Yahoo 2013 Annual Report Download - page 35

Recent Sales of Unregistered Securities
Convertible Senior Notes
On November 26, 2013, we completed an offering of $1.25 billion aggregate principal amount of our 0.00%
Convertible Senior Notes due 2018 (the “Notes”). We sold the Notes under a purchase agreement, dated
November 20, 2013, with J.P. Morgan Securities LLC and Goldman, Sachs & Co., as representatives of the
several initial purchasers named therein (collectively, the “Initial Purchasers”). We sold the Notes to the Initial
Purchasers in a private placement for resale to qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended (the “Securities Act”). We also granted the Initial Purchasers a 30-day over-
allotment option to purchase additional Notes. On December 11, 2013 such option was exercised in full and
accordingly, on December 16, 2013, we sold an additional $187.5 million aggregate principal amount of Notes to
the Initial Purchasers on the same terms and conditions. All of the Notes were issued under an indenture (the
“Indenture”) dated November 26, 2013 between us and The Bank of New York Mellon Trust Company, N.A., as
trustee. We do not intend to file a shelf registration statement for the resale of the Notes or any common stock
issuable upon conversion of the Notes.
The net proceeds from our sales of the Notes were approximately $1.4 billion, after deducting the Initial
Purchasers’ discount and the offering expenses payable by us.
Under the Indenture, the Notes are senior unsecured obligations of Yahoo! Inc., the Notes will not bear regular
interest, and the principal amount of the Notes will not accrete. The Notes will mature on December 1, 2018,
unless previously purchased or converted in accordance with their terms. The Notes are not redeemable prior to
maturity, and no sinking fund is provided for the Notes.
The Notes will be convertible into shares of our common stock at an initial conversion rate of 18.7161 shares per
$1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately $53.43 per
share), subject to adjustment upon the occurrence of certain events. The initial conversion price represents a
premium of approximately 50% to the $35.62 per share closing price of our common stock on November 20,
2013 (the date we entered into the purchase agreement). Upon conversion of the Notes, holders will receive cash,
shares of our common stock, or a combination thereof, at our election.
Prior to September 1, 2018, the Notes will be convertible only upon the occurrence of certain events and during
certain periods, and thereafter, at any time until the close of business on the second scheduled trading day
immediately preceding the maturity date of the Notes. The conversion rate is subject to customary anti-dilution
adjustments. Following certain corporate events described in the Indenture that occur prior to the maturity date,
the conversion rate will be increased for a holder who elects to convert its Notes in connection with such
corporate event in certain circumstances.
Note Hedge and Warrant Transactions
On November 20, 2013 and December 11, 2013, in connection with our issuances of the Notes, we entered into
note hedge transactions with the Initial Purchasers (in such capacity, the “Option Counterparties”) to reduce the
potential dilution with respect to our common stock upon conversion of the Notes or to offset any cash payment
we are required to make in excess of the principal amount of converted Notes.
In these transactions, we paid $206 million for call options giving us the right to purchase from the Option
Counterparties, subject to customary anti-dilution adjustments, approximately 26.9 million shares of Yahoo’s
common stock (which is equal to the number of shares that initially underlie the Notes), with a strike price of
approximately $53.43 per share. The Option Counterparties or their respective affiliates may enter into, or
unwind, various over-the-counter derivatives and/or purchase or sell our common stock in open market and/or
privately negotiated transactions prior to maturity of the Notes, including during any observation period for the
settlement of conversions of Notes, or upon any repurchase of Notes by us, which could adversely impact the
price of our common stock and of the Notes.
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