AKAM Akamai Technologies Inc

Convertible Note Offering

On August 16, 2019, Akamai Technologies, Inc. (“Akamai”) completed its previously announced offering of $1,000,000,000 in aggregate principal amount of its 0.375% Convertible Senior Notes due September 1, 2027 (the “Notes”). The Notes were sold in a private placement under a purchase agreement, dated as of August 13, 2019, entered into by and between Akamai and each of J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and BofA Securities, Inc. as representatives 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 Act”).

Akamai also granted the Initial Purchasers an option to purchase up to an additional $150,000,000 in aggregate principal amount of Notes on the same terms and conditions.

Akamai used $110.5 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 $100 million of the net proceeds to repurchase 1,118,943 shares of Akamai’s common stock, as described below in Item 8.01.

Akamai intends to use the remaining net proceeds from the offering for working capital and other general corporate purposes. Additionally, Akamai may choose to expand its current business through acquisitions of, or investments in, other businesses, products or technologies, using cash or shares of its common stock.

Indenture and the Notes

On August 16, 2019, 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, and bear interest from August 16, 2019 at an annual rate of 0.375% payable semiannually in arrears on March 1 and September 1 of each year, beginning on March 1, 2020. The Notes will mature on September 1, 2027, unless previously purchased or converted in accordance with their terms prior to such date.

The Notes are convertible into shares of Akamai’s common stock at an initial conversion rate of 8.6073 shares per $1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately $116.18 per share), subject to adjustment upon the occurrence of certain events. The initial conversion price represents a premium of approximately 30% to the $89.37 per share closing price of Akamai’s common stock on August 13, 2019. 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 May 1, 2027, 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 that 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 interest up to but excluding the fundamental change purchase date.

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 August 13, 2019, Akamai entered into convertible note hedge transactions and warrant transactions with certain of the Initial Purchasers or their respective affiliates and another financial institution (the “Option Counterparties”).

The convertible note hedge transactions are expected to reduce the potential dilution with respect to shares of 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 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 warrants in cash. The above description of the convertible note hedge transactions and the warrant transactions is a summary only and is qualified in its entirety by reference to the forms of the Call Option Confirmation and the Warrant Confirmation executed by Akamai and each Option Counterparty as of the dates specified above, which are attached hereto as Exhibit 10.1 and 10.2, respectively, and are incorporated herein by reference.