent of M.I.T. which
will not be unreasonably withheld, except no such consent will be required to
assign 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
assignment. Failure of such assignee to so agree shall be grounds for
termination 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.
- 18 -
<PAGE> 21
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisk denote omission.
13.2 Non-Use of M.I.T. Name. COMPANY and its AFFILIATES and
SUBLICENSEES shall not use the name of Massachusetts Institute of Technology,
"Lira Laboratory" or any variation, adaptation, or abbreviation thereof, or of
any of its trustees, officers, faculty, students, employees, or agents (other
than COMPANY employees), or any trademark owned by M.I.T., or any terms of this
Agreement in any promotional material or other public announcement or disclosure
without the prior written consent of M.I.T. The foregoing, notwithstanding,
without the consent of M.I.T., COMPANY may state that it is licensed by M.I.T.
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
thirty (30) days 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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<PAGE> 22
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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<PAGE> 23
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 sixty (60) days 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 sixty (60) days 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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<PAGE> 24
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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<PAGE> 25
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 thirty (30) days 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.
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<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, [**] 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 10.23
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMMISSION.
AKAMAI TECHNOLOGIES AND MICROSOFT CORPORATION
BROADBAND STREAMING INITIATIVE AGREEMENT
This Broadband Streaming Initiative Agreement (the "Agreement") is
entered into and effective as of September 20, 1999 (the "Effective Date") by
and between MICROSOFT CORPORATION, a Washington corporation located at One
Microsoft Way, Redmond, WA 98052 ("Microsoft") and AKAMAI TECHNOLOGIES, INC., a
Delaware Corporation located at 201 Broadway, Cambridge, MA 02139 ("Akamai").
RECITALS
Akamai offers a service that delivers Internet-related broadband multimedia
content (including live and on-demand broadband Streaming Media) and provides
related services for independent content providers and corporate customers
(referred to collectively as "ICPs").
Microsoft is a developer of operating system technologies and tools for the
development and serving of Internet and other online content, including
broadband multimedia applications and Streaming Media.
Microsoft has established a "Broadband Streaming Initiative," whereby Microsoft
desires to promote adoption of Windows Media Technologies ("WMT") and other
Microsoft technologies for broadband multimedia services on the Internet.
Microsoft wishes to engage Akamai as, and Akamai wishes to become, a supplier
and promoter of broadband content delivery services for Streaming Media in
connection with Microsoft's upcoming Broadband Streaming Initiative.
Microsoft Confidential & Proprietary
Page 1
<PAGE> 2
AGREEMENT
This Agreement is entered into with reference to the following information
("INITIAL DEFINITIONS TABLE") as well as the definitions set forth below:
<TABLE>
<CAPTION>
<S> <C>
AKAMAI INFORMATION: Corporate Name: Akamai Technologies, Inc.
Place of Incorporation: Delaware
Address for Notices: 201 Broadway, Cambridge,
MA 02139
AKAMAI CONTACT: Akamai Contact/Title: Paul Sagan, President and COO
Telephone Number: (617) 250-3006
Facsimile Number: (617) 250-3001
Email:[email protected]
Copy to: Vice President and General Counsel
Facsimile Number: (617) 250-3001
AKAMAI NAME AND AKAMAI SERVICE Akamai Name: Akamai Technologies
NAME(S) Akamai Service Name(s): FreeFlow, FreeFlow
(for use in press release): Streaming
AKAMAI WEB SITE: www.akamai.com and any successors and
additional and/or new versions of such web site
owned or controlled by Akamai during the Term.
TERM: Beginning as of the Effective Date and continuing
through September 30, 2001, unless earlier
terminated in accordance with Section 9.
</TABLE>
1. DEFINITIONS
1.1 ABOVE THE FOLD means the placement of Content (including an icon and/or
link) or other material on an Akamai Web Site page such that the
material is viewable on a computer screen at a 800 x 600 pixels
resolution when the user first accesses such web page and without
having to scroll down to view more of the web page.
1.2 AKAMAI SERVICES means Akamai's provision of delivery and/or other
services involving "live" and "on-demand" broadband Streaming Media,
including without limitation through Akamai's "FreeFlow Streaming"
service offering and its successors.
1.3 AKAMAI SERVICES GUIDELINES means the guidelines and procedures related
to this Agreement with respect to how Akamai will be engaged by
Broadband Streaming Initiative ICP Participants to provide Akamai
Services and will apply Network Credits against such provision of
Akamai Services, as more fully described in Exhibit A.
Microsoft Confidential & Proprietary
2
<PAGE> 3
1.4 AKAMAI SOFTWARE means Akamai's proprietary software that is licensed in
connection with offering the Akamai Services, and any direct successor
thereto.
1.5 BROADBAND STREAMING INITIATIVE ICP PARTICIPANT means an ICP or other
customer designated by Microsoft in its sole discretion (including
without limitation Microsoft or any of its affiliates) to use Network
Credits in support of the Broadband Streaming Initiative as
contemplated by this Agreement.
1.6 CONFIDENTIAL INFORMATION means: (i) any source code of software
disclosed by either party to the other party; (ii) any trade secrets
and/or other proprietary non-public information not generally known
relating to either party's product plans, designs, costs, prices or
names, finances, marketing plans, business opportunities, personnel,
research, development or know-how; and (iii) the terms and conditions
of this Agreement. "Confidential Information" does not include
information that: (i) is or becomes generally known or available by
publication, commercial use or otherwise through no fault of the
receiving party; (ii) is known and has been reduced to tangible form by
the receiving party prior to the time of disclosure and is not subject
to restriction; (iii) is independently developed by the receiving party
without the use of the other party's Confidential Information; (iv) is
lawfully obtained from a third party that has the right to make such
disclosure; or (v) is made generally available by the disclosing party
without restriction on disclosure.
1.7 CONTENT means data, text, audio, video, graphics, photographs, artwork
and other technology and materials.
1.8 MICROSOFT SOFTWARE means Windows NT Server (including Windows Media
Streaming Media Services, one of which is Windows Media Rights Manager)
and direct successors thereto.
1.9 NETWORK CREDITS means credits available to pay for Akamai Services,
which credits are equal in value to the Network Credits Fee Amount (as
defined in Section 2.1) having been paid by Microsoft from time to time
during the Term, less amounts having been applied pursuant to this
Agreement to reflect the provision of Akamai Services to Broadband
Streaming Initiative ICP Participants, as further set forth in Section
2.1 and Exhibit A.
1.10 STREAMING MEDIA means multimedia Content that is transmitted live or
held in archive on servers and played or displayed via the Web
incrementally, or in semi-real time, such that it can be heard, viewed
or received by an end user with minimal download delays, if any.
1.11 UPDATES means, as to any software, all subsequent public releases
thereof during the Term, including public maintenance releases, error
corrections, upgrades, enhancements, additions, improvements,
extensions, modifications and successor versions.
1.12 WINDOWS MEDIA FORMAT means (a) the Windows Media Audio format which
encodes files with the Microsoft Audio codec (.wma extension), (b) the
proposed industry standard format referred to as the "Advanced
Streaming Format" (.asf extension), which as of the Effective Date is
in comment/revision processes within industry standards bodies, and (c)
any successors or replacements for such formats that may be designated
by Microsoft, regardless of the brand or trademark under which they are
made available from time to time.
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1.13 WINDOWS MEDIA PLAYER means the North American English version of the
upgrade to the Windows 95 and Windows 98 Microsoft Windows Media Player
client technology that displays Streaming Media in Windows Media
Format, other formats of Streaming Media, and other multimedia
data-types, and all successors and Updates to such technology which are
commercially released during the Term.
1.14 WINDOWS MEDIA TECHNOLOGIES or "WMT" means, collectively and
interchangeably, Windows Media Player and Windows Media Streaming Media
services, including Windows Media Rights Manager, for the Windows NT
operating system.
All other initially capitalized terms shall have the meanings assigned to them
in this Agreement.
2. MICROSOFT OBLIGATIONS
2.1 Network Credits Fee. Microsoft agrees to pay to Akamai a total Network
Credits fee of One Million Dollars ($1,000,000.00) (the "Network
Credits Fee Amount"), which fee is intended to pre-pay for Akamai
Services and other services offered by Akamai which Microsoft may
obtain, in accordance with this Agreement, either for Microsoft's
internal operations or for the benefit of Broadband Streaming
Initiative ICP Participants. Microsoft will pay the Network Credits Fee
Amount in [**] sub-parts, in accordance with the following schedule: an
initial payment of [**] shall be due after Akamai delivers an invoice
for such amount to Microsoft, which invoice Akamai may deliver on or
after the Effective Date; [**] of [**], shall be due on [**]; and [**]
of [**], shall be due on [**]. All amounts payable under this Agreement
shall be due on a net thirty (30) day basis. Akamai shall be obligated
to refund the Network Credits Fee Amount to Microsoft only to the
extent set forth in Section 9. The Network Credits Fee Amount shall
serve as a prepayment against which Microsoft or Broadband Streaming
Initiative ICP Participants may obtain Akamai Services and other
services offered by Akamai pursuant to Section 3.2(c) below.
2.2 Deployment Support. During the Term, Microsoft shall provide at no
charge to Akamai, and upon Akamai's request, up to a total of [**]
(i.e., a total of [**]) of high-level technical support in the United
States from (at Microsoft's option) Microsoft's developer relations
group or its product support group in order to assist Akamai with
deploying Windows Media Technologies in accordance with this Agreement.
Such support shall include providing reasonable on-site deployment
support services to Akamai. In addition, during the Term, Microsoft
shall provide [**] to Akamai, and upon Akamai's request, up to a total
of [**] (i.e., a total of [**]) of technical assistance from Microsoft
Consulting Services in order to assist Akamai in porting its
proprietary FreeFlow software to the Windows NT Server platform as
contemplated in Section 3.1(c). Microsoft's obligation to provide any
of the technical support and assistance contemplated by the preceding
sentence in this Section 2.2 shall be subject to the parties' entry
into a mutually-agreed standard technical support agreement (e.g., a
Microsoft Consulting Services Master Agreement). Microsoft shall be
entitled to charge Akamai at its then-current rates for any on-site
deployment support
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services or other technical assistance requested by Akamai which
exceeds the applicable [**] limitations set forth in this Section 2.2,
provided that Microsoft first notifies Akamai that Akamai has exceeded
the applicable [**] limitation.
2.3 Early Releases. During the Term, Microsoft will provide to Akamai, at
no charge, successive [**] ([**], and where practical as determined by
Microsoft in its sole discretion, [**]) of Microsoft Software in object
code form; provided, however, that nothing herein shall be deemed to
require that Microsoft release any additional versions of any Microsoft
Software during the Term. All Microsoft Software provided hereunder may
be used by Akamai only in accordance with the confidentiality and
license agreements accompanying such Microsoft Software and, in
addition, may be used solely in connection with supporting the
provision of Akamai Services that use Windows Media Technologies.
Akamai understands that [**] software is not intended for [**].
2.4 Promotion of Akamai Services. In conjunction with its Broadband
Streaming Initiative, Microsoft agrees to publicly announce, in a
manner commercially similar to the level of promotion provided to other
Content delivery service providers who are Broadband Streaming
Initiative participants, that Akamai is a Microsoft recommended
solution provider for ICPs who are using WMT to deliver high bandwidth
Streaming Media. Thereafter, during the Term, Microsoft will use
commercially reasonable, good faith efforts to include and promote
Akamai as a provider of broadband delivery and other services related
to Streaming Media, including without limitation as part of Microsoft's
applicable marketing efforts and materials, sales training, Web sites,
and other promotions, consistent with Microsoft's promotion of other
Broadband Streaming Initiative Content delivery service providers which
have entered into agreements with Microsoft on similar terms to this
Agreement.
2.5 Preconditions for Microsoft Sponsorship and Support Obligations. Each
of Microsoft's obligations under this Section 2 is expressly
conditioned upon Akamai's performance of its obligations under Sections
3.1 through 3.4 throughout the Term. In addition, because Akamai has
not shared with Microsoft Akamai's plans for the Akamai Services as of
the Effective Date, Akamai agrees to confer in good faith with
Microsoft promptly after the Effective Date in order to develop and set
forth in writing, no later than ninety (90) days after the Effective
Date, mutually approved performance objectives (the "Performance
Criteria") for Akamai's participation in the Broadband Streaming
Initiative during the [**] of the Term. If Microsoft reasonably
believes that Akamai has not met or exceeded such Performance Criteria
during the [**] of the Term, then Microsoft may notify Akamai of such
determination by providing a written notice identifying the specific
Performance Criteria which Akamai has not met, provided that Microsoft
must issue any such notice within ninety (90) days after the [**]
anniversary of the Effective Date. If, after receiving such a notice,
Akamai does not notify Microsoft of Akamai's good faith disagreement
with Microsoft's determination and does not improve its performance
such that it meets the Performance Criteria within sixty (60) days
after receiving Microsoft's written notice hereunder, then Microsoft
may in its discretion terminate this Agreement effective thirty (30)
days after Microsoft provides written notice to Akamai of such
termination. If Akamai disagrees in good faith with Microsoft's
determination as set forth
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in such notice, the parties shall promptly undertake to resolve such
dispute as provided in Section 11.5 of this Agreement.
2.6 Reservation of Rights. Except as expressly licensed pursuant to this
Agreement, Akamai shall have no other rights in the Microsoft Software,
the Windows Media Player or any other Microsoft software, technology or
services provided to Akamai hereunder. Microsoft retains all right,
title and interest in and to the Microsoft Software, the Windows Media
Player and any other Microsoft software, technologies and services.
Nothing in this Agreement shall be construed, by implication, estoppel
or otherwise, as granting Akamai any rights to any Microsoft software,
technology, service or other intellectual property rights.
3 AKAMAI OBLIGATIONS
3.1 Use and Promotion of Windows Media Technologies and Windows Media
Format. Subject to Windows Media Technologies being a competitively
comparable solution to other Streaming Media technologies and platforms
(as reasonably determined based on technology, price, quality and
delivery timetables), throughout the Term, Akamai will deploy, describe
and promote Windows Media Technologies and the Windows Media Format to
all of its prospective and actual customers for Akamai Services
(including without limitation both ICPs and Internet Service Providers
("ISPs")) in a manner consistent with and commercially similar to all
other Streaming Media platforms or formats that it offers, promotes or
recommends for any Akamai Service.
Akamai's use and promotion of Windows Media Technologies and related
technologies shall further include, without limitation:
(a) Content Format. Within thirty (30) days after the Effective
Date, and continuing thereafter throughout the Term, except as
set forth below, all Streaming Media made available on the
Akamai Web Site shall be made available in Windows Media
Format; provided, however, that nothing herein shall be deemed
to prevent Akamai from making Streaming Media available on
such Web site in additional formats. Notwithstanding the
foregoing, it is understood and agreed that from time to time
during the Term Akamai, in conjunction with one or more third
parties, may enter into a program or opportunity that features
particular Streaming Media created for and/or formatted in a
specific platform or technology other than Windows Media
Format or Windows Media Technologies, and nothing contained
herein shall prevent Akamai from doing so, but in such event
Akamai will use commercially reasonable efforts promptly to
offer to Microsoft a similar program or opportunity.
(b) Deployment of New Applications and Services. Throughout the
Term, Akamai will promote and make available to its customers
and prospective customers all new Akamai services and products
related to Streaming Media on WMT and in Windows Media Format
concurrently with or sooner than Akamai makes such new
services or products available based on or in conjunction with
other Streaming Media
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technologies or formats, subject to the limitation that
Akamai's obligations hereunder with respect to release
schedule parity are conditioned on Microsoft providing
comparable competitive offerings to other commercially
available offerings of a particular technology or format
within a time frame that makes it commercially feasible for
Akamai to achieve the foregoing release schedule parity. If,
at any time, Microsoft provides a comparable competitive
offering later than necessary to enable Akamai to achieve such
release schedule parity, Akamai will use commercially
reasonable efforts to offer versions of its ongoing services
and products related to Streaming Media on WMT and in Windows
Media Format promptly after Microsoft provides the applicable
comparable competitive offering. Nothing in this Section
3.1(c) is intended to require Akamai to disclose any third
party confidential information to Microsoft with respect to
competitive services or offerings.
(c) Porting and Promotion of Akamai FreeFlow Server Software for
Windows NT. Akamai shall port its FreeFlow server software
(which software enables and supports FreeFlow, Akamai's
non-Streaming Media Web Content delivery service), and any new
versions and successors thereto that Akamai offers during the
Term, to operate on the Microsoft Windows NT operating system.
Further, Akamai agrees to make available and promote to
participants of Akamai's FreeFlow ISP program (and any
successor programs) during the Term hardware and Akamai
software that supports Akamai's FreeFlow service operating on
the Windows NT operating system. Nothing herein shall be
deemed to transfer to Microsoft any right, title or interest
in and to the Akamai FreeFlow server software, or any
enhancements, improvements, updates and upgrades thereto.
(d) Sponsorship. Beginning on the Effective Date and continuing
thereafter throughout the Term, Akamai shall include on all
pages of the Akamai Web Site that relate to or promote
Streaming Media or applications therefor (other than pages or
areas within the Akamai Web Site that are specific to a
particular Streaming Media format or technology) a prominent
"Get Windows Media Player" link logo (the "Windows Media
Sponsorship Notice") which links to a Microsoft-authorized
Windows Media Player download site, in accordance with the
following terms:
(i) The Windows Media Sponsorship Notice shall appear no
less prominently than any other similar notices on
each Akamai Web Site page that contains or provides
access to Streaming Media or that materially features
any Akamai Service (other than pages or areas within
the Akamai Web Site that are specific to a particular
Streaming Media format or technology other than
Window Media).
(ii) On all pages of the Akamai Web Site, including
without limitation those described in Section
3.1(d)(i) (but subject to the exceptions set forth
therein), in the event Akamai includes any
information or notices concerning Streaming Media
technologies or formats other than Windows Media
Technologies and Windows Media Format, the Windows
Media Sponsorship Notice shall appear on such page in
a position at least as favorable in prominence, size
and
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positioning as any other such notice; provided,
however, that this provision shall not require the
Windows Media Sponsorship Notice (or any thereto) to
be placed on any pages or areas within the Akamai Web
Site that are specific to a particular Streaming
Media format or technology.
(iii) In all cases, the Windows Media Sponsorship Notice
shall be a minimum of 65 by 57 pixels (width by
height), and shall conform to all trademark usage
standards provided by Microsoft to Akamai from time
to time.
(iv) Microsoft shall be entitled to substitute from time
to time a different hypertext link and/or link logo
as the Windows Media Sponsorship Notice, subject to
the same pixel size restrictions as are set forth in
Section 3.1(d)(iii), in place of the "Get Windows
Media Player" link logo for purposes of this
Agreement, including without limitation Akamai's
responsibilities under this Section 3.1(d), upon
Microsoft's reasonable advance written notice to
Akamai.
(e) Uses of the Get Windows Media Player Logo. All use by Akamai
of the "Get Windows Media Player" link logo (or any successor
logo(s)) in connection with this Agreement is subject to
compliance with Microsoft's guidelines relating to the use of
such logo(s). The current version of such guidelines as of the
Effective Date is set forth in Exhibit B hereto.
3.2 Provision of Akamai Services to Broadband Streaming Initiative
Participants. Subject to Microsoft's performance of its
obligations under Sections 2.1 through 2.4, Akamai agrees to
perform the following obligations:
(a) Akamai agrees to provide, during the six (6) month period
commencing on the Effective Date, Akamai Services to be
comprised of broadband Streaming Media delivery services, at
no charge (either to Microsoft or the ICP, and without
applying Network Credits against the value of such services)
to each Broadband Streaming Initiative ICP Participant that
Microsoft designates in its discretion as a participant in the
Broadband Streaming Initiative; provided, however, that such
obligation shall not extend beyond the first six (6) months of
the Term of this Agreement, and the aggregate value of such
no-charge Akamai Services that Akamai agrees to provide for
and as used by all Broadband Streaming Initiative ICP
Participants, will not exceed [**]), as such usage is
calculated in accordance with Exhibit A. Akamai will use
commercially reasonable efforts to notify Microsoft in writing
at least thirty (30) days before it anticipates participants'
usage exceeding the foregoing maximum value of the relevant
Akamai Services. Notwithstanding the foregoing, Akamai's
obligation under this Section 3.2(a) will be subject to (i)
notification by Microsoft as to the names of participating
Broadband Streaming Initiative ICP Participants; (ii)
execution of Akamai's standard services agreement by each
Broadband Streaming Initiative ICP Participant; and (iii)
there being at least three (3) participating Broadband
Streaming Initiative ICP Participants, none of which will use
during any thirty (30) day period more than [**] worth of the
available no-charge Akamai Services that Akamai agrees to
provide pursuant to this Section 3.2(a).
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(b) At Microsoft's request and at no charge to Microsoft or the
applicable Internet service providers ("ISPs"), and without
applying Network Credits against the value of such services,
Akamai will install hardware and equipment, as well as copies
of the Akamai Software, and provide its standard level of
service related to such hardware and equipment and for such
software during the Term in order to support ISPs which
Microsoft has designated in its discretion to participate in
the Broadband Streaming Initiative. As a condition to Akamai
performing the foregoing obligations, each participating ISP
will first agree to comply with a separate written agreements
with Akamai and/or its resellers or other licensees with
respect to installation and support of the hardware, equipment
and Akamai Software, and nothing in this Agreement shall be
deemed to authorize Microsoft to install and/or support such
hardware, equipment or copies of the Akamai Software.
(c) In addition to the obligations of Akamai under Sections 3.2(a)
and (b), as contemplated in Section 2.1 above, Microsoft shall
be entitled to apply its prepaid Network Credits and thereby
obtain Akamai Services, at Microsoft's sole discretion, (i)
for the benefit of designated ICPs in accordance with this
Agreement (including without limitation Exhibit A) or (ii) for
Microsoft to obtain other services offered by Akamai,
including without limitation Akamai's FreeFlow services and
any new versions or successors thereto, subject to such
participants and/or Microsoft entering into Akamai's standard
services agreement. In the event that Microsoft authorizes
Akamai to provide Akamai Services that exceed in value (as
calculated pursuant to the terms set forth in Exhibit A) the
value of then-existing pre-paid balance of Network Credits,
Microsoft agrees to pay Akamai for such Akamai Services in
accordance with Akamai's then-current pricing to third parties
that are purchasing Akamai Services in aggregate volumes
comparable to those being purchased by Microsoft in connection
with the use of Network Credits under this Agreement.
Akamai's obligation under this Section 3.2(c) is further
subject to a partial, rolling expiration schedule to the
extent Microsoft (for its internal operations) or Broadband
Streaming Initiative ICP Participants do not use Akamai
Services or other services of Akamai that are equal in value
(as calculated pursuant to Exhibit A) to the prepaid Network
Credits Fee Amount as follows:
(i) to the extent that Akamai Services [**] to the first
payment of the prepaid Network Credits Fee Amount due under
Section 2.1 are not used by Microsoft or Broadband Streaming
Initiative ICP Participants by December 31, 1999, then up to
[**] of such first payment (i.e., up to [**]) may be carried
over for use during the next calendar quarter (i.e., for use
before March 31, 2000), and a further [**] of such first
payment (i.e., up to [**]) may be carried over for use during
a second succeeding calendar quarter (i.e., for use before
June 30, 2000), after which any remaining unused Network
Credits Fee Amount shall expire;
(ii) to the extent that Akamai Services equal to the
successive payments of sub-parts of the prepaid Network
Credits Fee Amount as due under Section 2.1 are not used by
Microsoft or Broadband Streaming Initiative ICP Participants
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH
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during the calendar quarter beginning on the day they become
payable, then [**] of each such payment may be carried over
for use during the next succeeding calendar quarter, and a
further [**] of each such payment may be carried over for use
during the second succeeding calendar quarter, all in the same
manner as described in Section 3.2(c)(i) above, with the
result being that the last date on which Microsoft or a
Broadband Streaming Initiative ICP Participant might
potentially use any prepaid Akamai Services (or other services
of Akamai) under this Section 3.2(c), assuming unused and
unexpired Network Credits Fee Amounts have been carried over
as provided for herein, is June 30, 2001; and
(iii) notwithstanding subparagraph (ii) above, to the
extent that any prepaid Network Credits Fee Amount are not
used by Microsoft or Broadband Streaming Initiative ICP
Participants by June 30, 2001, then the unused portion shall
expire.
Except as provided in Section 9, Akamai shall be entitled to
retain all prepaid Network Credits Fees.
3.3 Publicity. Akamai will work with Microsoft to develop a mutually
agreeable press release to be released as soon as possible after the
Effective Date, provided that the text of such release must have been
approved in writing by each party before its release. In such release,
(a) Akamai shall designate Windows Media Technologies and the Windows
Media Format as being recommended by Akamai as one of its recommended
platforms and formats for broadband Streaming Media-related services,
(b) Microsoft shall designate Akamai's Streaming Media services as
being recommended by Microsoft as one of its recommended content
delivery services for broadband Streaming Media, (c) the parties shall
promote the availability of Akamai's FreeFlow and FreeFlow Streaming
services on the Windows NT Server platform, (d) Akamai may be
identified as a participant in Microsoft's Network Credits program, and
(e) Akamai may identify the Microsoft's Windows Media group as a
customer of Akamai. Further, subject to the limitations set forth in
the next sentence, Akamai agrees that (a) it will not release or
approve any press releases relating to broadband Streaming Media and
using its name or any descriptions of the Akamai Services, other than
in conjunction with promotions of Windows Media Technologies as
described above, during the period of September 20, 1999 through
October 17, 1999 (provided that Microsoft understands and accepts that
Akamai (i) has preexisting arrangements relating to the NetAid event
scheduled for October 9, 1999, and in conjunction therewith Akamai may
be party to one or more press releases related to such event, which
press releases may reference Streaming Media, and (ii) has preexisting
arrangements relating to announcing the migration of QuickTime TV onto
the Akamai Network, and (iii) intends to make a general "FreeFlow
Streaming" announcement on or about October 4, 1999 in conjunction with
Internet World), and (b) at all times during the Term, it will not
issue or approve press releases from third parties relating to
broadband Streaming Media that are inconsistent with the spirit of this
Section 3.3. Notwithstanding the restrictions set forth in the previous
sentence, Akamai shall be entitled to perform under any contractual
obligation to which it is subject as of the Effective Date which
requires it to release or approve press releases or making other
announcements during the Term. During the Term, Akamai will also work
with Microsoft to develop and release additional joint press
announcements, provided that the
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details of each such announcements must have been approved in writing by
each party before it occurs, and Akamai agrees to provide Microsoft with
reasonably detailed information on use of Microsoft's technology in the
Akamai Services for inclusion in a case study which Akamai shall be
entitled to review and approve. With respect to all approvals contemplated
by this Section 3.3, the parties agree not to unreasonably withhold or
delay such approvals.
3.4 Reporting and Audits. By the tenth (10th) day of each calendar month
during the Term (other than the month in which the Effective Date
falls), Akamai shall provide a report to Microsoft setting forth the
following information concerning the provision of Akamai Services
related to Streaming Media during the previous calendar month, to the
extent Akamai's provision of such information to Microsoft does not
conflict with any contractual obligation of Akamai to a customer or
other third party:
(a) The URL and number of page views for pages on the Akamai Web
Site or third party web sites hosted by Akamai which contain
Streaming Media;
(b) The number of referrals of end users from the Akamai Web Site
or third party web sites hosted by Akamai to Microsoft's
Windows Media Player download site(s);
(c) Web browsing software share and Streaming Media player share
information for the Akamai Web Site and third party web sites
hosted by Akamai, including version information;
(d) The number of streams served, including the total number of
.wma, .asx and .asf format files served, by bit rate;
(e) The average length of a user stream for a single connection to
the Akamai Web Site and third party web sites hosted by
Akamai;
(f) The number of streams of pages with feature/streaming
technology; and
(g) The average number of .wma, .wmx, and .asx files on site.
Akamai shall provide all reports hereunder to Microsoft via Microsoft's
web reporting system located at
http://webevents.microsoft.com/report.asp, or any successor thereto.
In the event that Akamai has failed to provide a report as described in
this Section 3.4 on or before the twenty-fifth (25th) day of the
relevant calendar month, then Microsoft will be entitled to suspend its
performance under this Agreement (including without limitation its
payment obligations under Section 2.1) until such report has been
received. All information provided pursuant to this Section will be
deemed to be Confidential Information of Akamai.
3.5 Additional Trademark Use. Akamai further agrees to use all Windows
Media Technologies-related logos in accordance with the applicable logo
program requirements established by Microsoft in its sole discretion
from time to time. In the event that Akamai fails to comply with
Microsoft's then-current logo requirements for participation in the
Streaming Media Initiative at any time during the Term, then Microsoft
will be entitled, after providing Akamai with notice of breach and an
opportunity to cure such breach within thirty (30) days, to suspend its
performance under this Agreement and terminate this Agreement
(including without limitation Microsoft's payment obligations under
Section 2.1) upon further written notice to Akamai.
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3.6 Reservation of Rights. Except as expressly licensed pursuant to this
Agreement, Microsoft shall have no other rights in the Akamai Services,
the Akamai Software or any other Akamai software, technology or
services provided to Microsoft hereunder. Akamai retains all right,
title and interest in and to the Akamai Services, Akamai Software and
any other Akamai software, technologies and services. Nothing in this
Agreement shall be construed, by implication, estoppel or otherwise, as
granting Microsoft any rights to any Akamai software, technology,
service or other intellectual property rights.
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4. ADDITIONAL UNDERSTANDINGS
4.1 Technology Development and Testing Discussions. Subject to the
commercial availability of appropriate technical personnel,
and to the parties' prior mutual written agreement with
respect to applicable intellectual property ownership and
licenses, the parties agree to cooperate in good faith to
discuss additional technical cooperation endeavors in
connection with the Akamai Services and Microsoft Software and
other commercial activities in relation to the following areas
of mutual interest concerning technology development: (a) [**]
into [**] (b) [**] of the [**] thereto into [**], and/or the
[**] thereto; and (c) other possible integration and support
opportunities consistent with the intent and purpose of this
Agreement.*
5. NON-EXCLUSIVE
Nothing in this Agreement shall be deemed to restrict either party's ability to
license, develop, sub-license, manufacture, deploy, support, promote, offer or
distribute software, Content, Streaming Media or any other format or technology,
whether or not similar to or competitive with Windows Media Technologies, Akamai
Services, or any products, services or technologies related to the products and
services of either party, subject to the obligations of the parties with respect
to Confidential Information.
6. CONFIDENTIALITY
6.1 Each party shall protect the other's Confidential Information from
unauthorized dissemination and use with the same degree of care that
such party uses to protect its own like information and in no event
using less than a reasonable degree of care. Neither party will use the
other's Confidential Information for purposes other than those
necessary to directly further the purposes of this Agreement. Neither
party will disclose to third parties the other's Confidential
Information without the prior written consent of the other party.
Except as expressly provided in this Agreement, no ownership or license
rights are granted in any Confidential Information. The other
provisions of this Agreement notwithstanding, either party will be
permitted to disclose the Confidential Information to their outside
legal and financial advisors; and to the extent required by applicable
law, provided however that before making any such required filing or
disclosure, the disclosing party shall first give written notice of the
intended disclosure to the other party, within a reasonable time from
the time disclosure is requested and in any event prior to the time
when disclosure is to be made, and the disclosing party will exercise
best efforts, in cooperation with and at the expense of the other
party, consistent with reasonable time constraints, to obtain
confidential treatment for all non-public and sensitive provisions of
this Agreement, including without limitation dollar amounts and other
numerical information.
6.2 The parties' obligations of confidentiality under this Agreement shall
not be construed to limit either party's right to independently develop
or acquire products without use of the other party's Confidential
Information. Further, either party shall be free to use for any
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purpose the residuals resulting from access to or work with such
Confidential Information, provided that such party shall maintain the
confidentiality of the Confidential Information as provided herein. The
term "residuals" means information in non-tangible form, which may be
retained by persons who have had rightful and good faith access to the
Confidential Information, including 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. However, the
foregoing shall not be deemed to grant to either party a license under
the other party's copyrights or patents.
7. WARRANTIES AND DISCLAIMERS
7.1 Warranties. Each party warrants and covenants that it has the full
power and authority to enter into and perform according to the terms of
this Agreement.
7.2 DISCLAIMERS. ANY AND ALL SOFTWARE, TECHNOLOGY, SERVICES, CONTENT, OR
INFORMATION PROVIDED BY EITHER PARTY TO THE OTHER HEREUNDER IS PROVIDED
"AS IS," WITHOUT WARRANTY OF ANY KIND. EACH PARTY DISCLAIMS ALL
WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE
IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, TITLE AND NONINFRINGEMENT, WITH RESPECT TO ANY SOFTWARE,
TECHNOLOGY, SERVICES, CONTENT, OR INFORMATION PROVIDED HEREUNDER.
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8. INDEMNITY
8.1 Indemnity by Akamai. Akamai shall, at its expense and Microsoft's
request, defend any claim or action brought by a third party against
Microsoft, or Microsoft's affiliates, directors, or officers, to the
extent it is based upon a claim involving the Akamai Services and/or
the Akamai Web Site, including without limitation any claim that any
Akamai Services or any Content included in or uploaded to the Akamai
Web Site infringes or violates any copyright, patent, trademark, trade
secret, right of publicity, or other intellectual property, proprietary
or contractual right of a third party (all such claims or actions being
referred to hereinafter as "Akamai Claims"), and Akamai will indemnify
and hold Microsoft harmless from and against any costs, damages and
fees reasonably incurred by Microsoft, including but not limited to
fees of outside attorneys and other professionals, that are
attributable to such Akamai Claims; provided, however, that Microsoft
shall: (a) provide Akamai reasonably prompt notice in writing of any
such Akamai Claims and permit Akamai, through counsel chosen by Akamai,
to answer and defend and have exclusive control over, subject to
Section 8.2, the answer and defense of such Akamai Claims; and (b)
provide the entity defending such claim information, assistance and
authority, at such entity's expense, to help defend such Akamai Claims.
Akamai will not be responsible for any settlement made by Microsoft
without Akamai's written permission, which permission will not be
unreasonably withheld or delayed. Reasonable withholding of permission
may be based upon, among other factors, editorial and business
concerns. Akamai will consult with Microsoft on Akamai's choice of
counsel under this Section 8.1. In the event Microsoft receives any
Akamai Claim or Microsoft has reason to believe it may be subject to
any Akamai Claim, Microsoft shall be entitled, upon written notice to
Akamai, to suspend performance under this Agreement with respect to the
applicable Akamai Service(s), Akamai Web Site or Content thereon until
Akamai has taken steps to Microsoft's reasonable satisfaction in order
to address the alleged infringement. If Akamai does not take
satisfactory steps to address the alleged infringement within ten (10)
days after Microsoft delivers such a notice of suspension, then
Microsoft in its discretion may terminate this Agreement upon written
notice to Akamai and such termination shall be deemed to be a
termination for cause for purposes of Section 9.
8.2 Settlement by Akamai. Unless Akamai obtains for Microsoft a complete
release of all Akamai Claims thereunder, Akamai may not settle any
Akamai Claim under Section 8.1 on Microsoft's behalf without first
obtaining Microsoft's written permission, which permission will not be
unreasonably withheld or delayed. Reasonable withholding of permission
may be based upon, among other factors, the ability for Microsoft to
ship any product. In the event Akamai and Microsoft agree to settle an
Akamai Claim, both parties agree not to disclose terms of the
settlement without first obtaining the other party's written
permission, which will not be unreasonably withheld or delayed.
8.3 Indemnification by Microsoft. Microsoft shall, at its expense and
Akamai's request, defend any claim or action brought by a third party
against Akamai, or Akamai's affiliates, directors, or officers, to the
extent it is based upon a claim relating to Microsoft's promotion of
any Akamai Services or Microsoft's promotional activities regarding the
Broadband Streaming Initiative (all such claims or actions being
referred to hereinafter as "Microsoft
Microsoft Confidential & Proprietary
15
<PAGE> 16
Claims"), and Microsoft will indemnify and hold Akamai harmless from
and against any costs, damages and fees reasonably incurred by Akamai,
including but not limited to fees of outside attorneys and other
professionals, that are attributable to such Microsoft Claims;
provided, however, that Akamai shall: (a) provide Microsoft reasonably
prompt notice in writing of any such Microsoft Claims and permit
Microsoft, through counsel chosen by Microsoft, to answer and defend
and have exclusive control, subject to Section 8.4, over the answer and
defense of such Microsoft Claims; and (b) provide Microsoft such claim
information, assistance and authority, at Microsoft's expense, to help
defend such Microsoft Claims. Microsoft will not be responsible for any
settlement made by Akamai without Microsoft's written permission, which
permission will not be unreasonably withheld or delayed. Reasonable
withholding of permission may be based upon, among other factors,
editorial and business concerns. In the event Akamai receives any
Microsoft Claim or Akamai has reason to believe it may be subject to
any Microsoft Claim, Akamai shall be entitled, upon written notice to
Microsoft, to suspend performance under this Agreement with respect to
the applicable obligations of Akamai under Section until Microsoft has
taken steps to Akamai's reasonable satisfaction in order to address the
alleged infringement. If Microsoft does not take satisfactory steps to
address the alleged infringement within ten (10) days after Akamai
delivers such a notice of suspension, then Akamai in its discretion may
terminate this Agreement upon written notice to Microsoft and such
termination shall be deemed to be a termination for cause for purposes
of Section 9.
8.4 Settlement by Microsoft. Unless Microsoft obtains for Akamai a complete
release of all Microsoft Claims thereunder, Microsoft may not settle
any Microsoft Claim under Section 8.3 on Akamai's behalf without first
obtaining Akamai's written permission, which permission will not be
unreasonably withheld or delayed. Reasonable withholding of permission
may be based upon, among other factors, the ability for Akamai to
provide any Akamai Services. In the event Microsoft and Akamai agree to
settle a Microsoft Claim, both parties agree not to disclose terms of
the settlement without first obtaining the other party's written
permission, which will not be unreasonably withheld or delayed.
9. TERMINATION
9.1 Termination By Either Party. Either party may suspend performance
and/or terminate this Agreement only as expressly provided elsewhere in
this Agreement or:
(a) Immediately upon written notice at any time, if the other
party is in material breach of any material warranty, term,
condition or covenant of this Agreement, other than those
contained in Section 6, and fails to cure that breach within
thirty (30) days after written notice thereof; or
(b) Immediately upon written notice at any time, if the other
party is in material breach of Section 6.
Microsoft Confidential & Proprietary
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<PAGE> 17
9.2 Effect of Termination.
(a) Neither party shall be liable to the other for damages of any
sort resulting solely from terminating this Agreement in
accordance with its terms.
(b) Termination of this Agreement shall not affect any other
agreement between the parties.
(c) Should either Akamai or Microsoft terminate for cause pursuant
to Section 8.1, 8.3, 9.1(a), or 9.1(b), neither party shall
have any further obligations to the other under Sections
2.1-2.5, Section 3.1-3.5, or Section 4, with the exception
that Microsoft shall be entitled to require Akamai to refund
the portion of the total Network Credits Fee Amount then
having been prepaid by Microsoft and not (as of the
termination date) used to provide Akamai Services or other
services for the parties and purposes specified in Section 2.1
and Exhibit A. Alternatively, in the event Microsoft
terminates this Agreement for cause pursuant to Section 8.1,
9.1(a) or 9.1(b), Microsoft may elect in its sole discretion
to retain and use, in accordance with the Network Credits
roll-over and expiration schedule set forth in Section 3.2(c),
any prepaid Network Credits Fee Amount then having been paid
by Microsoft and which has not been recouped via use of such
prepaid Networks Credits Fee Amount still outstanding as of
the date of termination. Without limiting the generality of
the foregoing, Microsoft will have no obligation following
termination of this Agreement to make any additional payments
or provide any further services to Akamai under Section 2 of
this Agreement, and, except as provided above, Akamai shall
have no obligation following termination of this Agreement to
provide any further services to Microsoft or any ICP.
9.3 Survival. In the event of termination or expiration of this Agreement
for any reason, Sections 1, 2.6, 3.6 and 5-11 shall survive termination
and continue in effect in accordance with their terms.
10. LIMITATION OF LIABILITIES
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY CONSEQUENTIAL, INDIRECT,
INCIDENTAL, PUNITIVE OR SPECIAL DAMAGES WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF
BUSINESS INFORMATION, AND THE LIKE, ARISING OUT OF THIS AGREEMENT OR THE USE OF
OR INABILITY TO USE THE MICROSOFT SOFTWARE OR EITHER PARTY'S CONFIDENTIAL
INFORMATION, CONTENT, OR SERVICES, EVEN IF A PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
THIS SECTION SHALL NOT APPLY TO SECTION 6 (REGARDING CONFIDENTIALITY), NOR TO
THE INDEMNITY OBLIGATIONS WITH RESPECT TO THIRD PARTY CLAIMS AS PROVIDED IN
SECTION 8 OF THIS AGREEMENT.
Microsoft Confidential & Proprietary
17
<PAGE> 18
11. GENERAL PROVISIONS
11.1 Notices. All notices and requests in connection with this Agreement
shall be deemed given as of the day they are received either by
messenger, delivery service, or in the United States of America mails,
postage prepaid, certified or registered, return receipt requested. Any
such notices to Akamai should be sent to the address set forth in the
Initial Definitions Table on the first page of this Agreement, and sent
to the attention of the Akamai Contact named in such Initial
Definitions Table or to such other address as a party may designate
pursuant to this notice provision. Any such notices to Microsoft should
be addressed as follows:
ADDRESS:
Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
Attention: Patty Jackson
Phone: (425) 882-8080
Fax: (425) 936-7329
COPY TO: LAW AND CORPORATE AFFAIRS
Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
Attention: Law & Corporate Affairs
Phone: (425) 882-8080
Fax: (425) 936-7409
11.2 Independent Parties. Nothing in this Agreement shall be construed as
creating an employer-employee relationship, an agency relationship, a
partnership, or a joint venture between the parties.
11.3 Governing Law. This Agreement will be governed by the laws of the State
of Washington, without reference to the conflict of law principles
thereof. Any action or litigation concerning this Agreement brought by
Akamai will take place exclusively in the federal or state courts in
King County, Washington. Any action or litigation concerning this
Agreement brought by Microsoft will take place exclusively in the
federal or state courts in Boston, Massachusetts. The parties expressly
consent to jurisdiction of and venue in the courts specified in the
foregoing sentences and waive all defenses of lack of personal
jurisdiction and forum non conveniens with respect to such courts. Each
party hereby agrees to service of process by mail or other method
acceptable under the laws of the State of Washington.
11.4 Attorneys' Fees. In any action or suit to enforce any right or remedy
under this Agreement or to interpret any provision of this Agreement,
the prevailing party shall be entitled to recover its costs, including
reasonable attorneys' fees.
Microsoft Confidential & Proprietary
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<PAGE> 19
11.5 Dispute Resolution Procedures Related to Meeting Performance Criteria.
In the event a dispute between Akamai and Microsoft arises under
Section 2.5 of the Agreement, the parties shall attempt to settle such
dispute through consultation and negotiation between the responsible
Microsoft contact and Akamai contact in good faith and a spirit of
mutual cooperation. If the respective contacts are unable to resolve
the dispute, it shall be referred to a conflict resolution committee
comprised of one representative designated by each party. 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.
11.6 Assignment. This Agreement and any rights or obligations hereunder may
not be assigned by either party (including without limitation via
merger, stock purchase, a sale of substantially all assets, or
otherwise by operation of law) without the other party's prior written
approval, which approval will not be unreasonably withheld or delayed.
Any attempted assignment, sub-license, transfer, encumbrance or other
disposal which has not been so approved will be void and will
constitute a material default and breach of this Agreement for which
the non-breaching party may terminate this Agreement in accordance with
Section 9.1. Except as otherwise provided, this Agreement will be
binding upon and inure to the benefit of the parties' successors and
lawful assigns.
11.7 Force Majeure. Neither party shall be liable to the other under this
Agreement for any delay or failure to perform its obligations under
this Agreement if such delay or failure arises from any cause(s) beyond
such party's reasonable control, including by way of example labor
disputes, strikes, acts of God, floods, fire, lightning, utility or
communications failures, earthquakes, vandalism, war, acts of
terrorism, riots, insurrections, embargoes, or laws, regulations or
orders of any governmental entity.
11.8 Construction. If for any reason a court of competent jurisdiction finds
any provision of this Agreement, or portion thereof, 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. 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. This Agreement has been negotiated by the parties
and their respective counsel and will be interpreted fairly in
accordance with its terms and without any strict construction in favor
of or against either party.
11.9 Execution in Counterparts and by Facsimile. This Agreement may be
executed in one or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument. A facsimile copy of a signed counterpart shall be treated
the same as a signed original.
11.10 Entire Agreement. This Agreement does not constitute an offer by
Microsoft and it shall not be effective until signed by both parties.
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and merges all prior
Microsoft Confidential & Proprietary
19
<PAGE> 20
and contemporaneous communications. It shall not be modified except by
a written agreement dated subsequent to the date of this Agreement and
signed on behalf of Akamai and Microsoft by their respective duly
authorized representatives.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective Date written above.
MICROSOFT CORPORATION AKAMAI TECHNOLOGIES, INC.
By: By:
- -------------------------------------------------------------------------------
Name (print): Name (print):
- -------------------------------------------------------------------------------
Title: Title:
- -------------------------------------------------------------------------------
Date: Date:
- -------------------------------------------------------------------------------
Microsoft Confidential & Proprietary
20
<PAGE> 21
EXHIBIT A
AKAMAI SERVICES GUIDELINES
1. Approval of Program Participants
Subject to the restrictions and limitations contained in the Agreement,
Microsoft shall have sole discretion regarding the designation of Broadband
Streaming Initiative ICP Participants and allocation of Network Credits for use
by such entities and/or Microsoft's internal use under this Agreement. Microsoft
shall make reasonable efforts to provide Network Credits to shared customers
that Akamai recommends for the Broadband Streaming Initiative. In no event shall
either party provide any of the other party's Confidential Information to any
customer or prospective customer except with such other party's express written
approval. Microsoft shall notify Akamai from time to time in writing of approved
Broadband Streaming Initiative ICP Participants, the particular Akamai Services
to be used by each such entity pursuant to this Agreement, and the approved
allocation of Network Credits among such entities and Microsoft (if applicable),
and a copy of the standard Akamai Services agreement as executed by such
participant. Microsoft and Akamai will cooperate in good faith following the
Effective Date to develop and implement operational procedures to coordinate the
use of Network Credits in accordance with this Agreement.
2. Terms of Service
Notwithstanding anything to the contrary in the foregoing paragraph or
elsewhere in this Agreement, the relationship between Akamai and any Broadband
Streaming Initiative ICP Participant or any Microsoft participating ISP shall be
separate from Akamai's relationship with Microsoft and Akamai shall have the
right to choose, in its sole discretion, not to do business with any ISP or any
Broadband Streaming Initiative ICP Participant, or to refuse to provide Akamai
Services to any Broadband Streaming Initiative ICP Participants or to take steps
to prevent any Content from being routed to, passed through or stored on or
within the Akamai Network if Akamai determines in its sole discretion that such
Content is inappropriate or unacceptable. Akamai shall enter into a separate
agreement in a timely manner with each Broadband Streaming Initiative ICP
Participant to which Akamai intends to provide Akamai Services pursuant to this
Agreement and any ISP designated by Microsoft pursuant to Section 3.2(b), and
Akamai shall perform all such Akamai Services in a manner as mutually agreed
upon by Akamai and each such Broadband Streaming Initiative ICP Participant or,
as appropriate, each such ISP. Akamai shall be solely responsible for all
services it provides to Broadband Streaming Initiative ICP Participants,
including without limitation the Akamai Services, and for enforcing the terms of
any services or other agreements it enters into with Broadband Streaming
Initiative ICP Participants or ISPs.
At Microsoft's sole discretion, Akamai may perform Akamai Services for
Microsoft acting on behalf of a Broadband Streaming Initiative ICP Participant,
in which event such provision of Akamai Services shall be subject to the terms
of this Agreement and any further services agreement that Microsoft and Akamai
may mutually agree upon.
Microsoft Confidential & Proprietary
21
<PAGE> 22
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION. ASTERISK DENOTE OMISSION.
3. Rate Schedule
In applying Network Credits under this Agreement for Microsoft's
internal use or provision to Broadband Streaming Initiative ICP Participants,
Akamai will calculate use of Network Credits on the basis of the lower of (a)
[**] of Akamai's standard retail list price (without regard to or adjustment for
any volume discounts), subject to Akamai's standard payment terms and conditions
and pricing methodology, and (b) [**] from time to time [**] by [**] group in
connection with this Agreement.
Microsoft Confidential & Proprietary
22
<PAGE> 23
EXHIBIT B
GET WINDOWS MEDIA(TM) PLAYER
LINK LOGO GUIDELINES
Get Windows Media(TM) Player logo usage instructions
To put the logo and link on your Web site, follow these easy steps:
1. Read our policy below on using the Get Windows Media Player
logo.
2. Copy the Get Windows Media Player logo.gif file image to your
desktop.
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
3. Move the Get Windows Media Player logo .gif file from your
desktop to your Web server. 4. Insert the following HTML code
on your Web page. Be sure to point the (IMG SRC) to the
location of the Get Windows Media Player logo .gif file on
your server:
(BR)(CENTER)
(AHREF="http://www.microsoft.com/windows/mediaplayer/download
/default.asp")
(IMG SRC="type path to logo image here" WIDTH="65" HEIGHT="57"
BORDER="0"
ALT="Get Windows Media Player" VSPACE="7")(/A)
(/CENTER)(BR)
5. You can modify this HTML code to fit your formatting as long
as you follow the guidelines outlined below.
Get Windows Media(TM) Player logo usage guidelines
1. Except as Microsoft may authorize elsewhere, non-Microsoft Web sites
may display only the Get Windows Media(TM) Player logo provided above
("Logo"). By downloading the Logo to your Web site, you agree to be
bound by these Policies.
2. You may only display the Logo on your Web site, and not in any other
manner. It must always be an active link to the download page for the
Windows Media Player at
http://www.microsoft.com/windows/mediaplayer/download/default.asp.
3. The Logo GIF image includes the words "Get Windows Media Player"
describing the significance of the Logo on your site (that the Logo is
a link to the download page for the Microsoft Windows Media Player, not
an endorsement of your site). You may not remove or alter any element
of the Logo.
4. The Logo may be displayed only on Web pages that make accurate
references to Microsoft or its products or services or as otherwise
authorized by Microsoft. Your Web page title and other trademarks and
logos must appear at least as prominently as the Logo. You may not
display the Logo in any manner that implies sponsorship, endorsement,
or license by Microsoft except as expressly authorized by Microsoft.
5. The Logo must appear by itself, with a minimum spacing (30 pixels)
between each side of the Logo and other distinctive graphic or textual
elements on your page. The Logo may not be displayed as a feature or
design element of any other logo.
Microsoft Confidential & Proprietary
23
<PAGE> 24
6. You may not alter the Logo in any manner, including size, proportions,
colors, elements, or animate, morph, or otherwise distort its
perspective or appearance, except in the event expressly authorized by
Microsoft.
7. You may not display the Logo on any site that infringes any Microsoft
intellectual property or other rights, or violates any state, federal,
or international law.
8. These Policies do not grant a license or any other right to Microsoft's
logos or trademarks. Microsoft reserves the right at its sole
discretion to terminate or modify permission to display the Logo at any
time. Microsoft reserves the right to take action against any use that
does not conform to these Policies, infringes any Microsoft
intellectual property or other right, or violates other applicable law.
9. MICROSOFT DISCLAIMS ANY WARRANTIES THAT MAY BE EXPRESS OR IMPLIED BY
LAW REGARDING THE LOGO, INCLUDING WARRANTIES AGAINST INFRINGEMENT.
(C)1999 Microsoft Corporation. All rights reserved. Terms of Use.
Microsoft Confidential & Proprietary
24
`
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Amendment No. 6 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
October 28, 1999
<PAGE> 1
EXHIBIT 24.1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to signed on its
behalf by the undersigned, thereunto duly authorized, in Cambridge,
Massachusetts, on this ____ day of October, 1999.
AKAMAI TECHNOLOGIES, INC.
By:
---------------------------------
Robert O. Ball III
Vice President, General Counsel
and Secretary
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers, directors and authorized representatives of
Akamai Technologies, Inc. hereby severally constitute and appoint George H.
Conrades, Paul Sagan and Robert O. Ball III, and each of them singly, our true
and lawful attorneys with full power to them, and each of them singly, with full
powers of substitution and resubstitution, to sign for us and in our names in
the capacities indicated below, the Registration Statement on Form S-1 of
Akamai Technologies, Inc. and any and all pre-effective and post-effective
amendments to said Registration Statement, and any subsequent Registration
Statement for the same offering which may be filed under Rule 462(b), and
generally to do all such things in our names and on our behalf in our capacities
as officers and directors to enable Akamai Technologies, Inc. to comply with
provisions of the Securities Act of 1933, as amended, and all requirements of
the Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, or any of them, or their
substitute or substitutes, to said Registration Statement and any and all
amendments thereto or to any subsequent Registration Statement for the same
offering which may be filed under Rule 462(b).
Pursuant to the requirements of the Securities Act of 1933, as amended,
this 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 Officer (principal October __, 1999
- ----------------------------- executive officer)
George H. Conrades
/s/ Timothy Weller Chief Financial Officer and Treasurer (principal October 26, 1999
- ----------------------------- financial and accounting officer)
Timothy Weller
Director October __, 1999
- -----------------------------
Arthur H. Bilger
Director October __, 1999
- -----------------------------
Todd A. Dagres
Director October __, 1999
- -----------------------------
F. Thompson Leighton
Director October __, 1999
- -----------------------------
Daniel M. Lewin
</TABLE>
