Yahoo 2013 Annual Report Download - page 44

Alibaba Group (the “Shares”) we owned at the time (the “Initial Repurchase”) pursuant to the terms of a Share
Repurchase and Preference Share Sale Agreement (as amended on September 11, 2012 and October 14, 2013, the
“Repurchase Agreement”).
In September 2012, we received net cash proceeds of approximately $4.3 billion after the payment of taxes and
fees from the Initial Repurchase, which included the $550 million TIPLA payment. We returned $3.65 billion of
these after-tax proceeds to shareholders.
In connection with the Initial Repurchase, we also received $800 million in Alibaba Group Preference Shares. On
May 16, 2013, we received $846 million in cash from Alibaba Group to redeem the Alibaba Group Preference
Shares. The cash received represented the redemption value, which included the stated value of $800 million plus
accrued dividends of $46 million.
The Company, Yahoo! Hong Kong Holdings Limited (“YHK”) and Alibaba Group entered into a Second
Amendment to the Share Repurchase and Preference Share Sale Agreement, dated as of October 14, 2013. The
amendment reduced the maximum number of Shares of Alibaba Group that we are required to sell in connection
with an initial public offering of Alibaba Group meeting certain specified criteria (a “Qualified IPO”) from
261.5 million Shares to 208.0 million Shares.
Convertible Senior Notes
In 2013, we completed the offering of $1.4375 billion aggregate principal amount of our 0.00% Convertible
Senior Notes due in 2018 (the “Notes”). The Notes were sold in a private placement under a purchase agreement,
dated November 20, 2013, that we entered into with J.P. Morgan Securities LLC and Goldman, Sachs & Co., as
representatives of the several initial purchasers named therein (collectively, the “Initial Purchasers”), for resale to
qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the
“Securities Act”). In connection with the issuance 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 offset any cash payment we would be required to make in
excess of the principal amount of converted Notes. For the year ended December 31, 2013, we used $206 million
to pay the cost of the privately negotiated note hedge transactions. Separately, we entered into privately
negotiated warrant transactions with the Option Counterparties giving them the right to purchase Yahoo common
stock from us. The warrant transactions will have a dilutive effect with respect to our common stock to the extent
that the market price per share of our common stock exceeds the $71.24 strike price of the warrants on or prior to
the expiration date of the warrants. For the year ended December 31, 2013, we received $125 million from the
issuance of warrants.
Concurrent with the offering, we also used approximately $87.5 million of the net proceeds from the sale of the
Notes to repurchase approximately 2.5 million shares of our common stock. We expect to use the remainder of
the net proceeds from the sale of the Notes for general corporate purposes, including, but not limited to,
acquisitions or other strategic transactions, additional repurchases of common stock and working capital. For
additional information see “Item 5—Recent Sales of Unregistered Securities” and Note 11—“Convertible Notes”
in the Notes to our consolidated financial statements.
Search Agreement with Microsoft Corporation
On December 4, 2009, we entered into a Search and Advertising Services and Sales Agreement, as amended, (the
“Search Agreement”) with Microsoft Corporation (“Microsoft”), which provides for Microsoft to be the
exclusive algorithmic and paid search services provider on Yahoo Properties and non-exclusive provider of such
services on Affiliate sites. We also entered into a License Agreement with Microsoft pursuant to which Microsoft
acquired an exclusive 10-year license to our core search technology that it will be able to integrate into its
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