Item 1.01. Entry into a Material Definitive Agreement.
Convertible Note Offering
On February 20, 2014, Akamai Technologies, Inc. ("Akamai") completed its
previously announced offering of $600.0 million aggregate principal amount of
its 0% Convertible Senior Notes due 2019 (the "Notes"). The Notes were sold in a
private placement under a purchase agreement, dated as of February 13, 2014,
entered into by and between Akamai and Morgan Stanley & Co. LLC, as
representative of the several initial purchasers named therein (collectively,
the "Initial Purchasers"), for resale to qualified institutional buyers pursuant
to Rule 144A under the Securities Act of 1933, as amended (the "Securities
Akamai used approximately $20.3 million of the net proceeds from the offering of
the Notes to pay the cost of the privately-negotiated convertible note hedge
transactions described below (after such cost was partially offset by the
proceeds to Akamai from the sale of warrants pursuant to the warrant
transactions described below), and used approximately $62.0 million of the net
proceeds to repurchase 1,038,352 shares of Akamai's common stock, as described
below in Item 8.01.
Akamai also granted the Initial Purchasers an over-allotment option to purchase
an additional $90.0 million aggregate principal amount of Notes on the same
terms and conditions, which the Initial Purchasers exercised in full on
February 14, 2014 and which additional purchase was also completed on
February 20, 2014.
Akamai intends to use the remaining net proceeds from the offering for working
capital and other general corporate purposes, as well as potential acquisitions
and strategic transactions.
On February 20, 2014, Akamai entered into an indenture (the "Indenture") with
respect to the Notes with U.S. Bank National Association, as trustee (the
"Trustee"). Under the Indenture, the Notes will be senior unsecured obligations
of Akamai, the Notes will not bear regular interest, and the principal amount of
the Notes will not accrete. The Notes will mature on February 15, 2019, unless
previously purchased or converted in accordance with their terms prior to such
The Notes are convertible into shares of Akamai's common stock at an initial
conversion rate of 11.1651 shares per $1,000 principal amount of Notes (which is
equivalent to an initial conversion price of approximately $89.56 per share),
subject to adjustment upon the occurrence of certain events. The initial
conversion price represents a premium of approximately 50% to the $59.71 per
share closing price of Akamai's common stock on February 13, 2014. Upon
conversion of the Notes, holders will receive cash or shares of Akamai's common
stock or a combination thereof, at Akamai's election.
Prior to August 15, 2018, the Notes will be convertible only upon the occurrence
of certain events, and will be convertible thereafter at any time until the
close of business on the second scheduled trading day immediately preceding the
maturity date of the Notes.
The conversion rate is subject to customary anti-dilution adjustments. If
certain corporate events described in the Indenture occur prior to the maturity
date, the conversion rate will be increased for a holder who elects to convert
its Notes in connection with such corporate event in certain circumstances.
The Notes are not redeemable prior to maturity, and no sinking fund is provided
for the Notes. If Akamai undergoes a "fundamental change," as defined in the
Indenture, subject to certain conditions, holders may require Akamai to purchase
for cash all or any portion of their Notes. The fundamental change purchase
price will be 100% of the principal amount of the Notes to be purchased plus any
accrued and unpaid special interest up to but excluding the fundamental change
The Indenture contains customary terms and covenants, including that upon
certain events of default occurring and continuing, either the Trustee or the
holders of at least 25% in principal amount of the outstanding Notes may declare
100% of the principal of, and accrued and unpaid interest, if any, on, all the
Notes to be due and payable.
The above description of the Indenture and the Notes is a summary only and is
qualified in its entirety by reference to the Indenture (and the Form of Note
included therein), which is attached hereto as Exhibit 4.1 and is incorporated
herein by reference.
Convertible Note Hedge Transactions and Warrant Transactions
On February 13, 2014, Akamai entered into convertible note hedge transactions
and warrant transactions with the initial purchasers of the Notes or their
respective affiliates (the "Option Counterparties"). In connection with the
exercise in full by the initial purchasers of their option to purchase up to an
additional $90.0 million in aggregate principal amount of the Notes, on
February 14, 2014Akamai entered into additional convertible note hedge
transactions and additional warrant transactions with the Option Counterparties.
The convertible note hedge transactions, including the additional convertible
note hedge transactions, are expected to reduce the potential dilution with
respect to shares of the Akamai's common stock upon any conversion of the Notes
and/or offset any cash payments Akamai is required to make in excess of the
principal amount of the converted Notes, as the case may be. The warrant
transactions, including the additional warrant transactions, will have a
dilutive effect with respect to Akamai's common stock to the extent that the
market price per share of Akamai's common stock, as measured under the terms of
the warrant transactions, exceeds the applicable strike price of the warrants.
However, subject to certain conditions, Akamai may elect to settle all of the
. . .
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 is incorporated herein by reference.
Item 3.02. Unregistered Sales of Equity Securities.
The Notes were sold to the Initial Purchasers in reliance on the exemption from
the registration requirements provided by Section 4(a)(2) of the Securities Act
for resale to qualified institutional buyers pursuant to Rule 144A of the
Securities Act. Akamai does not intend to file a shelf registration statement
for the resale of the Notes or any common stock issuable upon conversion of the
Notes. The warrants were sold to the Option Counterparties in reliance on the
exemption from the registration requirements provided by Section 4(a)(2) of the
Securities Act. Additional information pertaining to the Notes, the shares of
common stock issuable upon conversion of the Notes and the warrants is contained
in Item 1.01 of this report and is incorporated herein by reference.
Item 8.01. Other Events.
In connection with the sale of the Notes, Akamai used approximately $62.0
million of the net proceeds of such sale to repurchase 1,038,352 shares of its
common stock from purchasers of Notes in privately-negotiated transactions
effected through one of the Initial Purchasers or its affiliate, as Akamai's
agent. The purchase price of the common stock repurchased in such transactions
was equal to the closing price per share of Akamai's common stock on the date of
the pricing of the offering, which was $59.71 per share.
Item 9.01. Financial Statements and Exhibits.
4.1 Indenture (including form of Notes) with respect to Akamai's 0%
Convertible Senior Notes due 2019, dated as of February 20, 2014,
between Akamai and U.S. Bank National Association, as trustee.
10.1 Form of Call Option Confirmation between Akamai and each Option
10.2 Form of Warrant Confirmation between Akamai and each Option