Yahoo 2015 Annual Report Download - page 36

the Notes we issued in November 2013. In addition, our charter documents do not permit cumulative
voting, which may make it more difficult for a third-party to gain control of our Board. Further, we are
subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law,
which will prohibit us from engaging in a “business combination” with an “interested stockholder” for
a period of three years after the date of the transaction in which the person became an interested
stockholder, even if such combination is favored by a majority of stockholders, unless the business
combination is approved in a prescribed manner. The application of Section 203 also could have the
effect of delaying or preventing a change in control of us.
Any of these provisions could, under certain circumstances, depress the market price of our common
stock and the Notes.
Risks Relating to the Notes
The conditional conversion feature of the Notes, if triggered, may adversely affect our financial
condition and operating results.
In the event the conditional conversion feature of the Notes is triggered, holders of Notes will be
entitled to convert the Notes at any time during specified periods at their option. If one or more
holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering
solely shares of our common stock (other than paying cash in lieu of delivering any fractional share),
we would be required to settle a portion or all of our conversion obligation through the payment of
cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert
their Notes, we could be required under applicable accounting rules to reclassify all or a portion of
the outstanding principal of the Notes as a current rather than long-term liability, which would result
in a material reduction of our net working capital.
We may not have the ability to raise the funds necessary to settle conversions of the Notes in cash
or to repurchase the Notes upon a fundamental change, and our future debt may contain limitations
on our ability to pay cash upon conversion or repurchase of the Notes.
Holders of the Notes will have the right to require us to repurchase all or a portion of their Notes
upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal
amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any. We may not
have enough available cash or be able to obtain financing at the time we are required to make
repurchases of Notes surrendered therefore, or pay cash with respect to Notes being converted if we
elect not to issue shares, which could harm our reputation and affect the trading price of our
common stock.
The note hedge and warrant transactions may affect the value of the Notes and our common stock.
In connection with the pricing of the Notes, we entered into note hedge transactions with the option
counterparties. The note hedge transactions are generally expected to reduce the potential dilution
upon conversion of the Notes and/or offset any cash payments we are required to make in excess of
the principal amount of converted Notes, as the case may be. We also entered into warrant
transactions with the option counterparties. However, the warrant transactions could separately have
a dilutive effect to the extent that the market price per share of our common stock exceeds the
applicable strike price of the warrants.
In connection with establishing their initial hedge of the note hedge and warrant transactions, the
option counterparties or their respective affiliates have purchased shares of our common stock
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