Item 1.01
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Entry into a Material Definitive Agreement
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On July 23, 2016, Yahoo! Inc.
(Yahoo) entered into a Stock Purchase Agreement (the Purchase Agreement) with Verizon Communications Inc. (Verizon), pursuant to which Yahoo has agreed to sell, and Verizon has agreed to purchase (the
Sale), all of the outstanding shares of Yahoo Holdings, Inc., a newly formed wholly-owned subsidiary of Yahoo (Yahoo Holdings), which, immediately prior to the consummation of the Sale (the Closing), will own the
Operating Business (as defined below) of Yahoo. The consideration to be paid by Verizon to Yahoo in connection with the Sale is $4,825,800,000 in cash, subject to certain adjustments as provided in the Purchase Agreement.
Concurrently with the execution of the Purchase Agreement, Yahoo entered into a Reorganization Agreement (the Reorganization
Agreement and, together with the Purchase Agreement, the Transaction Agreements) with Yahoo Holdings, pursuant to which Yahoo will, prior to the consummation of the Sale, transfer all of its assets and liabilities relating to the
operating business of Yahoo (the Operating Business), other than specific excluded assets and retained liabilities, to Yahoo Holdings (the Reorganization and, together with the Sale, the Transactions). Verizon
will also receive for its benefit and that of its current and certain future affiliates, a non-exclusive, worldwide, perpetual, royalty-free license (the Excalibur License) to certain intellectual property not core to the Operating
Business held by Excalibur IP, LLC, a wholly-owned subsidiary of Yahoo, that is not being transferred to Yahoo Holdings with the Operating Business.
The excluded assets include cash and marketable securities as of the Closing, Yahoos equity interests in Alibaba Group Holdings Limited,
Yahoo Japan Corporation, certain other minority equity investments, and all of the equity in Excalibur IP, LLC. The retained liabilities will include Yahoos 0.00% Convertible Senior Notes due 2018. Following the Closing, the excluded
assets and retained liabilities will remain in Yahoo (referred to as Remaining Yahoo) which will be renamed and will become an independent, publicly traded management investment company registered under the Investment Company Act of
1940.
Closing Conditions
The
Closing is subject to certain conditions, including, among others, (i) the approval of the Transactions by Yahoos stockholders (the Stockholder Approval), (ii) antitrust approvals in certain jurisdictions, including the
expiration or early termination of the waiting period applicable to the consummation of the Sale under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) the accuracy of the representations and warranties of the parties, and
compliance by the parties with their respective obligations under the Purchase Agreement, (iv) the closing of the Reorganization, (v) the Excalibur License remaining in full force and effect and (vi) the absence of any law or order restraining,
enjoining or otherwise prohibiting the consummation of the Sale.
Termination
The Purchase Agreement may be terminated by Yahoo or Verizon in certain circumstances, including, subject to certain exceptions, if the
consummation of the Sale has not occurred by April 24, 2017 (the Outside Date). The Outside Date may be extended in connection with a delay in the clearance of a proxy statement by the U.S. Securities and Exchange Commission (the
SEC) or in obtaining antitrust approvals.
If the Purchase Agreement is terminated, Yahoo may be required to pay Verizon a
termination fee of $144,774,000 in certain circumstances, including if Yahoo terminates the Purchase Agreement to enter into a superior proposal satisfying certain requirements, Verizon terminates the Purchase Agreement because the Board of
Directors of Yahoo has made an adverse recommendation change, or following the termination of the Purchase Agreement for reasons specified in the Purchase Agreement and within 12 months Yahoo consummates or enters into a definitive agreement for a
competing proposal for more than 50 percent of Yahoos stock or consolidated assets (without taking into account any excluded assets). In addition, if the Purchase Agreement is terminated by Verizon due to a breach by Yahoo of the Purchase
Agreement that would cause a failure of the conditions to the Closing to be satisfied (and such breach is not timely cured), Yahoo is required to reimburse Verizons expenses in an amount up to $15,000,000 (which is creditable toward the
termination fee). The Reorganization Agreement automatically terminates upon termination of the Purchase Agreement.
Treatment of Equity Awards
Under the terms of the Purchase Agreement, each Yahoo stock option outstanding immediately prior to the Closing will, if not already vested,
become fully vested as of the Closing and will remain outstanding in accordance with its terms, and Yahoo will retain all liabilities and obligations with respect to such outstanding stock options. For employees who transfer to Verizon at the
Closing, such options will generally be required to be exercised within 90 days and will be exercisable for the stock of Remaining Yahoo. Each holder of a restricted stock unit (an RSU) of Yahoo that is outstanding immediately prior
to the Closing generally will receive in substitution therefor a cash-settled Verizon RSU award, and will be subject to the same vesting and other terms and conditions as the Yahoo RSUs.
Representations and Warranties; Covenants; Taxes
Each of Yahoo and Verizon has made customary representations and warranties and covenants in the Purchase Agreement. Yahoo has further agreed
not to solicit alternative transactions and, subject to certain exceptions, not to enter into discussions concerning, or provide confidential information in connection with, an alternative transaction. Pursuant to the terms of the Transaction
Agreements, Verizon will generally assume both pre- and post-Closing taxes of the Operating Business and former operations of Yahoo and its affiliates. Yahoo will generally bear income and transfer taxes resulting from the Transactions.
Additional Information
The Transaction
Agreements are attached as Exhibits to this Current Report on Form 8-K to provide stockholders with information regarding their terms. They are not intended to provide any other factual information about Yahoo. The Transaction Agreements
contain representations and warranties by each of the parties to the Transaction Agreements. These representations and warranties were made solely for the benefit of the other party to each such Transaction Agreement and (i) are not intended to be
treated as categorical statements of fact, but rather as a way of allocating risk to one of the parties if those statements prove to be inaccurate, (ii) may have been qualified in the Transaction Agreements by confidential disclosure schedules that
were delivered to the other party thereto in connection with the signing of the Transaction Agreements, which disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants
set forth in the Transaction Agreements, (iii) may be subject to standards of materiality applicable to the parties that differ from what might be viewed as material to stockholders and (iv) were made only as of the date of the applicable
Transaction Agreement or such other date or dates as may be specified in such Transaction Agreement. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Transaction
Agreements, which subsequent information may or may not be fully reflected in public disclosures by Yahoo or Verizon. Accordingly, you should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations
of the actual state of facts or condition of Yahoo or Verizon.
The foregoing summaries of the Purchase Agreement and the Reorganization
Agreement do not purport to be complete and are subject to, and qualified in their entirety by, the full text of the Purchase Agreement and the Reorganization Agreement, respectively, copies of which are attached to this Current Report on Form 8-K
as Exhibit 2.1 and Exhibit 2.2, respectively, and are incorporated herein by reference.