UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
(Rule 14a-101)
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AKAMAI TECHNOLOGIES, INC.
(Name of Registrant as Specified In Its Charter)
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Dear Fellow Stockholders:
Since our founding in 1998, Akamai has developed unique technology and an unmatched global infrastructure—the Akamai Intelligent Platform. Today, Akamai’s cloud delivery platform is utilized by many of the world’s major commerce companies, financial institutions, airlines, and auto manufacturers. With our highly differentiated solutions supported by a talented employee base, we believe that Akamai has a unique opportunity to be the fabric that connects billions of people and devices to businesses and organizations around the world—with uncompromising security, unparalleled performance, and unrivaled quality.
In 2017, we achieved record results, with our 15th consecutive year of annual revenue growth. We had another excellent year in 2016. We generated $2.3have nearly doubled our revenue over the past five years—growing from less than $1.4 billion in revenue, our highest level ever. As I look back at 2016, I’m especially pleased with the success of Akamai’s innovation engine. We released several new products last year, including Bot Manager, Image Manager and Enterprise Application Access, and their reception2012 to $2.5 billion in the marketplace has been very positive.
2017. For the year, we generated solid net income was $316of $218 million, or $1.79$1.26 per diluted share. We also generated $866share, and $801 million in cash from operations, or 37%equal to 32% of revenue, exitingrevenue. We exited the year with approximately $1.6a strong balance sheet, with more than $1.2 billion in cash, cash equivalents, and marketable securities.
In addition,recent years, we completed threehave made investments that have diversified our business from a media-dominated content delivery network into a leading supplier of web and security services for a broad range of customers. In 2017, for the first time, revenue from our Web Division was greater than from our Media Division, and Security was our fastest-growing solution, growing 32% year over year, exiting 2017 at a half-billion-dollar annualized revenue run rate. We also expanded and strengthened our product portfolio in 2017 through new offerings such as Enterprise Threat Protector, Digital Performance Management, and Bot Manager Premier, and two significant technology acquisitions (Nominum and SOASTA).
As evidence of our evolution, Akamai was recognized as a leading cyber security innovator last year.year when research firm Gartner named us as a visionary leader in its “Magic Quadrant” for web application firewalls. And, for the first time ever, Akamai served the majority of companies in the Global 500. Akamai has received many recognitions for being a “Best Place to Work” and a highly innovative company. In December, after evaluating nearly 1,000 of the largest publicly traded companies,Forbes and JUST Capital ranked Akamai in the top 40—and second among Internet companies—for ethical leadership, product quality, and for treating our customers, communities, and employees well.
Looking forwardAs a more diversified business with a broader set of customers, we believe Akamai has tremendous potential and is poised to 2017,capitalize on significant market opportunities, from cyber security to mobile and web performance management to online video streaming. We are taking a disciplined operational approach that is focused on expanding our operating margins to drive greater profitability. And we plan to significantly increasecontinue to drive our investment levelsmomentum and strengthen our competitive advantage in newthe marketplace by further diversifying our customer base and product innovation, service delivery enablement,set. We believe that our unique technology and IP portfolio, our ability to efficiently manage a platform scaling. We also planwith millions of components, our strong relationships with leading telecommunications carriers and major brands on the Internet, and our relentless and personalized attention to broadencustomers and partners all provide Akamai with the foundation for a bright future that creates value for our offerings withinshareholders, customers, and employees.
Our highly talented workforce is an integral part of our web security, web performance,business, and media solution portfolios. We are confident the successI thank them for their dedication to Akamai’s continued success. On behalf of our more than 7,000 global employees, we have had with our cloud security investment strategy can be duplicated in other areas of the business, particularly our new and emerging enterprise solutions portfolio.
I see a very bright and exciting future for Akamai. All of us here wantwould like to thank you, our fellow stockholders, for your continued support. We believe that our achievements attest to the sound fundamentals of our strategy and the value of our innovative technology for our customers.
I am also pleased to invite you to attend Akamai’s 20172018 Annual Meeting of Stockholders to be held on Wednesday, May 17, 2017,Friday, June 1, 2018, at 9:3011:00 a.m. at Akamai’s offices at 150 Broadway, Cambridge, Massachusetts, 02142. Details regarding admission to the meeting and the business to be conducted at the meeting are more fully described in the accompanying Notice of 20172018 Annual Meeting of Stockholders and Proxy Statement.
Your vote is important. Whether or not you plan to attend the 20172018 Annual Meeting of Stockholders, we hope you will vote as soon as possible. Voting by proxy will ensure your representation at the 20172018 Annual Meeting of Stockholders if you do not attend in person. Please review the instructions on the proxy card regarding your voting options.
/s/ Dr. Tom Leighton |
Dr. Tom Leighton |
AKAMAI TECHNOLOGIES, INC.
150 BROADWAY
CAMBRIDGE, MASSACHUSETTS 02142
NOTICE OF 20172018 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2017JUNE 1, 2018
The 20172018 Annual Meeting of Stockholders (the “Annual Meeting”) of Akamai Technologies, Inc. (“Akamai” or the “Company”) will be held on Wednesday, May 17, 2017,Friday, June 1, 2018, at 9:3011:00 a.m., local time, at the Company’s offices at 150 Broadway, Cambridge, Massachusetts, 02142.
At the Annual Meeting, we expect stockholders will consider and vote upon the following matters:
(1) | To elect the |
(2) | To adopt and approve amendments to |
(3) | To approve, on an advisory basis, our named executive officer compensation; |
(4) | To |
To transact such other business as may properly come before the meeting or any adjournment or postponement thereof. |
Stockholders of record at the close of business on March 22, 2017,April 16, 2018, are entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof. The stock transfer books of Akamai will remain open for the purchase and sale of Akamai’s common stock.
All stockholders are cordially invited to attend the Annual Meeting.
By order of the Board of Directors, |
/s/
|
Cambridge, Massachusetts
April 3, 201720, 2018
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AT YOUR EARLIEST CONVENIENCE. MOST STOCKHOLDERS HAVE A CHOICE OF VOTING OVER THE INTERNET, BY TELEPHONE OR BY USING A TRADITIONAL PROXY CARD. SENDING IN YOUR PROXY WILL NOT PREVENT YOU FROM VOTING YOUR SHARES IN PERSON AT THE ANNUAL MEETING IF YOU DESIRE TO DO SO, AND YOUR PROXY IS REVOCABLE AT YOUR OPTION BEFORE IT IS EXERCISED.
i
AKAMAI TECHNOLOGIES, INC.
150 BROADWAY
CAMBRIDGE, MASSACHUSETTS 02142
PROXY STATEMENT
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY THE BOARD OF DIRECTORS OF AKAMAI TECHNOLOGIES, INC. (“AKAMAI” OR THE “COMPANY”) FOR USE AT THE 20172018 ANNUAL MEETING OF STOCKHOLDERS (THE “ANNUAL MEETING”) TO BE HELD AT THE OFFICES OF AKAMAI TECHNOLOGIES, INC., 150 BROADWAY, CAMBRIDGE, MASSACHUSETTS, 02142 AT 9:3011:00 AM LOCAL TIME ON MAY 17, 2017,JUNE 1, 2018, AND AT ANY ADJOURNMENT OR POSTPONEMENT OF THAT MEETING. You may obtain directions to the location of the Annual Meeting by contacting Investor Relations, Akamai Technologies, Inc., 150 Broadway, Cambridge, Massachusetts 02142; telephone:617-444-3000.
Our Annual Report to Stockholders for the year ended December 31, 20162017 is being mailed to our stockholders with the mailing of the Notice of 20172018 Annual Meeting of Stockholders and this Proxy Statement on or about April 3, 2017.20, 2018.
Important Notice Regarding the Availability of Proxy Materials for the 20172018 Annual
Meeting of Stockholders to be Held on May 17, 2017:June 1, 2018:
This Proxy Statement and the 20162017 Annual Report to Stockholders are available for viewing, printing and downloading at www.akamai.com/html/investor/financial_reports.html.
You may obtain a copy of our Annual Report on Form10-K for the year ended December 31, 2016,2017, as filed with the Securities and Exchange Commission, which we sometimes refer to herein as the Commission, except for exhibits thereto, without charge upon written request to Akamai Technologies, Inc., 150 Broadway, Cambridge, Massachusetts 02142, Attn: Investor Relations. Exhibits will be provided upon written request and payment of an appropriate processing fee.
Certain documents referenced in this Proxy Statement are available on our website at www.akamai.com. We are not including the information contained on our website, or any information that may be accessed by links on our website, as part of, or incorporating it by reference into, this Proxy Statement.
This Proxy Statement contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management based on information currently available to them. Use of words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “should,” “may,” “could,” “likely” or similar expressions indicates a forward-looking statement. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, inability to grow revenue or increase profitability as projected, lack of market acceptance of new solutions changes in management and other factors set forth under the heading “Risk Factors” in our Annual Report on Form10-K for the year ended December 31, 2016.2017. We disclaim any obligation to update any forward-looking statements as a result of new information, future events or otherwise.
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Executive SummaryEXECUTIVE SUMMARY
Below are highlights of important information you will find in this Proxy Statement. As it is only a summary, please review the complete Proxy Statement before you vote.
Our Mission and Strategy
The Internet plays a crucial role in the way companies, government agencies and other enterprises conduct business and reach the public. Smart enterprises want to take advantage of these trends safely, profitably and intelligently. At the same time, security threats are growing more prevalent and advanced. Enterprise applications are moving from behind the firewall to the cloud - making cybersecurity more complex to achieve than yesterday’s perimeter defense. More consumers are “cutting the cord” and consuming entertainment over the Internet rather than through traditional cable, and they are increasingly using mobile devices to consume content and shop. Web pages are becoming vastly more complex with advertisements, videos, graphics and other third-party content that impair speed and reliability. Our strategy is to bridge the gap between our customers’ digital goals and the inherent challenges of the Internet by providing technology that optimizes and secures the delivery of online content and applications.
Akamai 2017 Performance Highlights
Akamai has increased its revenue in each of the past six fiscal years and has been profitable over that same period. The charts below show our revenue and earnings per share, calculated in accordance with generally accepted accounting principles in the United States, or GAAP, for those years.
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Our security business has grown rapidly in recent years as shown below:
Over the past five years, we have successfully generated cash from operations to use in strategic initiatives. We believe we have effectively deployed that cash in stock repurchases and acquisition activity as reflected in the chart below.
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ACQUISITIONS
We completed two acquisitions in 2017:
Our acquisition of Soasta, Inc. was intended to allow us to offer solutions designed to provide greater visibility into the business impact of our customers’ website and application optimization strategies. Our acquisition of Nominum, Inc. was intended to add complementary capabilities to our portfolio of security offerings while expanding our distribution to carriers that serve our enterprise customers.
Corporate Governance Snapshot
Akamai’s governance structure reflects our commitment to advancing the long-term interests of our stockholders, maintaining accountability, diversity, ethical conduct and alignment of interests between leadership and investors. Highlights of our governance profile include:
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Executive Compensation Overview
Akamai has developed an executive compensation program that is designed to closely align executive compensation with performance by allocating a majority of target compensation to performance-based equity awards that directly link the value of executive compensation to our stock price performance and tying annual incentive bonuses to performance against specific financial measures. We believe that a significant portion of executive pay should be variable and at risk. Specifically, the amount earned by the executive should primarily be tied to our financial performance and the performance of our stock price. The following graphs show the key design and structural aspects of our program.
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Summary of Voting Matters and Recommendations
Matter | Board Recommendation | See Page Number for More Information | ||
Election of Directors | FOR each nominee | 71 | ||
Amendments to | FOR | 71 | ||
Advisory Vote on Executive Compensation | FOR | |||
Ratification of Selection of Independent Auditors | FOR |
Akamai 2016 Performance Highlights
Akamai has increased its revenue in each of the past five fiscal years and has been profitable over that same period. The charts below show our revenue and net income, calculated in accordance with generally accepted accounting principles in the United States, or GAAP, for those years.
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Other performance highlights in 2016 include:
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– Corporate Governance Highlights
Akamai seeks to maintain and enhance its record of excellence in corporate governance by continually refining its corporate governance policies, procedures and practices to align with evolving best practices, taking into account issues raised by our stockholders and other stakeholders and otherwise as circumstances warrant. We also place great value on stockholder input and engage regularly with our investors to gain insights into the governance issues about which they care most.
Key Corporate Governance Facts
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Overview of our Board of Directors
Our Board of Directors consists of 13 individuals with a range of backgrounds as reflected in the graphics below. Collectively, they bring industry expertise, leadership skills and financial sophistication to our corporate governance.
Board Refreshment
Akamai believes that having an independent, diverse, active and engaged Board of Directors has been key to our success. We also believe that new perspectives and ideas are critical to a forward-looking and strategic Board. At the same time, it is equally important to benefit from the valuable experience and familiarity that longer-serving directors bring to the boardroom. We striveThe Board believes that the skill set and perspectives of its members should remain sufficiently current and broad in dealing with current and changing business dynamics and, therefore, seeks to strikemaintain a balance of directors with varying lengths of service and ages. While the right balance between experience and fresh perspectives. Rather than imposeBoard recognizes that term limits and/or a mandatory retirement ages, term limits or other arbitrary mechanisms forage could assist in this regard, they may have the unintended consequence of forcing the Board and Akamai to advance these goals, welose the contribution of directors who, over time, have developed increased judgment, knowledge and valuable insight into our business and operations. We have chosen to take aan effective and more holistic, balanced approach to Board composition and director succession.
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We remain committed to ensuring our Board is composed of a highly capable and diverse group of directors well-equipped to oversee the success of the business and effectively represent the interests of stockholders. Six of our directors have been elected in the last five years. The average tenure for our independent directors is approximately 6.1 years.
Engaging with our Stockholders
During 2017 and early 2018, we reached out to 30 of our largest stockholders, which collectively held approximately 62% of our outstanding shares, to express an interest in meeting with them to discuss governance or executive compensation matters at Akamai. We met with more than 75% of those investors and discussed a broad range of operational, strategic and governance topics with them. A number of these meetings included Mr. Salerno, our Chairman of the Board. These engagement efforts and meaningful conversations provided our Board and management with a valuable understanding of investors’ perspectives and opportunity to exchange views. When the Board conducted its regular reviews of governance and executive compensation, it discussed the input we received and the evaluation process was reflective of those views. We were encouraged by the feedback we received and look forward to continuing our dialogue with our stockholders in the coming year.
Board Diversity
We believe that we have assembled an outstanding set of directors with varied backgrounds, experiences and viewpoints who understand our markets, our customers and our employees. Female and/or minority directors make up nearlyone-third of the total Board. In addition, the Board is dedicated to encouraging diversity in leadership positions and two of our three standing committees are chaired by women.
Board Evaluations
A key component of our approach is thea robust annual director peerBoard evaluation and Board survey process. Led by our Lead Director and Chair of the Nominating and Corporate Governance Committee, this review is intended to elicit the views of all directors about what makes the Board effective, what improvements can be made, how their peers are most effective and whether steps should be taken to improve contributions.contributions and their views on the performance of the Board and its committees over the past year. We have historically also conducted individual peer evaluations. The Nominating and Corporate
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Governance Committee also regularly oversees and plans for director succession and refreshment of the Board to ensure a mix of skills, experience, tenure, and diversity that promotes and supports the Company’s long-term strategy. In doing so, the Nominating and Corporate Governance Committee takes into consideration the overall needs, composition and size of the Board, as well as the criteria adopted by the Board regarding director candidate qualifications.
We remain committed to ensuring our Board is composed of a highly capable and diverse group of directors well-equipped to oversee the success of the business and effectively represent the interests of stockholders. In just the last four years, five new directors have been elected. The average tenure for our 12 directors is approximately 8.5 years.
Engaging with our Stockholders/8/
During 2016, we reached out to 25 of our largest stockholders, which collectively held approximately 52% of our outstanding shares, to see if they were interested in meeting with us to discuss governance or executive compensation matters at Akamai. Several large holders accepted the invitation, and we discussed with them a broad range of governance topics. These engagement efforts and meaningful conversations provided us with a valuable understanding of their perspectives and opportunity to exchange views. We were encouraged by the positive feedback we received and look forward to continuing our dialogue with our stockholders in the coming year.
Human Rights and Sustainability
In 2016, we adopted a Human Rights Policy. We believe that the Internet can bring the world closer together and facilitate greater understanding among people across the globe. We also believe that respect for human rightsAkamai is fundamental to unlocking the potential of the Internet and an essential value for the communities in which we operate. We are committed to ensuring thatmitigating the environmental impact of our employees; the people who work for our contractors, customers and suppliers; and individuals in the communities affected by our activities are treated with dignity and respect. Our Human Rights Policy is intended to advance these ideals.
operations. We have also adopted a Sustainability Policy to reflect our belief that Akamai can and should operate with a limited environmental footprint. This Policy is centered on efforts to reduce greenhouse-gasgreenhouse gas emissions ofarising from our business operations through energy conservation, energy efficiency, and the procurement of renewable energy; responsibly manage and dispose of our electronic waste; and deliver sustainable work environments that promote wellness and the conservation of natural resources through water efficiency, source reduction, material reuse and recycling, and the purchase of materials containing recycled and/or renewable natural resources.
In 2016, we adopted a Human Rights Policy. We believe that the Internet can bring the world closer together and facilitate greater understanding among people across the globe. We are proud of our mission to make the Internet work better for people around the world. We also believe that respect for human rights is fundamental to unlocking the potential of the Internet and an essential value for the communities in which we operate. We are committed to ensuring that our employees, the people who work for our contractors, customers and suppliers, and individuals in the communities affected by our activities are treated with dignity and respect. Our Human Rights Policy is intended to advance these ideals.
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Code of Ethics
We have adopted a written Code of Ethics that applies to, among others, our principal executive officer and principal financial and accounting officer, or persons serving similar functions. The text of ourOur Code of Ethics is available on our website at www.akamai.com. We did not waive any provisions of the Code of Ethics for our directors or executive officers during the year ended December 31, 2016.2017. If we amend, or grant a waiver under, our Code of Ethics that applies to our principal executive officer, principal financial and accounting officer,officers or persons performing similar functions,directors, we intend to post information about such amendment or waiver on our website at www.akamai.com. We have also adopted Corporate Governance Guidelines, a copy of which is also available on our website at www.akamai.com/html/investor/corporate_governance.html.
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Our Board of Directors
Our Board of Directors currently consists of 1213 persons, divided into three classes, serving staggered terms of three years, as follows: fourfive Class I directors (with terms expiring at the 2018 Annual Meeting of Stockholders), four Class II directors (with terms expiring at the 2019 Annual Meeting of Stockholders) and four Class III directors (with terms expiring at the 20172020 Annual Meeting of Stockholders). In accordance with our amended and restated
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certificate of incorporation and amended and restated bylaws, the Board of Directors has fixed thevoted to fix its size of the Board of Directors at 1112 directors effective as of the Annual Meeting. Following our2018 Annual Meeting we will have three directors in Class III andwith four directors in each of Class I and Class II.class.
Set forth below is information about the professional experiences of members of ourthe Board, of Directors, including the threefour nominees for election at the 20172018 Annual Meeting of Stockholders. In addition, for each individual, we discuss the specific experience, qualifications and attributes that we believe qualify him or her to serve on our Board of Directors.the Board.
Nominees for Director Whose Terms Expire in 20172018 (Class IIII Directors)
Biography | Key Attributes | |||
Jill Greenthal Director Since 2007 Age 61 Independent Board Committees Audit Nominating and Corporate Governance (Chair) | Senior Advisor in the Private Equity Group of The Blackstone Group, a global asset manager, since 2007 Senior Managing Director in Blackstone’s Advisory Group (2003-2007) Previously served asCo-Head of the Global Media Investment Banking Group of Credit Suisse First Boston Other Current Boards Houghton Mifflin Harcourt, an educational content company Cars.com, an online automotive marketplace Prior Public Company Boards in Last 5 Years Michaels Stores Orbitz Worldwide TEGNA Inc. | Rich experience as a leading investment banker and advisor, a role that has given her a deep understanding of capital markets and mergers and acquisitions Insight into financial and strategic aspects of financial matters such as debt and equity financing transactions and acquisitions Experience working with other Internet and media companies as they have built their businesses enables her to provide valuable counsel to both our management and fellow directors Insight into corporate governance trends that drives conversations in our governance committee. |
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Biography | Key Attributes | |||
Daniel Hesse Director Since 2016 Age 64 Independent Board Committees Audit Nominating and Corporate Governance | Former President and CEO, Sprint Corporation, a telecommunications provider, December 2007 to August 2014 Other Current Boards PNC Corporation, a financial institution | Insight into mobile and telecommunications industry affords important insight into strategy deliberations Plays key role in the Audit Committee’s cybersecurity oversight function Experience as a chief executive officer enables him to advise on leadership, management and operational issues Leverages experience overseeing a large, complex technology company to provide valuable guidance and perspective |
Biography | Key Attributes | |||
Tom Leighton Director Since 1998 Age 61 | Chief Executive Officer, Akamai, since January 2013 Chief Scientist, Akamai(8/1998-12/2012) Professor of Applied Mathematics at the Massachusetts Institute of Technology since 1982 (on leave) | Co-founder and key developer of the software underlying our platform Unparalleled understanding of our technology and how the Internet works Crucial source of industry information, technical and market trends and how Akamai can address those needs Provides the Board with vital information about the strategic and operational challenges and opportunities facing the company |
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Biography | Key Attributes | |||
William Wagner Director Since 2018 Age 51 Independent | President and CEO of LogMeIn, Inc., asoftware-as-a-service company since December 2015, having previously served from May 2013 through November 2015 as its President and Chief Operating Officer. | Extensive sales and marketing leadership experience in successful technology andsoftware-as-a-service businesses Current experience as a chief executive officer in the software industry Understanding of how customers use Akamai solutions |
Directors With Terms That Will Expire in 2019 (Class II Directors)
Biography | Key Attributes | |||
Pamela Craig Director Since 2011 Age 61 Independent Board Committees Audit(Chair) Compensation | Former Chief Financial Officer of Accenture, a global management consulting, technology services and outsourcing organization, October 2006 to July 2013, having previously served in numerous positions at the firm Other Current Boards Merck and Co., a pharmaceutical company Advisory board member of SpencerStuart, a global executive search and recruitment firm Prior Public Company Boards in Last 5 Years VMware Walmart Stores | Knowledge, leadership experience and insight from her significant leadership role at Accenture provides us with unique insight into how to manage a large, global organization that has grown rapidly Keen understanding of the challenges our current and potential customers face in interacting with customers, suppliers and partners across the world in a rapidly changing technological environment Knowledge of in complex global business issues and financial and accounting matters |
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Biography | Key Attributes | |||
Jonathan Miller Director Since 2015 Age 61 Independent Board Committees Compensation Nominating and Corporate Governance | Partner at Advancit Capital, a venture capital firm focusing on early-stage companies, since 2014 Former Chairman and CEO of the Digital Media Group and Chief Digital Officer of Newscorp, a global media company(4/2009-12/2013) Other Current Boards AMC Networks, an entertainment company Interpublic Group of Companies, a marketing solutions provider J2 Global, which provides telecommunications solutions as well as technology, gaming and lifestyle content Prior Public Company Boards in Last 5 Years TripAdvisor Houghton Mifflin Harcourt Live Nation RTL Group Shutterstock | Insight into the challenges, goals and priorities of media companies such as those that are key current and prospective customers Key participant in the rapid development of the Internet as a global platform for video and audio entertainment Deep understanding of the ongoing evolution of digital media Involvement with early-stage media and technology companies gives our management and the Board a window into developments that could shape our industry in the future |
Biography | Key Attributes | |||
Paul Sagan Director Since 2005 Age 59 | Managing Director, since 2018, at General Catalyst Partners, a venture capital firm; previously served as executive in residence (XIR) at the firm from 2014 until 2017. Former Chief Executive Officer, President and Chief Operating Officer(1/2005-12/2012) Previously served as a Senior Advisor to the World Economic Forum and in senior executive positions at Time Warner Cable, Time Inc. and CBS, Inc. Other Current Boards VMware, Inc., a provider of information infrastructure technology and solutions Prior Public Company Boards in Last 5 Years EMC iRobot | Having overseen every aspect of our operations for nearly fifteen years, has an unparalleled understanding of our business, personnel needs and customers and the markets in which we operate From his roles at General Catalyst, provides helpful insight into innovation developments among emerging companies Past and present service on boards of an array of other public companies allows him to bring valuable experience from those directorships High level of integrity and strong sense of corporate responsibility, valuable key attributes that contribute to the effective functioning of our Board |
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Biography | Key Attributes | |||
Naomi Seligman Director Since 2001 Age 79 Independent Board Committees Audit Nominating and Corporate Governance | Senior partner at Ostriker von Simson, a consulting firm focusing on information technology, which brings together CIOs, CEOs, and other top executives from the largest multinational enterprises and premier venture capitalists and entrepreneurs to discuss technology issues, since 1999 Other Current Boards Oracle Corporation, an enterprise software company Vice Chairman of New Leaders, a national nonprofit for developing school leaders School of American Ballet Prior Public Company Boards in Last 5 Years iGate Sun Microsystems Dun & Bradstreet | Frequent interactions with technology company CEOs and Fortune 100 corporate CIOs give her a deep understanding of ongoing developments across the technology landscape Educates management and the Board about the priorities of our current and potential customers Understanding of investor perspectives, providing insight into how to communicate effectively with that community Experience, intelligence and willingness to challenge assumptions stimulate productive Board discussions to ensure that there are fulsome and appropriate deliberations |
Directors With Terms That Will Expire in 2020 (Class III Directors) |
Biography | Key Attributes | |||
Monte Ford
Director Since 2013
Age
Independent
Board Committees
Compensation
Nominating and Corporate Governance |
Network Partner at
CEO of Aptean Software, a provider of enterprise application software(2/2012-9/2013)
SVP & CIO of American Airlines (2000-2011)
Other Current Boards
Michaels Stores, Inc., an arts and crafts retailer
Prior Public Company Boards in Last 5 Years
Oncor Electric | Experience as an information technology executive:
🌑 CEO of a software company 🌑 At American Airlines, oversaw all aspects of information systems and business analytics functions
Helps fellow Board members and management understand what Akamai’s current and potential customers expect and want from our solutions and to provide actionable insight into our innovation
Provides valuable advice and counsel regarding potential improvements to our internal IT |
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Biography | Key Attributes | |||
Peter Tom Killalea Director Since 2018 Age 50 | President, Aionle LLC, a consulting firm, since November 2014 VP Technology, Amazon.com,(2008-11/2014) Other Current Boards Capital One Financial Corp., a financial services company MongoDB, operator of a database platform Prior Public Company Boards in Last 5 Years Xoom | Professional focus on Internet security issues, a key area of emphasis in Akamai’s strategic plan Experience with digital innovation and focus on customer experience Understanding of the CDN business through his work on the AWS platform at Amazon Extensive corporate governance experience serving on several public company boards |
Biography | Key Attributes | |||
Frederic Salerno
Director Since 2002
Age
Independent
Board Committees
Audit
Nominating and Corporate Governance | Akamai’s Chairman of the Board since March 2018; previously Lead Independent Director since
Former executive at Verizon Communications, a telecommunications provider (1997-2002), last serving as Vice Chairman and CFO
Other Current Boards
Florida Community Bank, a regional bank
Intercontinental Exchange, an electronic exchange for trading commodities
Prior Public Company Boards in Last 5 Years
| Insight into the challenges, goals and priorities of media companies such as those that are key current and prospective customers Key participant in the rapid development of the Internet as a global platform for video and audio entertainment Deep understanding of
|
Biography | Key Attributes | |||
Director Since
Age | Managing Director, since 2018, at General Catalyst Partners, a venture capital firm; previously served as executive in residence (XIR) at the firm from 2014 until 2017. Former Chief Executive Officer, President and Chief Operating Officer(1/2005-12/2012) Previously served as a Senior Advisor to the World Economic Forum and in senior executive positions at Time Warner Cable, Time Inc. and CBS, Inc. Other Current Boards VMware, Inc., a provider of information infrastructure technology and solutions Prior Public Company Boards in Last 5 Years EMC iRobot | Having overseen every aspect of our operations for nearly fifteen years, has an unparalleled understanding of our business, personnel needs and customers and the markets in which we operate From his roles at General Catalyst, provides helpful insight into innovation developments among emerging companies Past and present service on boards of an array of other public companies allows him to bring valuable experience from those directorships High level of integrity and strong sense of corporate responsibility, valuable key attributes that contribute to the effective functioning of our Board |
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Biography | Key Attributes | |||
Naomi Seligman Director Since 2001 Age 79
Independent
Board Committees
Nominating and Corporate Governance |
Other Current Boards
School of American Ballet Prior Public Company Boards in Last 5 Years iGate Sun Microsystems Dun & Bradstreet |
Educates management and the Board about the priorities of our Understanding of investor perspectives, providing insight into how to
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Directors Whose Terms Expire in 2018 (Class I Directors)
Directors With Terms That Will Expire in 2020 (Class III Directors) |
Biography | Key Attributes | |||
Director Since
Age Independent Board Committees Compensation Nominating and Corporate Governance |
Other Current Boards
Prior Public Company Boards in Last 5 Years
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🌑 CEO of 🌑 At American Airlines, oversaw all aspects of information systems and business analytics functions Helps fellow Board members and management
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Biography | Key Attributes | |||
Peter Tom Killalea Director Since 2018 Age 50 | President, Aionle LLC, a consulting firm, since November 2014 VP Technology, Amazon.com,(2008-11/2014) Other Current Boards Capital One Financial Corp., a financial services company MongoDB, operator of a database platform Prior Public Company Boards in Last 5 Years Xoom | Professional focus on Experience with digital innovation and focus on customer experience Understanding of the Extensive corporate governance |
Biography | Key Attributes | |||
Director Since
Age
Independent
Board Committees
Audit
Nominating and Corporate Governance |
Other Current Boards
Prior Public Company Boards in Last 5 Years
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Directors With Terms That Will Expire in 2019 (Class II Directors)
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TripAdvisor Houghton Mifflin Harcourt Live Nation RTL Group Shutterstock | Insight into the challenges, goals and priorities of media companies such as those that are key current and prospective
Key participant in the rapid development of the Internet as a global platform for video and audio
Deep understanding of the ongoing evolution of digital
Involvement with early-stage media and technology companies gives our management and the Board a window into developments that could shape our industry in the |
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Biography | Key Attributes | |||
Paul Sagan
Director Since 2005
Age |
Former Chief Executive Officer,
Previously served as a Senior Advisor to the World Economic Forum and in senior executive positions at Time Warner Cable, Time Inc. and CBS, Inc.
Other Current Boards
VMware, Inc., a provider of information infrastructure technology and solutions
Prior Public Company Boards in Last 5 Years
EMC iRobot | Having overseen every aspect of our operations for nearly fifteen years, has an unparalleled understanding of our business, personnel needs and customers and the markets in which we
Past and present service on boards of an array of other public companies allows him to bring valuable experience from those
High level of integrity and strong sense of corporate responsibility, |
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Biography | Key Attributes | |||
Naomi Seligman
Director Since 2001
Age
Independent
Board Committees
Audit
Nominating and Corporate Governance | Senior partner at Ostriker von Simson, a consulting firm focusing on information technology, which brings together CIOs, CEOs, and other top executives from the largest multinational enterprises and premier venture capitalists and entrepreneurs to discuss technology issues, since
Other Current Boards
Oracle Corporation, an enterprise software company
Vice Chairman of New Leaders, a national nonprofit for developing school leaders
School of American Ballet Prior Public Company Boards in Last 5 Years
iGate Sun Microsystems Dun & Bradstreet |
Educates management and the Board about the priorities of our current and potential
Understanding of
Experience, intelligence and willingness to challenge assumptions |
Directors With Terms That Will Expire in 2020 (Class III Directors) |
Biography | Key Attributes | |||
Monte Ford Director Since 2013 Age 58 Independent Board Committees Compensation Nominating and Corporate Governance | Principal of CIO Strategy Exchange, a membership organization for chief information officers since 2016 Network Partner at Brightwood Capital Partners, a venture capital firm CEO of Aptean Software, a provider of enterprise application software(2/2012-9/2013) SVP & CIO of American Airlines (2000-2011) Other Current Boards Michaels Stores, Inc., an arts and crafts retailer Prior Public Company Boards in Last 5 Years Oncor Electric | Experience as an information technology executive: 🌑 CEO of a software company 🌑 At American Airlines, oversaw all aspects of information systems and business analytics functions Helps fellow Board members and management understand what Akamai’s current and potential customers expect and want from our solutions and to provide actionable insight into our innovation initiatives Provides valuable advice and counsel regarding potential improvements to our internal IT systems |
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Biography | Key Attributes | |||
Peter Tom Killalea Director Since 2018 Age 50 | President, Aionle LLC, a consulting firm, since November 2014 VP Technology, Amazon.com,(2008-11/2014) Other Current Boards Capital One Financial Corp., a financial services company MongoDB, operator of a database platform Prior Public Company Boards in Last 5 Years Xoom | Professional focus on Internet security issues, a key area of emphasis in Akamai’s strategic plan Experience with digital innovation and focus on customer experience Understanding of the CDN business through his work on the AWS platform at Amazon Extensive corporate governance experience serving on several public company boards |
Biography | Key Attributes | |||
Frederic Salerno Director Since 2002 Age 74 Independent Board Committees Audit Nominating and Corporate Governance | Akamai’s Chairman of the Board since March 2018; previously Lead Independent Director since 2013 Former executive at Verizon Communications, a telecommunications provider (1997-2002), last serving as Vice Chairman and CFO Other Current Boards Florida Community Bank, a regional bank Intercontinental Exchange, an electronic exchange for trading commodities Prior Public Company Boards in Last 5 Years CBS Broadcasting Consolidated Edison National Fuel Gas Company Popular Inc. Viacom | Deep understanding of financial markets, financial statements and investments Provides essential guidance about capital structure and other strategic matters Leadership, professional judgment and operating experience enable him to provide keen insight in helping address issues faced by the company Valued advisor to management and other directors when we are contemplating strategic initiatives intended to enable future growth |
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Biography | Key Attributes | |||
Bernardus Verwaayen Director Since 2013 Age 65 Independent Board Committees Compensation (Chair) Nominating and Corporate Governance | General Partner of Keen Venture Partners, a venture capital firm, since 2017 Former Chief Executive Officer of Alcatel-Lucent, a provider of communications equipment and solutions(2008-11/2013) Former Chief Executive Officer of British Telecom, a provider of communications services (2002-2008) Other Current Boards Akzo Nobel, a manufacturer of powder coatings Bharti Airtel, a global telecommunications company | Brings an international perspective to our Board deliberations, helping us better understandnon-U.S. markets, public policy issues and how to operate with a global employee base CEO experience enables him to provide significant guidance to our CEO on management, leadership and operational issues Ability to leverage knowledge of telecommunications industry to advise us on carrier strategy and network relationships Deep understanding of motivational aspects of executive compensation approaches and applicable international issues |
Director With Term That Will Expire in 20172018 Not Standing forRe-Election
Biography | ||
Director Since
Age
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Chairman of the Board, Akamai, 1999-2018. Managing Partner of Longfellow Venture Partners, an early stage venture capital company, since 2014 and a venture partner emeritus of Polaris Venture Partners, Inc., an early stage investment company Former Chief Executive
Other Current Boards
Harley-Davidson Ironwood Pharmaceuticals |
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Our Executive Officers
Our executive officers as of February 28, 20172018 were:
F. Thomson Leighton, age | ||
Aaron Ahola, age 48, joined Akamai in April 2000. During his tenure, he previously served as a Vice President and Deputy General Counsel from 2011 to 2017. In addition, from 2008 until 2017, he was our Chief Privacy Officer. From 2015 until 2017, he was our Chief Compliance Officer. In October 2017, he became our Senior Vice President, General Counsel and Corporate Secretary. | ||
James Benson, age | ||
Robert Blumofe, age |
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James Gemmell, age |
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Rick McConnell, age | |||
Bill Wheaton, age |
Security Ownership of Certain Beneficial Owners and Management
The following table includes information as to the number of shares of our common stock beneficially owned as of February 28, 2017,2018, by the following:
🌑 | each person known to us to be the beneficial owner of more than 5% of our outstanding shares of common stock; |
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🌑 | each of our directors; |
🌑 | our Named Executive Officers, who consist of (i) our principal executive officer during |
🌑 | all of our executive officers and directors as of February 28, |
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Beneficial ownership is determined in accordance with the rules of the Commission and includes voting and/or 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 shares of common stock identified below, except to the extent authority is shared by spouses under applicable law. Beneficial ownership includes any shares that the person has the right to acquire within 60 days after February 28, 2017,2018, through the exercise of any stock option or other equity right. Unless otherwise indicated, the address of each person identified in the table below is c/o Akamai Technologies, Inc., 150 Broadway, Cambridge, Massachusetts 02142. On February 28, 2017,2018, there were 172,917,873169,977,772 shares of our common stock outstanding.
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Name of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned | Percentage of Common Stock Outstanding (%) | ||||||
5% Stockholders | ||||||||
The Vanguard Group (1) | 15,662,235 | 9.1 | ||||||
Capital World Investors (2) | 10,607,124 | 6.1 | ||||||
BlackRock, Inc. (3) | 10,588,783 | 6.1 | ||||||
The Growth Fund of America (4) | 10,179,389 | 5.9 | ||||||
Capital Research Global Investors (5) | 9,272,694 | 5.4 | ||||||
Directors | ||||||||
George H. Conrades (6) | 647,904 | * | ||||||
Pamela J. Craig (7) | 53,318 | * | ||||||
Monte Ford (8) | 30,293 | * | ||||||
Jill A. Greenthal | 33,662 | * | ||||||
Daniel Hesse | 0 | * | ||||||
F. Thomson Leighton (9) | 3,602,195 | 2.1 | ||||||
Jonathan Miller | 1,832 | * | ||||||
Paul Sagan (10) | 688,517 | * | ||||||
Frederic V. Salerno (11) | 66,566 | * | ||||||
Steven Scopellite (12) | 25,246 | * | ||||||
Naomi O. Seligman (13) | 58,308 | * | ||||||
Bernardus Verwaayen (14) | 27,743 | * | ||||||
Other Named Executive Officers | ||||||||
James Benson (15) | 76,376 | * | ||||||
Robert Blumofe (16) | 33,774 | * | ||||||
Rick McConnell (17) | 109,725 | * | ||||||
William Wheaton (18) | 58,259 | * | ||||||
All executive officers and directors as of February 28, 2017 as a group (18 persons) (19) | 5,613,289 | 3.2 |
Name of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned | Percentage of Common Stock Outstanding (%) | ||||||
5% Stockholders | ||||||||
The Vanguard Group (1) | 16,567,469 | 9.7 | ||||||
FMR LLC (2) | 10,854,126 | 6.4 | ||||||
BlackRock, Inc. (3) | 10,582,672 | 6.2 | ||||||
Clearbridge Investments, LLC (4) | 9,105,713 | 5.4 | ||||||
Directors | ||||||||
George H. Conrades (5) | 531,644 | * | ||||||
Pamela J. Craig (6) | 42,708 | * | ||||||
Monte Ford (7) | 35,825 | * | ||||||
Jill A. Greenthal | 38,197 | * | ||||||
Daniel Hesse | 2,562 | * | ||||||
Peter T. Killalea (8) | 0 | * | ||||||
F. Thomson Leighton | 3,626,773 | 2.1 | ||||||
Jonathan Miller | 8,101 | * | ||||||
Paul Sagan (9) | 620,472 | * | ||||||
Frederic V. Salerno (10) | 67,022 | * | ||||||
Naomi O. Seligman (11) | 56,892 | * | ||||||
Bernardus Verwaayen (12) | 37,273 | * | ||||||
William R. Wagner (13) | 0 | * | ||||||
Other Named Executive Officers | ||||||||
James Benson | 31,376 | * | ||||||
Robert Blumofe | 36,106 | * | ||||||
Rick McConnell | 45,052 | * | ||||||
William Wheaton (14) | 48,847 | * | ||||||
All executive officers and directors as of February 28, 2018 as a group (20) | 5,503,671 | 3.2 |
* | Percentage is less than 1% of the total number of outstanding shares of our common stock. |
(1) | The information reported is based on a Schedule 13G/A filed with the Commission on February |
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(2) | The information reported is based on a Schedule |
(3) | The information reported is based on a Schedule 13G/A filed with the Commission on January |
(4) | The information reported is based on a Schedule 13G filed with the Commission on February 14, |
Includes 1,500 shares held by Mr. Conrades’ wife and |
Includes |
Includes |
(8) | Mr. Killalea joined the Board of Directors in March 2018. |
(9) | Includes 117,292 shares of our common stock issuable upon exercise of stock options exercisable within 60 days after February 28, 2018, 6 shares held by Mr. Sagan in a trustee capacity and 9,112 shares issuable in respect of DSUs that have vested but not yet been distributed. |
(10) | Includes 4,830 shares issuable in respect of DSUs that have vested but not yet been distributed. |
(11) | Includes |
(12) |
(13) | Mr. Wagner joined the Board of Directors in April 2018. |
(14) | Includes |
(15) | Includes 170,547 shares of our common stock issuable upon exercise of stock options exercisable within 60 days after February 28, 2018, 3,929 shares issuable in respect of RSUs vesting within such time period, and 131,721 shares issuable in respect of DSUs that have vested but not yet been distributed. |
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Board Leadership and Role in Risk Oversight
Chairman of the Board
From 1999 until March 2018, George Conrades iswas our non-executive Chairman of the Board. In this role, he worksworked with the Lead Director and Chief Executive Officer to prepare Board meeting agendas, chairschaired meetings of the Board and our annual stockholder meetings and informsinformed other directors about the overall progress of Akamai. Mr. Conrades also providesprovided advice and counsel to the Chief Executive Officer and other executive officers, particularly relating to strategy, key customer accounts, market opportunities and leadership development. In addition, Mr. Conrades consultsconsulted in the annual performance evaluation of the Chief Executive Officer.
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Lead Director
Frederic Salerno became theserved as our independent Lead Director of our Board infrom May 2013.2013 until March 2018. In this role, he presidespresided over meetings of the independent members of our Board of Directors, providesprovided leadership and advice to management on key strategic
initiatives and seekssought to ensure effective communication among the committees of the Board of Directors.Board. Mr. Salerno also worksworked with the Chairman of the Board to review and recommend committee memberships for the Board. He leadsled discussions on the performance of the Chief Executive Officer and succession planning for executive officers and other key management positions. Mr. Salerno also takestook the lead role in providing feedback from our annual director peer evaluation process to his fellow Board members. In March 2018, Mr. Salerno was elected Chairman of the Board. We do not currently intend to appoint a new Lead Director to replace Mr. Salerno.
Roles of Chairman of the Board, CEO and CEOLead Director
Currently, the roles of Chairman of the Board of Directors and Chief Executive Officer are held by two different individuals. We believe this structure represents an appropriate allocation of roles and responsibilities at this time. With his backgroundMr. Salerno, as our Chief Executive Officer from April 1999a strong independent director, is able to April 2005 combined with his leadership qualities, Mr. Conrades is well-positionedplay a key role in ensuring Board effectiveness, management oversight and adherence to lead the Board in its fundamental role of providing advice to and oversight of management.good governance principles. Dr. Leighton is then better able to focus on ourday-to-day business and strategy, meet with investors and convey the management perspective to other directors. In addition, with Mr. Salerno’s position as Lead Director, an independent director is able to play a key role in ensuring Board effectiveness and adherence to good governance principles.
Risk Oversight
Our Board of Directors has an active role in supervising management’s oversight of Akamai’s risks. The Board and its committees perform this through both formal and informal mechanisms. They review business, regulatory, operational, cyber security and other risks that are incorporated in operating and strategic presentations that members of management and our advisors make to the Board. In addition, the Board regularly reviews information regarding our liquidity and operations, as well as the risks associated with each. Financial reporting risks are typically addressed by the Audit Committee through internal audits, committee agenda items, ethics and whistleblower updates and other
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discussions. As an example, the Audit Committee has overseen and reviewed analyses prepared by our internal audit function designed to assess the likelihood that enumerated risks would occur, the harm such risks would create if they occurred and current sufficiency of controls to address such risks. The Compensation Committee, in consultation with our independent executive compensation consultants, reviews Akamai’s management of executive compensation and retention risks as part of its annual executive compensation review and individual compensation discussions. See also the discussion of our annual risk assessment in “How We Evaluate and Address Risk in Our Compensation Policies and Practices” in Part Two of this Proxy Statement. The full Board of Directors typically reviews on an annual basis executive succession planning and development. The Nominating and Corporate Governance Committee, or the N&G Committee, assists the Board in fulfilling its oversight
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responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance.
Board Committees
The standing committees of our Board of Directors consist of an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each committee operates under a charter that has been approved by the Board of Directors.Board. Copies of the charters are posted in the Investor Relations section of our website at www.akamai.com. The Board of Directors has determined that all of the members of each of the three standing committees of the Board of Directors are independent as defined under The NASDAQNasdaq Stock Market, Inc. Marketplace Rules, or the NASDAQNasdaq Rules, including, in the case of all members of the Audit Committee, the independence requirements of Rule10A-3 under the Securities Exchange
Act of 1934, as amended, and, in the case of all members of the Compensation Committee, the independence requirements under Rule10C-1 under the Exchange Act. Membership on each standing committee as of February 28, 20172018 is reflected in the chart below.
Committee Membership as of December 31, 2017
Audit | Compensation | N&G | ||||
Pamela Craig | X* | X | ||||
Monte Ford | X | X | ||||
Jill Greenthal | X | X* | ||||
Daniel Hesse | X | X | ||||
Jonathan Miller | X | X | ||||
Frederic Salerno | X | X | ||||
| ||||||
Naomi Seligman | X | X | ||||
Bernardus Verwaayen | X* | X |
* | Committee Chair |
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The Audit Committee assists the Board of Directors in overseeing the financial and accounting reporting processes and audits of our financial statements, which includes reviewing the professional services provided by our independent auditors, the independence of such auditors from our management, our annual financial statements and our system of internal financial and IT 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. The Board of Directors has determined that Ms. Craig is our designatedan “audit committee financial expert” within the meaning of Item 407(d)(5)(ii) under RegulationS-K promulgated by the Commission under the Exchange Act. The Audit Committee held nine meetings in 2016.2017.
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The Compensation Committee assists the Board of Directors in discharging its responsibilities relating to the compensation of our executive officers, including determining the compensation of our Chief Executive Officer and other executive officers, administering our bonus, incentive compensation and stock plans, approving equity grants and approving the salaries and other benefits of our executive officers. In addition, the Compensation Committee consults with our management regarding our benefit plans and compensation policies and practices. The Compensation Committee is directly responsible for the appointment and oversight of our independent compensation consultants and other advisors it retains. The Compensation Committee held eight meetings in 2016.2017 and took one action by unanimous written consent.
The N&G Committee is responsible for, among other things, identifying individuals qualified to become members of our Board of Directors; recommending to the full Board of Directors the persons to be nominated for election as directors and to each of its committees; overseeing self-evaluation of the Board, of Directors, including the performance of individual directors; and reviewing and making recommendations to the Board of Directors with respect to corporate governance practices. The N&G Committee held threefive meetings in 2016.2017 and took one action by unanimous written consent.
Mr. Killalea was appointed to the Audit Committee of the Board in March 2018. Mr. Wagner was elected to the Board in April 2018 and has not yet been appointed to a standing committee.
Meeting Attendance
The Board of Directors held sixeight meetings during 20162017 and took two actions by unanimous written consent. Each incumbent director attended at leastmore than 75% of the total number of meetings of the Board of Directors and each committee on which he or she served during the fiscal year ended December 31, 2016.2017. All directors are expected to attend regular Board of Directors meetings, Board committee meetings for committees on which he or she serves and our annual meeting of stockholders. All of our then-incumbent directors attended the 20162017 Annual Meeting of Stockholders.
Determination of Independence
Under the NASDAQNasdaq Rules, a director of Akamai will only qualify as an “independent director” if, in the opinion of the Board of Directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board of Directors has determined that each of the
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following individuals is an “independent director” as defined under NASDAQNasdaq Rule 5605(a)(2):
Pamela Craig | Monte Ford | Jill Greenthal | ||
Daniel Hesse | ||||
Naomi Seligman | Bernardus Verwaayen | |||
William Wagner |
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The Board had previously made a similar determination of independence with respect to Steven Scopellite, who served as a director until the 2017 Annual Meeting of Stockholders.
In making its independence determination with respect to Mr. Wagner, the Board considered that, in 2017, Akamai sold approximately $1,700,000 of products and services to, and purchased approximately $1,500 of products and services from, LogMeIn, Inc., where Mr. Wagner is an executive officer. The amount of sales and the amount purchases in 2017 were less than 0.2% of LogMeIn, Inc.’s annual revenues and less than 0.1% of Akamai’s annual revenues and the transactions were conducted in the ordinary course of business, on commercial terms and on an arms’-length basis.
Our independent directors meet separately as part of each Board of Directors meeting and at other times as appropriate. In the independent director sessions, Mr. Salerno and the other independent directors review management performance, assess the focus and content of meetings of the Board of Directors and establish the strategic issues that the Board of Directors believes should be the focus of management’s attention to drive short-term and longer-term business success. Mr. Salerno then provides feedback to the Chief Executive Officer and other members of management on their performance and important issues on which the independent members of the Board of Directors believe management should focus.
Director Compensation
The following table sets forth compensation paid in 20162017 to our directors for their service as directors, other than Dr. Leighton, whose compensation is reflected in “Executive Compensation Matters” below:
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Total ($) | ||||||||||||||||||
George H. Conrades (2) | 95,000 | 244,978 | 339,978 | 95,000 | 245,005 | 340,005 | ||||||||||||||||||
Pamela L. Craig (3) | 80,000 | 244,978 | 324,978 | 80,000 | 245,005 | 325,005 | ||||||||||||||||||
Monte Ford (4) | 75,000 | 224,994 | 299,994 | 75,000 | 225,008 | 300,008 | ||||||||||||||||||
Jill A. Greenthal (5) | 80,000 | 230,015 | 310,015 | 80,000 | 229,995 | 309,995 | ||||||||||||||||||
Daniel Hesse (6) | — | 399,982 | 399,982 | 75,000 | 225,008 | 300,008 | ||||||||||||||||||
Jonathan Miller (7) | 75,000 | 224,994 | 299,994 | 75,000 | 225,008 | 300,008 | ||||||||||||||||||
Paul Sagan (8) | 75,000 | 224,994 | 299,994 | 75,000 | 225,008 | 300,008 | ||||||||||||||||||
Frederic V. Salerno (9) | 95,000 | 244,978 | 339,978 | 95,000 | 245,005 | 340,005 | ||||||||||||||||||
Steven Scopellite (10) | 75,000 | 224,994 | 299,994 | 75,000 | — | 75,000 | ||||||||||||||||||
Naomi O. Seligman (11) | 75,000 | 224,994 | 299,994 | 75,000 | 225,008 | 300,008 | ||||||||||||||||||
Bernardus Verwaayen (12) | 80,000 | 244,978 | 324,978 | 80,000 | 245,005 | 325,005 |
(1) |
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(2) | At December 31, |
(3) | At December 31, |
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(4) | At December 31, |
(5) | At December 31, |
(6) | At December 31, |
(7) | At December 31, |
(8) | At December 31, |
(9) | At December 31, |
(10) |
(11) | At December 31, |
(12) | At December 31, |
Under our non-employeeMr. Killalea was elected to the Board of Directors in March 2018 and, therefore, did not receive any director compensation in 2017. Mr. Wagner was elected to the Board in April 2018 and likewise did not receive any director compensation in 2017.
Under ournon-employee director compensation plan,non-employee directors are entitled to receive annual compensation of $300,000, of which $75,000 is paid in cash and $225,000 is paid in DSUs representing the right to receive shares of Akamai common stock. This compensation is generally paid or, in the case of DSUs, granted, on the date of our annual meeting of stockholders, and the number of DSUs issued is based on the fair market value of our common stock on that date. For so long as the person remains a director, DSUs will vest in full on the first anniversary of the grant date, but a director may defer distribution of his or her shares for up to ten years. If a director has completed one year of service on our Board, vesting of 100% of the DSUs held by such director will accelerate at the time of his or her departure from the Board.
In addition, our Chairman of the Board Vice Chairman and Lead Director are entitled to $40,000 of additional annual compensation, of which $20,000 is paid in cash and $20,000 is paid in DSUs. Chairs of the Audit Committee and the Compensation Committee are
entitled to $25,000 of additional compensation, of which $5,000 is paid in cash and $20,000 is paid in DSUs. The Chair of the N&G Committee is entitled to $10,000 of additional compensation, of which $5,000 is paid in cash and $5,000 is paid in DSUs. Eachnon-employee director is eligible to receive RSUs with a fair value at the time of grant of $400,000 when he or she joins the Board of Directors.Board. Such RSUs vest over a three-year period, withone-third vesting on each of the first, second and third anniversaries of the date of grant. We also reimburse directors for reasonableout-of-pocket expenses incurred in attending meetings of the Board of Directors.Board.
Stock Ownership Guidelines
We have minimum stock ownership requirements for our senior management team and Board of Directors. Pursuant to the guidelines, each member of Akamai’s senior
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management team is required to own a number of shares of our common stock having at least the value calculated by applying the following multiples: for the Chief Executive Officer, six times his base salary; for Named Executive Officers, two times his or her base salary; and for other executives, one times his or her base salary. In addition, eachnon-employee director is required to own a number of shares of our common stock having a value equal to five times his or her then-current base cash retainer. If a director’s base cash
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retainer or an executive’s base salary is increased, the minimum ownership requirement shall bere-calculated at the end of the year in which the increase occurred, taking into account our stock price at that time. If anon-employee director or executive fails to meet the ownership guidelines as of a test date that occurs after the period of time for attainment of the ownership level, he or she will not be permitted to sell any shares of our common stock until such time as he or she has exceeded the required ownership level. A more detailed description of these guidelines, including the timeline for compliance, is set forth in our Corporate Governance Guidelines, which are posted on our website at www.akamai.com/html/investor/corporate_governance.html. All directors are currently in compliance with the ownership guidelines.
N&G Committee’s Process for Reviewing and Considering Director Candidates
The N&G Committee assists the Board of Directors in identifying and attracting individuals qualified to become members of our Board of Directors.Board. In executing its mission to solicit qualified candidates to become directors of Akamai, the N&G Committee seeks to attract intelligent potential candidates from varied backgrounds who have a strong desire to understand and provide insight about Akamai’s business and corporate goals; to understand and contribute to the role of the Board of Directors in representing the interests of stockholders; and to promote good corporate governance and ethical behavior by the members of the Board of Directors and our employees.
Criteria Used to Consider Nominees to the Board of Directors
In assessing whether an individual has these characteristics and whether to recommend any particular candidate for inclusion in the Board of Directors’ slate of recommended director nominees, the N&G Committee will apply the criteria attached to its charter. These criteria include:
🌑 | Integrity, honesty and adherence to high ethical standards |
🌑 | Business and financial acumen |
🌑 | Knowledge of Akamai’s business and industry |
🌑 | Experience in business, government, |
🌑 |
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🌑 | Avoidance of potential conflicts of interest with various constituencies of Akamai |
🌑 | Commitment to dedicate the necessary time and attention to Akamai |
🌑 | Ability to act in the interests of all stockholders |
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The Board of Directors particularly values demonstrated leadership experience and skills and reputation for high standards of honesty, ethics and integrity. Although the N&G Committee does not assign specific weights to particular criteria, we believe that it is essential that all potential Board members have integrity and honesty, adhere to high ethical standards and possess a commitment to dedicate the necessary time and attention to Akamai and an ability to act in the interests of all stockholders without any potential personal conflict of interest. The N&G Committee and the Board of Directors believe that the backgrounds and qualifications of its directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its responsibilities.
With respect to considering whether tore-nominate our incumbent directors, the N&G Committee and the full Board of Directors apply the criteria discussed above. The Board may also take into account information available to it about directors’ professional status and performance on other boards of directors. In addition, each of our directors annually undergoes an evaluation by the other directors, which measures, among other things, the director’s contributions to the Board including his or her knowledge, experience and judgment. In addition, if there is a change in a director’s professional status, under our Corporate Governance Guidelines, that director must offer to resign from the Board and in considering whether to accept the resignation, the Board considers whether the director’s new status continues to complement the Board’s skills and qualities.
Importance of Diversity
Since adoption in 2003, the Criteria for Nomination as a director appended to Akamai’s N&G Committee charter have always emphasized the importance of diversity in determining the appropriate composition of our Board of Directors. The Criteria specifically state, “The [N&G] Committee shall actively consider nominees who can contribute to the diversity of the Board of Directors in terms of gender, race, ethnicity, professional background. Nominees shall not be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability or any other basis proscribed by law.”
OverFollowing the years, we have strived to improve the diversity of our Board to achieve the aspirations articulated in our N&G Committee charter. We believe that we have assembled an outstanding set of directors with varied backgrounds, experiences and viewpoints who understand our markets, our customers and our employees. The percentage of2018 Annual Meeting, female and/or minority directors currently serving on our Board comprise 33%will make upone-third of the total.
total Board as proposed. To help us maintain the broad diversity we have already achieved and to continually assess the effectiveness of this diversity policy, the Board of Directors conducts an annual self-evaluation and survey. The survey questions include an assessment of whether the composition of the Board is appropriately diverse and possessesreflects the skills, experience and other characteristics consistent with achieving our corporate goals now and in the coming years.
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Process for Identifying Candidates to Serve as Directors
To identify and evaluate attractive candidates, the members of the N&G Committee actively and regularly solicit recommendations for highly-qualified director candidates, including from other members of Akamai’s Board of Directors and
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other professional contacts. As potential candidates emerge, the N&G Committee meets from time to time to evaluate biographical information and background material relating to potential candidates; discusses those individuals with other members of the Board of Directors;Board; and reviews the results of personal interviews and meetings conducted by members of the Board, of Directors, senior management and our outside legal advisors.
At the Annual Meeting, stockholders will be asked to consider the elections of Messrs. Hesse and Wagner, each of whom has been nominated for election as a director for the first time. Mr. Hesse was appointed to the Board in 2016. He was initially recommended by anon-management director. Mr. Wagner was appointed to the Board in April 2018. He was initially recommended by Elliott Management Corporation, an Akamai stockholder, with which we entered into a Cooperation Agreement in March 2018 related to, among other things, appointment of additional directors to our Board. A copy of the Cooperation Agreement was filed as an exhibit to our Current Report on Form8-K filed with the Commission on March 9, 2018. The Board determined to include Messrs. Hesse and Wagner among its nominees.
Stockholders may recommend individuals to the N&G Committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least a year as of the date such recommendation is made, to Nominating and Corporate Governance Committee, c/o Corporate Secretary, Akamai Technologies, Inc., 150 Broadway, Cambridge, Massachusetts 02142. Assuming that appropriate biographical and background material has been provided on a timely basis, the N&G Committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others.
Stockholders also have the right under Akamai’s bylaws to directly nominate director candidates, without any action or recommendation on the part of the N&G Committee or the Board, of Directors, by following the procedures set forth in our bylaws and described under “Deadline for Submission of Stockholder Proposals for the 20182019 Annual Meeting” below.
The Board of Directors will give appropriate attention to written communications that are submitted by stockholders and will respond if and as appropriate. The Lead Director,Chairman of the Board, with the assistance of our General Counsel, is primarily responsible for monitoring communications from stockholders and for providing copies or summaries to the other directors as he or she considers appropriate. Communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that the Lead Director considers to be important for the Board of Directors to know. In general, communications relating to corporate governance and corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which Akamai tends to receive repetitive or duplicative communications.
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Stockholders who wish to send communications on any topic to the Board of Directors should address such communications to Board of Directors, c/o Corporate Secretary, Akamai Technologies, Inc., 150 Broadway, Cambridge, Massachusetts 02142.
Compensation Committee Interlocks and Insider Participation
Ms. Craig and Messrs. Ford, Miller Scopellite and Verwaayen were members of the Compensation Committee throughout 2016. Mr.2017. Messrs. Hesse joinedand Scopellite were members of the Compensation Committee in October 2016.from January 1, 2017 until May 17, 2017. No member of the Compensation Committee was at any time during 2016,2017, or formerly, an officer or employee of Akamai or of any of our subsidiaries,
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and no member of the Compensation Committee had any relationship with us requiring disclosure under Item 404 of RegulationS-K under the Exchange Act. No member of the Compensation Committee receives compensation, directly or indirectly, from Akamai in any capacity other than as a director.
None of our executive officers served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity onewhere an executive officer of whose executive officersthat entity also served as a director or member of theour Compensation Committee at any time during 2016.2017.
Report of the Audit Committee
The Audit Committee of our Board of Directors has furnished the following report on the Audit Committee’s review of our audited financial statements:
The Audit Committee of Akamai’s Board of Directors is responsible for, among other things:
🌑 | Monitoring the integrity of Akamai’s consolidated financial statements |
🌑 | Oversight of Akamai’s compliance with legal and regulatory requirements |
🌑 | Oversight of Akamai’s system of internal controls (including oversight of our internal audit function, which reports directly to the Audit Committee) |
🌑 | Appointment, oversight and evaluation of the qualifications, independence and performance of our internal and independent auditors with the authority to replace Akamai’s independent |
🌑 | Review and oversight of handling of ethical issues brought to the attention of management and the Board |
🌑 | Review of management’s enterprise risk assessments |
The Audit Committee acts under a written charter that is available on our website at www.akamai.com/html/investor/corporate_governance.html. The members of the Audit Committee are independent directors as defined by the Audit Committee charter and the NASDAQNasdaq Rules.
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Akamai’s management is responsible for the financial reporting process, including Akamai’s system of internal controls, and for the preparation of consolidated financial statements in accordance with GAAP. PricewaterhouseCoopers LLP, or PwC, Akamai’s independent auditors, is responsible for auditing those financial statements and expressing an opinion as to their conformity with GAAP. The Audit Committee’s responsibility is to oversee and review these processes. The members of the Audit Committee are not, however, professionally engaged in the practice of accounting or auditing and do not provide any expert or other special assurance as to the financial statements concerning compliance with laws, regulations or GAAP or as to auditor independence.
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Our Director of Internal Audit reports directly to the Audit Committee. The Internal Audit function annually conducts a series of audits to test Akamai’s internal financial and IT controls. This annual internal audit plan is reviewed and approved by the Audit Committee. Individual audit reports are reviewed at each Audit Committee meeting and any deficiencies are reviewed with management.
We reviewed Akamai’s audited consolidated financial statements that were included in Akamai’s Annual Report on Form10-K for the fiscal year ended December 31, 2016,2017, as filed with the Commission, which we refer to herein as the Financial Statements. We reviewed and discussed the Financial Statements with Akamai’s management and PwC. PwC has represented to the Audit Committee that, in its opinion, Akamai’s Financial Statements were prepared in accordance with GAAP. We discussed with PwC the matters required to be discussed by AS 1301: Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board.
We also discussed with PwC its independence from Akamai and considered whether PwC’s rendering of certain services to Akamai, other than services rendered in connection with the audit or review of the Financial Statements, is compatible with maintaining PwC’s independence. See “Ratification of Selection of Independent Auditors” included elsewhere in this Proxy Statement. In connection with these matters, Akamai received the written disclosures and letter from PwC required by the applicable requirements of the Public Company Accounting Oversight Board regarding PwC’s communications with the Audit Committee concerning independence.
Based on our review of the Financial Statements and reports to us and our participation in the meetings and discussions described above, and subject to the limitations on our role and responsibilities referred to above and in the Audit Committee charter, we recommended to the Board of Directors that the Financial Statements be included in Akamai’s Annual Report on Form10-K for the fiscal year ended December 31, 20162017 as filed with the Commission.
We have also appointed PwC to act as Akamai’s independent auditors for 2017.2018.
Audit Committee | ||||
Pamela Craig—Chair | ||||
Jill Greenthal | Dan Hesse | |||
Frederic Salerno | ||||
Naomi Seligman |
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Certain Relationships and Related Party Transactions; Code of Ethics; Interest in Annual Meeting Matters
Akamai did not enter into any transactions of the type required to be disclosed under Item 404 of RegulationS-K under the Exchange Act. Under our written Code of Ethics, our employees and members of our Board of Directors are prohibited from entering into any business, financial, or other relationship with our existing or potential customers, competitors, or suppliers that might impair, or appear to impair, the exercise of his or her judgment for Akamai. Our Code of Ethics also prohibits situations involving Akamai entering into a business transaction with an executive officer or director, a family member of an executive officer or director, or a business in which such a person has any significant role or interest if such a transaction could give rise to a conflict of interest. Our executive officers and directors are obligated under the Code of Ethics to disclose to our Legal Department any existing or proposed transaction or relationship that reasonably could be expected to give rise to a conflict of interest. Under the procedures reflected in our Code of Ethics and Audit Committee Charter, proposed related party transactions are subject to review to determine if they are in theour best interests of the company and, if such transaction is entered into, the conditions under which it may proceed. Proposed transactions involving executive officers, other than the General Counsel, are reviewed and subject to approval by the General Counsel after notifying the Audit Committee and the Lead Director. Proposed transactions involving the General Counsel or a director are reviewed and subject to approval by disinterested members of the Audit Committee after notifying the Lead Director.
No person who served as a director or executive officer of Akamai during the year ended December 31, 20162017 has a substantial interest, direct or indirect, in any matter to be acted upon at the Annual Meeting. Each executive officer serves at the discretion of ourthe Board of Directors and holds office until his or her successor is elected and qualified or until his or her earlier resignation or removal. There are no family relationships among any of our directors or executive officers.
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– Executive Compensation Matters
Compensation Discussion and Analysis (CD&A)
The following discussion and analysis of Akamai’s executive compensation objectives, policies and practices is designed to provide an overview of the material elements of our compensation structure. This discussion is focused on the following persons who served as Akamai executive officers in 2016:2017:
Name | Title | Date Appointed to Current Role | Year of Hire | |||||||
F. Thomson Leighton | Chief Executive Officer | January 2013 | 1998 | |||||||
James Benson | Chief Financial Officer | February 2012 | 2009 | |||||||
Robert Blumofe | EVP, Platform and GM of Enterprise | April 2016 | 1999 | |||||||
Rick McConnell | President and GM Web | January 2013 | 2011 | |||||||
William Wheaton | 2000 |
We refer to these individuals as our Named Executive Officers or our NEOs. Please refer to the “Summary Compensation Table” and the additional tables that follow for detailed information on compensation paid to our NEOs.
Executive Summary
In this Executive Summary, we describe new compensation arrangements introduced in 2016, our guiding principles on executive compensation, how those principles have aligned with our executive pay outcomes and how we establish our compensation levels and performance targets. We also discuss key compensation policies and practices.
2016 Executive Compensation Highlights
In 2016, we made four significant changes to our NEO compensation plans with a goal of balancing our guiding principles related to strategy, financial impact, and talent management with external perspectives such as peer group practices and investor feedback:
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We believe these changes enhance the alignment of our NEO compensation programs with the principles we discuss below. We have maintained the same structure for our 2017 program. See “Our 2016 Executive Compensation Program and Results” below for a detailed description of these plans.
Our Compensation Principles
We use the following guiding principles to design our compensation programs:
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Aligning Executive Compensation with our Performance
Akamai seeks to align executive compensation with performance by:
🌑 |
Tying |
🌑 | Utilizing performance-based vesting restricted stock units, or PRSUs, that require achievement of financial targets to vest |
🌑 |
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We believe that a significant portion of executive pay should be variable and at risk. Specifically, the amount earned by the executive should primarily be tied to our financial performance and the performance of our stock price. The charts below show the percentage of “at risk” compensation for our CEO and other NEOs. We consider compensation to be “at risk” if vesting is subject to achievement of performance targets and/or the value received is dependent on our stock price.
Overview of Compensation Components
We structure the annual compensation ofopportunities for our executive officers using three principal components: base salary, cashannual incentive bonuses and long-term equity-related incentives. Within our long-term equity program, we grant three types of awards: PRSUs, time-vesting RSUs andTSR-Based RSUs.
We generally align our pay mix strategy with the practices of our peer group when possible and to the extent consistent with our business model. In addition, our pay mix decisions for individual members of management and employees reflect our view of internal pay equity
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and the ability of a given employee to contribute to our results. In making decisions about how to balance different compensation components, we strive to advance our overarching compensation principles.principles outlined above.
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In the graphic below, we provide an overview of each material elementcomponent of our 20162017 executive compensation program and describe how each elementcomponent is tied to our compensation objectives.
Setting Compensation Levels for our Executives
Each year we establish the base salary, target cashannual incentive bonus opportunity and long-term equity incentives for each NEO based on review and assessment of the following factors:
🌑 | Each individual’s overall performance |
🌑 | Company performance |
🌑 | Success in executing against corporate and functional goals |
🌑 | Importance and scope of role |
🌑 | Future potential contributions |
🌑 | Prior background, training and experience |
🌑 | Internal pay equity considerations |
🌑 | Retention concerns |
🌑 |
Practices of companies in our compensation benchmarking and design peer groups |
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We also consider the effect of market or competitive forces, changes in strategy or priorities that may bear upon an individual’s performance, and any other specific challenges faced or overcome by each person or the function or unit that they led during the prior fiscal year.
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The Compensation Committee does not assign relative weights or rankings to such factors. Rather, the Compensation Committee relies upon the CEO’s recommendations (for NEOs other than the CEO) and the directors’ knowledge and judgment in assessing the various qualitative and quantitative inputs it receives as to each individual and makes compensation decisions accordingly.
If our results do not meet our expectations, our NEOs will receive compensation that is below target opportunity levels and may be below market in comparison with our peer group.comparison. Similarly, when superior results are achieved, our NEOs may receive compensation that is above our target levels and above market. Foropportunity level. As an example, the past three years, for example,chart below demonstrates how our cash incentiveannual bonus plan payouts have closely reflected our financial performance:performance over the past three years:
Setting Financial Performance Targets
Revenue and profitability performance targets are used in our cash incentive plan and performance-based RSUs granted to NEOs.annual bonus plan. We engage in a rigorous and deliberate process in setting those targets, which are directly linked to our annual operating plan.plan and3-year strategic plan and are set early in the year. The performance targets for 20162017 are also consistent with the financial guidance we gave to investors on our public earnings call in February 2016.2017. As a result, we believe that the performance targets reflect our goals and expectations for the business, are common performance indicators in our industry and are meaningful to our stockholders andstockholders. The performance goals are rigorous but achievable without encouraging inappropriate risk taking.
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Revenue goals are set based on trends in sales of our solutions in prior quarters and reflect our understanding of how markets for our offerings may be evolving, information we learn about customer plans, expectations associated with new product introductions, predictions about macro-economic conditions, changes we have witnessed in the competitive landscape and other factors. Profitability goals are set based on our revenue expectations, plans for capital expenditures and hiring, expected growth in operating expenses as well as
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efforts to curtail spending growth and other factors. Our performance targets are also adjusted during the year to give effect to acquisitions that occur and to eliminate the impact of foreign currency exchange rate fluctuations.
We also carefully set our minimum and maximum target opportunities. Because we primarily derive income from sales of services to customers executing contracts with terms of one year or longer, we have a relatively consistent base level of revenue growth from year to year. In setting annual performance targets and associated payout levels, the Compensation Committee takes this into account. A5%-10% or greater improvement over target revenue or operating income targets represents excellent performance and is reflected in cash bonus payments; a5%-10% or greater shortfall against such targets leads to much lower payouts. For example, bonuses are not payable under our annual incentive plan unless revenue achievement is at least 90% of target.
The Compensation Committee has considered using different metrics for the cashannual incentive and equity incentive programs but has concluded that using both revenue and profitability targets is appropriate because they are fundamental measures ofmetrics used by investors to assess our performance. In particular, these particular performance targets represent key metrics by which we are evaluated by investors. We believe they also provide an appropriate and effective balance of performance incentives to focus and motivate executive officers to maximize value for our stockholders without excessive risk-taking, as evidenced by our revenue growth and strong GAAP gross margins and operating margins.
Once the Compensation Committee has approved performance targets, we set a range of payouts that can be earned by the NEOs based on achieved results against those targets. For each performance-based component, there is a threshold level of performance below which no cash, PRSUs orTSR-Based RSUs, as applicable, will be earned and a maximum level where achievement at or above that level would lead to a payout of 200% of target.
The Compensation Committee approves the performance targets and applicable ranges only after the full Board of Directors has met to review, discuss and approve the short- and long-term financial planplans for the coming year.company.
CEO Compensation
Dr. Leighton became our CEO in January 2013, having previously served as our Chief Scientist sinceco-founding Akamai. In his prior role, from 2001 through 2012, Dr. Leighton received an annual salary of $20,000. In establishing his salary as CEO, the Compensation Committee considered Dr. Leighton’s past compensation history, his significant equity holdings, peer group practices and the desire to include performance-based compensation as the majority of his pay package. This approach conforms to our philosophy of aligning his compensation with the interests of our long-term investors. TheIn 2013, when Dr. Leighton became CEO, his salary was established at $1. In 2017, in order to align Dr. Leighton with his leadership team, the Compensation Committee and Dr. Leighton agreed that in 2013 he would move to a salaryestablished an annual target bonus opportunity for him of $1 (with bonus potential of up to an additional 200%, consistent with our other NEOs’ bonus plans),million, with the remainder of his annual compensation to be market competitive and consisting of equity-based components. The Compensation
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Committee and Dr. Leighton agreed that his earned 2017 annual incentive bonus would be paid to him in shares of our common stock in lieu of cash to reinforce further the alignment of his compensation with stockholder interests. Ultimately, nearly 100% of Dr. Leighton’s compensation is at risk and stock-based.risk.
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Compensation Policies and Practices Highlights
Every year, the Compensation Committee assesses the effectiveness of the performance of our compensation plans and practices. We evaluate the financial metrics we use and how our programs compare with those used by our peer group companies. We also consider whether our goal of aligning awards with performance is being realized and if programs appear to have led to any unintended consequences. In recent years, we have continuously taken steps to strengthen and improve our executive compensation policies and practices. Highlights of our current policies and practices include:
What we do and don’t do | ||||||
We align executive compensation with the interests of our stockholders by designing our executive compensation to avoid excessive risk and foster sustainable growth | ✓ | Focus on Performance-Based Pay | ||||
✓ | Include a Relative Market-Based Performance Metric (TSR) in Executive Compensation | |||||
✓ | Mitigate Undue Risk in Compensation Programs | |||||
✓ | Include Double-Trigger Change in Control Provisions for All Equity Awards Issued to NEOs After 2015 | |||||
✓ | Utilize Objective Performance Metrics | |||||
✓ | Review Tally Sheets when Making Executive Compensation Decisions | |||||
✓ | Provide Modest Perquisites | |||||
✓ | Enforce Stock Ownership Guidelines for Officers and Directors | |||||
✓ | Bonus and PRSU Awards Have Maximum Payout Caps | |||||
We adhere to executive compensation best practices | ✓ | Prohibit Hedging Transactions and Short Sales by Executive Officers or Directors | ||||
✓ | Prohibit Pledging of Company Stock | |||||
✓ | Maintain a Clawback Policy | |||||
✓ | Mitigate Potential Dilutive Effect of Equity Awards | |||||
Through Robust Share Repurchase Program | ||||||
✓ | Utilize an Independent Compensation Consulting Firm that Provides No Other Services to Akamai | |||||
✓ | Provide Reasonable Post-Employment/Change in Control Provisions | |||||
✓ | No Employment Contracts (unless required by law) | |||||
✓ | No Repricing Underwater Stock Options | |||||
✓ | No Excise TaxGross-Ups Upon Change in Control |
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Our 20162017 Executive Compensation Program and Results
In this section, we describe our 20162017 NEO compensation program including the impact of our 20162017 financial performance on overall achievement.
Base Salary
Base salary is used to provide NEOs with a fixed amount of annual cash compensation. The Compensation Committee views base salary as a way to attract and retain talent by providing a reliable source of income while also motivating strong business performance without encouraging excessive risk taking. Base salaries represent a relatively small percentage of our overall compensation in order to increaseensure that our programs provide significant alignment with our stockholders’ interests and motivate performance that creates sustainable long-term stockholder value.interests.
Each year, the Compensation Committee evaluates each NEO’s base salary and the other components of his or her compensation to ensure that total compensation is in line with our overall compensation philosophy. Data from our benchmarking peer group indicated that the 20162017 base salaries for our NEOs as a group (other than the CEO) were, on average, slightly below market median.
For 2016, The Committee addressed some of these gaps with the Compensation Committee decided not to increaseincreases reflected in the base salaries of our NEOs in 2016.table below.
2016 Base Salaries for Named Executive Officers | ||||||||
2017 Base Salaries for Named Executive Officers | 2017 Base Salaries for Named Executive Officers | |||||||
Name | 2016 Base Salary | Percentage Increase from 2015 | 2017 Base Salary | Percentage Increase from 2016 | ||||
Dr. Leighton | $1 | 0% | $1 | 0% | ||||
Mr. Benson | $450,000 | 0% | $480,000 | 6.7% | ||||
Dr. Blumofe | $430,000 | 0% | $475,000 | 10.5% | ||||
Mr. McConnell | $530,000 | 0% | $550,000 | 3.8% | ||||
Mr. Wheaton | $420,000 | 0% | $420,000 | 0% |
CashAnnual Incentive Bonuses
CashAnnual incentive bonuses are performance-based awards that are intended to drive the achievement of key business results while rewarding NEOs based upon their contributions to Akamai’s success. Each year, the Compensation Committee sets a target cashannual incentive bonus award opportunity for each NEO, or Target Annual Bonus Opportunity, expressed as a percentage of base salary, based upon each individual’sexecutive’s role and responsibilities, internal pay equity considerations and peer group data. The Compensation Committee believes that the Target Annual Bonus Opportunity should make up a more significant portion of an NEO’s total target cash compensation as the executive’s level of responsibility increases.
Each NEO has the opportunity to earn between 0% and 200% of his or her Target Annual Bonus Opportunity based on performance.performance against objective financial targets. The Compensation Committee believes these goals
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Compensation Committee believes that these goals and objectives encourage a balanced focus on revenue growth and profitability. In 2016, we moved exclusively to corporate financial metrics to determine eligibility for NEO cash incentive bonuses, eliminating the more subjective management-by-objectives componentData from our benchmarking peer group indicated that, comprised 20% of the weighting of prior programs. Onon average, our NEOs’ Target Annual Bonus Opportunity was slightly below market median.
The table below reflects the structure of the cashannual incentive program as well as 20162017 performance against target. The overall payout percentage against the Target Annual Bonus Opportunity was 84.2% of target bonus, reflecting achieved performance slightly below the established target financial performance goals.101%.
2016 Cash Incentive Bonus Plan Targets and Results | ||||||||||||||||||||||||
2017 Annual Incentive Bonus Plan Targets and Results | 2017 Annual Incentive Bonus Plan Targets and Results | |||||||||||||||||||||||
Metric | % Weighting | Why We Use This Metric | 2016 Target | 2016 Actual | Achievement Target | Payout % Against | % Weighting | Why We Use This Metric | 2017 Target | 2017 Actual | Achievement Target | Payout % Against | ||||||||||||
Revenue (adjusted for foreign currency)* | 50% | Revenue is a fundamental measure of our success at selling our solutions, innovating and competing in the marketplace. | $2.38 billion | $2.32 billion | 97.4% | 74.4% | 50% | Revenue is a fundamental measure of our success at selling our solutions, innovating and competing in the marketplace. | $2,558.9 million | $2,520.2 million | 98.5% | 84.8% | ||||||||||||
Non-GAAP Operating Income* | 50% | Non-GAAP operating income is an indicator of profitability that eliminates the effects of events that either are not part of our core operations or are non- cash as well as the impact of income taxes; we use it as a component of the bonus targets to align our executives’ interests with those of our investors. | $649.9 million | $646.1 million | 99.4% | 94.1% | 50% | Non-GAAP operating income is an indicator of profitability that eliminates the effects of events that either are not part of our core operations or are non-cash as well as the impact of income taxes; we use it as a component of the bonus targets to align our executives’ interests with those of our investors. | $613.5 million | $624.0 million | 101.7% | 117.2% | ||||||||||||
Overall Payout as a % Against Target | Overall Payout as a % Against Target | 84.2% | Overall Payout as a % Against Target | 101% |
* | Refer to “Financial Metrics Definitions” below for an explanation of the calculation of this measure. |
The table below shows each NEO’s payout against the Target Annual Bonus Opportunity:Opportunity for 2017:
Name | Target Bonus Opportunity | 2016 Actual Payout (84.2% Achievement) | ||||||
Dr. Leighton | $ | 1 | $ | 1 | ||||
Mr. Benson | $ | 397,212 | $ | 334,642 | ||||
Dr. Blumofe | $ | 334,904 | $ | 282,149 | ||||
Mr. McConnell | $ | 550,385 | $ | 463,687 | ||||
Mr. Wheaton | $ | 327,115 | $ | 275,587 |
Name | Target Annual Bonus Opportunity | 2017 Actual Payout (101% Achievement) | ||||||
Dr. Leighton | $ | 1,000,000 | $ | 1,009,782 | ||||
Mr. Benson | $ | 401,625 | $ | 405,554 | ||||
Dr. Blumofe | $ | 371,000 | $ | 374,629 | ||||
Mr. McConnell | $ | 545,000 | $ | 550,331 | ||||
Mr. Wheaton | $ | 336,000 | $ | 339,287 |
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The Compensation Committee and Dr. Leighton agreed that his earned 2017 annual incentive bonus would be paid to him in shares of our common stock in lieu of cash.
Long-Term Equity Incentives
We believe that long-term equity-based compensation grants motivate and reward strong corporate performance, provide incentives for our NEOs to align executive and stockholder interests and enhance stockholder value. In addition, these awards assist in attracting and retaining our NEOs. In 2016,2017, we issued three types of RSUs to our NEOs: PRSUs that vest based upon our performance against establishedabsolute financial metrics; Time-Vesting RSUs that vest based on continued employment with us; and relativeTSR-Based RSUs that vest based on how our stock performs relative to an established peer group over a three-year period. The chart below explains why we granted each award type to our NEOs in 2016.2017.
Type of RSU | Why We use This Type of RSU | Vesting Schedule | Weighting | |||
PRSUs | By tying vesting to achievement against absolute revenue andnon-GAAP earnings per share* | 3-year cliff | 40% | |||
Time-Vesting RSUs | RSUs that vest over the passage of time provide compensation certainty that helps retain our NEOs and incent them to enhance stockholder value. | 1/3 annually over 3 years | 40% | |||
Relative TSR-Based RSUs | TSR-Based RSUs directly align our executives’ compensation with how our stock price has performed relative to our peer group, enhancing the alignment of management and investor interests. | 3-year cliff | 20% |
* | Refer to “Financial Metrics Definitions” below for an explanation of the calculation of this measure. |
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The Compensation Committee sets each NEO’s target equity award value based on market data, internal equity considerationsfuture expected contributions and performance, job responsibilities and duties. OnData from our benchmarking peer group indicated that, on average, our NEOs’ 20162017 target equity grant values were atslightly above market median. The grant-date target 20162017 long-term equity incentive values for our NEOs were:
Name | Target Value for PRSUs (Achievement at Target) | Target Value for Time-Vesting RSUs | Target Value for TSR- at Target) | Total | ||||||||||||
Dr. Leighton | $ | 3,400,000 | $ | 3,400,000 | $ | 1,700,000 | $ | 8,500,000 | ||||||||
Mr. Benson | $ | 920,000 | $ | 920,000 | $ | 460,000 | $ | 2,300,000 | ||||||||
Dr. Blumofe | $ | 920,000 | $ | 920,000 | $ | 460,000 | $ | 2,300,000 | ||||||||
Mr. McConnell | $ | 1,400,000 | $ | 1,400,000 | $ | 700,000 | $ | 3,500,000 | ||||||||
Mr. Wheaton | $ | 920,000 | $ | 920,000 | $ | 460,000 | $ | 2,300,000 |
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Name | Target Value for PRSUs | Target Value for Time-Vesting RSUs | Target Value for TSR- Based RSUs | Total | ||||||||||||
Dr. Leighton | $ | 3,400,000 | $ | 3,400,000 | $ | 1,700,000 | $ | 8,500,000 | ||||||||
Mr. Benson | $ | 1,080,000 | $ | 1,080,000 | $ | 540,000 | $ | 2,700,000 | ||||||||
Dr. Blumofe | $ | 1,080,000 | $ | 1,080,000 | $ | 540,000 | $ | 2,700,000 | ||||||||
Mr. McConnell | $ | 1,500,000 | $ | 1,500,000 | $ | 750,000 | $ | 3,750,000 | ||||||||
Mr. Wheaton | $ | 920,000 | $ | 920,000 | $ | 460,000 | $ | 2,300,000 |
PRSUs. Each NEO has the opportunity to earn between 0% and 200% of his or her target PRSUs based on achievement against annual revenue andnon-GAAP earnings per share performance targets for each of 2016, 2017, 2018 and 2018. 2019.One-third of an NEO’s 20162017 PRSUs may be earned over eachone-year period. At the beginning of each year, the Compensation Committee sets the performance targets for the year. After the conclusion of the year and the Compensation Committee’s certification of achieved performance, however, vesting of PRSUs earned only occurs on the date of the Compensation Committee’s certification of our financial results for 2018.2019.
In structuring our PRSUs, we sought to achieve a balance between the desire to incorporate specific performance-based components in the long-term incentive compensation for NEOs with an acknowledgment of the difficulties inherent in establishing long-term performance goals in our industry where traffic and other trends are outside of our control and consistently unpredictable. Although we carefully considered the implications of usingone-year performance periods as opposed to a single three-year period, we ultimately determined that any related issuesdrawbacks were outweighed by the desire to avoid any unintended consequences of motivating the wrong behavior or limiting Akamai’s flexibility as a result of outdated or inapplicable long-term goals. The Committee also took into consideration that use ofone-year performance periods is a common practice within our benchmarking and design peer groups and industry.
We use revenue as a target metric for our PRSUs, as well as our annual bonus plan, because it is a fundamental metric used by investors to assess our performance. Revenue growth is also key to both our short- and long-term strategic plans.
Because the PRSUs includeare dependent upon annual financial goals, the values reported in the Summary Compensation Table below are different than the target values set forth in the tables above. Financial Accounting Standards Board ASC Topic 718 requires that the value of the PRSUs reported in the Summary Compensation Table include only that portion of the
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value of the PRSUs for which annual financial performance metrics were established during fiscal 20162017 based on probable achievement of such metrics. As a result, for the 20162017 PRSUs, the Summary Compensation Table does not include the value of the PRSUs based on the annual financial metrics for fiscal 20172018 or fiscal 2018.2019. Such amounts will be included as equity compensation in the Summary Compensation Table for fiscal 20172018 and fiscal 2018,2019, respectively, when the financial metrics are established.
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The chart below shows the applicable 20162017 performance metrics and our achievement against them:
2016 PRSU Targets and Results | ||||||||||||||||||||||||
2017 PRSU Targets and Results | 2017 PRSU Targets and Results | |||||||||||||||||||||||
Metric | % Weighting | Why We Use This Metric | 2016 Target | 2016 Actual | Achievement Target | % of Against | % Weighting | Why We Use This Metric | 2017 Target | 2017 Actual | Achievement Target | % of Against | ||||||||||||
Revenue (adjusted for foreign currency)* | 50% | Revenue is a fundamental measure of our performance against our long-term growth strategy. | $2.38 billion | $2.32 billion | 97.4% | 74.4% | 50% | Revenue is a fundamental measure of our performance against our long-term growth strategy. | $2,558.9 million | $2,520.2 million | 98.5% | 84.8% | ||||||||||||
Non-GAAP Earnings per Share* | 50% | Non-GAAP earnings per share is an indicator of profitability that eliminates the effects of events that either are not part of our core operations or are non-cash as well as the impact of income taxes; we use it as a performance target to align our executives’ interests with those of our investors. | $2.59/per share | $2.65/per share | 102.4% | 123.9% | 50% | Non-GAAP earnings per share is an indicator of profitability that eliminates the effects of events that either are not part of our core operations or arenon-cash as well as the impact of income taxes; we use it as a performance target to align our executives’ interests with those of our investors. | $2.55/per share | $2.68/per share | 105.1% | 150.8% | ||||||||||||
Overall Payout as a % Against Target | Overall Payout as a % Against Target | 99.2% | Overall Payout as a % Against Target | 117.8% |
* | Refer to “Financial Metrics Definitions” below for an explanation of the calculation of this measure. |
RelativeTSR-Based RSUs. Each NEO has the opportunity to earn between 0% and 200% of his or her targetTSR-Based RSU award based on the three-year performance of our stock price relative to that of companies in the S&P 500 Information Technology Index (or any successor thereto)index) as of January 1, 2016.2017. The number ofTSR-Based RSUs earned and vested is based upon the percentile ranking of our TSR within the Index Group at the conclusion of the three-year performance period ending on December 31, 2018.2019. TSR is calculated on a per share basis as the quotient of (i) (Ending Priceplus Dividends per Share Paidminus Beginning Price),divided by (ii) the Beginning Price, where Ending Price means the average closing stock price of one share of our common stock over the 90 trading days immediately preceding January 1, 2019;2020; Dividends per Share Paid means cumulative dividends per share
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of common stock paid by us between January 1, 20162017 through
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December 31, 2018;2019; and Beginning Price means the average closing stock price of one share of our common stock over the 90 trading days immediately preceding January 1, 2016. 2017.TSR-Based RSUs, to the extent earned, will vest following the Compensation Committee’s certification of our financial results for 2018.2019.
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In 2015, we granted to each of our NEOs similar performance-based RSUs that could be earned based on achieved performance against pre-determined performance metrics over a two-year performance period (2015-2016). The chart below shows actual performance against target and the percentage of target payout earned by each NEO. To the extent earned, these performance-based RSUs will vest 50% in 2017 and 50% in 2018.
Metric | Weighting | Target Performance (2015-2016) | Actual Performance (2015-2016) | Achievement % Against Target | ||||
Operating Free Cash Flow | 25% | $1.17 billion | $1.11 billion | 94.5% | ||||
Web Performance, Security, Emerging Products and Carrier Solutions Revenue | 50% | $2.34 billion | $2.31 billion | 98.7% | ||||
Media Delivery and Services Revenue | 25% | $2.64 billion | $2.28 billion | 86.4% |
Based on such performance, the overall weighted average payout as against target was 64.5%.
How We Select and Use Peer Groups
The Compensation Committee works closely with Meridian Compensation Partners, LLC, or Meridian, our independent compensation consultants,consultant, to establish the peer groupgroups we use in reviewing and setting executive compensation for the upcoming year. Meridian provides research data, and the Compensation Committee also considers input from Akamai executives and members of the Board on the competitive landscape in our industry and adjacent ones. We adhere to the following key principles to establish our peer group:groups:
🌑 | Consistency. Peer group composition should remain relatively stable year over year. |
🌑 | Competitors. Peer group companies should reflect Akamai’s competitors for executive talent as well as in business (including investment capital). |
🌑 | Similarity in Size. |
🌑 | Statistical Validity. Peer group should include enough data points to develop statistically valid data. We generally expect to include approximately 20 companies in our peer group. |
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As we considered companies to include in our peer group, we identified a number of companies with which we compete for executive talent that are larger than Akamai. Failing to consider the practices of these companies would not allow us to structure our compensation programs effectively. To address this, the Compensation Committee approved and adopted two peer groups for use in connection with setting 2016 compensation.2017 compensation, one for benchmarking and one for additional design considerations.
Benchmarking Peer Group
The benchmarking peer group is comprised of companies of similar size and industry as Akamai. The Compensation Committee reviewed compensation data for executives with comparable positions at these benchmarking peer group companies to gauge the reasonableness and competitiveness of each of our NEO’s total compensation as well as to inform the design of our programs. Our benchmarking peer group consisted of the following companies:
Adobe Systems | Autodesk | Brocade Communications | ||
CA | Ciena | Citrix Systems | ||
Equinix | F5 Networks | IAC/Interactive Group | ||
Juniper Networks | Nuance Communications | |||
PTC | Rackspace Hosting | Red Hat | ||
Salesforce.com | VeriSign | |||
VMWare | Yahoo! |
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The Compensation Committee established this benchmarking peer group in mid-2015mid-2016 for use in setting 20162017 compensation. Akamai’s revenue for 20162017 was $2.34$2.52 billion, and our market capitalization at the end of that year was $11.6$11.1 billion. The median 20162017 revenue for our benchmarking peer group was approximately $2.87$2.57 billion, and the median market capitalization for the group at the end of that year was $11.2$12.3 billion.
Design Reference Peer Group
In addition to the benchmarking peer group, the Compensation Committee approved a supplemental design reference peer group to provide it with further information on competitive market design practices. The companies in the design reference peer group consistently provide the greatest challenges for Akamai in competing for talent even though they are considerably larger than us so wouldand are therefore not be appropriate forincluded in the benchmarking peer group at this time. The Compensation Committee used data derived from the design reference peer group to inform our incentive plan design, pay mix, long-term incentive vehicles and other practices. The Compensation Committee believes that understanding design reference peer group data helps us to successfully attract and retain experienced and talented individuals who are critical to our long-term success.
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Our 20162017 design reference peer group consisted of the following companies:
Amazon.com | Apple | Cisco Systems | ||
EBay | EMC | |||
Microsoft | Netflix | |||
Oracle |
Target Compensation Philosophy
Our philosophy is generally to target each NEO’s total direct compensation (i.e., the sum of base salary, target annual cash incentive bonus and target value of long-term incentives) at the 50th percentile of our benchmarking peer group; however, the Compensation Committee may ultimately set an NEO’s total direct compensation at a level above or below the 50th percentile based onnon-market data factors.
In determining 20162017 compensation levels for each NEO, the Compensation Committee took into account a number of factors beyond market data, including long-term retention objectives, individual and corporate performance, complexity of job roles and the highly-competitive marketplace for executives with the skills and expertise of our NEOs.
The Compensation Committee set 20162017 total direct compensation for Messrs. Leighton, Benson, Blumofe, McConnell and McConnellWheaton at approximately the 50th percentile of the benchmarking peer group. Dr. Blumofe’s 2016 total direct compensation was below the median; however, he received a compensation increase in 2017 to bring his compensation more in line with the peer group median.
We also structure and balance the different elements of compensation to reflect trends across our design reference peer group.
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Our Executive Compensation Process
The Compensation Committee constructs our executive compensation program with input from Meridian and our Chief Executive Officer. We establish the annual compensation packages for our executive officers at the beginning of each year after an extensive process of analysis and review of competitive trends, assessment of prior compensation programs to understand their effectiveness and results, consideration of the peer group practices we use, performance evaluations, and investor input that occurs during the third and fourth quarters of the prior year. Following is an overview of the planning and assessment process:
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Role of the Compensation Committee
The Compensation Committee sets the compensation for each of our Named Executive Officers and other senior executives. It establishes the financial metrics for performance-based awards based on Akamai’s operating plans and long-term strategy approved by the Board and then assesses performance against those targets in later years. For NEOs other than our CEO, the Compensation Committee reviews Dr. Leighton’s evaluation of his direct
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reports’ performance and establishes compensation levels and opportunities. The full Board makes the determination of our CEO’s performance when setting his compensation levels and opportunities.
The Compensation Committee makes judgments about the role of each executive in the pursuit and achievement of our corporate and strategic objectives. Typically, these judgments involve qualitative, rather than quantitative, evaluations of each individual’s past performance and expectations about future contributions. We believe that it is important to reward excellence, leadership and outstanding long-term company performance through compensation arrangements designed to retain and motivate executives while aligning their incentives with continued high levels of performance.
The Compensation Committee approves and grants all equity incentive awards to our NEOs. In general, annual executive compensation determinations are made at the scheduled Compensation Committee meeting in January or February of each year. Historically and for 2018, annual equity grants to executives have been made on the second business day following our earnings call for the most recently-completed fiscal-year end. For 2019, we are considering making such grants at the same time as annual equity grants are made to ournon-executive employees, typically in early March. Equity incentive awards to newly-hired executive officers are generally approved at the first regularly-scheduled Compensation Committee meeting following the individual’s date of hire. For retention purposes or to reflect changes in responsibilities or similar events or circumstances, the Compensation Committee may approve equity awards to our executive officers at other times during the year. The Compensation Committee sets a dollar value for each executive RSU award that is granted as part of our compensation program; the number of RSUs granted is determined on the second business day following the public announcement of our earnings results for the most recently-completed quarter based on the closing sale price of our stock on thatthe grant date. We believe that it is appropriate to grant our annual executive equity awards after such earnings results announcements, a time when the Board and the executives are not in possession of material nonpublic information about the prior quarter’s financial performance and after the market has had an opportunity to absorb such information.
The Compensation Committee retains, but we do not currently expect that it will exercise in the future, discretion to waive the achievement of stated corporate performance targets as a condition to payment of cashannual incentive bonuses.
Role of our Chief Executive Officer
Annually, the Chief Executive Officer evaluates the performance of the other NEOs and sets expectations for their roles in the upcoming year. He makes a recommendation to the Compensation Committee as to proposed salary, bonus and equity incentive compensation for the coming year for these NEOs. With respect to his own compensation, the CEO
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conducts a self-assessment of prior year performance. The Board (without the participation of the CEO) then discusses and evaluates the Chief Executive Officer’s performance. The Compensation Committee is the ultimate decision-maker with respect to the compensation of our Chief Executive Officer and other NEOs.
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Role of Independent Compensation Consultants
Our Compensation Committee considered advice provided by Meridian in establishing our 20162017 executive compensation program. Meridian is retained by and reports directly to the Chair of the Compensation Committee. Meridian was first retained by the Compensation Committee in 2011. Since then, Meridian has provided the following services to the Compensation Committee: (i) recommending a peer group of companies, (ii) assisting the Compensation Committee in understanding compensation levels of executive officers in the benchmarking peer group, (iii) assisting the Compensation Committee in understanding compensation design practices of companies in the design reference group, (iv) reviewing the value of equity compensation previously granted to executives, (v) developing a long-term executive compensation strategy and related services. Meridian has not provided us with any services during fiscal years 2011 through 2016 beyond providing advice or recommendations on the amount or form of executive and director compensation. The Compensation Committee determined that Meridian was independent of management throughout this period.management.
How We Considered the 2016 “Say-on-Pay”2017“Say-on-Pay” Advisory Vote on Executive Compensation
The Compensation Committee has consistently strived to balance the need to offer competitive executive compensation with what it believes is in the long-term best interests of Akamai and our stockholders. The Compensation Committee takes seriously stockholder input. We consider that input, best practices and the competitive environment to develop compensation programs that are designed to support our short- and long-term success without encouraging excessive risk-taking.
At our 20162017 Annual Meeting of Stockholders, we held an advisory vote on our 20152016 executive compensation program, and 90%84% of the votes were cast in support of the program.
Taking into account feedback we have received from investors, we made the following changes to our executive compensation programs in recent years:
🌑 | Introduced a relative stock price metric |
🌑 | Increased the emphasis on PRSUs andTSR-Based RSUs to 60% of the target value of executive equity awards |
🌑 | Eliminated the subjective component of our |
🌑 | Adopted a compensation recovery, or clawback, policy |
🌑 | Moved away from the issuance of stock options to our executives and directors |
🌑 | Amended our Change in Control Agreements for NEOs to eliminate single-trigger vesting for RSUs granted after 2015 except where an acquirer would cancel the awards |
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How We Evaluate and Address Risk in Our Compensation Policies and Practices
Annual Risk Assessment
Annually, the Compensation Committee asks management and Meridian to review with it the potential risks associated with the structure and design of various Akamai compensation plans. The analysis includes assessing executive andnon-executive compensation programs, with particular emphasis on incentive compensation plans, including sales compensation, against key risks that our company faces. Our review takes into account changes in compensation programs, as well as new risks we identify. In addition, our compensation plans and programs operate within strong governance and review structures that serve and support risk mitigation. In particular, we believe the following factors mitigate any components of our compensation programs that would encourage excessive risk taking:
🌑 | Significant weighting towards long-term incentive compensation discourages short-term risk-taking |
🌑 | Performance goals are appropriately set to avoid targets that, if not achieved, result in a large percentage loss of compensation |
🌑 |
🌑 | Stock ownership requirements align the interests of management with those of our stockholders |
🌑 | Our executives are granted a mix of different types of compensation awards |
🌑 | Our incentive plans are balanced with different types of performance metrics |
🌑 | Our controls and procedures are designed to provide checks and balances to ensure that one individual or a small group of individuals cannot engage in activities that expose us to excessive risks without having received approvals from other areas of the business or senior management |
In reviewing our compensation policies and practices for all employees, the Compensation Committee determined that they do not create risks that are reasonably likely to have a material adverse effect on Akamai.
Compensation Recovery Policy
In 2014, the Compensation Committee adopted a Compensation Recovery Policy that is applicable to our NEOs and other members of senior management. The policy provides that the Compensation Committee may require a covered person who engages in detrimental conduct (e.g., committing a felony, gross negligence or willful misconduct with respect to our financial statements) to reimburse us for all, or a portion of, any bonus, incentive payment, equity-based award or other compensation received by him or her
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during the 12 months preceding such detrimental conduct and remit to us any profits
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realized by him or her from the sale of Akamai securities during such12-month period. In addition, if we need to restate our reported financial results to correct a material accounting error due to material noncompliance with a financial reporting requirement under U.S. securities laws, the Compensation Committee may seek to recover or cancel the excess portion of incentive compensation paid (including through vesting of equity awards) to such individual during the36-month period preceding the filing of the restatement that is deemed by us to be unearned.
Stock Ownership Requirements
Our executive officers are subject to minimum stock ownership requirements. Our Chief Executive Officer must hold shares of our common stock with a value at least equal to six times his annual base salary. Other Named Executive Officers must hold shares of our common stock with a value at least equal to two times their annual base salary. A senior executive’s stock ownership includes all shares of our common stock owned by the individual outright or held in trust for the senior executive and his or her immediate family and any shares of Akamai common stock in employee plans, but not the executive officer’s unvested or unexercised equity.
If a senior executive fails to meet the ownership guidelines under the review procedures set forth in the guidelines as of the end of a five-year qualification period, he or she will not be permitted to sell shares of Akamai stock until such time as he or she has exceeded the required minimum ownership level. As of February 28, 2017,2018, all of our Named Executive Officers had either satisfied the minimum ownership requirement or are on track for compliance within the timeline for compliance set forth in the guidelines.
Anti-Hedging Policy
We have an insider trading policy that is applicable to all of our employees, consultants and members of our Board of Directors. The policy prohibits those individuals and certain related persons from engaging in any speculative transactions involving our stock including the following activities: use of Akamai’s securities to secure a margin loan; short sales of our securities; buying or selling puts or calls on Akamai’s securities; transactions in publicly-traded options relating to our securities (i.e., options that are not granted by Akamai); and other transactions involving financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of our securities. In addition, Akamai’s executive officers and members of the Board of Directors may not pledge Akamai securities as collateral for a loan.
Severance Arrangements
We believe that having in place reasonable and competitive employee severance plans is essential to attracting and retaining highly-qualified executives. Akamai’s severance arrangements are designed to provide reasonable compensation to departing executives under certain circumstances to facilitate an executive’s transition to new employment. We
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seek to mitigate any potential employer liability and avoid future disputes or litigation by
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requiring the executive to sign a separation and release agreement acceptable to Akamai as a condition to receiving severance benefits.
We do not consider specific amounts payable under the severance arrangements when establishing annual compensation. We do believe, however, that these arrangements are necessary to offer compensation packages that are competitive. In determining payment and benefit levels under the various circumstances triggering the provision of benefits under employment and severance agreements, the Compensation Committee has drawn a distinction between voluntary terminations or terminations for cause, and terminations without cause or as a result of a change in control. Payment in the latter circumstances has been deemed appropriate in light of the benefits to us described above, as well as the likelihood that the executive’s departure is due, at least in part, to circumstances not within his or her control. In contrast, we believe that payments are not appropriate in the event of a termination for cause or voluntary resignation because such events often reflect either inadequate performance or an affirmative decision by the executive to end his or her relationship with Akamai.
We have change in control agreements in place with each of our Named Executive Officers (except in the case of Dr. Leighton, who is partparty to an employment offer letter agreement). We believe that these agreements are designed to align the interests of management and stockholders when considering the long-term best future for Akamai. The primary purpose of these arrangements is to keep senior executives focused on pursuing all corporate transaction activity that is in the best interests of stockholders regardless of whether those transactions may result in their own job loss. Reasonable post-acquisition benefits should serve the interests of both the executive and our investors.
In 2012, we amended our Executive Severance Pay Plan and Change in Control Agreements that we have with several of our Named Executive Officers.Agreements. We also adopted new forms of stock option and RSU grant agreements. These changes primarily accomplished the following:
🌑 | Eliminated excise tax gross ups from existing agreements |
🌑 | Replaced single-trigger vesting for stock options and time-vesting RSUs for NEOs beginning in July 2012 with a requirement that the individual’s employment be terminated (including through constructive discharge) following a change in control |
🌑 | Eliminated the perpetual terms of executive Change in Control Agreements, thus providing flexibility to the Compensation Committee to revisit the benefits and other terms of these arrangements in response to future events |
In 2015, we amended our Change in Control Agreements that we have with our Named Executive Officers,NEOs, as well as our employment offer letter agreement with Dr. Leighton, to eliminate single-trigger vesting of performance-based equity awards upon a change in control of Akamai unless such awards are not assumed by the acquiring entity. If they are assumed, such awards convert to time-based vesting awards based on an assumed target-level of performance.
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We believe that these changes are consistent with the preferences of our largest investors and with emerging market practices.
See “Post-Employment Compensation and Other Employment Agreements” below for a discussion of the specific severance and change in control benefits payable to our Named Executive Officers.NEOs.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended, which we refer to herein as the Code, generally disallows a tax deduction to public companies for certain compensation in excess of $1 million paid to the company’s Chief Executive Officer and the three other officers (other than the Chief Executive Officer and Chief Financial Officer) whose compensation is required to be disclosed to our stockholders under the Exchange Act. CertainPursuant to the Tax Cuts and Jobs Act, signed into law on December 22, 2017, which we refer to as the Tax Act, for fiscal years beginning after December 31, 2017, the compensation of our Chief Financial Officer will also be subject to the deduction limitation. For fiscal years beginning on or before December 31, 2017, certain compensation, including qualified performance-based compensation, will not be subject to the deduction limit if certain requirements are met under Section 162(m) of the Code. Pursuant to the Tax Act, subject to certain transition rules, for fiscal years beginning after December 31, 2017, the performance-based compensation exception to the deduction limitations under Section 162(m) of the Code will no longer be available. As a result, for fiscal years beginning after December 31, 2017, all compensation in excess of $1 million paid to the specified executives will not be deductible (except as provided in transition relief).
In 2013,connection with fiscal 2017 compensation decisions, the stockholders approved the 2013 Stock Incentive Plan, which allows for equity and cash-based awards that are intended to constitute qualified performance-based compensation. The Compensation Committee reviewsreviewed the potential effect of Section 162(m) periodically and may structurestructured certain elements of the incentive compensation granted under the 2013 Stock Incentive Plan to its executive officers in a manner that is intended to avoid disallowance of deductions under Section 162(m).
There can be no assurance that any compensation attributable to these incentive awards will be treated as qualified performance-based compensation under Section 162(m). In addition, the Compensation Committee reserves the right to use its judgment to authorize compensation payments that may be subject to the deduction limit when the Compensation Committee believes such payments are appropriate and in the best interests of Akamai and its stockholders, after taking into consideration changing business conditions and the performance of its employees.
Financial Metrics Definitions
Below are definitions of the financial metrics we used in our 20162017 performance-based compensation programs:
“Revenue”Revenue (adjusted for foreign currency)” means revenue calculated in accordance with GAAP, adjusted for the impact of fluctuations in foreign currency exchange rates.
“Non-GAAP Operating Income” means our annual GAAP operating income excluding amortization of intangible assets, stock-based compensation, restructuring charges and benefits, acquisition-related costs and similar items excluded by us in determiningnon-GAAP income from operations in issuing our public earnings announcements; adjusted for the impact of fluctuations in foreign currency exchange rates.
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“Non-GAAP Earnings per Share” means ournon-GAAP net income for the applicable fiscal year (adjusted for constant currency) divided by our diluted weighted average shares outstanding.Non-GAAP net income per share is GAAP net income adjusted for the followingtax-affected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; other operating expenses (comprised of acquisition-related costs, restructuring charges, benefit from adoption of software development activities, gains and other activity related to divestiture of a business, gains and losses on legal settlements and costs incurred with respect to Akamai’s internal investigation relating to sales practices in a country outside the U.S.; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; and othernon-recurring or unusual items that may arise from time to time).
“Operating Free Cash Flow” means our consolidated cumulative net income before interest, income taxes, depreciation and amortization, equity-related compensation expense, restructuring charges and benefits, certain gains and losses on equity investments, and similar items excluded by us in determining adjusted EBITDA less annual cash capital expenditures, which include purchases of property and equipment and capitalized internal-use software but exclude capitalized stock-based compensation, adjusted for the impact of fluctuations in foreign currency exchange rates.
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Compensation Committee Report
The Compensation Committee of our Board of Directors:
(1) has reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement as required by Item 402(b) of RegulationS-K under the Exchange Act with management; and
(2) based on the review and discussion referred to in paragraph (1) above, the members of the Compensation Committee have recommended to the Board of Directors the inclusion of this Compensation Discussion and Analysis in this Proxy Statement for the 20172018 Annual Meeting of Stockholders.
The Compensation Committee
Bernardus Verwaayen - Chair
Pamela Craig
Monte Ford
Daniel Hesse
Jonathan Miller
Steven Scopellite
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Summary Compensation Table
The following table sets forth information with respect to compensation paid to our Named Executive Officers during the years ended December 31, 2017, 2016 2015 and 2014:2015:
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1)(2)(3) | Non-Equity Incentive Plan Compensation ($) | All Other ($) | Total ($) | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1)(2)(3) | Non-Equity Incentive Plan Compensation ($) | All Other ($) | Total ($) | ||||||||||||||
(a) | (b) | (c) | (d) | (e) | (g) | (i) | (j) | (b) | (c) | (d) | (e) | (g) | (i) | (j) | ||||||||||||||
F. Thomson Leighton | 2016 | 1 | — | 6,258,768 | 1 | — | 6,258,770 | 2017 | 1 | — | 8,193,138 | 1,009,782(4) | — | 9,202,921 | ||||||||||||||
Chief Executive | 2015 | 1 | — | 8,499,916 | 1 | — | 8,499,917 | 2016 | 1 | — | 6,258,768 | 1 | — | 6,258,770 | ||||||||||||||
Officer | 2014 | 1 | — | 7,499,986 | 2 | — | 7,499,989 | 2015 | 1 | — | 8,499,916 | 1 | — | 8,499,917 | ||||||||||||||
James Benson | 2016 | 467,308 | — | 1,693,549 | 334,642 | — | 2,495,499 | 2017 | 472,500 | — | 2,528,362 | 405,554 | — | 3,406,416 | ||||||||||||||
Chief Financial | 2015 | 443,076 | — | 2,099,886 | 297,528 | 1,858 | 2,842,348 | 2016 | 467,308 | — | 1,693,549 | 334,642 | — | 2,495,499 | ||||||||||||||
Officer | 2014 | 418,569 | — | 1,999,958 | 545,004 | 603 | 2,964,134 | 2015 | 443,076 | — | 2,099,886 | 297,528 | 1,858 | 2,842,348 | ||||||||||||||
Robert Blumofe | 2016 | 446,538 | — | 1,693,549 | 282,149 | — | 2,422,236 | 2017 | 463,750 | — | 2,528,362 | 374,629 | — | 3,366,741 | ||||||||||||||
EVP – Platform and | 2015 | 421,693 | — | 1,699,889 | 249,855 | — | 2,371,437 | 2016 | 446,538 | — | 1,693,549 | 282,149 | — | 2,422,236 | ||||||||||||||
GM Enterprise and Carrier Division | 2014 | 392,731 | — | 1,299,945 | 511,710 | 450 | 2,204,836 | |||||||||||||||||||||
GM Enterprise Division | 2015 | 421,693 | — | 1,699,889 | 249,855 | — | 2,371,437 | |||||||||||||||||||||
Rick McConnell | 2016 | 550,385 | — | 2,577,140 | 463,687 | — | 3,591,212 | 2017 | 545,000 | — | 3,568,254 | 550,331 | — | 4,663,585 | ||||||||||||||
President and GM Web Performance Division | 2015 2014 | 525,847 510,962 | — — | 3,249,930 2,999,938 | 407,008 887,814 | 1,476 467 | 4,184,261 4,399,181 | |||||||||||||||||||||
President and GM Web Division | 2016 2015 | 550,385 525,847 | — — | 2,577,140 3,249,930 | 463,687 407,008 | — 1,476 | 3,591,212 4,184,261 | |||||||||||||||||||||
William Wheaton | 2016 | 436,154 | — | 1,693,549 | 275,587 | — | 2,405,290 | 2017 | 420,000 | — | 2,216,910 | 339,287 | — | 2,976,197 | ||||||||||||||
EVP and GM Media Division | ||||||||||||||||||||||||||||
Chief Strategy Officer | 2016 | 436,154 | — | 1,693,549 | 275,587 | — | 2,405,290 |
(1) | Amounts reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for equity awards granted to the Named Executive Officer during the applicable year. The assumptions we use in calculating these amounts are discussed in Note |
Name | Intended Value of 2017 Stock Awards ($) | Intended Value of 2016 Stock Awards ($) | Intended Value of 2015 Stock Awards ($) | |||||||||
F. Thomson Leighton | 8,500,000 | 8,500,000 | 8,500,000 | |||||||||
James Benson | 2,300,000 | 2,300,000 | 2,100,000 | |||||||||
Robert Blumofe | 2,300,000 | 2,300,000 | 1,700,000 | |||||||||
Rick McConnell | 3,750,000 | 3,500,000 | 3,250,000 | |||||||||
William Wheaton | 2,300,000 | 2,300,000 | — |
(2) | Includes both time-vested RSUs and performance-based RSUs (at target). |
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2016 Grants of Plan-Based Awards
The following table sets forth information with respect to grants of plan-based awards to our Named Executive Officers during the year ended December 31, 2016. All equity awards were issued under the 2013 Stock Incentive Plan.
Name/Award | Grant Date | Date of val | Estimated Possible Payouts Under Non- Equity Incentive Plan Awards | Estimated Future Equity Incentive Plan | All Other Stock Awards: Number of Shares of Stock or Units(#) | All Other Option Awards: Number of Securities Under- lying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant of Stock and Options Awards (2) | ||||||||||||||||||||||||||||||||||||||||
Thres- hold ($) | Target ($) | Maxi- mum ($) | Thres- hold (#) | Target (#) | Maxi- mum (#) | |||||||||||||||||||||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | |||||||||||||||||||||||||||||||||||||
Dr. Leighton | ||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs (3) | 2/11/16 | 2/3/16 | — | — | — | —` | 23,063 | 46,127 | — | — | — | 1,133,332 | ||||||||||||||||||||||||||||||||||||
Time-Vesting RSUs (4) | 2/11/16 | 2/3/16 | — | — | — | — | — | — | 69,190 | — | — | 3,399,997 | ||||||||||||||||||||||||||||||||||||
TSR-Based RSUs (5) | 2/11/16 | 2/3/16 | — | — | — | 8,648 | 34,595 | 69,190 | — | — | — | 1,725,439 | ||||||||||||||||||||||||||||||||||||
Cash Incentive Plan (6) | 2/3/16 | — | — | 1 | 2 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Mr. Benson | ||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs (3) | 2/11/16 | 2/3/16 | — | — | — | — | 6,241 | 12,481 | — | — | — | 306,666 | ||||||||||||||||||||||||||||||||||||
Time-Vesting RSUs (4) | 2/11/16 | 2/3/16 | — | — | — | — | — | — | 18,722 | — | — | 919,999 | ||||||||||||||||||||||||||||||||||||
TSR-Based RSUs (5) | 2/11/16 | 2/3/16 | — | — | — | 2,340 | 9,361 | 18,722 | — | — | — | 466,884 | ||||||||||||||||||||||||||||||||||||
Cash Incentive Plan (6) | 2/3/16 | — | — | 397,212 | 794,424 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Dr. Blumofe | ||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs (3) | 2/11/16 | 2/3/16 | — | — | — | — | 6,241 | 12,481 | — | — | — | 306,666 | ||||||||||||||||||||||||||||||||||||
Time-Vesting RSUs (4) | 2/11/16 | 2/3/16 | — | — | — | — | — | — | 18,722 | — | — | 919,999 | ||||||||||||||||||||||||||||||||||||
TSR-Based RSUs (5) | 2/11/16 | 2/3/16 | — | — | — | 2,340 | 9,361 | 18,722 | — | — | — | 466,884 | ||||||||||||||||||||||||||||||||||||
Cash Incentive Plan (6) | 2/3/16 | — | — | 334,904 | 669,808 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Mr. McConnell | ||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs (3) | 2/11/16 | 2/3/16 | — | — | — | — | 9,497 | 18,993 | — | — | — | 466,666 | ||||||||||||||||||||||||||||||||||||
Time-Vesting RSUs (4) | 2/11/16 | 2/3/16 | — | — | — | — | — | — | 28,490 | — | — | 1,399,999 | ||||||||||||||||||||||||||||||||||||
TSR-Based RSUs (5) | 2/11/16 | 2/3/16 | — | — | — | 3,561 | 14,245 | 28,490 | — | — | — | 710,475 | ||||||||||||||||||||||||||||||||||||
Cash Incentive Plan (6) | 2/3/16 | — | — | 550,385 | 1,100,770 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Mr. Wheaton | ||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs (3) | 2/11/16 | 2/3/16 | — | — | — | — | 6,241 | 12,481 | — | — | — | 306,666 | ||||||||||||||||||||||||||||||||||||
Time-Vesting RSUs (4) | 2/11/16 | 2/3/16 | — | — | — | — | — | — | 18,722 | — | — | 919,999 | ||||||||||||||||||||||||||||||||||||
TSR-Based RSUs (5) | 2/11/16 | 2/3/16 | — | — | — | 2,340 | 9,361 | 18,722 | — | — | — | 466,884 | ||||||||||||||||||||||||||||||||||||
Cash Incentive Plan(6) | 2/3/16 | — | — | 327,115 | 654,230 | — | — | — | — | — | — | — |
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(3) |
(4) | The Compensation Committee and Dr. Leighton agreed that his earned 2017 annual incentive bonus would be paid to him in shares of our common stock in lieu of cash. |
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2017 Grants of Plan-Based Awards
The following table sets forth information with respect to grants of plan-based awards to our Named Executive Officers during the year ended December 31, 2017. All equity awards were issued under the 2013 Stock Incentive Plan.
Name/Award | Grant Date | Date of val | Estimated Possible Payouts Under Non- Equity Incentive Plan Awards | Estimated Future Equity Incentive Plan | All Other Stock Awards: Number of Shares of Stock or Units(#) | All Other Option Awards: Number of Securities Under- lying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant of Stock and Options Awards (2) | ||||||||||||||||||||||||||||||||||||||||
Thres- hold ($) | Target ($) | Maxi- mum ($) | Thres- hold (#) | Target (#) | Maxi- mum (#) | |||||||||||||||||||||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | |||||||||||||||||||||||||||||||||||||
Dr. Leighton | ||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs (3) | 2/9/17 | 2/1/17 | — | — | — | —` | 40,624 | 81,435 | — | — | — | 2,708,429 | ||||||||||||||||||||||||||||||||||||
Time-Vesting RSUs (4) | 2/9/17 | 2/1/17 | — | — | — | — | — | — | 53,249 | — | — | 3,399,949 | ||||||||||||||||||||||||||||||||||||
TSR-Based RSUs (5) | 2/9/17 | 2/1/17 | — | — | — | 6,656 | 26,624 | 53,248 | — | — | — | 2,084,627 | ||||||||||||||||||||||||||||||||||||
Annual Incentive Plan (6) | 2/1/17 | — | — | 1,000,000 | 2,000,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Mr. Benson | ||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs (3) | 2/9/17 | 2/1/17 | — | — | — | — | 11,827 | 23,705 | — | — | — | 786,194 | ||||||||||||||||||||||||||||||||||||
Time-Vesting RSUs (4) | 2/9/17 | 2/1/17 | — | — | — | — | — | — | 16,914 | — | — | 1,079,959 | ||||||||||||||||||||||||||||||||||||
TSR-Based RSUs (5) | 2/9/17 | 2/1/17 | — | — | — | 2,114 | 8,457 | 16,914 | — | — | — | 662,173 | ||||||||||||||||||||||||||||||||||||
Annual Incentive Plan (6) | 2/1/17 | — | — | 408,000 | 816,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Dr. Blumofe | ||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs (3) | 2/9/17 | 2/1/17 | — | — | — | ��� | 11,827 | 23,705 | — | — | — | 786,194 | ||||||||||||||||||||||||||||||||||||
Time-Vesting RSUs (4) | 2/9/17 | 2/1/17 | — | — | — | — | — | — | 16,914 | — | — | 1,079,959 | ||||||||||||||||||||||||||||||||||||
TSR-Based RSUs (5) | 2/9/17 | 2/1/17 | — | — | — | 2,114 | 8,457 | 16,914 | — | — | — | 662,173 | ||||||||||||||||||||||||||||||||||||
Annual Incentive Plan (6) | 2/1/17 | — | — | 380,000 | 760,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Mr. McConnell | ||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs (3) | 2/9/17 | 2/1/17 | — | — | — | — | 17,248 | 34,574 | — | — | — | 1,148,494 | ||||||||||||||||||||||||||||||||||||
Time-Vesting RSUs (4) | 2/9/17 | 2/1/17 | — | — | — | — | — | — | 23,492 | — | — | 1,499,964 | ||||||||||||||||||||||||||||||||||||
TSR-Based RSUs (5) | 2/9/17 | 2/1/17 | — | — | — | 2,937 | 11,746 | 23,492 | — | — | — | 919,698 | ||||||||||||||||||||||||||||||||||||
Annual Incentive Plan (6) | 2/1/17 | — | — | 550,000 | 1,100,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Mr. Wheaton | ||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs (3) | 2/9/17 | 2/1/17 | — | — | — | — | 10,992 | 22,035 | — | — | — | 732,865 | ||||||||||||||||||||||||||||||||||||
Time-Vesting RSUs (4) | 2/9/17 | 2/1/17 | — | — | — | — | — | — | 14,408 | — | — | 919,951 | ||||||||||||||||||||||||||||||||||||
TSR-Based RSUs (5) | 2/9/17 | 2/1/17 | — | — | — | 1,801 | 7,204 | 14,408 | — | — | — | 564,065 | ||||||||||||||||||||||||||||||||||||
Annual Incentive Plan (6) | 2/1/17 | — | — | 336,000 | 672,000 | — | — | — | — | — | — | — |
(1) | Equity awards were approved by the Compensation Committee on February 1, 2017, but the grants were not effective or priced until February 9, 2017, the second business day following the release of our 2016 earnings results. |
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(2) | Amounts reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for equity awards granted to the Named Executive Officer during 2017 and assumes target level of achievement for both types of performance-based awards. The assumptions we use in calculating these amounts are discussed in Note 16 of the notes to our consolidated financial statements for the year ended December 31, 2017 included in our Annual Report on Form10-K, which accompanies this Proxy Statement, except that the amounts reflected in the table above exclude the impact of estimated forfeitures of equity awards. |
(3) | Consists of PRSUs eligible for vesting in 2020. Grant date fair value is calculated based on number of shares issuable at target achievement level. Because the performance-related component is based on separate measurements of our financial performance for each year in the three-year performance cycle, FASB ASC Topic 718 requires the grant date fair value to be calculated at the commencement of each separate year of the performance cycle when the respective performance measures are approved. The amounts for fiscal 2017 represent the grant date fair value for PRSUs at target granted in both 2016 and 2017 for the fiscal 2017 tranche of each of such awards. It excludes shares that may be earned based on performance against 2018 and 2019 targets. |
(4) | Time-vesting RSUs vest in three equal annual installments over a three-year period from the date of grant. |
(5) | Consists ofTSR-Based RSUs eligible for vesting in |
(6) | Consists of performance-based |
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Outstanding Equity Awards at December 31, 20162017
The following table sets forth information with respect to outstanding equity incentive awards held by our Named Executive Officers as of December 31, 2016:2017:
| Option Awards | Stock Awards | ||||||||||||||||
Name/Award | Award Grant Date | Number of Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of (#) | Market Units of Vested ($) (2) | Equity Unearned Shares, That Have Not Vested (#) | Equity Unearned That Have ($) (2) | |||||||||
(a) | (b) | (c) | (e) | (f) | (g) | (h) | (i) | (j) | ||||||||||
Dr. Leighton | ||||||||||||||||||
Stock Options | 2/8/2013 | 110,282 | — | 35.42 | 2/8/2020 | — | — | — | — | |||||||||
2014 Time-Vesting RSUs (3) | 2/7/2014 | — | — | — | — | 17,656 | 1,177,302 | — | — | |||||||||
2014 PRSUs (4) | 2/7/2014 | — | — | — | — | 44,094 | 2,940,188 | — | — | |||||||||
2015 Time-Vesting RSUs (3) | 2/12/2015 | — | — | — | — | 33,536 | 2,236,180 | — | — | |||||||||
2015 PRSUs (4) | 2/12/2015 | — | — | — | — | 48,668 | 3,245,182 | — | — | |||||||||
2016 Time-Vesting RSUs (3) | 2/11/2016 | — | — | — | — | 69,190 | 4,613,589 | — | — | |||||||||
2016 PRSUs (5) | 2/11/2016 | — | — | — | — | 22,879 | 1,525,572 | 46,126 | 3,075,682 | |||||||||
2016 TSR-Based RSUs (6) | 2/11/2016 | — | — | — | — | — | — | 8,648 | 576,649 | |||||||||
Mr. Benson | ||||||||||||||||||
Stock Options | 2/8/2013 | 7,843 | — | 35.42 | 2/8/2020 | — | — | — | — | |||||||||
2014 Time-Vesting RSUs (3) | 2/7/2014 | — | — | — | — | 4,709 | 313,996 | — | — | |||||||||
2014 PRSUs (4) | 2/7/2014 | — | — | — | — | 11,758 | 784,023 | — | — | |||||||||
2015 Time-Vesting RSUs (3) | 2/12/2015 | — | — | — | — | 8,285 | 552,444 | — | — | |||||||||
2015 PRSUs (4) | 2/12/2015 | — | — | — | — | 12,023 | 801,694 | — | — | |||||||||
2016 Time-Vesting RSUs (3) | 2/11/2016 | — | — | — | — | 18,722 | 1,248,383 | — | — | |||||||||
2016 PRSUs (5) | 2/11/2016 | — | — | — | — | 6,191 | 412,816 | 12,481 | 832,233 | |||||||||
2016 TSR-Based RSUs (6) | 2/11/2016 | — | — | — | — | — | — | 2,340 | 156,031 |
| Option Awards | Stock Awards | ||||||||||||||||
Name/Award | Award Grant Date | Number of Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of (#) | Market Units of Vested ($) (2) | Equity Unearned Shares, That Have Not Vested (#) | Equity Unearned That Have ($) (2) | |||||||||
(a) | (b) | (c) | (e) | (f) | (g) | (h) | (i) | (j) | ||||||||||
Dr. Leighton | ||||||||||||||||||
2015 Time-Vesting RSUs (3) | 2/12/2015 | — | — | — | — | 16,768 | 1,090,591 | — | — | |||||||||
2015 PRSUs (4) | 2/12/2015 | — | — | — | — | 24,334 | 1,582,683 | — | — | |||||||||
2016 Time-Vesting RSUs (3) | 2/11/2016 | — | — | — | — | 46,127 | 3,000,100 | — | — | |||||||||
2016 PRSUs (5) | 2/11/2016 | — | — | — | — | 22,876 | 1,487,855 | 23,067 | 1,500,299 | |||||||||
2016TSR-Based RSUs (6) | 2/11/2016 | — | — | — | — | — | — | 8,648 | 562,450 | |||||||||
2017 Time-Vesting RSUs (3) | 2/09/2017 | — | — | — | — | 53,249 | 3,463,315 | — | — | |||||||||
2017 PRSUs (7) | 2/09/2017 | — | — | — | — | — | — | 35,500 | 2,308,942 | |||||||||
2017TSR-Based RSUs (6) | 2/09/2017 | — | — | — | — | — | — | 6,656 | 432,906 | |||||||||
Mr. Benson | ||||||||||||||||||
2015 Time-Vesting RSUs (3) | 2/12/2015 | — | — | — | — | 4,143 | 269,461 | — | — | |||||||||
2015 PRSUs (4) | 2/12/2015 | — | — | — | — | 6,012 | 391,020 | — | — | |||||||||
2016 Time-Vesting RSUs (3) | 2/11/2016 | — | — | — | — | 12,482 | 811,829 | — | — | |||||||||
2016 PRSUs (5) | 2/11/2016 | — | — | — | — | 6,190 | 402,598 | 6,241 | 405,893 | |||||||||
2016TSR-Based RSUs (6) | 2/11/2016 | — | — | — | — | — | — | 2,340 | 152,210 | |||||||||
2017 Time-Vesting RSUs (3) | 2/09/2017 | — | — | — | — | 16,914 | 1,100,087 | — | — | |||||||||
2017 PRSUs (7) | 2/09/2017 | — | — | — | — | — | — | 11,277 | 733,456 | |||||||||
2017TSR-Based RSUs (6) | 2/09/2017 | — | — | — | — | — | — | 2,114 | 137,511 |
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| Option Awards | Stock Awards | ||||||||||||||||
Name/Award | Award Grant Date | Number of Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of (#) | Market Units of Vested ($) (2) | Equity Unearned Shares, That Have Not Vested (#) | Equity Unearned That Have ($) (2) | |||||||||
(a) | (b) | (c) | (e) | (f) | (g) | (h) | (i) | (j) | ||||||||||
Dr. Blumofe | ||||||||||||||||||
2014 Time-Vesting RSUs (3) | 2/7/2014 | — | — | — | — | 3,061 | 204,107 | — | — | |||||||||
2014 PRSUs (4) | 2/7/2014 | — | — | — | — | 7,643 | 509,635 | — | — | |||||||||
2015 Time-Vesting RSUs (3) | 2/12/2015 | — | — | — | — | 6,707 | 447,223 | — | — | |||||||||
2015 PRSUs (4) | 2/12/2015 | — | — | — | — | 9,733 | 648,996 | — | — | |||||||||
2016 Time-Vesting RSUs (3) | 2/11/2016 | — | — | — | — | 18,722 | 1,248,383 | — | — | |||||||||
2016 PRSUs (5) | 2/11/2016 | — | — | — | — | 6,191 | 412,816 | 12,481 | 832,233 | |||||||||
2016 TSR-Based (6) | 2/11/2016 | — | — | — | — | — | — | 2,340 | 156,031 | |||||||||
Mr. McConnell | ||||||||||||||||||
Stock Options | 11/1/2011 | 8,964 | — | 26.64 | 11/1/2018 | — | — | — | — | |||||||||
Stock Options | 2/10/2012 | 2,793 | — | 38.43 | 2/10/2019 | — | — | — | — | |||||||||
Stock Options | 2/8/2013 | 36,612 | — | 35.42 | 2/8/2020 | — | — | — | — | |||||||||
2014 Time-Vesting RSUs (3) | 2/7/2014 | — | — | — | — | 7,063 | 470,961 | — | — | |||||||||
2014 PRSUs (4) | 2/7/2014 | — | — | — | — | 17,637 | 1,176,035 | — | — | |||||||||
2015 Time-Vesting RSUs (3) | 2/12/2015 | — | — | — | — | 12,823 | 855,038 | — | — | |||||||||
2015 PRSUs (4) | 2/12/2015 | — | — | — | — | 18,608 | 1,240,781 | — | — | |||||||||
2016 Time-Vesting RSUs (3) | 2/11/2016 | — | — | — | — | 28,490 | 1,899,713 | — | — | |||||||||
2016 PRSUs (5) | 2/11/2016 | — | — | — | — | 9,421 | 628,192 | 18,993 | 1,266,453 | |||||||||
2016 TSR-Based RSUs (6) | 2/11/2016 | — | — | — | — | — | — | 3,561 | 237,447 |
| Option Awards | Stock Awards | ||||||||||||||||
Name/Award | Award Grant Date | Number of Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of (#) | Market Units of Vested ($) (2) | Equity Unearned Shares, That Have Not Vested (#) | Equity Unearned That Have ($) (2) | |||||||||
(a) | (b) | (c) | (e) | (f) | (g) | (h) | (i) | (j) | ||||||||||
Dr. Blumofe | ||||||||||||||||||
2015 Time-Vesting RSUs (3) | 2/12/2015 | — | — | — | — | 3,354 | 218,144 | — | — | |||||||||
2015 PRSUs (4) | 2/12/2015 | — | — | — | — | 4,867 | 316,550 | — | — | |||||||||
2016 Time-Vesting RSUs (3) | 2/11/2016 | — | — | — | — | 12,482 | 811,829 | — | — | |||||||||
2016 PRSUs (5) | 2/11/2016 | — | — | — | — | 6,190 | 402,598 | 6,241 | 405,893 | |||||||||
2016TSR-Based RSUs (6) | 2/11/2016 | — | — | — | — | — | — | 2,340 | 152,210 | |||||||||
2017 Time-Vesting RSUs (3) | 2/09/2017 | — | — | — | — | 16,914 | 1,100,087 | — | — | |||||||||
2017 PRSUs (7) | 2/09/2017 | — | — | — | — | — | — | 11,277 | 733,456 | |||||||||
2017TSR-Based RSUs (6) | 2/09/2017 | — | — | — | — | — | — | 2,114 | 137,511 | |||||||||
Mr. McConnell | ||||||||||||||||||
2015 Time-Vesting RSUs (3) | 2/12/2015 | — | — | — | — | 6,412 | 417,036 | — | — | |||||||||
2015 PRSUs (4) | 2/12/2015 | — | — | — | — | 9,304 | 605,132 | — | — | |||||||||
2016 Time-Vesting RSUs (3) | 2/11/2016 | — | — | — | — | 18,994 | 1,235,370 | — | — | |||||||||
2016 PRSUs (5) | 2/11/2016 | — | — | — | — | 9,419 | 612,612 | 9,499 | 617,793 | |||||||||
2016TSR-Based RSUs (6) | 2/11/2016 | — | — | — | — | — | — | 3,561 | 231,624 | |||||||||
2017 Time-Vesting RSUs (3) | 2/09/2017 | — | — | — | — | 23,492 | 1,527,920 | — | — | |||||||||
2017 PRSUs (7) | 2/09/2017 | — | — | — | — | — | — | 15,662 | 1,018,678 | |||||||||
2017TSR-Based RSUs (6) | 2/09/2017 | — | — | — | — | — | — | 2,937 | 190,990 |
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| Option Awards | Stock Awards | ||||||||||||||||
Name/Award | Award Grant Date | Number of Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of (#) | Market Units of Vested ($) (2) | Equity Unearned Shares, That Have Not Vested (#) | Equity Unearned That Have ($) (2) | |||||||||
(a) | (b) | (c) | (e) | (f) | (g) | (h) | (i) | (j) | ||||||||||
Mr. Wheaton | ||||||||||||||||||
Stock Options | 2/8/2013 | 3,922 | — | 35.42 | 2/8/2020 | — | — | — | — | |||||||||
2014 Time-Vesting RSUs (3) | 2/7/2014 | — | — | — | — | 2,355 | 157,031 | — | — | |||||||||
2014 PRSUs (4) | 2/7/2014 | — | — | — | — | 5,879 | 392,012 | — | — | |||||||||
2015 Time-Vesting RSUs (3) | 2/12/2015 | — | — | — | — | 4,735 | 315,730 | — | — | |||||||||
2015 PRSUs (4) | 2/12/2015 | — | — | — | — | 6,871 | 458,158 | — | — | |||||||||
2015 RSUs (7) | 7/22/2015 | — | — | — | — | 3,224 | 214,976 | — | — | |||||||||
2016 Time-Vesting RSUs (3) | 2/11/2016 | — | — | — | — | 18,722 | 1,248,383 | — | — | |||||||||
2016 PRSUs (5) | 2/11/2016 | — | — | — | — | 6,191 | 412,816 | 12,481 | 832,233 | |||||||||
2016 TSR-Based RSUs (6) | 2/11/2016 | — | — | — | — | — | — | 2,340 | 156,031 |
| Option Awards | Stock Awards | ||||||||||||||||
Name/Award | Award Grant Date | Number of Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of (#) | Market Units of Vested ($) (2) | Equity Unearned Shares, That Have Not Vested (#) | Equity Unearned That Have ($) (2) | |||||||||
(a) | (b) | (c) | (e) | (f) | (g) | (h) | (i) | (j) | ||||||||||
Mr. Wheaton | ||||||||||||||||||
Stock Options | 2/8/2013 | 3,922 | — | 35.42 | 2/8/2020 | — | — | — | — | |||||||||
2015 Time-Vesting RSUs (3) | 2/12/2015 | — | — | — | — | 2,368 | 154,015 | — | — | |||||||||
2015 PRSUs (4) | 2/12/2015 | — | — | — | — | 3,435 | 223,412 | — | — | |||||||||
2015 RSUs (8) | 7/22/2015 | — | — | — | — | 1,382 | 89,885 | — | — | |||||||||
2016 Time-Vesting RSUs (3) | 2/11/2016 | — | — | — | — | 12,482 | 811,829 | — | — | |||||||||
2016 PRSUs (5) | 2/11/2016 | — | — | — | — | 6,190 | 402,598 | 6,241 | 405,893 | |||||||||
2016TSR-Based RSUs (6) | 2/11/2016 | — | — | — | — | — | — | 2,340 | 152,210 | |||||||||
2017 Time-Vesting RSUs (3) | 2/09/2017 | — | — | — | — | 14,408 | 937,096 | — | — | |||||||||
2017 PRSUs (7) | 2/09/2017 | — | — | — | — | — | — | 9,606 | 624,796 | |||||||||
2017TSR-Based RSUs (6) | 2/09/2017 | — | — | — | — | — | — | 1,801 | 117,137 |
(1) | Unless otherwise noted, stock options granted prior to January 1, 2012 vest over four years with 25% vesting on the first anniversary of the date of grant and the remainder vesting in equal quarterly installments of 6.25% thereafter; stock options granted after January 1, 2012 vest over three years withone-third vesting on each of the first, second and third anniversaries of the date of grant. |
(2) | Based on the |
(3) | Consists of time-vesting RSUs that vest in three equal annual installments on the first, second and third anniversaries of the date of grant. |
(4) | Consists of performance-based RSUs and reflects the actual number of shares earned based on performance; such shares vest in two equal installments; 50% on the date that financial results are certified by the Compensation Committee and 50% on the first anniversary thereof. |
(5) | Consists of performance-based RSUs issuable based on achievement against two targets for each of 2016, 2017 and 2018; such shares, if issued, vest on the date that financial results for 2018 are certified by the Compensation Committee. Reflects actual number of shares earned based on performance against 2016 and 2017 targets and target number of shares issuable in respect of performance against |
(6) | Assumes threshold level of performance against target. |
(7) | Consists of performance-based RSUs issuable based on achievement against two targets for each of 2017, 2018 and 2019; such shares, if issued, vest on the date that financial results for 2019 are certified by the Compensation Committee. Reflects actual number of shares earned based on performance against 2017 targets and target number of shares issuable in respect of performance against 2018 and 2019 targets. |
(8) | Consists of time-vesting RSUs that vest over a |
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20162017 Option Exercises and Stock Vested
The following table sets forth the number of shares acquired upon exercise of stock options by our Named Executive Officers in 20162017 and the value realized upon exercise as well as the value realized upon vesting of RSU awards in 2016.2017.
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||
Name (a) | Number of Shares Acquired on Exercise (#) (b) | Value Realized ($) (1) (c) | Number of Shares Acquired on Vesting (#) (2) (d) | Value Realized on Vesting ($) (3) (e) | Number of Shares Acquired on Exercise (#) (b) | Value Realized ($) (1) (c) | Number of Shares Acquired on Vesting (#) (2) (d) | Value Realized on Vesting ($) (3) (e) | ||||||||||||||||||||||||||||||||
Dr. Leighton | — | — | 162,897 | 7,710,409 | 110,282 | 3,309,563 | 125,914 | 7,123,971 | ||||||||||||||||||||||||||||||||
Mr. Benson | — | — | 38,609 | 1,845,484 | 7,843 | 232,037 | 32,860 | 2,120,989 | ||||||||||||||||||||||||||||||||
Dr. Blumofe | 14,704 | 263,783 | 25,306 | 1,212,558 | — | — | 25,163 | 1,621,008 | ||||||||||||||||||||||||||||||||
Mr. McConnell | 20,000 | 817,200 | 64,860 | 3,069,485 | 48,369 | 1,105,732 | 49,911 | 3,220,924 | ||||||||||||||||||||||||||||||||
Mr. Wheaton | — | — | 21,873 | 1,067,506 | — | — | 22,118 | 1,413,545 |
(1) |
(2) | Consists of RSUs vesting during |
(3) | Calculated by multiplying the number of shares vested by the fair market value of one share of our common stock on the vesting date used to calculate taxable compensation to the executive. |
Post-Employment Compensation and Other Employment Agreements
Severance Arrangements. Each of our Named Executive Officers, other than Dr. Leighton, is a participant in the Executive Severance Pay Plan, which we refer to herein as the Severance Plan. Under the Severance Plan, participants who are terminated for any reason other than “cause” (as defined in the Severance Plan) and have signed a separation and release agreement acceptable to Akamai are entitled to:
🌑 | a lump sum payment equal to one year of the participant’s then-current base salary; |
🌑 | a lump sum payment equal to the annual incentive bonus at target that would have been payable to the executive under Akamai’s then-current |
🌑 | reimbursement of up to 12 times the monthly premium for continued health and dental insurance coverage. |
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Executive Equity and Change in Control Agreements. As of December 31, 2016,2017, each of our Named Executive Officers had entered into stock option grant agreements, change in control agreements (except in the case of Dr. Leighton) and RSU grant agreements that provide for acceleration of all or a portion of equity awards held by such executives upon a change in control of Akamai. Under the terms of the change in control agreements, in the event of a termination without cause, or a resignation for “good reason” (as defined in the agreement) within one year following a change in control of Akamai, such executives will receive full acceleration of stock options so that such stock options become 100% vested; full acceleration of time-vesting RSUs; a lump sum payment equal to one year of the executive’s then-current base salary; a lump sum payment equal to the annual incentive bonus at target that would have been payable to the executive under our cashannual incentive plan in effect immediately before the change in control event; and reimbursement for up to 12 months of health and dental insurance coverage. Under the terms of the agreements governing the performance-based RSUs granted in 2014 and 2015, upon a change in control, vesting shall accelerate at the target level of unvested performance-based RSUs that could be earnedpro-rated based on the date on which the change in control occurs. For performance-based RSUs issued after 2015, upon a change in control, unvested performance-based RSUs that are assumed by an acquirer shall continue in place and be deemed to have been earned at target with the same vesting schedule. To the extent such RSUs are not assumed by the acquirer, they shall vest in full at the target level at the closing of the acquisition. See “Potential Payments Upon Termination or Change in Control” below for a description of the benefits payable to our Named Executive Officers upon a change in control of Akamai. Under the terms of time-vesting RSUs, such RSUs vest in full upon the death or permanent disability of the executive.
Dr. Leighton’s Employment Offer Letter Agreement. In February 2013, we entered into a letter agreement with Dr. Leighton in connection with him becoming our Chief Executive Officer; the agreement was amended in November 2015 to eliminate single-trigger vesting of assumed performance-based RSUs following a change in control for awards issued after that date. The amended agreement provides that, in addition to his annual salary, Dr. Leighton is eligible to receive an incentive bonus in any year that Akamai enters into a bonus plan for its senior executive team. Either Akamai or Dr. Leighton may terminate the agreement upon 30 days’ advance written notice to the other party; provided however, that in the event Dr. Leighton is terminated for “cause” (as defined in the letter agreement), Akamai may elect to pay Dr. Leighton an amount equal to 30 days of his then-current salary in lieu of providing him 30 days’ notice of the termination of his employment. If Dr. Leighton is terminated without cause or terminates his employment for “good reason” (as defined in the letter agreement) following a “change in control” (as defined in the letter agreement) of Akamai, he shall be entitled to:
🌑 | accelerated vesting of any options and any time-vesting RSUs held by him; |
🌑 | pro rata vesting at target of performance-based RSUs held by him; |
🌑 | a lump sum cash payment equal to one year of his then-current base salary; and |
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🌑 | a lump sum cash payment equal to one year of his then-applicable annual incentive bonus at target. |
If, outside of the change in control context, Dr. Leighton’s employment is involuntarily terminated for any reason other than cause or if he dies or becomes disabled, he shall be entitled to:
🌑 | a lump sum cash payment equal to one year of his then-current base salary; |
🌑 | a lump sum cash payment equal to his then-applicable annual incentive bonus at target; and |
🌑 | a lump sum cash payment in an amount equal to 12 times the monthly premium for continued health and dental insurance coverage paid by Akamai on his behalf in the month preceding termination of his employment. |
The letter agreement also provides that unless Akamai consents otherwise on a case by case basis, to ensure the maximum efficiency of Dr. Leighton’s business travel and to ensure his security on business travel, all of his air travel on Akamai business shall be via private air transportation; however, Dr. Leighton shall pay the costs of such airfare.
PRSUs Retirement Plan
The terms of our PRSUs andTSR-Based RSUs provide for vesting of such awards under certain circumstances upon the voluntary retirement of an executive. If a U.S. based executive is at least 55 years old at the time of retirement, the sum of his or her age plus years of service with the Company is greater than or equal to 70 and at least half of a performance period (under the terms of the applicable equity award) has been completed, then he or she is entitled to vest in apro-rated number of shares based on our actual performance for the applicable period.
Death and Disability
Upon an executive’s death or permanent disability, all time-based vesting RSUs outstanding on such date shall vest as of such date and all PRSUs outstanding on such date shall vest, on apro-rated basis, at the actual achievement level for completed performance periods (under the terms of the applicable equity award) and target achievement level for uncompleted periods.
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Potential Payments Upon Termination or Change in Control
The chart set forth below describes the estimated benefits provided under various circumstances that trigger payments or provision of benefits under Akamai’s Severance Plan and other arrangements. Payments would not be cumulative. The value of equity incentive awards for which vesting would accelerate is calculated as if the triggering event occurred on December 30, 2016.29, 2017. Our closing stock price on December 30, 201629, 2017, the last trading day prior toyear-end, was $66.68.$65.04. In addition to the amounts listed below, each NEO is eligible to receive a lump sum payment equal to the sum of 12 times the monthly premium for continued health and dental coverage in the event of a termination without cause including following a change in control of Akamai.
Name | Triggering Event | Cash Severance Payment ($) | Stock Acceleration ($) | Acceleration of Time- | Acceleration Based RSUs ($) (1) | |||||
Dr. Leighton | Voluntary Separation | — | — | — | — | |||||
Involuntary Separation Without Cause | 2 | — | — | — | ||||||
Termination for Cause | — | — | — | — | ||||||
Change in Control Event | — | — | — | 5,576,371 | ||||||
Termination following a Change in Control (2) | 2 | — | 8,027,072 | 6,920,384 | ||||||
Death or Disability | — | — | 8,027,072 | 7,883,186 | ||||||
Mr. Benson | Voluntary Separation | — | — | — | — | |||||
Involuntary Separation Without Cause | 832,500 | — | — | — | ||||||
Termination for Cause | — | — | — | — | ||||||
Change in Control Event | — | — | — | 1,426,700 | ||||||
Termination following a Change in Control (2) | 832,500 | — | 2,114,823 | 1,872,574 | ||||||
Death or Disability | — | — | 2,114,823 | 2,050,892 |
Name | Triggering Event | Cash Severance Payment ($) | Acceleration of Time- | Acceleration Based RSUs ($)(1) | ||||
Dr. Leighton | Voluntary Separation | — | — | — | ||||
Involuntary Separation Without Cause | 1,000,001 | — | — | |||||
Termination for Cause | — | — | — | |||||
Change in Control Event | — | — | 2,317,444 | |||||
Termination following a Change in Control (2) | 1,000,001 | 7,554,006 | 11,945,011 | |||||
Death or Disability | — | 7,554,006 | 7,056,085 | |||||
Mr. Benson | Voluntary Separation | — | — | — | ||||
Involuntary Separation Without Cause | 888,000 | — | — | |||||
Termination for Cause | — | — | — | |||||
Change in Control Event | — | — | 567,030 | |||||
Termination following a Change in Control (2) | 888,000 | 2,181,377 | 3,476,648 | |||||
Death or Disability | — | 2,181,377 | 1,941,846 |
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Name | Triggering Event | Cash Severance Payment ($) | Stock Acceleration ($) | Acceleration of Time- | Acceleration Based RSUs ($) (1) | |||||
Dr. Blumofe | Voluntary Separation | — | — | — | — | |||||
Involuntary Separation Without Cause | 752,500 | — | — | — | ||||||
Termination for Cause | — | — | — | — | ||||||
Change in Control Event | — | — | — | 1,048,551 | ||||||
Termination following a Change in Control (2) | 752,500 | — | 1,936,120 | 1,872,574 | ||||||
Death or Disability | — | — | 1,936,120 | 1,672,743 | ||||||
Mr. McConnell | Voluntary Separation | — | — | — | — | |||||
Involuntary Separation Without Cause | 1,060,000 | — | — | — | ||||||
Termination for Cause | — | — | — | — | ||||||
Change in Control Event | — | — | — | 2,176,287 | ||||||
Termination following a Change in | 1,060,000 | — | 3,225,712 | 2,849,570 | ||||||
Death or Disability | — | — | 3,225,712 | 3,126,090 | ||||||
Mr. Wheaton | Voluntary Separation | — | — | — | — | |||||
Involuntary Separation Without Cause | 735,000 | — | — | — | ||||||
Termination for Cause | — | — | — | — | ||||||
Change in Control Event | — | — | — | 804,290 | ||||||
Termination following a Change in | 735,000 | — | 2,201,408 | 1,872,574 | ||||||
Death or Disability | — | — | 2,201,408 | 1,428,482 |
Name | Triggering Event | Cash Severance Payment ($) | Acceleration of Time- | Acceleration Based RSUs ($)(1) | ||||
Dr. Blumofe | Voluntary Separation | — | — | — | ||||
Involuntary Separation Without Cause | 855,000 | — | — | |||||
Termination for Cause | — | — | — | |||||
Change in Control Event | — | — | 463,464 | |||||
Termination following a Change in Control (2) | 855,000 | 2,143,068 | 3,476,648 | |||||
Death or Disability | — | 2,143,068 | 1,871,513 | |||||
Mr. McConnell | Voluntary Separation | — | — | — | ||||
Involuntary Separation Without Cause | 1,100,000 | — | — | |||||
Termination for Cause | — | — | — | |||||
Change in Control Event | — | — | 886,080 | |||||
Termination following a Change in Control (2) | 1,100,000 | 3,180,326 | 5,071,365 | |||||
Death or Disability | — | 3,180,326 | 2,903,620 | |||||
Mr. Wheaton | Voluntary Separation | — | — | — | ||||
Involuntary Separation Without Cause | 756,000 | — | — | |||||
Termination for Cause | — | — | — | |||||
Change in Control Event | — | — | 327,158 | |||||
Termination following a Change in Control (2) | 756,000 | 1,993,132 | 3,232,162 | |||||
Death or Disability | — | 1,993,132 | 1,715,637 |
(1) | Includes both PRSUs andTSR-Based RSUs and assumes the company acquiring Akamai assumed such PRSUs andTSR-Based RSUs. For PRSUs andTSR-Based RSUs issued after 2015, there is no acceleration of vesting upon a change in control unless the acquiring company does not assume such awards. |
(2) | Values associated with equity award acceleration in the event of termination following a change of control assume that acceleration provisions applicable upon the occurrence of a change in control event have already been triggered. |
CEO Pay Ratio
Pursuant to Item 402(u) of RegulationS-K and Section 953(b) of the Dodd-Frank Act, presented below is the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee (excluding our CEO).
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The ratio presented below is a reasonable estimate calculated in a manner consistent with Item 402(u). The SEC’s rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios.
We selected the median employee based on 7,150 full-time, part-time, and temporary workers who were employed as of a determination date of October 1, 2017, which number excludes 313non-US employees (representing less than 4.2% of our global workforce of 7,463 persons and consisting of employees located in China (51), Hong Kong (50), Sweden (38), Spain (37), Italy (32), Czech Republic (24), Netherlands (20), Denmark (18), Taiwan (13), United Arab Emirates (10), Brazil (6), Switzerland (6), Malaysia (3), Belgium (2), Turkey (2), and Russia (1) who were excluded pursuant to the de minimis exemption provided under Item 402(u)). We selected the median employee using a compensation measure that incorporates base salary, overtime, bonuses paid, and equity granted during the twelve-month period preceding the determination date. Conforming adjustments were made for full-time and part-time employees who were hired during the twelve-month period and did not receive pay for the full period, and international employees’ pay was converted to US dollars using the exchange rates on the determination date. We did not apply anycost-of-living adjustments as part of the calculation.
The 2017 annual total compensation as determined under Item 402 of RegulationS-K for our CEO was $9,202,921, as reported in the Summary Compensation Table of this proxy statement. The 2017 annual total compensation as determined under Item 402 of RegulationS-K for our median employee was $109,461. Based on the foregoing, our estimate of the ratio of our CEO’s annual total compensation to our median employee’s annual total compensation for fiscal year 2017 is 84 to 1.
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Securities Authorized for Issuance Under Equity Compensation Plans
The following table reflects the number of shares of our common stock that, as of December 31, 2016,2017, were outstanding and available for issuance under compensation plans that have previously been approved by our stockholders as well as compensation plans that have not previously been approved by our stockholders.
Plan Category | Number of Securities to (a) | Weighted- Exercise Price (b) | Number of (c) | Number of Securities to (a) | Weighted- Exercise Price (b) | Number of (c) | ||||||||||||||||||
Equity Compensation Plans Approved by Security Holders (2)(3) | 6,841,617 | $ | 37.31 | 8,103,974 | 6,502,553 | $ | 38.23 | 12,622,769 | ||||||||||||||||
Equity Compensation Plans not Approved by Security Holders (4) | 16,624 | $ | 7.93 | 162,175 | 16,034 | $ | 8.12 | 86,051 | ||||||||||||||||
Total | 6,858,241 | $ | 36.72 | (5) | 8,266,149 | 6,518,587 | $ | 36.73 | (5) | 12,708,820 |
(1) | Includes 1,500,000 shares available for future issuance under the Akamai Technologies, Inc. Amended and Restated 1999 Employee Stock Purchase Plan, as amended, which we refer to herein as the 1999 Employee Stock Purchase Plan. At our 2002 Annual Meeting of Stockholders, our stockholders approved an evergreen provision for the 1999 Employee Stock Purchase Plan pursuant to which the number of shares available for issuance automatically increases to up to 1,500,000 shares each June 1 and December 1, subject to an aggregate cap of 20,000,000 shares. |
(2) | Consists of stock options and other equity rights, such as DSUs and RSUs, issuable under the Akamai Technologies, Inc. Second Amended and Restated 1998 Stock Incentive Plan, which we refer to herein as the 1998 Stock Incentive Plan, the 1999 Employee Stock Purchase Plan, the Akamai Technologies, Inc. 2006 Stock Incentive Plan, which refer to herein as the 2006 Stock Incentive Plan, the Akamai Technologies, Inc. 2009 Stock Incentive Plan, which we refer to herein as the 2009 Stock Incentive Plan and the 2013 Stock Incentive Plan. The 1998 Stock Incentive Plan expired in 2008; the 2006 Stock Incentive Plan expired in 2016; and the Akamai Technologies, Inc. 2001 Stock Incentive Plan, which we refer to herein as the 2001 Stock Incentive Plan expired in 2011; therefore, no additional shares are available for issuance under such plans. The Board of Directors has determined that no additional shares may be issued under the 2009 Stock Incentive Plan. |
(3) | Excludes stock options to purchase up to |
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connection with our acquisitions of the parent company of aCerno, Inc., Blaze Software, Inc. and Prolexic Technologies, Inc. No future equity awards may be issued under these plans. |
(4) |
Consists of stock options issuable under the Akamai Technologies, Inc. 2001 Stock Incentive Plan and the Cotendo Inc. Amended and Restated 2008 Stock Plan, which we refer to herein as the Cotendo Plan. |
(5) | RSUs issued under our equity compensation plans do not require payment by the recipient to us at the time of vesting. As such, the weighted-average exercise price does not take these awards into account. |
The following is a brief description of the material features of the equity compensation plans reflected in the chart above that were not approved by our stockholders:
Our 2001 Stock Incentive Plan allows for a total of 5,000,000 shares of our common stock, subject to adjustment in the event of a stock split or similar event, to be issued to our consultants, advisors and employees, including individuals who have accepted offers for employment with us; however, the 2001 Stock Incentive Plan excludes from participation all directors and all officers within the meaning of Section 16 of the Exchange Act and related rules. The 2001 Stock Incentive Plan provides for the granting ofnon-statutory stock options, restricted stock awards and other stock-based awards. A copy of the 2001 Stock Incentive Plan was filed with the Commission as an exhibit to our Annual Report on Form10-K for the fiscal year ended December 31, 2001.
In connection with our acquisition of Cotendo, Inc., we assumed unvested stock options issued by Cotendo on anas-converted basis of which 16,62416,034 shares were outstanding at December 31, 2016.2017. Each assumed option continues to have the same terms and conditions in effect prior to the acquisition, except that the number of shares received upon exercise of such assumed options and the exercise price thereof were adjusted in accordance with the transaction terms. RSUs from the Cotendo Plan representing 294,854 shares of Akamai common stock were granted to employees of Cotendo following the acquisition closing date in satisfaction of the terms of the merger agreement and to induce continued employment following the merger.
The Cotendo Plan allows for a total of 1,100,000 shares of our common stock subject to adjustment in the event of a stock split or similar event, to be issued to former employees of Cotendo who are now Akamai employees but who are not Akamai directors or officers within the meaning of Section 16 of the Exchange Act and related rules. The Cotendo Plan provides for the granting of stock options, restricted stock and RSUs. A copy of the Cotendo Plan was included as an exhibit to our Registration Statement on FormS-8 filed with the Commission on March 14, 2012.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act, which we refer to herein as Section 16(a), requires our officers and directors, and holders of more than ten percent of a registered class of our equity securities, which we refer to herein collectively as reporting persons, to file reports of ownership and changes in ownership of such securities with the Commission. Reporting persons are required by Commission regulations to furnish us with copies of all Section 16(a) forms they file.
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Based solely on our review of copies of reports filed by
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reporting persons or written representations from such persons pursuant to Item 405 of RegulationS-K under the Exchange Act, we believe that during 2016,2017 all filings required to be made by the reporting persons pursuant to Section 16(a) with respect to Akamai securities were made in accordance with Section 16(a), except that the grant of 7,689 RSUs to Mr. Hesse on August 10, 2016 was not reported until August 16, 2016.
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– Matters to be Voted Upon at the Annual Meeting
At the Annual Meeting, stockholders will vote to elect the threefour nominees named in this Proxy Statement as Class IIII directors. Each of the Class IIII directors elected at the Annual Meeting will hold office until the 20202021 Annual Meeting of Stockholders and until his or her successor has been duly elected and qualified. Based on the recommendation of the N&G Committee, the Board of Directors has nominated Monte Ford, Frederic SalernoJill Greenthal, Daniel Hesse, Tom Leighton and Bernardus VerwaayenWilliam Wagner to serve as Class IIII directors for a term expiring at the 20202021 Annual Meeting of Stockholders. The persons named in the enclosed proxy will vote to elect Monte Ford, Frederic SalernoJill Greenthal, Daniel Hesse, Tom Leighton and Bernardus VerwaayenWilliam Wagner unless a stockholder indicates that the shares should be voted against one or more of such nominees.
In the event that any nominee for Class IIII director becomes unavailable or declines to serve as a director at the time of the Annual Meeting, the proxy holders will vote the proxies in their discretion for any nominee who is designated by the current Board of Directors to fill the vacancy. It is not expected that any of the nominees will be unavailable or will decline to serve.
Board of Directors Recommendation
Our Board of Directors believes that approval of the election of Monte Ford, Frederic SalernoJill Greenthal, Daniel Hesse, Tom Leighton and Bernardus VerwaayenWilliam Wagner to serve as Class IIII directors is in the best interests of Akamai and our stockholders and, therefore, recommends that the stockholders vote FOR each of these nominees.
Approval of Amendments to 2013 Stock Incentive Plan
Overview
In the opinionour Amended and Restated Certificate of Akamai’sIncorporation to Declassify our Board of Directors the future success
Under our Amended and Restated Certificate of Akamai depends, in large part, on its ability to maintain a competitive position in attracting, retaining and motivating key employees with experience and ability. On February 23, 2017, the Compensation Committee of Akamai’s Board of Directors adopted, subject to stockholder approval, an amendment to the Akamai Technologies, Inc. 2013 Stock Incentive Plan, as amended to date,Incorporation, which we refer to below as the 2013 Stock Incentive Plan,our Certificate of Incorporation, our Board of Directors is currently divided into three classes, with members of each class holding office for staggered three-year terms. We are asking you to increase by 7,500,000 the number of shares issuable thereunder.
If this amendment is approved, the 2013 Stock Incentive Plan would allow for the issuance of (i) up to 18,500,000 shares of our common stock plus (ii) up to 753,814 shares of
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common stock subject to awards that are outstanding as of February 28, 2017 under the 1998 Stock Incentive Plan, the 2006 Stock Incentive Planadopt and the 2009 Stock Incentive Plan, which we refer to collectively as the Existing Plans, that are terminated, canceled, surrendered or forfeited,approve amendments to our employees, officers, directors, consultantsCertificate of Incorporation to declassify the Board and advisors into make the form of options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units and other stock-based awards aschanges described below, which we refer to, collectively, as Awards.below.
The Compensation Committee has also approved 5 additional amendments to the 2013 Stock Incentive Plan that provide as follows:
Highlights of the 2013 Stock Incentive Plan
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The Board of Directors believes that approving an additional 7,500,000 shares for issuance under the 2013 Stock Incentive Plan is appropriate and in the best interests of stockholders given Akamai’s current expectations on hiring created by recent business growth, the highly competitive environment in which we recruitN&G Committee regularly review our corporate governance policies and retain employees, our plans for future acquisitions, the dilution rate of Akamai’s peers and Akamai’s historical rate of issuing equity awards.
The 2013 Stock Incentive Plan is intended to be a broad-based plan that allows for the issuance of equity awards deep into our organization. Approximately 60% of Akamai’s employee population currently participates in our annual equity incentive compensation programs. In addition, new employees are eligible for new-hire equity awards; we have approximately 6,500 employees worldwide.
practices. As of March 15, 2017, options covering 808,127 shares of our common stock with a weighted average exercise price of approximately $35.53 and a weighted average remaining term of approximately 2.2 years were outstanding under the 2013 Stock Incentive Plan and our other equity compensation plans. As of March 15, 2017, unvested RSUs and DSUs issued under our 2013 Stock Incentive Plan and our other compensation plans covering 7,125,320 shares of our common stock were outstanding. Finally, as of March 15, 2017, 3,936,585 shares were available for future grant under the 2013 Stock Incentive Plan.
In 2016, our Board of Directors approved our latest stock repurchase plan. Under this plan, we are authorized to repurchase up to $1 billion in shares of common stock from February 2016 through December 2018. A key purposepart of the plan is to offset a significant percentageN&G Committee’s continuing review, it discussed the potential declassification of the dilution attributableBoard and moving to shares issuedannual elections of all directors. In deciding whether to recommend that stockholders vote in respectfavor of awards under our
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stock incentive plans. In 2016, we repurchased approximately 7 million shares of our common stock insuch management proposal, the open market. Pursuant to the terms of the 2013 Stock Incentive Plan, shares repurchased on the open market using proceeds from an award under the plan are not added to the shares available for issuance under the 2013 Stock Incentive Plan.
In developing our share request for an increase in the number of shares available for issuance under the 2013 Stock Incentive Plan and analyzing the impact of utilizing equity on our stockholders, we consider our “burn rate” and “overhang.”
Burn rate provides a measure of the potential dilutive impact of our annual equity award program. Our burn rate is low for a technology company. Set forth below is a table that reflects our burn rate for 2014, 2015 and 2016,N&G Committee, as well as the average over those years.
FY | Options Granted (1) | Full Value Shares Granted (2) | Less Forfeitures | Total Granted (Net of Forfeitures) | Weighted Avg # of | Net Burn Rate (3) | ||||||
2016 | — | 4,162,000 | 534,000 | 3,628,000 | 174,917,000 | 2.1% | ||||||
2015 | — | 3,118,000 | 289,000 | 2,829,000 | 178,391,000 | 1.6% | ||||||
2014 | 24,000 | 2,572,000 | 1,177,000 | 1,419,000 | 178,279,000 | 0.8% | ||||||
Three Year Average | 1.5% |
Overhang providesfull Board, considered the advantages of both a measure ofclassified and declassified board structure. A classified board can promote continuity and enhance the potential dilutive effect of all outstanding equity awards and shares available for future grants. We calculated overhang as the total number of equity awards outstanding, plus shares available to be granted, divided by total common shares outstanding plus the equity award shares. Our overhang at March 15, 2017 was 5.7%. If the 7,500,000 shares proposed to be authorized for grant under the 2013 Stock Incentive Plan are included in the calculation our overhang would have been 9.3% at March 15, 2017, which assumes no repurchases to offset dilution under our stock repurchase program.
As of March 15, 2017, we had 173,581,760 shares outstanding. In addition, we had convertible notes and warrants outstanding that are convertible into, or exercisable for, 15.4 million shares of our common stock in the aggregate.
Summary of the 2013 Stock Incentive Plan, as Amended
The following summary of the 2013 Stock Incentive Plan is qualified in its entirety by reference to the 2013 Stock Incentive Plan, as amended by proposed Amendment No. 2 thereto, a copy of which is attached asAppendix A to this Proxy Statement. The 2013 Stock Incentive Plan was previously amended in 2015 to increase the number of shares
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available for issuance thereunder from 8 million to 11 million. References to the Board of Directors in this summary shall include the Compensation Committeestability of the Board, of Directors or any similar committee appointed by the Board of Directors to administer the 2013 Stock Incentive Plan.
Types of Awards; Shares Available for Issuance.
The 2013 Stock Incentive Plan allows for the issuance of incentive stock options intended to qualify under Section 422 of the Code, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units, other stock-based awards and performance awards or other awards in the form of cash awards; we refer to these securities as Awards. Subject to adjustment in the event of stock splits, stock dividends or similar events, Awards may be made under the 2013 Stock Incentive Plan for (i) up to 18,500,000 shares of our common stock; and (ii) up to 753,814 shares of common stock subject to awards under the Existing Plans that expire, are terminated, canceled, surrendered or forfeited, or are repurchased by Akamai at their original issuance price pursuant toencourage a contractual repurchase right (subject, however, in the caselong-term perspective of incentive stock options to any limitations under the Code), subject to adjustment under the terms of the 2013 Stock Incentive Plan. In addition, if any Award granted under the 2013 Stock Incentive Plan expires or is terminated, canceled, forfeited or otherwise results in any common stock not being issued, the unused common stock covered by such Award shall revert or again be available for the grant of Awards under the 2013 Stock Incentive Plan (subject, in the case of incentive stock options, to any limitations under the Code). However, shares of common stock delivered to Akamai by a participant to purchase common stock upon exercise of an Award or to satisfy tax withholding obligations (including shares retained from the Award creating the tax obligation) shall not be added back to the number of shares of common stock available for the future grant of Awards under the 2013 Stock Incentive Plan. In addition, common stock repurchased by Akamai on the open market using proceeds from the exercise of an Award shall not increase the number of shares of common stock available for future grant of Awards under the 2013 Stock Incentive Plan.
Certain sub-limitations apply to the shares available for issuance under the 2013 Stock Incentive Plan. The maximum number of shares with respect to which Awards may be granted to any participant under the 2013 Stock Incentive Plan may not exceed 1,000,000 shares per calendar year. The maximum aggregate number of shares with respect to which Awards may be granted to directors who are not employees of Akamai at the time of grant shall be 10% of the total number of shares available for issuance under the 2013 Stock Incentive Plan. Performance Awards can also provide for cash payments of up to a maximum of $15,000,000 per calendar year per individual. Up to 5,000,000 shares shall be available under the 2013 Stock Incentive Plan for Awards in the form of incentive stock options.
All shares of common stock covered by stock appreciation rights shall be counted against the number of shares available for grant under the 2013 Stock Incentive Plan and the sub-limitations described above. However, stock appreciation rights that may be settled only in
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cash shallmanagement and reduce a company’s vulnerability to coercive takeover tactics. Having experienced directors on the Board is important because of the unique demands of overseeing Akamai, including the need to understand the complexities of our business and our long-term strategy for profitable growth. The directors also considered that many investors believe that a classified board structure reduces the accountability of directors to shareholders because the directors do not face an annual election. After weighing these and other considerations, the N&G Committee determined that moving to annual elections of directors is in the best interests of Akamai and our stockholders and recommended to the Board that it support the proposal to declassify the Board. After deliberation, in the belief that these changes are advisable and in the best interests of our stockholders, the Board unanimously accepted that recommendation, has unanimously approved the proposed amendments and declared them to be so counted,advisable, and ifrecommends that the Company’s stockholders adopt and approve the proposed amendments. The following description of the proposed amendments is a stock appreciation rightsummary and is granted in tandem with an option and the grant provides that only one such Award may be exercised, only the shares coveredqualified by the option shallfull text of the proposed amendments, which is attached to this proxy statement as Appendix A.
If the proposed amendments to our Certificate of Incorporation are adopted and approved by the stockholders, the declassification of the Board would be counted, and the expiration of onephased in connectioncommencing with the other’s exercise2019 Annual Meeting and would result in the classified Board of Directors being fullyphased-out (and all Board members standing for annual elections) commencing with the 2021 Annual Meeting of stockholders. If the proposed amendments are not adopted, no changes will not restore sharesbe made to the 2013 Stock Incentive Plan.
Substitute Awards granted under the 2013 Stock Incentive Plan in connection with a merger or consolidationour Certificate of an entity with Akamai or the acquisition by Akamai of property or stock of an entity shall not count against the overall share limits and sub-limitations described above, except as required by reason of Section 422 and related provisions of the Code.
Shares issued under the 2013 Stock Incentive Plan may consist in whole or in part of authorized but unissued shares, treasury shares, or shares purchased on the open market.
Descriptions of Awards.
Options.Optionees receiveIncorporation. The Board reserves the right to purchase a specified number of shares of common stockabandon the proposed amendments at a specified option price and subjectany time prior to such other terms and conditions as are specified in connection with the option grant. Options may not be granted at an exercise price that is less than 100%effectiveness of the fair market valueCertificate of Amendment to be filed to reflect the amendments.
The proposed amendments to our Certificate of Incorporation would not change the unexpired three-year terms of directors elected prior to the effectiveness of the common stock onamendments (including directors elected at this Annual Meeting). Accordingly, the effective datethree-year term for directors elected at the 2016 Annual Meeting would expire at the 2019 Annual Meeting, the three-year term for directors elected at the 2017 Annual Meeting would expire at the 2020 Annual Meeting of grant. Under present law, incentive stock options may not be grantedstockholders, and the three-year term for directors elected at an exercise price less than 110%this Annual Meeting would expire at the 2021 Annual Meeting. The implementation of the fair market value in the case of stock options granted to optionees holding more than 10%declassification of the total combined voting power of all classes of stock of Akamai or any of our subsidiaries. Under the terms of the 2013 Stock Incentive Plan, stock options may not be granted for a term in excess of seven years (and, under present law, five years in the case of incentive stock options granted to optionees holding greater than 10% of the total combined voting power of all classes of stock of Akamai or any of our subsidiaries). The 2013 Stock Incentive Plan permits participants to pay the exercise price of options using one or more of the following manners of payment: (i) payment by cash or check or, except as may otherwise be provided in the applicable option agreement or approved by our Board of Directors, in connection with a “cashless exercise” through a broker, (ii) to the extent provided in the applicable option agreement or approved by our Board of Directors, and subject to certain conditions, by surrender to us of shares of common stock owned by the participant valued at their fair market value, (iii) to the extent provided in an applicable non-statutory stock option agreement or approved by our Board of Directors, and subject to certain conditions, by delivery of a notice of “net exercise” as a result of which Akamai will retain shares of common stock otherwise issuable pursuant to the stock option, (iv)proposed amendments would commence at the 2019 annual meeting. Director nominees standing for election at the 2019 annual meeting and each annual meeting thereafter would be elected to serve aone-year term. Beginning with the 2021 annual meeting, all directors would stand for annual elections. The table below summarizes the implementation of the declassification of the Board pursuant to the extent provided in the applicable option agreement or approved by our Board of Directors, by any other lawful means, or (v) any combination of the foregoing.proposed amendments:
Stock Appreciation Rights.A SAR is an award entitling the holder, upon exercise, to receive a number of shares of common stock or cash (or a combination thereof) determined by reference to appreciation, from and after the date of grant, in the fair market value of a share of our common stock over the grant price. SARs may be granted independently or in
Annual Meeting Year | Length of Term for Directors | Year that Term Would | ||||||
2018 | Three Years | 2021 | ||||||
2019 | One Year | 2020 | ||||||
2020 | One Year | 2021 | ||||||
2021 and thereafter | Annual Election | One year later |
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tandem with stock options granted under the 2013 Stock Incentive Plan. WhenApproval of this Item 3 will also constitute stockholder approval of (i) a SAR is granted in tandem withtechnical amendment to Section 6 of Article TENTH of our Certificate of Incorporation to delete a stock option, the SAR will be exercisable only at such time or times, andprovision relating to the extentquorum at directors meetings and an amendment to Section 7 of Article TENTH of our Certificate of Incorporation to provide that, effective immediately after the related stock option2021 annual meeting, when the Board is exercisable (except tono longer classified, directors may be removed with or without cause by the extent designated by our Boardaffirmative vote of Directors in connection with an acquisition or change in control event) and will be transferable only with the related stock option. The 2013 Stock IncentivePlan provides that the grant price or exercise price of an SAR may not be less than 100% of the fair market value per sharea majority of our common stock on the effective date of grantoutstanding and that SARs granted under the 2013 Stock Incentive Plan may not have a term in excess of seven years.
No Repricings of Options or SARs; Other Limitations.With respect to options and SARs, unless such action is approved by stockholders or permitted under the terms of the 2013 Stock Incentive Plan in connection with certain changes in capitalization and change in control events, we may not (i) amend any outstanding option or SAR granted under the 2013 Stock Incentive Plan to provide an exercise price or grant price per share that is lower than the then-current exercise price or grant price per share of such outstanding option or SAR, (ii) cancel any outstanding option or SAR (whether or not granted under the 2013 Stock Incentive Plan) and grant in substitution therefor new Awards under the 2013 Stock Incentive Plan (other than certain Awards granted in connection with our merger or consolidation with, or acquisition of, another entity) covering the same or a different number of shares of common stock and having an exercise price or grant price per share lower than the then-current exercise price per share of the canceled option or SAR, (iii) cancel in exchange for a cash payment any outstanding option or SAR with an exercise price or grant price per share above the then-current fair market value of our common stock, or (iv) take any other action under the 2013 Stock Incentive Plan that constitutes a “repricing” within the meaning of the rules of the NASDAQ Stock Market. No option or SAR granted under the 2013 Stock Incentive Plan shall contain any provision entitling the grantee to the automatic grant of additional options or SARs in connection with any exercise of the original option or SAR or provide for the payment or accrual of dividend equivalents.
Restricted Stock Awards. We may issue Awards entitling recipients to acquire shares of our common stock subject to the right of Akamai to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board of Directors in the applicable Award are not satisfied prior to the end of the applicable restriction period established for such Award. We refer to these Awards as Restricted Stock. Any dividend declared and paid by Akamai with respect to a share of Restricted Stock shall be paid to the participant (without interest) only if and when such shares of Restricted Stock become free from any applicable restrictions on transferability and forfeitability.
Restricted Stock Units; Deferred Stock Units. Instead of granting Awards for Restricted Stock, we may also grant Awards entitling the recipient to receive shares of our common stock (or cash equal to the fair market value of such shares) to be delivered at a future date
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on or after such Award vests. We refer to these Awards as Restricted Stock Units. A participant has no voting rights with respect to any Restricted Stock Units. To the extent provided by our Board of Directors in its sole discretion, a grant of Restricted Stock Units may provide the participant with a right to receive dividend equivalents, which may be settled in cash and/or shares of our common stock and shall be subject to the same restrictions on transfer and forfeitability as the underlying Restricted Stock Units. Our Board of Directors may provide for deferral of settlement of a Restricted Stock Unit (on a mandatory basis or at the election of the participant); we refer to Restricted Stock Units with a mandatory or elected deferral as Deferred Stock Units.
Other Stock-Based Awards; Cash-Based Awards. Under the 2013 Stock Incentive Plan, our Board of Directors may grant other Awards that are based upon our common stock or other property having such terms and conditions as the Board of Directors may determine including the grant of shares based upon certain conditions, the grant of Awards that are valued in whole or in part by reference to, or otherwise based on, shares of our common stock, and the grant of Awards entitling recipients to receive shares of our common stock to be delivered in the future. We refer to these types of Awards as Other Stock-Based Awards. Other Stock-Based Awards may be available as a form of payment in the settlement of other Awards granted under the 2013 Stock Incentive Plan or as payment in lieu of compensation to which a participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of our common stock or cash, as our Board of Directors determines. Our Board of Directors may also grant Performance Awards (as defined below) or other Awards denominated in cash rather than shares of common stock. We refer to these types of Awards as Cash-Based Awards.
Performance Awards. Restricted Stock, Restricted Stock Units and Other Stock-Based Awards granted under the 2013 Stock Incentive Plan may be made subject to achievement of performance goals. We refer to these types of Awards as Performance Awards. Performance Awards may also provide for cash payments of up to $15,000,000 per calendar year per individual. With respect to Performance Awards intended to qualify as “performance-based compensation” under the Code’s Section 162(m), the Compensation Committee of our Board of Directors shall specify, at the time of grant, that such Performance Award will vest solely upon the achievement of specified objective performance criteria that are based on the relative or absolute attainment of specified levels of one or any combination of the following, which may be determined pursuant to GAAP or on a non-GAAP basis, as determined by the Compensation Committee: (a) net income, (b) earnings before or after discontinued operations, interest, taxes, depreciation and/or amortization, (c) operating profit before or after discontinued operations and/or taxes, (d) revenue, (e) sales growth, (f) earnings growth, (g) cash flow or cash position, (h) gross margins, (i) stock price, (j) market share, (k) return on sales, assets, equity or investment, (l) improvement of financial ratings, (m) achievement of balance sheet or income statement objectives, (n) total shareholder return, or (o) earnings per share. The preceding performance criteria may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated or relative to
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the performance of a peer group of entities or other external measure of the selected performance criteria. The Compensation Committee shall specify whether such performance measures are to be adjusted to exclude any one or more of (I) extraordinary items, (II) gains or losses on the dispositions of discontinued operations, (III) the cumulative effects of changes in accounting principles, (IV) the writedown of any asset, (V) charges for restructuring and rationalization programs, (VI) other non-cash charges or items, (VII) gains or losses relating to financing or investment activities, (VIII) the effect of acquisitions, or (IX) gains or losses as a result of foreign currency conversions or fluctuations in foreign currency exchange rates. Such performance measures (A) may vary by participant and may be different for different Awards; (B) may be particular to a participant or the department, branch, line of business, subsidiary or other unit in which the participant works and may cover such period as may be specified by the Compensation Committee; and (C) shall be set by the Compensation Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m). The Compensation Committee may adjust downwards, but not upwards, the cash or number of shares payable pursuant to such Awards and may not waive the achievement of the applicable performance measures except in the case of the death or disability of the participant or a change in control of Akamai. Performance Awards that are not intended to qualify as “performance-based compensation” under Section 162(m) may be based on these or other performance measures as determined by our Board of Directors.
Transferability of Awards
Except as the Board of Directors may otherwise determine or provide in an Award in connection with certain gratuitous transfers, Awards may not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an incentive stock option, pursuant to a qualified domestic relations order. During the life of the participant, Awards are exercisable only by the participant.
Eligibility to Receive Awards
Employees, officers, directors, consultants and advisors of Akamai and our present or future parent or subsidiary corporations and any other business venture in which Akamai has a controlling interest (as determined by our Board of Directors) are eligible to be granted Awards under the 2013 Stock Incentive Plan. Under current law, however, incentive stock options may only be granted to employees of Akamai and its present or future parent or subsidiaries. The granting of Awards under the 2013 Stock Incentive Plan is discretionary, and we cannot now determine the number or type of Awards to be granted in the future to any particular person or group, except that Awards are subject to the limitations described above. On February 28, 2017, the last reported sale price of our common stock on the NASDAQ Global Select Stock Market was $62.60.
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Awards Granted Under the 2013 Stock Incentive Plan
Since the initial approval of the 2013 Stock Incentive Plan in 2013 through February 28, 2017, the following number of equity awards have been granted to the individuals and groups described in the table. No other equity awards have been granted to any other individuals or groups under the 2013 Stock Incentive Plan.
Name of Beneficial Owner | Number of Shares of Common Stock Underlying Options Granted | Number of Shares of Common Stock Underlying RSUs | Number of Shares of Common Stock Underlying DSUs | |||||||||
Named Executive Officers: | ||||||||||||
F. Thomson Leighton, Chief Executive Officer | — | 546,036 | — | |||||||||
James Benson, Chief Financial Officer | — | 151,130 | — | |||||||||
Robert Blumofe, EVP – Platform and GM Enterprise and Carrier Division | — | 133,298 | — | |||||||||
Rick McConnell, President and GM Web Performance Division | — | 224,180 | — | |||||||||
William Wheaton, EVP and GM Media Division | — | 121,064 | — | |||||||||
All current executive officers as a group | — | 1,388,461 | — | |||||||||
All directors who are not executive officers as a group | 73,954 | 13,187 | 112,787 | |||||||||
All nominees for election as a director: | ||||||||||||
Monte Ford | 24,721 | — | 11,554 | |||||||||
Frederic Salerno | — | — | 12,673 | |||||||||
Bernardus Verwaayen | 25,062 | — | 12,211 | |||||||||
Associates of our executive officers, directors and nominees for director | — | — | — | |||||||||
All other eligible participants, none of whom received more than 5% of such equity awards | — | 8,074,819 | — |
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Administration
Our Board of Directors administers the 2013 Stock Incentive Plan and is authorized to adopt, alter and repeal the administrative rules, guidelines and practices relating to the 2013 Stock Incentive Plan and to interpret the provisions of the 2013 Stock Incentive Plan and any Award documentation and remedy any ambiguities, omissions or inconsistencies therein. Pursuant to the terms of the 2013 Stock Incentive Plan, our Board of Directors may delegate authority under the 2013 Stock Incentive Plan to one or more committees or subcommittees of our Board of Directors. Our Board of Directors has authorized the Compensation Committee to administer certain aspects of the 2013 Stock Incentive Plan, including the granting of awards to directors and executive officers. The Compensation Committee, with the input of management, selects the recipients of Awards and determines, in addition to other items, and subject to the terms of the 2013 Stock Incentive Plan:
Subject to any requirements of applicable law, our Board of Directors may delegate to one or more of our officers the power to grant Awards (subject to any limitations under the 2013 Stock Incentive Plan) to employees or non-executive officers of Akamai or any of our present or future subsidiary corporations and to exercise such other powers under the 2013 Stock Incentive Plan as the Board of Directors may determine, provided that the Board of Directors shall fix the terms of the Awards to be granted by such officers, the maximum number of shares subject to Awards that the officers may grant and the time period in which such Awards may be granted. No officer shall be authorized to grant Awards to any of our executive officers. The Board of Directors has delegated to our Chief Executive Officer the authority under the 2013 Stock Incentive Plan to grant Restricted Stock Units to non-executive employees of Akamai subject to certain specified limitations and oversight by the Compensation Committee. Awards to non-employee directors will only be granted and administered by a committee, all the members of which are independent as defined by Section 5606(a)(2) of the NASDAQ Rules.
The Board of Directors may at any time provide that any Award will become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be, except as otherwise provided under the terms of the 2013 Stock Incentive Plan in the case of Performance Awards.
The Board of Directors is required to make appropriate adjustments in connection with the 2013 Stock Incentive Plan and any outstanding Awards to reflect stock splits, stock dividends, recapitalizations, spin-offs and other similar changes in capitalization.
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All decisions by the Board of Directors shall be made in the Board of Directors’ sole discretion and shall be final and binding on all persons having or claiming any interest on the 2013 Stock Incentive Plan or in any Award. No director or person acting pursuant to authority delegated by the Board of Directors shall be liable for any action or determination relating to or under the 2013 Stock Incentive Plan made in good faith. Akamai will indemnify and hold harmless each director, officer, other employee, or agent to whom any duty or power relating to the administration or interpretation of the 2013 Stock Incentive Plan has been or will be delegated against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Board of Director’s approval) arising out of any act or omission to act concerning the 2013 Stock Incentive Plan unless arising out of such person’s own fraud or bad faith.
Minimum Vesting. Subject to the discretionary authority of the Board of Directors to accelerate the vesting of an Award as described above, no Award shall vest earlier than the first anniversary of its date of grant, unless such Award is granted in lieu of salary, bonus or other compensation otherwise earned by or payable to the holder except for Awards granted, in the aggregate, for up to 5% of the maximum number of authorized shares under the 2013 Stock Incentive Plan.
Amendment of Awards. Except as otherwise provided under the 2013 Stock Incentive Plan, with respect to repricing outstanding stock options or SARs, our Board of Directors may amend, modify or terminate any outstanding Award provided that the participant’s consent to such action will be required unless our Board of Directors determines that the action, taking into account any related action, would not materially and adversely affect the participant or the change is otherwise permitted under the terms of the 2013 Stock Incentive Plan.
Acquisition and Change in Control Events.
Definitions. The 2013 Stock Incentive Plan contains provisions addressing the consequences of any acquisition event or change in control event. An “acquisition event” is defined under the terms of the 2013 Stock Incentive Plan to mean (a) any merger or consolidation of Akamai with or into another entity as a result of which our common stock is converted into or exchanged for the right to receive cash, securities or other property, or is canceled or (b) any exchange of our common stock for cash, securities or other property pursuant to a share exchange or other transaction. A “change in control event,” as defined in the 2013 Stock Incentive Plan, means (w) any merger or consolidation which results in the voting securities of Akamai outstanding immediately prior thereto representing immediately thereafter (either by remaining outstanding or by being converted into voting securities of the surviving or acquiring entity) less than 50% of the combined voting power of voting securities of Akamai or such surviving or acquiring entity outstanding immediately after such merger or consolidation; (x) subject to certain restrictions contained in the definition of the change in control event under the 2013 Stock Incentive Plan, the acquisition by an individual, entity or group of beneficial ownership of any capital stock of Akamai if, after such acquisition, such individual, entity or group beneficially owns 50% or
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more of either (i) the then-outstanding shares of our common stock or (ii) the combined voting power of Akamai’s then-outstanding voting securities entitled to vote generally in the election of directors; (y) any sale of all or substantially all of Akamai’s assets; or (z) the complete liquidation of Akamai.
Awards Other than Restricted Stock; Options Available to the Board of Directors. For Awards other than Restricted Stock, under the 2013 Stock Incentive Plan, if an acquisition event occurs (regardless of whether such event also constitutes a change in control event), our Board of Directors may take any one or more of the following actions as to all or any (or any portion of) outstanding Awards other than Restricted Stock on such terms as the Board of Directors determines (except to the extent specifically provided otherwise in an applicable Award agreement or another agreement between a participant and Akamai): (A) provide that such Awards shall be assumed, or substantially equivalent Awards shall be substituted,required by the acquiring or succeeding corporation (or an affiliate thereof), (B) upon written notice toDelaware General Corporation Law when a participant, provide that allboard of the participant’s unexercised Awards will terminate immediately prior to the consummation of such acquisition event unless exercised by the participant (to the extent then exercisable) within a specified period following the date of such notice, (C) provide that outstanding Awards shall become exercisable, realizable, or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such acquisition event, (D) in the event of an acquisition event under the terms of which holders of common stock will receive upon consummation thereof a cash payment fordirectors is not classified, each share surrendered in the acquisition event, which we refer to as the Acquisition Price, make or provide for a cash payment to participants with respect to each Award held by a participant equal to (X) the number of shares of common stock subject to the vested portion of the Award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to such acquisition event) multiplied by (Y) the excess, if any, of (I) the Acquisition Price over (II) the exercise, grant or purchase price of such Award and any applicable tax withholdings, in exchange for the termination of such Award, (E) provide that, in connection with a liquidation or dissolution of Akamai, Awards shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise, measurement or purchase price thereof and any applicable tax withholdings) and (F) any combination of the foregoing.
The 2013 Stock Incentive Plan also provides, however, that for Restricted Stock Units that are subject to Section 409A of the Code: (A) if the applicable Restricted Stock Unit agreement provides that the Restricted Stock Units shall be settled upon a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(i), and the acquisition event constitutes such a “change in control event”, then no assumption or substitution of the Restricted Stock Unit shall be permitted, and the Restricted Stock Units shall instead be settled in accordance with the terms of the applicable Restricted Stock Unit agreement; and (B) the Board of Directors may only undertake the actions set forth in clauses (C), (D) or (E) above; if the acquisition event is a “change in control event” as so defined under the Treasury RegulationAppendix A, and such action is permitted required by Section 409A of the Code. If the acquisition event does not constitute a “change in control
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event” as defined in the Treasury Regulation or such action is not permitted or required by Section 409A of the Code,(ii) conforming changes to Sections 2.3, 2.4, 2.5, 2.6, 2.12 and the acquiring or succeeding corporation does not assume or substitute the Restricted Stock Units pursuant to clause (A) above, then the unvested Restricted Stock Units shall terminate immediately prior to the consummation of the acquisition event without any payment in exchange therefor.
Except to the extent specifically provided to the contrary in the instrument evidencing the Award or any other agreement between the participant and Akamai, each Award (other than Restricted Stock) shall become immediately vested, exercisable, or free from forfeiture, as applicable, if on or prior to the first anniversary of the date of the consummation of a change in control event, the participant’s employment with us or our successor is terminated for good reason (as defined in the 2013 Stock Incentive Plan) by the participant or is terminated without cause (as defined in the 2013 Stock Incentive Plan) by us or our successor.
Provisions Applicable to Restricted Stock. Upon the occurrence of an acquisition event (regardless of whether such event also constitutes a change in control event), Akamai’s repurchase and other rights with respect to outstanding Restricted Stock shall inure to the benefit2.15 of our successor and shall, unless the Board of Directors determines otherwise, apply to the cash, securities or other property which the common stock was converted into or exchanged for pursuant to such acquisition eventbylaws, as reflected in the same manner and to the same extent as they applied to such Restricted Stock; provided, however, that the Board of Directors may provide for termination or deemed satisfaction of such repurchase or other rights under the instrument evidencing any Restricted Stock or any other agreement between a participant and Akamai, either initially or by amendment.Appendix B.
Upon the occurrence of a change in control event (regardless of whether such event also constitutes an acquisition event), except to the extent specifically provided to the contrary in the instrument evidencing the Award or any other agreement between the participant and Akamai, each Award of Restricted Stock shall become immediately vested and free from forfeiture if on or prior to the first anniversary of the date of the consummation of a change in control event, the participant’s employment with us or our successor is terminated for good reason (as defined in the 2013 Stock Incentive Plan) by the participant or is terminated without cause (as defined in the 2013 Stock Incentive Plan) by us or our successor.
Other Stock-Based Awards or Cash-Based Awards. The Board of Directors shall specify at the time of grant or thereafter the effect of an acquisition event or change in control event on any Other Stock-Based Award or Cash-Based Award granted under the 2013 Stock Incentive Plan.
Provisions for Foreign Participants.
The Board of Directors may modify Awards granted to participants who are foreign nationals or employed outside the United States or establish subplans or procedures under
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the 2013 Stock Incentive Plan to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.
Amendment or Termination.
Our Board of Directors may amend, suspend or terminate the 2013 Stock Incentive Plan or any portion thereof at any time provided that (i) to the extent required by Section 162(m) of the Code, no Award granted to a participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award, unless and until such amendment shall have been approved by Akamai’s stockholders if required by Section 162(m) of the Code (including the vote required under Section 162(m)); (ii) no amendment that would require stockholder approval under the rules of the NASDAQ Stock Market may be made effective unless and until such amendment shall have been approved by Akamai’s stockholders; and (iii) if the NASDAQ Stock Market amends the NASDAQ rules so that such rules no longer require stockholder approval of material amendments to equity compensation plans, then, from and after the effective date of such amendment to the NASDAQ Rules, no amendment to the 2013 Stock Incentive Plan (A) materially increasing the number of shares authorized under the 2013 Stock Incentive Plan (other than as provided for in the 2013 Stock Incentive Plan in connection with changes in capitalization), (B) expanding the types of Awards that may be granted under the 2013 Stock Incentive Plan, (C) materially expanding the class of participants eligible to participate in the 2013 Stock Incentive Plan, or (D) materially increasing benefits generally available to participants shall be effective unless stockholder approval is obtained. In addition, if at any time the approval of Akamai’s stockholders is required as to any other modification or amendment under Section 422 of the Code or any successor provision with respect to incentive stock options, the Board of Directors may not effect such modification or amendment without such approval. Unless otherwise specified in the amendment, any amendment to the 2013 Stock Incentive Plan adopted in accordance with the procedures described above shall apply to, and be binding on the holders of, all Awards outstanding under the 2013 Stock Incentive Plan at the time the amendment is adopted, provided that the Board of Directors determines that such amendment, taking into account any related action, does not materially and adversely affect the rights of participants under the 2013 Stock Incentive Plan.
Effective Date and Term of 2013 Stock Incentive Plan.
The 2013 Stock Incentive Plan became effective on May 13, 2013, the date the plan was approved by Akamai’s stockholders. No Awards shall be granted under the 2013 Stock Incentive Plan after the completion of 10 years from the effective date, but Awards previously granted may extend beyond that date.
Federal Income Tax Consequences
The following summarizes the United States federal income tax consequences that generally will arise with respect to Awards granted under the 2013 Stock Incentive Plan.
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This summary is based on the federal tax laws in effect as of the date of this Proxy Statement. In addition, this summary assumes that all Awards are exempt from, or comply with, the rules under Section 409A of the Code regarding nonqualified deferred compensation. Changes to these laws or assumptions could alter the tax consequences described below.
Incentive Stock Options. A participant will not have income upon the grant of an incentive stock option. Also, except as described below, a participant will not have income upon exercise of an incentive stock option if the participant has been employed by Akamai or its corporate parent or 50% or more-owned corporate subsidiary at all times beginning with the option grant date and ending three months before the date the participant exercises the option. If the participant has not been so employed during that time, then the participant will be taxed as described below under “Nonstatutory Stock Options.” The exercise of an incentive stock option may subject the participant to the alternative minimum tax.
A participant will have income upon the sale of the stock acquired under an incentive stock option, which we refer to as ISO stock, at a profit (if sales proceeds exceed the exercise price). The type of income will depend on when the participant sells the ISO stock. If a participant sells the ISO stock more than two years after the option was granted and more than one year after the option was exercised, then all of the profit will be long-term capital gain. If a participant sells the ISO stock prior to satisfying these waiting periods, then the participant will have engaged in a disqualifying disposition and a portion of the profit will be ordinary income and a portion may be capital gain. This capital gain will be long-term if the participant has held the ISO stock for more than one year and otherwise will be short-term. If a participant sells the ISO stock at a loss (sales proceeds are less than the exercise price), then the loss will be a capital loss. This capital loss will be long-term if the participant held the ISO stock for more than one year and otherwise will be short-term.
Nonstatutory Stock Options. A participant will not have income upon the grant of a nonstatutory stock option. A participant will have compensation income upon the exercise of a nonstatutory stock option equal to the fair market value of the stock on the day the participant exercised the option less the exercise price. Upon sale of the stock, which we refer to as NSO stock, the participant will have capital gain or loss equal to the difference between the sales proceeds and the fair market value of the NSO stock on the day the option was exercised. This capital gain or loss will be long-term if the participant has held the NSO stock for more than one year and otherwise will be short-term.
Stock Appreciation Rights. A participant will not have income upon the grant of an SAR but generally will recognize compensation income upon the exercise of an SAR equal to the amount of the cash and the fair market value of any stock received. Upon the sale of the stock, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the day the SAR was exercised. This capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
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Restricted Stock. A participant will not have income upon the grant of Restricted Stock unless an election under Section 83(b) of the Code is made within 30 days of the date of grant. If a timely Section 83(b) election is made, then a participant will have compensation income equal to the fair market value of the Restricted Stock on the date of grant less the purchase price, if any. When the shares of Restricted Stock are sold, the participant will have capital gain or loss equal to the difference between the sales proceeds and the fair market value of the stock on the date of grant. If the participant does not make a Section 83(b) election, then when the shares of Restricted Stock vest the participant will have compensation income equal to the fair market value of the stock on the vesting date less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the sales proceeds less the fair market value of the stock on the vesting date. Any capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
Restricted Stock Units and Deferred Stock Units. A participant will not have income upon the grant of a Restricted Stock Unit or Deferred Stock Unit. A participant is not permitted to make a Section 83(b) election with respect to a Restricted Stock Unit or Deferred Stock Unit. When the Restricted Stock Unit or Deferred Stock Unit vests, unless the distribution of the shares of common stock associated with such Award has been deferred in a manner that complies with Section 409A of the Code, the participant will have income on the vesting date in an amount equal to the fair market value of the stock on the vesting date less the purchase price, if any. If the participant has made a valid deferral election, he or she will have income on the distribution date of the stock in an amount equal to the fair market value of the stock on such date less the purchase price, if any. When the stock is sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the stock on the vesting date or delivery date, as applicable. Any capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
Other Stock-Based Awards. The tax consequences associated with any Other Stock-Based Award granted under the 2013 Stock Incentive Plan will vary depending on the specific terms of the Award. Among the relevant factors are whether or not the Award has a readily ascertainable fair market value, whether or not the Award is subject to forfeiture provisions or restrictions on transfer, the nature of the property to be received by the participant under the Award and the participant’s holding period and tax basis for the Award or underlying common stock.
Tax Consequences to Akamai. There will be no tax consequences to us except that we will be entitled to a deduction when a participant has compensation income. Any such deduction will be subject to the limitations of Section 162(m) of the Code.
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Board of Directors Recommendation
Our Board of Directors believes that adoption of the proposed amendments to the 2013 Stock Incentive Plan isour Certificate of Incorporation to declassify our Board of Directors are in the best interests of Akamai and itsour stockholders and, therefore, recommends that the stockholders vote FOR this proposal.
Advisory Vote on Executive Compensation
In accordance with Section 14A of the Exchange Act, we are providing our stockholders with the opportunity to vote to approve, on an advisory ornon-binding basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement in accordance with Commission rules. Our Board of Directors has adopted a policy of providing annual advisory votes on executive compensation.
Akamai has a “pay-for-performance”“pay-for-performance” philosophy that forms the foundation of all decisions regarding compensation of our executives. The goal of our executive compensation program is to attract, retain and reward talented and hard-working individuals in a highly competitive business environment. Our annual and long-term incentive compensation strategy is performance-oriented and is designed to link our strategic business objectives, specific financial performance objectives and the enhancement of stockholder returns with the compensation of our executives, including our Named Executive Officers. Please refer to the CD&A section of this Proxy Statement for an overview of the compensation of our Named Executive Officers.
We are asking for stockholder approval of the compensation of our Named Executive Officers as disclosed in this Proxy Statement in accordance with Commission rules, which disclosures include the disclosures under “Executive Compensation Matters—Compensation Discussion and Analysis,” the compensation tables and the narrative discussion following the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the policies and practices described in this Proxy Statement.
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This vote is advisory and therefore not binding on Akamai, the Compensation Committee or the Board. The Board and the Compensation Committee value the opinions of Akamai stockholders and will consider those stockholders’ concerns when making future compensation decisions for our Named Executive Officers, and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
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Board of Directors Recommendation
Our Board of Directors recommends that youthe stockholders vote FOR the approval of our 20162017 executive compensation.
Advisory Vote on Frequency of Future Executive Compensation Advisory Votes
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Section 14A of the Exchange Act also enable Akamai stockholders to vote, on an advisory or non-binding basis, on how frequently they would like to cast an advisory vote on the compensation of our Named Executive Officers. By voting on this proposal, stockholders may indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two, or three years.
After careful consideration of the frequency alternatives, the Board believes that continuing to conduct advisory votes on executive compensation on an annual basis is appropriate for Akamai and its stockholders at this time.
Board of Directors Recommendation
Our Board of Directors recommends that you vote in favor of an ANNUAL advisory vote on executive compensation.
Ratification of Selection of Independent Auditors
Upon the recommendation of the Audit Committee, which conducted an annual review of the firm’s performance, our Board of Directors has selected PricewaterhouseCoopers LLP, independent auditors, which we sometimes refer to as PwC, to audit our financial statements for the year ending December 31, 2017.2018. PwC has audited our financial statements for each fiscal year since our incorporation. Although stockholder approval of the selection of PwC is not required by law, ourthe Board of Directors believes that it is advisable to give stockholders the opportunity to ratify this selection. The affirmative vote of holders of a majority of the shares of our common stock present or represented and voting at the Annual Meeting is necessary to ratify the appointment of PwC as our independent auditors. In the event stockholders do not ratify the selection of PwC as our independent auditors, the Audit Committee will reconsider its selection. Representatives of PwC are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.
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The following table summarizes the fees we incurred for professional services provided by PwC for each of the last two fiscal years for audit, audit-related, tax and other services (in thousands):
Fee Category | 2016 | 2015 | 2017 | 2016 | ||||||||||||
Audit Fees (1) | $ | 3,101 | $ | 2,899 | $ | 3,373 | $ | 3,101 | ||||||||
Audit-Related Fees (2) | 626 | 269 | 740 | 626 | ||||||||||||
Tax Fees (3) | 475 | 849 | 756 | 475 | ||||||||||||
All Other Fees (4) | 7 | 7 | 7 | 7 | ||||||||||||
Total Fees | $ | 4,209 | $ | 4,024 | $ | 4,876 | $ | 4,209 |
(1) | Audit fees consist of fees for the audit of our annual financial statements and internal control over financial reporting, the review of the interim financial statements included in our quarterly reports on Form10-Q and other professional services provided in connection with statutory and regulatory filings or engagements. |
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(2) | Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit and the review of our financial statements and which are not reported under “Audit Fees.” These services relate to financial due diligence with respect to potential acquisitions and consultations concerning financial accounting and reporting standards. |
(3) | Tax fees consist of fees primarily related to tax compliance and consulting. |
(4) | All other fees related to license fees for an accounting research tool. |
The Audit Committee has adopted policies and procedures relating to the approval of all audit andnon-audit services that are to be performed by our independent auditor. This policy generally provides that we will not engage our independent auditor to render audit ornon-audit services unless the service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to one of thepre-approval procedures described below. The Audit Committee may delegatepre-approval authority to one or more of its members but not to our management. Any suchpre-approval by a member of the Audit Committee pursuant to this delegated authority is reported on at the next meeting of the Audit Committee.
Services can be approved in two ways: specificpre-approval or generalpre-approval. Specificpre-approval represents the Audit Committee’s consent for the independent auditor to perform a specific project, set of services or transaction for us. Generalpre-approval represents the Audit Committee’s consent for the independent auditor to perform certain categories of services for us. If a particular service or project falls into a category that has been generallypre-approved by the Audit Committee within the preceding 12 months, further specificpre-approval of that service or project need not be obtained. Any proposed services exceeding cost levels generallypre-approved by the Audit Committee will require further specificpre-approval. From time to time, the Audit Committee may revise the list of services for which generalpre-approval is granted. During 2016,2017, 100% of the services provided by PwC werepre-approved by the Audit Committee.
PwC has provided tax services, as described in the Public Company Accounting Oversight Board Rule 3523, “Tax Services for Persons in Financial Reporting Oversight Roles,” to
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George H. Conrades, our Chairman of the Board of Directors,a director, and Bernardus Verwaayen, a director. PwC has provided such services to Mr. Conrades since 1999. PwC has provided such services to Mr. Verwaayen since 2008. PwC and Akamai have determined that the provision of such services to Messrs. Conrades and Verwaayen does not impact PwC’s independence because neither is in a financial reporting oversight role solely because he served as a member of ourthe Board of Directors and neither is otherwise responsible for our financial reporting oversight. Akamai did not pay for these tax services on behalf of Messrs. Conrades or Verwaayen.
Board of Directors Recommendation
Our Board of Directors believes that ratification of the selection of PricewaterhouseCoopers LLP as our independent auditors for the year ending December 31, 20172018 is in the best interests of Akamai and our stockholders and, therefore, recommends that the stockholders vote FOR this proposal.
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– Information About Attending the Annual Meeting, Voting Your Shares and Other Matters
Q: | Who can attend the Annual Meeting? |
A: | Each holder of Akamai common stock, par value $.01 per share, on |
Q: | Can I access the Proxy Statement and Annual Report on the Internet? |
A: | Yes. Our Proxy Statement and Annual Report to Stockholders are available on our website at www.akamai.com/html/investor/financial_reports.html. |
Q. | In the future, can I access copies of the Proxy Statement and Annual Report on the Internet instead of receiving paper copies? |
A: | Yes. A stockholder of record may sign up for this option by going to www.investorvote.com. If you are not a stockholder of record, please refer to the information provided by your broker, bank or other nominee for instructions on how to elect to access future proxy materials on the Internet. Stockholders who elect electronic access will receive ane-mail message next year containing the Internet address for |
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access to next year’s proxy materials. Your choice will remain in effect until you advise us by written correspondence that you wish to resume mail delivery of these documents. |
Q. | What is the difference between holding shares as a stockholder of record and as a beneficial owner? |
A: | Most Akamai stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially. |
Stockholder of Record—If your shares are registered directly in your name with our transfer agent, you are considered, with respect to those shares, the “stockholder of record.” As the stockholder of record, you have the right to grant your voting proxy directly to Akamai or to a third party, or to vote in person at the Annual Meeting. |
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Beneficial Owner—If your shares are held in a brokerage account or by a bank, broker or other nominee, you are considered the “beneficial owner” of those shares. As the beneficial owner of those shares, you have the right to direct your broker, bank or other nominee to vote in accordance with your instructions and you also are invited to attend the Annual Meeting. However, because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, bank or other nominee that holds your shares, giving you the right to vote the shares at the meeting. |
Q: | When is the record date and who is entitled to vote? |
A: | The record date for the Annual Meeting is |
Q: | What will constitute a quorum for the meeting? |
A: | Under our bylaws, the holders of a majority of the shares of our common stock issued, outstanding and entitled to vote on any matter shall constitute a quorum for the Annual Meeting. Shares of our common stock present in person or represented by executed proxies received by us (including “brokernon-votes” and shares that abstain with respect to one or more of the matters presented for stockholder approval) will be counted for purposes of determining whether a quorum is present. |
Q: | How will my shares that are held through a broker, bank or other nominee be voted? |
A: | Brokers, banks and other nominees that hold shares in “street name” for customers may have the discretion to vote those shares with respect to certain matters if they have not received instructions from the beneficial owners. Under applicable stock |
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exchange rules, nominees subject to these rules will have this discretionary authority with respect to routine matters such as the ratification of the selection of our independent auditors; however, they will not have this discretionary authority with respect to any of the other matters scheduled to be voted upon. As a result, with respect to all matters other than ratification of the selection of our independent auditors, if the beneficial owners have not provided instructions with respect to that matter, those beneficial owners’ shares will be considered “brokernon-votes.” The effect of brokernon-votes is discussed in the answer to the following question. |
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Q: | How many votes are required for approval of different matters? |
A: |
Item | Vote Required | Abstentions | Broker Non-Votes | Unmarked Proxy Cards | ||||||||
Election of Directors
| Majority of votes cast | No effect | No effect | Voted “FOR” | ||||||||
| shares | Votes “AGAINST” | Votes “AGAINST” | Voted “FOR” | ||||||||
Advisory Vote on Executive Compensation
| ||||||||||||
| Majority of votes cast | No effect | No effect | Voted “FOR” | ||||||||
Ratification of Selection of Independent Auditors (Item | Majority of votes cast | No effect | No effect | Voted “FOR” |
Q: | What happens if an incumbent director nominee fails to receive more “For” votes than “Against” votes in an uncontested election? |
A: | Under our majority vote standard for the election of directors, the shares voted “For” a nominee must exceed the number of voted “Against” that nominee. Our Corporate Governance Guidelines set forth a process that takes effect if an incumbent director nominee receives more “Against” votes than “For” votes in an uncontested election. Upon such an occurrence, the affected director is expected, promptly following certification of the stockholder vote, to submit to the Board of Directors his or her offer to resign from the |
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accepting the resignation. If the director’s resignation is accepted, then the Board |
Q: | Can I revoke my proxy? |
A: | Any proxy may be revoked by a stockholder at any time before it is exercised by delivery of a signed proxy with a later date or a later-dated written revocation to our Secretary or by voting in person at the Annual Meeting. Attendance at the Annual Meeting will not itself be deemed to revoke a proxy unless the stockholder gives affirmative notice at the Annual Meeting that the stockholder intends to revoke the proxy and vote in person. |
Q: | Who pays for the solicitation of proxies? |
A: | All costs of solicitation of proxies will be borne by us. In addition to solicitations by mail, our Board of Directors, officers and employees, without additional remuneration, may solicit proxies by telephone, electronic mail and personal interviews. Brokers, banks and other nominees will be requested to forward proxy soliciting material to the owners of stock held in their names, and we will reimburse them for their reasonableout-of-pocket expenses incurred in connection with the distribution of proxy materials. We have retained |
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Q: | Are there matters to be voted on at the Annual Meeting that are not included in the proxy? |
A: | Our Board of Directors does not know of any other matters that may come before the Annual Meeting; however, if any other matters are properly presented at the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote, or otherwise act, in accordance with their judgment on such matters. Under our bylaws, the deadline for stockholders to notify us of any proposals or director nominations to be presented for action at the |
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Q: | What is “householding”? |
A: | Some banks, brokers and other nominees may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement or annual report to stockholders may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of either document to you if you write to us at the following address or call us at the following phone number: |
Akamai Technologies, Inc. |
If you want to receive separate copies of the annual report and proxy statement in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address or phone number.
Our Board of Directors does not know of any other matters that may come before the Annual Meeting; however, if any other matters are properly presented at the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote, or otherwise act, in accordance with their judgment on such matters.
Deadline for Submission of Stockholder Proposals for the 20182019 Annual Meeting
Proposals of stockholders intended to be presented at the 20182019 Annual Meeting of Stockholders, pursuant to Rule14a-8 promulgated under the Exchange Act, must be received by us no later than December 4, 201722, 2018 in order to be included in the proxy statement and form of proxy relating to that meeting.
In addition, our bylaws require that we be given advance notice of stockholder nominations for election to our Board of Directors and of other business that stockholders wish to present for action at an annual meeting of stockholders (other than matters included in our
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proxy statement in accordance with Rule14a-8 under the Exchange Act). The required notice must be delivered by the stockholder and received by the Secretary at the principal executive offices of Akamai (i) no earlier than 90 days before and no later than 70 days before the first anniversary of the date of the preceding year’s annual meeting, or (ii) if the date of the annual meeting is advanced by more than 20 days or delayed by more than 70 days from the first anniversary date, (a) no earlier than 90 days before the annual meeting and (b) no later than 70 days before the annual meeting or ten days after the day notice of the annual meeting was mailed or publicly disclosed, whichever occurs first. Assuming the date of our 20182019 Annual Meeting of Stockholders is not so advanced or delayed, stockholders who do wish to make a proposal at the 20182019 Annual Meeting (other than one to be included in our proxy statement) should notify us no earlier than February 16, 2018March 3, 2019 and no later than March 8, 2018.23, 2019.
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OUR BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AT YOUR EARLIEST CONVENIENCE. A PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE APPRECIATED. STOCKHOLDERS OF RECORD WHO ATTEND THIS MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
By order of the Board of Directors, | ||
/s/ | ||
April |
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APPENDIX A
AKAMAI TECHNOLOGIES, INC.PROPOSED AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION
The following are proposed changes to our Certificate of Incorporation as described in Item 3. The text indicated by underline will be added, and the text indicated by strike-through will be deleted.
TENTH. This Article is inserted for the management of the business and for the conduct of the affairs of the Corporation.
1. NUMBER OF DIRECTORS. The number of directors of the Corporation shall not be less than three. The exact number of directors within the limitations specified in the preceding sentence shall be fixed from time to time by, or in the manner provided in, the Corporation’sBy-Laws.
2. CLASSES OF DIRECTORS.The2013 STOCK INCENTIVE PLANUntil the election of directors at the annual meeting scheduled to be held in 2021, theBoard of Directors shall be and is divided intothreeclasses: Class I, Class II and Class III. No one class shall have more than one director more than any other class. If a fraction is contained in the quotient arrived at by dividing the designated number of directors by three, then, if such fraction isone-third, the extra director shall be a member of Class I, and if such fraction istwo-thirds, one of the extra directors shall be a member of Class I and one of the extra directors shall be a member of Class II, unless otherwise provided from time to time by resolution adopted by, with directors in each class having the terms of office specified in Section 4 of this Article TENTH. Commencing with the election of directors at the annual meeting scheduled to be held in 2021, the classification of the Board of Directors shall cease, and directors shall thereupon be elected for a term expiring at the next annual meeting of stockholders.
3. ELECTION OF DIRECTORS. Elections of directors need not be by written ballot except as and to the extent provided in theBy-Laws of the Corporation.
4. TERMS OF OFFICE. Each director shall serve for a term endingonatthedateelectionofdirectors atthe third annual meeting following the annual meeting at which such director was elected; provided, that each initial director in Class I shall serve for a term endingonatthedateelectionofdirectors atthe annual meeting in 2000; each initial director in Class II shall serve for a term endingonatthedateelectionofdirectors atthe annual meeting in 2001; and each initial director in Class III shall serve for a term endingonatthedateelectionofdirectors atthe annual meeting in 2002; and provided further, that the. Notwithstanding the foregoing, commencing with the election of directors at the annual meeting scheduled to be held in 2019, the successor of each director whose term expires at such meeting shall be elected for a term expiring at the annual meeting scheduled to be held in 2020; for the election of directors at the annual meeting scheduled to be held in 2020, the successor of each director whose term expires at such meeting shall be elected for a term expiring at the annual meeting scheduled to be held in 2021; and for
the election of directors at the annual meeting scheduled to be held in 2021 and for the election of directors at each annual meeting thereafter, each director shall be elected for a term expiring at the next succeeding annual meeting. The term of each director shall be subject to the election and qualification of hisor hersuccessor and to hisor herearlier death, resignation or removal.
5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR DECREASES IN THE NUMBER OF DIRECTORS.InUntil the election of directors at the annual meeting scheduled to be held in 2021, inthe event of any increase or decrease in the authorized number of directors, (i) each director then serving as such shall nevertheless continue as a director of the class of which heor sheis a member and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among thethreeclasses of directors so as to ensure that no one class has more than one director more than any other class. To the extent possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation, and any newly eliminated directorships shall be subtracted from those classes whose terms of offices are to expire at the earliest dates following such allocation, unless otherwise provided from time to time by resolution adopted by the Board of Directors..
(6. QUORUM; ACTION AT MEETING. A majority of the directors at any time in office shall constitute a quorum for the transaction of business. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each director so disqualified, provided that in no case shall less thanone-third of the number of directors fixed pursuant to Section 1 above constitute a quorum. If at any meeting of the Board of Directors there shall be less than such a quorum, a majority of those present may adjourn the meeting from time to time. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as proposedthe act of the Board of Directors unless a greater number is required by law, by theBy-Laws of the Corporation or by this Certificate of Incorporation.
7. REMOVAL.DirectorsUntil the election of directors at the annual meeting scheduled to be amended)held in 2021, directorsof the Corporation may be removed only for cause by the affirmative vote of the holders of at leasttwo-thirds of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote.generally in the election of directors. Thereafter, any director ofthe Corporation may be removed, with or without cause, by the affirmative vote of the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote generally in the election of such director.
AMENDMENT NO. 28. VACANCIES. Any vacancy in the Board of Directors, however occurring,including a vacancyor any newly created directorshipresulting from anenlargement of the size of the Board of Directorsincrease in the authorized number of directors, shall be filled only by a vote of a majority of the directors then in office, although less than a quorum, or by a sole
remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of hisor herpredecessor in office, and, until the election of directors at the annual meeting scheduled to be held in 2021, a director chosen to fill apositionnewly created directorshipresulting from an increase in the number of directors shall hold office until the next election of the class for which such director shall have been chosen, subject to the election and qualification of hisor hersuccessor and to hisor herearlier death, resignation or removal.
9. STOCKHOLDER NOMINATIONS AND INTRODUCTION OF BUSINESS, ETC. Advance notice of stockholder nominations for election of directors and other business to be brought by stockholders before a meeting of stockholders shall be given in the manner provided by theBy-Laws of the Corporation.
10. AMENDMENTS TO ARTICLE. Notwithstanding any other provisions of law, this Certificate of Incorporation or theBy-Laws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders ofat least seventy-five percent (75%) of the shares of capital stock of the Corporation issued and outstanding and entitled to voteshall be required to amend or repeal, or to adopt any provision inconsistent with, this Article TENTH.
APPENDIX B
PROPOSED AMENDMENTS TO OUR AMENDED AND RESTATED BYLAWS
The 2013 Stock Incentive Plan (the “Plan”) of Akamai Technologies, Inc. is hereby amendedfollowing are proposed changes to our bylaws as follows:described in Item 3. The text indicated by underline will be added, and the text indicated by strike-through will be deleted.
1. Section 3(c)ARTICLE 2 - Directors
2.1 General Powers. The business and affairs of the Plancorporation shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the corporation except as otherwise provided by law or the Certificate of Incorporation. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is hereby deletedfilled.
2.2 Number; Election and a new Section 3(c) is inserted in lieu thereofQualification. The number of directors which shall readconstitute the whole Board of Directors shall be determined by resolution of the Board of Directors, but in no event shall be less than three. The number of directors may be decreased at any time and from time to time by a majority of the directors then in office, but only to eliminate vacancies existing by reason of the death, resignation, removal or expiration of the term of one or more directors. The directors shall be elected at the annual meeting of stockholders by such stockholders as follows:have the right to vote on such election. Directors need not be stockholders of the corporation.
“(c) Delegation2.3 Classes of Directors.TheUntil the election of directors at the annual meeting scheduled to Officers. Subjectbe held in 2021, theBoard of Directors shall be and is divided intothreeclasses: Class I, Class II and Class III. No one class shall have more than one director more than any other class. If a fraction is contained in the quotient arrived at by dividing the designated number of directors by three, then, if such fraction isone-third, the extra director shall be a member of Class I, and if such fraction istwo-thirds, one of the extra directors shall be a member of Class I and one of the extra directors shall be a member of Class II, unless otherwise provided from time to time by resolution adopted by, with directors in each class having the terms of office specified in Section 2.4. Commencing with the election of directors at the annual meeting scheduled to be held in 2021, the classification of the Board of Directors shall cease, and directors shall thereupon be elected for a term expiring at the next annual meeting of stockholders.
2.4 Terms of Office. Each director shall serve for a term ending at the election of directors at the third annual meeting following the annual meeting at which such director was elected; provided, thatcommencing with the election of directors at the annual meeting scheduled to be held in 2019, the successor of each director whose term expires at such meeting shall be elected for a term expiring at the annual meeting scheduled to be held in 2020; for the election of directors at the annual meeting scheduled to be held in 2020, the successor of each director whose term expires at such meeting shall be elected
for a term expiring at the annual meeting scheduled to be held in 2021; and for the election of directors at the annual meeting scheduled to be held in 2021 and for the election of directors at each annual meeting thereafter, each director shall be elected for a term expiring at the next succeeding annual meeting. The term of each director shall be subject to the election and qualification of his or her successor and to his or her earlier death, resignation or removal.
2.5 Allocation of Directors Among Classes in the Event of Increases or Decreases in the Number of Directors.InUntil the election of directors at the annual meeting scheduled to be held in 2021, inthe event of any requirementsincrease or decrease in the authorized number of applicabledirectors, (i) each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among thethreeclasses of directors so as to ensure that no one class has more than one director more than any other class. To the extent possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation, and any newly eliminated directorships shall be subtracted from those classes whose terms of offices are to expire at the earliest dates following such allocation, unless otherwise provided from time to time by resolution adopted by the Board of Directors..
2.6 Vacancies. Any vacancy in the Board of Directors, however occurring,including a vacancyor any newly created directorshipresulting from anenlargement ofincrease inthesizeauthorized numberofthe Boarddirectors, shall be filled only byavote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office, and, until the election of directors at the annual meeting scheduled to be held in 2021, a director chosen to fill apositionnewly-created directorshipresulting from an increase in the number of directors shall hold office until the next election of the class for which such director shall have been chosen, subject to the election and qualification of a successor and until such director’s earlier death, resignation or removal.
2.7Resignation. Any director may resign by delivering a resignation in writing or by electronic transmission to the corporation at its principal office or to the President or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.
2.8Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Delaware, as shall be determined from time to time by the Board of Directors; provided that any director who is absent when such a determination is made shall be given notice of the determination. A regular meeting of the Board of Directors may be held without notice immediately after and at the same place as the annual meeting of stockholders.
2.9Special Meetings. Special meetings of the Board of Directors may be held at any time and place, within or without the State of Delaware, designated in a call by the Chairman of the Board, President, two or more directors, or by one director in the event that there is only a single director in office.
2.10Notice of Special Meetings. Notice of any special meeting of directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. Notice shall be duly given to each director (i) by giving notice to such director in person or by telephone at least 24 hours in advance of the meeting, (ii) by sending an electronic transmission, or delivering written notice by hand, to such director’s last known business, home or electronic transmission address at least 24 hours in advance of the meeting, or (iii) by mailing written notice to such director’s last known business or home address at least 72 hours in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting.
2.11Meetings by Conference Communication Equipment. Directors or any members of any committee designated by the directors may participate in a meeting of the Board of Directors or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting.
2.12 Quorum. A majority of the directors at any time in office shall constitute a quorum for the transaction of business. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case shall less thanone-third (1/3) of the number so fixed in accordance with the Certificate of Incorporation constitute a quorum. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.
2.13 Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law, (includingthe Certificate of Incorporation or theseBy-Laws.
2.14 Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee of the Board of Directors may be taken without a meeting, if all members of the Board or committee, as applicable Sections 152the case may be, consent to the action in writing or by electronic transmission, and 157(c)the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee.
2.15 Removal.DirectorsUntil the election of directors at the annual meeting scheduled to be held in 2021, directorsof the corporation may be removed only for cause by the affirmative vote of the holders of at leasttwo-thirds of the shares of the capital stock of the corporation issued and outstanding and entitled to vote.generally in the election of
directors. Thereafter, any director of the corporation may be removed, with or withoutcause, by the affirmative vote of the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote generally in the election of such director.
2.16 Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of the General Corporation Law of the State of Delaware),Delaware, shall have and may exercise all the Board may delegate to one or more officerspowers and authority of the Company the power to grant Awards (subject to any limitations under the Plan) to employees or officers of the Company and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of Awards to be granted by such officers, the maximum number of shares subject to Awards that the officers may grant, and the time period in which such Awards may be granted; and provided further, that no officer shall be authorized to grant Awards to any “executive officer” of the Company (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or to any “officer” of the Company (as defined by Rule 16a-1(f) under the Exchange Act).”
2. Section 4(a) of the Plan is hereby deleted and a new Section 4(a) is inserted in lieu thereof which shall read as follows:
“(a) Number of Shares. Subject to adjustment under Section 9, Awards may be made under the Plan for up to such number of shares of common stock, $0.01 par value per share, of the Company (the “Common Stock”) as is equal to the sum of:
(1) 18,500,000 shares of Common Stock; and
(2) such additional number of shares of Common Stock as is equal to the sum of (i) the number of shares of Common Stock reserved for issuance under the Company’s 2009 Stock Incentive Plan (the “2009 Plan”) that remained available for grant immediately prior to the date this Plan was first approved by the Company’s stockholders and (ii) the number of shares of Common Stock subject to awards granted under the 2009 Plan, the Company’s Second Amended and Restated 1998 Stock Incentive Plan, the Company’s 2001 Stock Incentive Plan and the Company’s 2006 Stock Incentive Plan (together, the “Existing Plans”) which awards expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject, however, in the case of Incentive Stock Options to any limitations of the Code).
Shares of Common Stock issued under the Plan may consist in whole or in part of authorized but unissued shares, treasury shares or shares purchased on the open market. Up to five million (5,000,000) shares of Common Stock shall be available under the Plan for Awards in the form of Incentive Stock Options (as defined in Section 5(b)).”
3. Section 4(c)(2) of the Plan is hereby deleted in its entirety and Section 4(c)(3) is renumbered to be the new Section 4(c)(2).
4. Section 7(c)(1) of the Plan is hereby deleted in its entirety and a new Section 7(c)(1) is inserted in lieu thereof which shall read as follows:
“(1) Dividends. Any dividend (whether paid in cash, stock or property) declared and paid by the Company with respect to shares of Restricted Stock (“Unvested Dividends”) shall be paid to the Participant only if and when such shares become free from the restrictions on transferability and forfeitability that apply to such shares. Each payment of Unvested Dividends will be made no later than the end of the calendar year in which the dividends are paid to the shareholders of that class of stock or, if later, the 15th day of the third month following the date of the lapsing of the restrictions on transferability and the forfeitability provisions applicable to the underlying shares of Restricted Stock. No interest will be paid on Unvested Dividends.”
4. Section 10(e) of the Plan is hereby deleted in its entirety and a new Section 10(e) is inserted in lieu thereof which shall read as follows:
“(e) Withholding. The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award. The Company may elect to satisfy the withholding obligations through additional withholding on salary or wages. If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations. Payment of withholding obligations is due before the Company will issue any shares on exercise, vesting or release from forfeiture of an Award or at the same time as payment of the exercise or purchase price, unless the Company determines otherwise. If provided for in an Award or approved by the Committee, a Participant may satisfy the tax obligations in whole or in part by delivery (either by actual delivery or attestation) of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their fair market value (valued in the manner determined by (or in a manner approved by) the Company); provided, however, except as otherwise provided by the Committee, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income), except that, to the extent that the Company is able to retain shares of Common Stock having a fair market value (determined by, or in a manner approved by, the Company) that exceeds the
statutory minimum applicable withholding tax without financial accounting implications or the Company is withholding in a jurisdiction that does not have a statutory minimum withholding tax, the Company may retain such number of shares of Common Stock (up to the number of shares having a fair market value equal to the maximum individual statutory rate of tax (determined by, or in a manner approved by, the Company)) as the Company shall determine in its sole discretion to satisfy the tax liability associated with any Award. Shares used to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.”
5. A new Section 10(k) will be added to the plan and will read as follows:
“(k) Minimum Vesting. Subject to Section 10(h), no Award shall vest earlier than the first anniversary of its date of grant, unless such Award is granted in lieu of salary, bonus or other compensation otherwise earned by or payable to the Participant. The foregoing sentence shall not apply to Awards granted, in the aggregate, for up to 5% of the maximum number of authorized shares set forth in Section 4(a).”
* * *
1.Purpose
The purpose of this 2013 Stock Incentive Plan (the “Plan”) of Akamai Technologies, Inc., a Delaware corporation (the “Company” or “Akamai”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to align their interests with those of the Company’s stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors in the management of the Company (the “Board”).
2.Eligibility
Allbusiness and affairs of the Company’s employees, officerscorporation and directors, as well as consultants and advisors tomay authorize the Company (asseal of the terms consultants and advisors are defined and interpreted for purposes of Form S-8 under the Securities Act of 1933, as amended (the “Securities Act”), or any successor form) are eligiblecorporation to be granted Awards underaffixed to all papers which may require it. Each such committee shall keep minutes and make such reports as the Plan. Each person who is granted an Award under the Plan is deemed a “Participant.” The Plan provides for the following types of awards, each of which is referred to as an “Award”: Options (as defined in Section 5), SARs (as defined in Section 6), Restricted Stock (as defined in Section 7), Restricted Stock Units (as defined in Section 7) and Other Stock-Based Awards (as defined in Section 8) and Cash-Based Awards (as defined in Section 8).
3.Administration and Delegation
(a)Administration by Board of Directors. The Plan will be administered by the Board. Subject to and consistent with the provisions of the Plan, the Board shall have the authority and discretion to: (i) determine which eligible employees, officers, directors, consultants and advisors will receive Awards, (ii) determine the number of shares of Common Stock (as hereinafter defined), cash, or other consideration to be covered by each Award, (iii) determine the terms and conditions of any Award (including Fair Market Value (as hereinafter defined), the exercise price, the vesting schedule, the term of the Award, and the period following termination from employment or service during which an Award may be exercised), (iv) approve forms of Award agreements and other documentation for use under the Plan, (v) adopt, alter, and repeal administrative rules, guidelines, and practices governing the operation of the Plan, (vi) interpret the provisions of the Plan and any Award documentation and remedy any ambiguities, omissions, or inconsistencies therein, (vii) modify or amend Awards, or grant waivers of Plan or Award conditions, (viii) determine the nature and provisions of Other Stock-Based Awards (as hereinafter defined) permitted pursuant to Section 8, and (ix) make all other determinations necessary or advisable for the administration of the Plan. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.
(b)Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall mean the Board or a Committee of the Board or the officers referred to in Section 3(c) to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee or officers. Notwithstanding the foregoing, for purposes of granting Awards to directors, the Committee shall mean the Compensation Committee.
(c)Delegation to Officers.* To the extent permitted by applicable law, the Board may delegate to one or more officers of the Company the power to grant Options and other Awards that constitute rights under Delaware law (subject to any limitations under the Plan) to employees or officers of the Company and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of such Awards to be granted by such officers (including the exercise price of such Awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to such Awards that the officers may grant; provided further, however, that no officer shall be authorized to grant Awards to any “executive officer” of the Company (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or to any “officer” of the Company (as defined by Rule 16a-1 under the Exchange Act). The Board may not delegate authority under this Section 3(c) to grant Restricted Stock unless Delaware law then permits such delegation.
(d)Awards to Non-Employee Directors. Awards to non-employee directors will only be granted and administered by a Committee, all of the members of which are independent as defined by Section 5605(a)(2) of the NASDAQ Marketplace Rules.
4.Stock Available for Awards
(a)Number of Shares. Subject to adjustment under Section 9, Awards may be made under the Plan for up to such number of shares of common stock, $0.01 par value per share, of the Company (the “Common Stock”) as is equal to the sum of:
(1) 11,000,000 shares of Common Stock;* and
(2) such additional number of shares of Common Stock as is equal to the sum of (i) the number of shares of Common Stock reserved for issuance under the Company’s 2009 Stock Incentive Plan (the “2009 Plan”) that remain available for grant under the 2009 Plan immediately prior to the date this Plan is approved by the Company’s stockholders and (ii) the number of shares of Common Stock subject to awards granted under the Company’s 2009 Stock Incentive Plan, the Company’s Second Amended and Restated 1998 Stock Incentive Plan, the Company’s 2001 Stock Incentive Plan and the Company’s 2006 Stock Incentive Plan (together, the “Existing Plans”) which awards expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject, however, in the case of Incentive Stock Options to any limitations of the Code).
Shares of Common Stock issued under the Plan may consist in whole or in part of authorized but unissued shares, treasury shares or shares purchased on the open market. Up to five million (5,000,000) shares of Common Stock shall be available under the Plan for Awards in the form of Incentive Stock Options (as defined in Section 5(b).
(b)Share Counting. For purposes of counting the number of shares available for grant of Awards under the Plan pursuant to Section 4(a) and the sublimits contained in Sections 4(c)(2) and 4(c)(3):
(1) all shares of Common Stock covered by SARs shall be counted against the number of shares available for the grant of Awards under the Plan and against the sublimits listed in the first clause of this Section 4(b);provided, however, that (i) SARs that may be settled only in cash shall not be so counted and (ii) if the Company grants an SAR in tandem with an Option for the same number of shares of Common Stock and provides that only one such Award may be exercised (a “Tandem SAR”), only the shares covered by the Option, and not the shares covered by the Tandem SAR, shall be so counted, and the expiration of one in connection with the other’s exercise will not restore shares to the Plan;
(2) if any Award (i) expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or (ii) results in any
Common Stock not being issued (including as a result of an SAR that was settleable either in cash or in stock actually being settled in cash), the unused Common Stock covered by such Award shall again be available for the grant of Awards;provided, however, that (1) in the case of Incentive Stock Options, the foregoing shall be subject to any limitations under the Code, (2) in the case of the exercise of an SAR, the number of shares counted against the shares available under the Plan and against the sublimits listed in the first clause of this Section 4(b) shall be the full number of shares subject to the SAR multiplied by the percentage of the SAR actually exercised, regardless of the number of shares actually used to settle such SAR upon exercise and (3) the shares covered by a Tandem SAR shall not again become available for grant upon the expiration or termination of such Tandem SAR;
(3) shares of Common Stock delivered (either by actual delivery, attestation, or net exercise) to the Company by a Participant to (i) purchase shares of Common Stock upon the exercise of an Award or (ii) satisfy tax withholding obligations (including shares retained from the Award creating the tax obligation) shall not be added back to the number of shares available for the future grant of Awards; and
(4) shares of Common Stock repurchased by the Company on the open market using the proceeds from the exercise of an Award shall not increase the number of shares available for future grant of Awards.
(c)Sub-limits. Subject to adjustment under Section 9, the following sub-limits on the number of shares subject to Awards shall apply:
(1)Section 162(m) Per-Participant Limit. The maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be 1,000,000 per calendar year. For purposes of the foregoing limit, the combination of an Option in tandem with an SAR (as each is hereafter defined) shall be treated as a single Award. The per-Participant limit described in this Section 4(c)(1) shall be construed and applied consistently with Section 162(m) of the Code or any successor provision thereto, and the regulations thereunder (“Section 162(m)”).
(2)Limit on Awards other than Options and SARS.* The maximum number of shares with respect to which Awards other than Options and SARs may be granted shall be 90% of the total number of shares available for issuance under the Plan.
(3)Limit on Awards to Non-Employee Directors. The maximum aggregate number of shares with respect to which Awards may be granted to directors who are not employees of the Company at the time of grant shall be 10% of the total number of shares available for issuance under the Plan.
(d)Substitute Awards. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances,
notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall not count against the overall share limit set forth in Section 4(a) or any sublimits contained in the Plan, except as may be required by reason of Section 422 and related provisions of the Code.
5.Stock Options
(a)General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option that is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a “Nonstatutory Stock Option”.
(b)Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of Akamai, any of Akamai’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. If the Fair Market Value (as defined below) of shares on the date of grant with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year exceeds $100,000, the Options for the first $100,000 worth of shares to become exercisable in that calendar year will be Incentive Stock Options, and the Options for the shares with a Fair Market Value (as defined below) in excess of $100,000 that become exercisable in that calendar year will be Nonstatutory Stock Options. The Company shall have no liability to a Participant, or any other person, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or for any action taken by the Board, including without limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock Option.
(c)Exercise Price. The Board shall establish the exercise price of each Option or the formula by which such exercise price shall be determined. The exercise price shall be specified in the applicable option agreement; provided however, that the exercise price shall not be less than 100% of the Fair Market Value (as defined below) on the date the Option is granted, provided that if the Board approves the grant of an Option with an exercise price to be determined on a future date, the exercise price shall be not less than 100% of the Fair Market Value on such future date.
(d)No Repricing of Options. Unless such action is approved by the Company’s stockholders, the Company may not (except as provided for under Section 9): (1) amend any outstanding Option granted under the Plan to provide an exercise price per share that is lower than the then-current exercise price per share of such outstanding Option, (2) cancel any outstanding option (whether or not granted under the Plan) and grant in
substitution therefor new Awards under the Plan (other than Awards granted pursuant to Section 4(d)) covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the then-current exercise price per share of the canceled option, (3) cancel in exchange for a cash payment any outstanding Option with an exercise price per share above the then-current Fair Market Value, or (4) take any other action under the Plan that constitutes a “repricing” within the meaning of the rules of the NASDAQ Stock Market (“NASDAQ”).
(e)Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement; provided however, that no Option will be granted for a term in excess of 7 years.
(f)Exercise of Option. Options may be exercised by delivery to the Company of a notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(g) for the number of shares for which the Option is exercised. Shares of Common Stock subject to the Option will be delivered by the Company following exercise either as soon as practicable following exercise.
(g)Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as may otherwise be provided in the applicable option agreement or approved by the Board, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;
(3) to the extent provided for in the applicable option agreement or approved by the Board, by delivery (either by actual delivery or attestation) of shares of Common Stock owned by the Participant valued at their fair market value as determined by (or in a manner approved by) the Board (“Fair Market Value”) provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board in its discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements;
(4) to the extent provided for in the applicable Nonstatutory Stock Option agreement or approved by the Board, by delivery of a notice of “net exercise” to the Company, as a result of which the Participant would receive (i) the number of shares underlying the portion of the Option being exercised, less (ii) such number of shares as is equal to (A) the aggregate exercise price for the portion of the Option being exercised divided by (B) the Fair Market Value on the date of exercise;
(5) to the extent permitted by applicable law and provided for in the applicable option agreement or approved by the Board, by payment of such other lawful consideration as the Board may determine;
(6) by any combination of the above permitted forms of payment.
(h)No Reload Rights. No option granted under the Plan shall contain any provision entitling the grantee to the automatic grant of additional Options in connection with any exercise of the original Option.
(i)No Dividend Equivalents. No option shall provide for the payment or accrual of dividend equivalents.
6.Stock Appreciation Rights
(a)General. The Board may grant Awards consisting of a Stock Appreciation Right, “SAR”, entitling the holder, upon exercise, to receive an amount in Common Stock or cash or a combination thereof (such form to be determined by the Board determined by reference to appreciation, from and after the date of grant, in the Fair Market Value of a share of Common Stock over the grant price established pursuant to Section 6(c). The date as of which such appreciation is determined shall be the exercise date.
(b)Grants. Stock Appreciation Rights may be granted in tandem with, or independently of, Options granted under the Plan.
(1)Tandem Awards. When Stock Appreciation Rights are expressly granted in tandem with Options, (i) the Stock Appreciation Right will be exercisable only at such time or times, and to the extent, that the related Option is exercisable (except to the extent designated by the Board in connection with an Acquisition Event or Change in Control Event) and will be exercisable in accordance with the procedure required for exercise of the related Option; (ii) the Stock Appreciation Right will terminate and no longer be exercisable upon the termination or exercise of the related Option, except to the extent designated by the Board in connection with an Acquisition Event or Change in Control Event and except that a Stock Appreciation Right granted with respect to less than the full number of shares covered by an Option will not be reduced until the number of shares as to which the related Option has been exercised or has terminated exceeds the number of shares not covered by the Stock Appreciation Right; (iii) the Option will terminate and no longer be exercisable upon the exercise of the related Stock Appreciation Right; and (iv) the Stock Appreciation Right will be transferable only with the related Option.
(2)Independent SARs.A Stock Appreciation Right not expressly granted in tandem with an Option will become exercisable at such time or times, and on such conditions, as the Board may specify in the SAR Award.
(c)Grant Price. The Board shall establish the grant price or exercise price of a SAR or the formula by which such exercise or grant price will be determined. The exercise or grant price shall be specified in the applicable SAR agreement. The exercise or grant price shall not be less than 100% of the Fair Market Value per share of Common Stock on the date of grant of the SAR;provided that if the Board approved the grant of the SAR effective as of a future date, the grant price shall be not less than 100% of the Fair Market Value on such future date.
(d)Term. The term of a SAR shall not be more than 7 years from the date of grant.
(e)Exercise. Stock Appreciation Rights may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board, together with any other documents required by the Board.
(f)No Repricing of SARs. Unless such action is approved by the Company’s stockholders, the Company may not (except as provided for under Section 9): (1) amend any outstanding SAR granted under the Plan to provide an grant price per share that is lower than the then-current grant price per share of such outstanding SAR, (2) cancel any outstanding stock appreciation right (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than Awards granted pursuant to Section 4(d)) covering the same or a different number of shares of Common Stock and having a grant price per share lower than the then-current exercise price per share of the canceled SAR, (3) cancel in exchange for a cash payment any outstanding SAR with a grant price per share above the then-current Fair Market Value, or (4) take any other action under the Plan that constitutes a “repricing” within the meaning of the rules of the NASDAQ.
(g)No Reload Rights. No SAR granted under the Plan shall contain any provision entitling the grantee to the automatic grant of additional SARs in connection with any exercise of the original SAR.
(h)No Dividend Equivalents. No SAR shall provide for the payment or accrual of dividend equivalents.
7.Restricted Stock; Restricted Stock Units Stock.
(a)General. The Board may grant Awards entitling recipients to acquire shares of Common Stock (“Restricted Stock”), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award. Instead of granting Awards for Restricted Stock, the Board may grant Awards entitling the recipient to receive shares of Common Stock or cash to be delivered at a future date on or after such Award vests (“Restricted Stock Units”). (Restricted Stock and Restricted Stock Units are each referred to herein as a “Restricted Stock Award”.)
(b)Terms and Conditions for all Restricted Stock Awards. The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.
(c)Additional Provisions Relating to Restricted Stock.
(1)Dividends. Unless otherwise provided in the applicable Award agreement,* any dividend (whether paid in cash, stock or property) declared and paid by the Company with respect to shares of Restricted Stock (“Unvested Dividends”) shall be paid to the Participant only if and when such shares become free from the restrictions on transferability and forfeitability that apply to such shares. Each payment of Unvested Dividends will be made no later than the end of the calendar year in which the dividends are paid to shareholders of that class of stock or, if later, the 15th day of the third month following the date the lapsing of the restrictions on transferability and the forfeitability provisions applicable to the underlying shares of Restricted Stock. No interest will be paid on Unvested Dividends.
(2)Stock Certificates. The Company may require that any stock certificates issued in respect of shares of Restricted Stock, as well as any dividends or distributions paid on such Restricted Stock, shall be deposited in escrow by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, “Designated Beneficiary” shall mean the Participant’s estate.
(d)Additional Provisions Relating to Restricted Stock Units.
(1)Settlement. Upon the vesting of and/or lapsing of any other restrictions (i.e., settlement) with respect to each Restricted Stock Unit, the Participant shall be entitled to receive from the Company the number of shares of Common Stock specified in the Award agreement or an amount of cash equal to the Fair Market Value of such number of shares, as provided in the applicable Award agreement. The Board may provide that settlement of Restricted Stock Units shall be deferred, on a mandatory basis or at the election of the Participant, in a manner that complies with Code Section 409A. Any Restricted Stock Units with a mandatory or elected deferral may be referred to by the Board as “Deferred Stock Units”.
(2)Voting Rights. A Participant shall have no voting rights with respect to any Restricted Stock Units.
(3)Dividend Equivalents. To the extent provided by the Board, in its sole discretion, a grant of Restricted Stock Units may provide Participants with the right to receive an amount equal to any dividends or other distributions declared and paid on an
equal number of outstanding shares of Common Stock (“Dividend Equivalents”). Dividend Equivalents shall be credited to an account for the Participants, may be settled in cash and/or shares of Common Stock and shall be subject to the same restrictions on transfer and forfeitability as the Restricted Stock Units with respect to which paid, in each case to be set forth in the applicable Award agreement. No interest will be paid on Dividend Equivalents.
8.Other Stock-Based Awards
The Board may grant other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property (“Other Stock-Based Awards”), including without limitation Awards entitling recipients to receive shares of Common Stock to be delivered in the future. Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock or cash, as the Board shall determine. The Company may also grant Performance Awards or other Awards denominated in cash rather than shares of Common Stock (“Cash-Based Awards”). Subject to the provisions of the Plan, the Board shall determine the terms and conditions of each Other Stock-Based Award, including any purchase price applicable thereto, and the terms and conditions of each Cash-Based Award.
9.Adjustments for Changes in Common Stock and Certain Other Events
(a)Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the sub-limits set forth in Section 4(c), (iii) the number and class of securities and exercise price per share of each outstanding Option, (iv) the share- and per-share provisions and the grant price of each Stock Appreciation Right, (v) the number of shares subject to and the repurchase price per share subject to each outstanding Restricted Stock Award and (vi) the share- and per-share-related provisions and the purchase price, if any, of each outstanding Other Stock-Based Award, shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner determined by the Board. If this Section 9(a) applies and Section 9(b) also applies to any event, Section 9(b) shall be applicable to such event, and this section 9(a) shall not be applicable.
(b)Acquisition and Change in Control Events.
(1)Definitions
(ii) An “Acquisition Event” shall mean:
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(iii) A “Change in Control Event” shall mean:
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(1)Effect on Awards other than Restricted Stock
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(1)Effect on Restricted Stock
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(1)Effect on Other Awards.
10.General Provisions Applicable to Awards
(a)Transferability of Awards. Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant; provided, however, that the Board may permit or provide in an Award for the gratuitous transfer of the Award by the Participant to or for the benefit of any immediate family member, family trust or other
entity established for the benefit of the Participant and/or an immediate family member thereof if, with respect to such proposed transferee, the Company would be eligible to use a Form S-8 for the registration of the sale of the Common Stock subject to such Award under the Securities Act of 1933, as amended, provided that Incentive Stock Options and Awards that are subject to Section 409A of the Code may be transferable only to the extent permitted by the Code; provided, further, that the Company shall not be required to recognize any such transfer until such time as the Participant and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument in form and substance satisfactory to the Company confirming that such transferee shall be bound by all of the terms and conditions of the Award. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees. For the avoidance of doubt, nothing contained in this Section 10(a) shall be deemed to restrict a transfer to the Company.
(b)Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to (but, except as expressly contemplated by another provision herein, not inconsistent with) those set forth in the Plan.
(c)Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.
(d)Termination of Status. The Board shall determine the effect on an Award of the disability, death, termination or other cessation of employment, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights, or receive any benefits, under an Award.
(e)Withholding.* The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award. The Company may elect to satisfy the withholding obligations through additional withholding on salary or wages. If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations. Payment of withholding obligations is due before the Company will issue any shares on exercise, vesting or release from forfeiture of an Award or at the same time as payment of the exercise or purchase price, unless the Company determines otherwise. If provided for in an Award or approved by the Board, a Participant may satisfy such tax obligations in whole or in part by delivery (either by actual delivery or attestation) of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value;provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax
obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares used to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
(f)Amendment of Award. Except as provided in Sections 5(d) and 6(f), the Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant’s consent to such action shall be required unless either (i) the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant or (ii) that the change is permitted under Section 9 hereof.
(g)Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and regulations and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.
(h)Acceleration. Except as set forth in Section 10(i), the Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.
(i)Performance Awards.
(1)Grants. Restricted Stock Awards and Other Stock-Based Awards under the Plan may be made subject to the achievement of performance goals pursuant to this Section 10(i) (“Performance Awards”), subject to the limit in Section 4(c)(1) on shares covered by such grants. Performance Awards can also provide for cash payments of up to $15,000,000 per calendar year per individual.
(2)Committee. Grants of Performance Awards to any Covered Employee (as defined below) intended to qualify as “performance-based compensation” under Section 162(m) (“Performance-Based Compensation”) shall be made only by a Committee (or subcommittee of a Committee) comprised solely of two or more directors eligible to serve on a committee making Awards qualifying as “performance-based compensation” under Section 162(m). In the case of such Awards granted to Covered Employees, references to the Board or to a Committee shall be deemed to be references to such
Committee or subcommittee. “Covered Employee” shall mean any person who is, or who the Committee, in its discretion determines may be, a “covered employee” under Section 162(m)(3) of the Code.
(3)Performance Measures. For any Award that is intended to qualify as Performance-Based Compensation, the Committee shall specify that the degree of granting, vesting and/or payout shall be subject to the achievement of one or more objective performance measures established by the Committee, which shall be based on the relative or absolute attainment of specified levels of one or any combination of the following, which may be determined pursuant to generally accepted accounting principles (“GAAP”) or on a non-GAAP basis, as determined by the Committee: (a) net income, (b) earnings before or after discontinued operations, interest, taxes, depreciation and/or amortization, (c) operating profit before or after discontinued operations and/or taxes, (d) revenue, (e) sales growth, (f) earnings growth, (g) cash flow or cash position, (h) gross margins, (i) stock price, (j) market share, (k) return on sales, assets, equity or investment, (l) improvement of financial ratings, (m) achievement of balance sheet or income statement objectives, (n) total shareholder return, or (o) earnings per share and may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated or relative to the performance of a peer group of entities or other external measure of the selected performance criteria. The Committee shall specify whether such performance measures are to be adjusted to exclude any one or more of (I) extraordinary items, (II) gains or losses on the dispositions of discontinued operations, (III) the cumulative effects of changes in accounting principles, (IV) the writedown of any asset, (V) charges for restructuring and rationalization programs, (VI) other non-cash charges or items, (VII) gains or losses relating to financing or investment activities, (VIII) the effect of acquisitions, or (IX) gains or losses as a result of foreign currency conversions or fluctuations in foreign currency exchange rates. Such performance measures: (A) may vary by Participant and may be different for different Awards; (B) may be particular to a Participant or the department, branch, line of business, subsidiary or other unit in which the Participant works and may cover such period as may be specified by the Committee; and (C) shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m). Awards that are not intended to qualify as Performance-Based Compensation may be based on these or such other performance measures as the Board may determine.
(4)Adjustments. Notwithstanding any provision of the Plan, with respect to any Performance Award that is intended to qualify as Performance-Based Compensation, the Committee may adjust downwards, but not upwards, the cash or number of Shares payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance measures except in the case of the death or disability of the Participant or a change in control of the Company.
(5)Other. The Committee shall have the power to impose such other restrictions on Performance Awards as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for Performance-Based Compensation. Prior to
the payment of any Award subject to this Section 10(i), the Committee shall certify in writing (which may be satisfied by the inclusion of such a determination in the minutes of a meeting of such Committee) that the performance goals and other material terms applicable to such Award were satisfied.
(j)Limitation Following a Hardship Distribution. To the extent required to comply with Treasury Regulation Section 1.401(k)-1(d)(2)(iv)(B)(4), or any amendment or successor thereto, a Participant’s “elective and employee contributions” (within the meaning of such Treasury Regulation) under the Plan shall be suspended for a period of twelve months following such Participant’s receipt of a hardship distribution made in reliance on such Treasury Regulation from any plan containing a cash or deferred arrangement under Section 401(k) of the Code maintained by the Company or a related party within the provisions of Section 414 of the Code.
11.Miscellaneous
(a)No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award by virtue of the adoption of the Plan, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.
(b)No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be issued with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to such Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.
(c)Effective Date and Term of Plan. The Plan shall become effective on the date the Plan is approved by the Company’s stockholders (the “Effective Date”). No Awards shall be granted under the Plan after the completion of 10 years from the Effective Date, but Awards previously granted may extend beyond that date.
(d)Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time provided that (i) to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award, unless and until such amendment shall have been approved by the Company’s
stockholders if required by Section 162(m) (including the vote required under Section 162(m)); (ii) no amendment that would require stockholder approval under the rules of the NASDAQ may be made effective unless and until such amendment shall have been approved by the Company’s stockholders; and (iii) if the NASDAQ amends its corporate governance rules so that such rules no longer require stockholder approval of material amendments to equity compensation plans, then, from and after the effective date of such amendment to the NASDAQ rules, no amendment to the Plan (A) materially increasing the number of shares authorized under the Plan (other than pursuant to Section 9), (B) expanding the types of Awards that may be granted under the Plan, (C) materially expanding the class of participants eligible to participate in the Plan, or (D) materially increasing benefits generally available to Participants shall be effective unless stockholder approval is obtained. In addition, if at any time the approval of the Company’s stockholders is required as to any other modification or amendment under Section 422 of the Code or any successor provision with respect to Incentive Stock Options, the Board may not effect such modification or amendment without such approval. Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance with this Section 11(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the amendment is adopted, provided the Board determines that such amendment, taking into account any related action, does not materially and adversely affect the rights of Participants under the Plan.
(e)Provisions for Foreign Participants. The Board may modify Awards or Options granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.
(f)Compliance With Code Section 409A. Except as provided in individual Award agreements initially or by amendment, if and to the extent any portion of any payment, compensation or other benefit provided to a Participant in connection with his or her employment termination is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the Participant is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, as determined by the Company in accordance with its procedures, by which determination the Participant (through accepting the Award) agrees that he or she is bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six months plus one day after the date of “separation from service” (as determined under Code Section 409A) (the “New Payment Date”), except as Code Section 409A may then permit. The aggregate of any payments that otherwise would have been paid to the Participant during the period between the date of separation from service and the New Payment Date shall be paid to the Participant in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule. The Company shall have no liability to a Participant, or any other Party if an Award that is intended to be exempt from, or compliant with, Section 409A is not so exempt or compliant or for any action taken by the Board.
(g)Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee, or agent of the Company will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan, nor will such individual be personally liable with respect to the Plan because of any contract or other instrument he or she executes in his or her capacity as a director, officer, other employee, or agent of the Company. The Company will indemnify and hold harmless each director, officer, other employee, or agent of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been or will be delegated, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Board’s approval) arising out of any act or omission to act concerning this Plan unless arising out of such person’s own fraud or bad faith.
(h)Authorization of Sub-Plans. The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable securities or tax laws of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to the Plan containing (i) such limitations on the Board’s discretion under the Planrequest. Except as the Board deems necessaryof Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or desirable or (ii)in such additional termsrules, its business shall be conducted as nearly as possible in the same manner as is provided in theseBy-laws for the Board of Directors.
2.17 Compensation of Directors. Directors may be paid such compensation for their services and conditions not otherwise inconsistent with the Plansuch reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall deem necessarypreclude any director from serving the corporation or desirable. All supplements adopted by the Board shall be deemed to be partany of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participantsits parent or subsidiary corporations in any jurisdiction which is not the subject ofother capacity and receiving compensation for such supplement.service.
(i)Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, excluding choice-of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than such state.
APPENDIX BC
PROXY CARD
Electronic Voting Instructions | ||||||||||||
Available 24 hours a day, 7 days a week! | ||||||||||||
Instead of mailing your proxy, you may choose one of the voting | ||||||||||||
methods outlined below to vote your proxy. | ||||||||||||
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. | ||||||||||||
Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Eastern Time, on | ||||||||||||
Vote by Internet | ||||||||||||
• Go towww.envisionreports.com/AKAM | ||||||||||||
• Or scan the QR code with your smartphone | ||||||||||||
• Follow the steps outlined on the secure website |
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Using ablack inkpen, mark your votes with anXas shown in | ☒ | ||||||
this example. Please do not write outside the designated areas. |
Vote by telephone
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q | ||||||
A | Proposals — The Board of Directors recommends a voteFOR the director nominees andFOR Proposals 2, 3 and |
1. | Election of Class I Directors: | For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | + | |||||||||||||||||
01 - Jill Greenthal | ☐ | ☐ | ☐ | 02 - Daniel Hesse | ☐ | ☐ | ☐ | 03 - F. Thomson Leighton | ☐ | ☐ | ☐ | |||||||||||||||||
04 - William Wagner | ☐ | ☐ | ☐ | |||||||||||||||||||||||||
For Against Abstain | For | Against | Abstain | |||||||||||||||||||||||||
2. | To approve amendments to our Certificate of Incorporation to declassify the Board of Directors. | ☐ ☐ ☐ | 3. | To approve, on an advisory basis, our named executive officer compensation. | ☐ | ☐ | ☐ | |||||||||||||||||||||
For Against Abstain | ||||||||||||||||||||||||||||
4. | To ratify the selection of PricewaterhouseCoopers LLP as our independent auditors for the fiscal year ending December 31, 2018.
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To transact such other business as may properly come before the meeting. |
B | Non-Voting Items |
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Mark the box to the right if you plan to attend the Annual Meeting. | ☐ |
C | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign this proxy exactly as your name appears hereon. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign. If a corporation or partnership, this signature should be that of an authorized officer who should state his or her title.
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. |
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
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PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Stockholders - May 17, 2017June 1, 2018
Those signing on the reverse side, revoking any prior proxies, hereby appoint(s) George Conrades, F. Thomson Leighton and Melanie Haratunian,Aaron Ahola, or each of them with full power of substitution, as proxies for those signing on the reverse side to act and vote at the 20172018 Annual Meeting of Stockholders of Akamai Technologies, Inc. (the “Meeting”) and any adjournment or postponement thereof as indicated upon all matters referred to on the reverse side and described in the Proxy Statement for the Meeting, and, in their discretion, upon any other matters which may properly come before the Meeting.
This Proxy when properly executed will be voted in the manner directed by the stockholder(s) signing the reverse side and in the discretion of the proxies upon any other matters that properly come before the Meeting. If no other indication is made, the proxies shall vote “FOR” each of the director nominees and “FOR” Proposals 2, 3 and 5 and “ONE YEAR” for Proposal 4.
PLEASE VOTE, DATE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SEE REVERSE SIDE |