The following table provides information regarding the estimated compensation that is contemplated to be paid to each director and each of the
executive officers of the Fund with aggregate compensation from the Fund in excess of $60,000, assuming a full fiscal year of operations of the Fund as an investment company. The Fund is not part of a fund complex and therefore only
aggregate estimated compensation from the Fund is shown.
Each of Mr.
McInerney, Mr. Chong, Ms. Wellman, and Ms. Work has entered into an offer letter setting forth the terms and conditions of his or her employment with the Fund, which offer letter will become effective on the date of the closing of the Sale
Transaction, other than Mr. Chong whose offer letter became effective on March 10, 2017. The letters have no specified term, and each officers employment with the Fund is on an at-will basis.
provide for a threshold value and range of payments that each officer may receive based on attainment of the pre-established performance targets:
The Company is currently seeking no-action relief from the staff of the SEC with respect to the Plan that the Board expects to adopt after the
closing of the Sale Transaction. There can be no assurance the staff of the SEC will grant the requested relief. If the SEC staff does not grant the Companys no-action relief as requested, the Compensation Committee will seek to modify the
Plan in a manner acceptable to the SEC staff and/or seek other forms of relief from the SEC and its staff, or adopt other alternative compensatory arrangements. Although the terms of any such modified Plan, other relief, or other alternative
compensatory arrangements cannot be known at this time, the terms may include a modified version of the Plan described above, discretionary cash bonuses or additional base salary.
Each officer in the table above also will be eligible to participate in the benefit programs generally available to other officers and
employees of the Fund and to accrue paid time off days in accordance with the Funds post-closing vacation or paid time off policy.
Each officer in the table above will also be eligible to participate in the Funds 401(k) plan and health and welfare benefit programs
which will be made available to the Funds employees generally.
There are no arrangements or understandings between any of Mr.
McInerney, Mr. Chong, Ms. Wellman, or Ms. Work and any other person pursuant to which he or she was selected as an executive officer of the Fund, and there are no family relationships between any of Mr. McInerney, Mr. Chong, Ms. Wellman,
or Ms. Work and any of the Funds other directors, executive officers or persons nominated or chosen by the Fund to become a director or executive officer.
None of Mr. McInerney, Mr. Chong, Ms. Wellman, or Ms. Work has any direct or indirect material interest in any transaction required to be
disclosed pursuant to Item 404(a) of
Regulation S-K,
except as set forth in this section, and, in the case of Mr. Chong, his retention agreement with Yahoo pursuant to which he served as an
outside legal advisor to Yahoo from October 31, 2016 to March 9, 2017 in exchange for $100,000 per month and reimbursement for reasonable out of pocket expenses (including a car service) and, in
the case of Ms. Work, her existing retention agreement with Yahoo pursuant to which she has served as an outside legal advisor to Yahoo since December 8, 2016 in exchange for $50,000 per month and reimbursement for reasonable out of pocket expenses.
As compensation for serving on the Board, each Independent Director will receive an annual retainer of $350,000 and the chair of the Board will
receive an additional retainer of $80,000 for his or her additional services in this capacity. Each Independent Director will receive reimbursement of reasonable out-of-pocket expenses incurred in connection with such attendance. In addition, the
chair of the Funds Audit Committee will receive an annual retainer of $40,000 and each Audit Committee member will receive an annual retainer of $20,000 for their additional services in these capacities. The chair of any other committee will
receive an annual retainer of $25,000 and each member of any other committee will receive an annual retainer of $10,000 for their additional services in these capacities. All amounts will be paid quarterly, subject to any deferred retainer amounts
(described below), and amounts will be pro-rated for partial periods of service.
Up to half of the aggregate retainers will be paid as
cash compensation, and it is intended that at least half of the aggregate retainers earned from the completion of the Sale Transaction to the third anniversary of the first annual stockholder meeting held after the completion of the Sale Transaction
will be paid as deferred compensation on generally the same terms as described above for the Funds officers, though an Independent Director may elect to defer up to all of his or her retainer.
In addition, the Fund will maintain directors and officers liability insurance on behalf of its directors and officers. Interested
Directors receive no additional compensation for serving on the Board.
Yahoo currently anticipates that the Fund will hire one or more external investment advisers to manage its Marketable Debt Securities
Portfolio. The 1940 Act requires any agreement pursuant to which an investment adviser provides the Fund advice with respect to the Funds securities to be approved by the Funds board of directors, including a majority of the Funds
Independent Directors, and by the Funds stockholders. The Funds
directors anticipate meeting shortly after the completion of the Sale Transaction to vote on interim investment advisory agreements with one or more external investment advisers and then meeting
in-person as soon as practicable to vote on the agreements as required under the 1940 Act and to call a meeting of the Funds stockholders to vote on the agreements. The Fund directors have not yet negotiated an investment advisory agreement
with any external investment adviser or completed due diligence with respect to any external investment adviser, and no assurance can be given that any particular external investment adviser will manage the Marketable Debt Securities Portfolio.
The following summary of the Funds capital stock does not purport to be complete and is subject to, and qualified in its entirety by,
the Funds certificate of incorporation. Reference is made to the Funds certificate of incorporation for a detailed description of the provisions summarized below. Yahoos existing certificate of incorporation, after giving effect to
the Charter Amendment (as defined in the section of this proxy statement entitled
The Special MeetingPurpose
) and the change of the Companys name to Altaba Inc., will be the certificate of incorporation of
the Fund.
The holders of the Funds common stock will be entitled to one vote for each share held of record on all matters submitted to a vote of
the stockholders. Subject to preferences that may be applicable to any outstanding preferred stock, holders of the Funds common stock will be entitled to receive ratably such dividends as may be declared by the Board out of funds legally
available for that purpose. In the event of liquidation, dissolution or winding up of the Fund, the holders of the Funds common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to the prior
distribution rights of any outstanding preferred stock. The Funds common stock will have no preemptive or conversion rights or other subscription rights. There will be no redemption or sinking fund provisions applicable to the Funds
common stock. The outstanding shares of the Funds common stock will be fully paid and non-assessable.
The Fund has no present
intention of offering any additional shares of the Funds common stock. Any offerings of the Funds common stock will require approval by the Board. Any offering of the Funds common stock will be subject to the requirements of the
1940 Act, which provides that shares of the Funds common stock may not be issued at a price below the Funds then-current net asset value, exclusive of sales load, except in connection with an offering to existing holders of the
Funds common stock, or with the consent of a majority of the Funds outstanding voting securities.
The Funds common
stock will continue to be listed on Nasdaq but its ticker symbol will change to AABA. Unlike open-end funds, closed-end funds like the Fund do not continuously offer shares and do not provide daily redemptions. Rather, if a stockholder
determines to buy additional shares of the Funds common stock or sell the Funds common stock already held, the stockholder may do so by trading through a broker on
Nasdaq or otherwise. Shares of closed-end investment companies frequently trade on an exchange at prices lower than net asset value. Shares of closed-end investment companies like the Fund have
during some periods traded at prices higher than net asset value and during other periods have traded at prices lower than net asset value. Because the market value of the Funds common stock may be influenced by such factors beyond the control
of the Fund, such as the relative demand for and supply of shares of the Funds common stock in the market and general market and economic conditions, the Fund cannot assure you that shares of the Funds common stock will trade at a price
equal to or higher than net asset value in the future.
Assuming the Sale Transaction had closed as of December 31, 2016, the Fund would
have had approximately 8,736 record holders of the Funds common stock (which amount does not include the number of stockholders whose shares are held of record by banks, brokers, or other nominees, but instead includes all such institutions as
one holder).
The
Board will have the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock, $0.001 par value per share, in one or more series. The Board will also have the authority to designate the rights,
preferences, privileges, and restrictions of each such series, including dividend rights, dividend rates, conversion rights, terms of redemption, redemption prices, liquidation preferences, and the number of shares constituting any series.
The issuance of preferred stock may have the effect of delaying, deferring, or preventing a change in control of the Fund without further
action by the stockholders. The issuance of preferred stock with voting and conversion rights may also adversely affect the voting power of the holders of the Funds common stock. In certain circumstances, an issuance of preferred stock could
have the effect of decreasing the market price of the Funds common stock.
Under the 1940 Act, the Fund is not permitted to issue
preferred stock unless immediately after such issuance the value of the Funds total assets are at least 200 percent of the liquidation value of the outstanding preferred stock (i.e., the liquidation value may not exceed 50 percent of the
Funds total assets). In addition, under the 1940 Act, the Fund is not permitted to declare any cash dividend or other distribution on its common stock unless, at the time of such declaration, the value of the Funds total assets are at
least 200 percent of such liquidation value. In addition, the 1940 Act requires that the holders of preferred stock, if any are issued, must be entitled as a class to elect two directors at all times, and to elect a majority of the directors if
dividends on preferred stock are in arrears by two years or more.
No shares of preferred stock of Yahoo are currently outstanding. The
Fund currently has no plans to issue preferred stock, but it reserves the right to do so to the full extent permitted by the 1940 Act.
As of December 31, 2016, Yahoo has $1.4 billion in principal amount of Convertible Notes outstanding. If Yahoo does not
repurchase the Convertible Notes prior to the closing of the Sale Transaction, then the Convertible Notes will remain senior unsecured obligations of the Fund and will rank senior in right of payment to any Fund indebtedness that is expressly
subordinated in right of payment to the Convertible Notes. The Convertible Notes do not bear regular interest, and the principal amount of the Convertible Notes will not accrete. The Convertible Notes mature on December 1, 2018, unless previously
purchased or converted in accordance with their terms prior to such date. The Fund may not redeem the Convertible Notes prior to maturity. No sinking fund is provided for the Convertible Notes. The Convertible Notes are convertible, subject to
certain conditions, into shares of the Funds common stock at an initial conversion rate of 18.7161 shares per $1,000 principal amount of Convertible Notes (which is equivalent to an initial conversion price of approximately
$53.43 per share), subject to adjustment upon the occurrence of certain events. See the section of this Annex 1 entitled
LeverageConvertible Notes
for additional
information about the Convertible Notes.
The description set forth below is intended as a summary of certain provisions of the certificate of incorporation and the bylaws of
the Fund, effective after the closing of the Sale Transaction.
The Funds certificate of incorporation will include provisions limiting the liability of the Funds directors for monetary damages
to the extent permitted under Delaware law and the 1940 Act, except that there is no limitation on the liability of the Funds directors (1) for any breach of the directors duty of loyalty to the Fund or its stockholders, (2) for so long
as the Fund is registered as an investment company under the 1940 Act, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law or by reason of willful misfeasance, bad faith or gross negligence,
in the performance of the directors duties or by reason of the directors reckless disregard of the duties involved in the conduct of his or her office, (3) for unlawful payments of dividends or unlawful stock purchases or redemptions, or
(4) for any transaction from which the director derived an improper personal benefit. The effect of these provisions in the Funds certificate of incorporation will be to eliminate the Funds rights and the stockholders rights
(through stockholders derivative suits on behalf of the Fund) to recover monetary damages against a director for breach of the fiduciary duty of care as a director under Delaware law except in specified limited circumstances. This provision
does not limit or eliminate the Funds rights or any stockholders rights to seek nonmonetary relief such as an injunction or rescission in the event of a breach of a directors duty of care. These provisions will not alter the
liability of directors under federal securities laws. These 1940 Act limitations on indemnification will not limit the obligation of the Fund to indemnify officers and directors of Yahoo for actions that occurred prior to the Funds
registration as an investment company under the 1940 Act.
The Funds certificate of incorporation and bylaws contain certain provisions that may discourage, delay, or prevent a change in control
of the Fund that a stockholder may consider favorable. These provisions include the following:
Yahoo believes that the benefits of these provisions outweigh the potential disadvantages of discouraging such proposals because, among other
things, negotiation of such proposals might result in an improvement of their terms.
The bylaws of the Fund provide that the number of directors shall be determined, from time to time, by a resolution of the Board. A director
may be removed from the Board with or without cause, only by the
affirmative vote of holders of at least a majority of the outstanding shares of the Fund then entitled to vote at an election of directors. The bylaws of the Fund provide that any vacancies
arising through death, resignation, removal, an increase in the number of directors, or otherwise may be filled only by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so
chosen shall hold office until the next annual election and until their successors are duly elected and qualified, or until their earlier death, resignation, or removal.
The bylaws of the Fund establish an advance notice procedure for stockholders to make nominations of candidates for election as directors or to
bring other business before an annual meeting of stockholders (the Stockholder Notice Procedure).
The Stockholder Notice
Procedure provides that (1) only persons who are nominated by, or at the direction of, the Board, or by a stockholder who has given timely written notice containing specified information to the Funds secretary prior to the meeting at which
directors are to be elected, will be eligible for election as directors and (2) at an annual meeting, only such business may be conducted as has been brought before the meeting by, or at the direction of, the Board or by a stockholder who has given
timely written notice to the Funds secretary of such stockholders intention to bring such business before the meeting. Except for stockholder proposals submitted in accordance with the federal proxy rules as to which the requirements
specified therein shall control, notice of stockholder nominations or business to be conducted at a meeting generally must be received by the Fund not less than 90 days or more than 120 days prior to the first anniversary of the previous years
annual meeting if the notice is to be submitted at an annual stockholders meeting.
Yahoos bylaws currently allow eligible
stockholders to include their own director nominees in Yahoos proxy materials along with the Board-nominated candidates. Among other things, this proxy access right currently:
In light of the reduction of the size of the Board to five directors following the completion of the Sale Transaction, the Fund anticipates
that it will amend its bylaws to provide that the maximum number of stockholder candidates eligible for inclusion in the Funds proxy materials is equal to 20 percent of the directors then serving on the Board (rounded to the nearest whole
number), and not the greater of two stockholder-nominated candidates or 20 percent of the directors then serving on the Board (rounded down to the nearest whole number).
The Funds certificate of incorporation provides that the Fund reserves the right to amend, alter, change, or repeal any provision
contained therein, in the manner prescribed by Delaware statute, and all rights conferred upon stockholders in the Certificate of Incorporation are granted subject to this reservation.
The Funds certificate of incorporation provides that the directors shall have the power to make, alter, or repeal the Funds
bylaws. The Funds bylaws also may be adopted, amended, altered, or repealed by the affirmative vote of the holders of a majority of the capital stock entitled to vote thereon or by a majority of the Board then in office.
The Fund will be a non-diversified, closed-end management investment company (commonly referred to as a closed-end fund) with no operating
history as an investment company. Closed-end funds differ from open-end funds (commonly referred to as mutual funds) in that closed-end funds generally list their common stock for trading on a stock exchange and do not redeem shares of common stock
at the request of the stockholder. This means that if you wish to sell your shares of common stock of a closed-end fund you must trade them on the stock exchange like any other stock at the prevailing market price at that time. In a mutual fund, if
the stockholder wishes to sell shares of the fund, the mutual fund will redeem or buy back the shares at net asset value per share. Also, mutual funds generally offer new shares on a continuous basis to new investors and closed-end funds generally
do not. The continuous inflows and outflows of assets in a mutual fund can make it difficult to manage the funds investments. By comparison, closed-end funds are generally able to stay more fully invested in securities that are consistent with
their investment objectives and also have greater flexibility to make certain types of investments and to use certain investment strategies, such as financial leverage and investments in illiquid securities.
Shares of closed-end funds frequently trade at a discount to net asset value. Because of this possibility and the recognition that any such
discount may not be in the interest of stockholders, the Board might consider from time to time engaging in open-market repurchases, tender offers for shares, or other programs intended to reduce the discount. The Board also might consider from time
to time engaging in open-market repurchases, tender offers for shares, or other programs intended to increase any premium to net asset value at which the Funds common stock may trade. The Fund cannot guarantee or assure, however, that the
Board will decide to engage in any of these actions. Nor is there any guarantee or assurance that such actions, if undertaken, would result in the shares trading at a price equal or close to the net asset value per share or increase any premium at
which such shares may trade. Although share repurchases and tender offers could have a favorable effect on the market price of the Funds common stock, the acquisition of shares of the Funds common stock by the Fund would decrease the
capital of the Fund and, therefore, may have the effect of increasing the Funds expense ratio. Any share repurchases or tender offers will be made in accordance with the requirements of the Securities Exchange Act of 1934, the 1940 Act, and
the principal stock exchange on which the Funds common stock is traded. Before deciding whether to take any action to repurchase the Funds common stock, the Board would likely consider all relevant factors, including the extent and
duration of the discount, the liquidity of the Funds portfolio, tax consequences to the Fund and its stockholders, the impact of any action that might be taken on the Fund or its stockholders, and market considerations. Based on these
considerations, even if the Funds shares would trade at a discount, the Board may determine that, in the interest of the Fund and its stockholders, no action should be taken. The Fund reserves the right to repurchase its common stock from time
to time, including prior to the mailing of its first annual or semi-annual stockholder report after the completion of the Sale Transaction.
Although the Fund does not currently intend to regularly engage in brokerage transactions, it does expect that one or more external investment
advisers will regularly engage in principal transactions with dealers in the fixed income markets in connection with the management of the Funds Marketable Debt Securities Portfolio. When engaging in any such brokerage or principal
transactions, Fund management or any external investment advisers will not execute transactions through any particular broker or dealer, but will seek to obtain the best net results for the Fund. While Fund management or any external investment
advisers generally will seek reasonable trade execution costs, the Fund will not necessarily pay the lowest spread or commission available, and payment of the lowest commission or spread is not necessarily consistent with obtaining the best price
and execution in particular transactions. In selecting brokers or dealers to execute portfolio transactions, Fund management or any external investment advisers will seek to obtain the best price and most favorable execution for the Fund, taking
into account a variety of factors including: (1) the size, nature, and character of the security or instrument being traded and the markets in which it is purchased or sold; (2) the desired timing of the transaction; (3) knowledge of
the expected commission rates and spreads currently available; (4) the activity existing and expected in the market for the particular security or instrument, including any anticipated execution difficulties; (5) the full range of
brokerage services provided; (6) the brokers or dealers capital; (7) the quality of research and research services provided; (8) the reasonableness of the commission, dealer spread, or its equivalent for the specific
transaction; and (9) knowledge of any actual or apparent operational problems of a broker or dealer.
The following discussion is a summary of certain U.S. federal income tax considerations for holders of the Funds common stock. This
discussion is based on the Code, applicable U.S. Department of the Treasury regulations, judicial authority, and administrative rulings and practice, all as in effect as of the date of this proxy statement. Such authorities are subject to change or
differing interpretations at any time, possibly with retroactive effect. This discussion is limited to holders of the Funds common stock that are U.S. holders, as defined below, and that hold their shares of the Funds common stock as
capital assets, within the meaning of Section 1221 of the Code. Further, this discussion does not discuss all tax considerations that may be relevant to holders of the Funds common stock in light of their particular circumstances, nor
does it address any tax consequences to holders of the Funds common stock subject to special treatment under the U.S. federal income tax laws, such as tax-exempt entities, partnerships (including entities treated as partnerships for U.S.
federal income tax purposes), persons who acquired their shares of the Funds common stock pursuant to the exercise of employee stock options, or otherwise as compensation, financial institutions, insurance companies, dealers, or traders in
securities, and persons who hold their shares of the Funds common stock as part of a straddle, hedge, conversion, constructive sale, synthetic security, integrated investment, or other risk-reduction transaction for U.S. federal income tax
purposes. This discussion does not address any U.S. federal estate, gift, or other non-income tax considerations (including the Medicare tax on net investment income), any state, local, or foreign tax considerations, or any tax reporting
requirements.
For purposes of this section, a U.S. holder is a beneficial owner of the Funds common stock that is, for U.S. federal
income tax purposes:
If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) holds shares of the Funds common
stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A partner in a partnership holding shares of the Funds common stock should consult its tax
advisor regarding any tax considerations related to the partnerships ownership of the Funds common stock.
It is currently anticipated that, immediately after the completion of the Sale Transaction, the Fund will be treated as a
regular corporation, or a C corporation, for U.S. federal income tax purposes, and the remainder of this summary assumes such treatment. Upon completion of the Sale Transaction, the Fund will not be eligible to elect to be treated as a
regulated investment company under the Code because a regulated investment company cannot invest more than 25 percent of its assets in securities of a single issuer, and more than 25 percent of the Funds assets will be invested in securities
of Alibaba. Accordingly, the Fund generally will be subject to U.S. federal income tax on its taxable income at the graduated rates applicable to corporations under the Code. In addition, the Fund may be subject to an alternative minimum tax on its
alternative minimum taxable income to the extent that the alternative minimum tax exceeds the Funds regular income tax liability. The extent to which the Fund is required to pay U.S. corporate income tax or alternative minimum tax could
materially reduce the Funds cash available to make distributions on the Funds common stock.
Distributions by the Fund of cash or property in respect of the Funds common stock will be treated as dividends for U.S. federal income
tax purposes to the extent paid from the Funds current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Any such dividends will be eligible for the dividends-received deduction if received by an
otherwise qualifying corporate holder that meets the holding period and other requirements for the dividends-received deduction. Dividends paid by the Fund to certain non-corporate holders of the Funds common stock (including individuals) will
be eligible for U.S. federal income taxation at the rates generally applicable to long-term capital gains for individuals;
provided
that the holder receiving the dividend satisfies applicable holding period and other requirements.
If the amount of a Fund distribution exceeds the Funds current and accumulated earnings and profits, such excess will be treated first
as a tax-free return of capital to the extent of the holders adjusted tax basis in the Funds Common Stock, with any remaining amount taxed as capital gain. Any such capital gain will be long-term capital gain if the holder receiving the
distribution has a holding period in the applicable shares of the Funds common stock of more than one (1) year. Long-term capital gains of certain non-corporate holders of the Funds common stock (including individuals) are generally
subject to U.S. federal income taxation at reduced maximum rates.
Upon the sale, exchange, or other taxable disposition of the Funds common stock, a holder generally will recognize capital gain or loss
equal to the difference between the amount realized on the sale, exchange, or other taxable disposition and the U.S. holders adjusted tax basis in the Funds common stock. Any such capital gain or loss will be long-term capital gain or
loss if the U.S. holders holding period in the Funds common stock is more than one (1) year at the time of disposition. Long-term capital gains of certain non-corporate holders of the Funds common stock (including individuals) are
generally subject to U.S. federal income taxation at reduced maximum rates. The deductibility of capital losses is subject to limitations under the Code.
U.S. Bank National Association
will serve as the custodian of the Funds assets pursuant to a custody agreement. Under the custody agreement, the custodian will hold the Funds assets, including assets that the Fund holds through Altaba HK, in compliance with the 1940
Act. U.S. Bank National Association is located at 1555 N. River Center Drive, Suite 302, Milwaukee, Wisconsin 53212.
Computershare Trust Company, N.A. will serve as the Funds transfer agent and registrar for the Funds common stock. Computershare
Trust Company, N.A. is located at 250 Royall Street, Canton, Massachusetts 02021.
U.S. Bancorp Fund Services, LLC will serve as administrator to the Fund. Pursuant to an administration agreement. U.S. Bancorp Fund Services,
LLC is located at 615 East Michigan Street, Milwaukee, Wisconsin 53202.
To the knowledge of Yahoo, based on the stockholders of the Company on April 3, 2017, it is expected that immediately upon completion of
the Sale Transaction, no person will beneficially own more than five percent of the voting securities of any class of equity securities of the Fund, except as indicated in the table set forth in the section of this proxy statement entitled
Beneficial Ownership of Principal Stockholders and Management
.
PricewaterhouseCoopers LLP will serve as the independent registered public accounting firm of the
Fund and is expected to render an opinion annually on the financial statements of the Fund.
The Fund will vote proxies relating to its portfolio securities in a manner in which the Fund believes is consistent with
the best interest of stockholders. The Fund will review on a case-by-case basis each proposal submitted to a stockholder vote to determine its impact on the portfolio securities held by the Fund. Although the Fund generally will vote against
proposals that the Fund expects would have a negative impact on its portfolio securities, the Fund may vote for such a proposal if there exist compelling long-term reasons to do so.
The Funds proxy voting decisions will be made by the Board. The Board may delegate its authority to make proxy voting decisions to a
committee of the Board. To ensure that the Funds vote is not the product of a conflict of interest, the Fund will require that:
Information on how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 will be made available on the Funds website at
www.altaba.com
when available. This information will also be available on the SECs website at
www.sec.gov
.
The Fund will adopt a code of ethics pursuant to Rule 17j-1 under the 1940 Act. The code of ethics will apply to the personal investing
activities of Interested Directors, officers, and certain employees (Access Persons). Rule 17j-1 under the 1940 Act and the codes of ethics are designed to prevent unlawful practices in connection with the purchase or sale of
securities by Access Persons. Under the code of ethics, Access Persons are permitted to engage in personal securities transactions, but are generally required to pre-clear their personal securities transactions in private investments and initial
public offerings, and must report their holdings for monitoring purposes. Access Persons may engage in personal securities transactions in securities that are held by the Fund, including in derivatives on those securities, subject to the limitations
of the code of ethics.
The code of ethics of the Fund will be filed with the SEC and subsequently can be reviewed and copied at the
SECs Public Reference Room in Washington, D.C. Information on the operation of the SECs Public Reference Room may be obtained by calling the SEC at (202) 551-8090. The code of ethics will also be available on the EDGAR Database on the
SECs website at
www.sec.gov
, and copies of the code of ethics may be obtained, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the SECs Public Reference
Section, Washington, D.C. 20549-0102.
The accompanying notes are an integral part of these combined financial statements.
The accompanying notes are an integral part of these combined financial statements.
The accompanying notes are an integral part of these combined financial statements.
The accompanying notes are an integral part of these combined financial statements.
The accompanying notes are an integral part of these combined financial statements.
Notes to Combined Financial Statements
(Unaudited)
Note 1 Yahoo Operating
Business and Summary of Significant Accounting Policies
Yahoo Operating Business.
On July 23, 2016, Yahoo! Inc.
(Yahoo or the Parent) and Verizon Communications Inc. (Verizon) entered into the Stock Purchase Agreement (the Original Stock Purchase Agreement), 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 wholly owned subsidiary of Yahoo (Yahoo Holdings) and, prior to the sale of Yahoo Holdings, to cause Yahoo Holdings to sell
to a foreign subsidiary of Verizon all of the equity interests in a newly formed foreign subsidiary of Yahoo Holdings that will hold certain foreign subsidiaries relating to the Yahoo Operating Business (as defined below) (the Foreign Sale
Transaction). Immediately prior to the consummation of the Sale, Yahoo Holdings will own Yahoos operating business. Under the Original Stock Purchase Agreement, the aggregate consideration to be paid to Yahoo by Verizon in connection
with the Sale was $4,825,800,000 in cash, subject to certain adjustments as provided in the Original Stock Purchase Agreement.
Concurrently with the
execution of the Original Stock Purchase Agreement, Yahoo entered into a Reorganization Agreement (the Original Reorganization Agreement) with Yahoo Holdings, pursuant to which Yahoo will transfer to Yahoo Holdings prior to the
consummation of the Sale all of Yahoos assets and liabilities relating to the Yahoo Operating Business (as defined below), other than specified excluded assets and retained liabilities (the Reorganization).
On February 20, 2017, Yahoo and Verizon entered into an Amendment to Stock Purchase Agreement amending the Original Stock Purchase Agreement (the Stock
Purchase Agreement Amendment and, together with the Original Stock Purchase Agreement, the Stock Purchase Agreement), and, concurrently with the execution of the Stock Purchase Agreement Amendment, Yahoo and Yahoo Holdings entered
into an Amendment to Reorganization Agreement amending the Original Reorganization Agreement (the Reorganization Agreement Amendment). Additionally, concurrently with the execution of the Stock Purchase Agreement Amendment and the
Reorganization Agreement Amendment, Yahoo, Yahoo Holdings, and Verizon entered into a Settlement and Release Agreement (the Settlement and Release Agreement).
The Stock Purchase Agreement Amendment, among other things, (i) reduced the consideration to be paid by Verizon to Yahoo in connection with the Sale by
$350,000,000 to $4,475,800,000, (ii) provided that certain data security incidents to which Yahoo has been subject will be disregarded for purposes of determining whether certain closing conditions have been satisfied and in determining whether a
Business Material Adverse Effect has occurred, and (iii) provided that the date after which each of Yahoo and Verizon may terminate the Stock Purchase Agreement if the Closing (as defined in the Stock Purchase Agreement) has not occurred
has been extended to July 24, 2017.
The Reorganization Agreement Amendment provides, among other things, that Yahoo and Verizon will each be responsible
for 50 percent of certain post-closing cash liabilities related to certain data security incidents and other data breaches incurred by Yahoo.
Under the
terms of the Settlement and Release Agreement, among other things, Verizon released certain claims, subject to certain exceptions, that it (and its affiliates and representatives) may have against Yahoo (or its affiliates and representatives)
relating to certain data security incidents and other data breaches incurred by Yahoo.
Upon completion of the Sale, Verizon will also receive for its
benefit and that of its current and certain of its future affiliates, a non-exclusive, worldwide, perpetual, royalty-free license to certain intellectual property not core to Yahoos operating business (the Excalibur IP Assets) held
by Excalibur IP, LLC, a wholly owned
Annex 2-6
subsidiary of the Company (Excalibur), that is not being transferred to Yahoo Holdings with the operating business.
The excluded assets include Yahoos cash and marketable securities as of the closing of the Sale, Yahoos shares in Alibaba Group Holding Limited
(Alibaba Group) and Yahoo Japan Corporation (Yahoo Japan), certain other minority equity investments, and all of the equity of Excalibur. The retained liabilities will include the 0.00% Convertible Senior Notes due 2018
issued by Yahoo in November 2013 (the Convertible Notes), securityholder litigation, certain director and officer indemnification obligations, and, pursuant to the Reorganization Agreement Amendment, 50 percent of certain post-closing
cash liabilities related to certain data security incidents and other data breaches incurred by Parent. Following the closing of the Sale, the excluded assets and retained liabilities will remain in Parent which will be renamed Altaba Inc. and will
become an independent, publicly traded, management investment company registered under the Investment Company Act of 1940.
The closing of the Sale is
subject to certain conditions, including, among others, the approval of the Sale by Parents stockholders, the closing of the Reorganization, and certain other customary closing conditions.
We refer to the transactions contemplated by the Stock Purchase Agreement and the Reorganization Agreement as the Sale Transaction.
These combined financial statements relate to the operating business of Yahoo which is to be sold to Verizon pursuant to the Sale Transaction, which business
we refer to in these combined financial statements as Yahoo Operating Business. These financial statements have been prepared on a combined basis as they represent a portion of the Parents business that was not historically a
separate legal entity from the Parent. The combined financial statements have been prepared as if Yahoo Operating Business were a separate legal entity as of the dates and for the periods presented in the combined financial statements and described
in these notes. Throughout these notes, references to actions of, or contracts entered into by, Yahoo Operating Business refer to historical actions of, or contracts entered into by, the Parent or one of its subsidiaries that are attributable to
Yahoo Operating Business.
Yahoo Operating Business is a guide to digital information discovery, focused on informing, connecting, and entertaining users
through its search, communications, and digital content products. By creating highly personalized experiences, Yahoo Operating Business helps users discover the information that matters most to them around the worldon mobile or desktop. Yahoo
Operating Business creates value for advertisers with a streamlined, simple advertising technology that leverages Yahoo Operating Business data, content, and technology to connect advertisers with their target audiences. Advertisers can build
their businesses through advertising to targeted audiences on Yahoo Operating Business online properties and services (Yahoo Properties) and a distribution network of third party entities (Affiliates) who integrate
Yahoo Operating Business advertising offerings into their websites or other offerings (Affiliate sites). Yahoo Operating Business revenue is generated principally from search and display advertising. Yahoo Operating Business
manages and measures its business geographically, principally in the Americas, EMEA (Europe, Middle East, and Africa) and Asia Pacific.
Basis of
Presentation.
The accompanying combined financial statements reflect the assets and liabilities, operating results, and cash flows of Yahoo Operating Business. The preparation of these combined financial
statements includes the use of carve-out accounting procedures wherein only assets and liabilities that are specifically attributable to Yahoo Operating Business have been identified and attributed to Yahoo Operating Business, and all
costs directly related to Yahoo Operating Business have been allocated to Yahoo Operating Business.
Financial statements have not historically been
prepared for Yahoo Operating Business as it has not operated as a separate business. The accompanying combined financial statements include certain assets and liabilities that
Annex 2-7
have historically been held at the Yahoo corporate level but are specifically identifiable or otherwise attributable to Yahoo Operating Business. Cash and cash equivalents held by Yahoo were
not attributed to Yahoo Operating Business unless they were held in a legal entity that was dedicated to Yahoo Operating Business for the periods presented. All intercompany transactions and accounts have been eliminated. Net parent company
investment is impacted by contributions from and distributions to Yahoo which are the result of treasury activities and net funding distributed to or provided by Yahoo. The other components impacting the net parent company investment are corporate
cost allocations and income tax related transfers.
The combined financial statements of Yahoo Operating Business include all Parent expenses for certain
functions, including general corporate expenses related to information technology, finance, legal, human resources, internal audit, treasury, tax, investor relations, and executive oversight except for certain costs related to management of the
excluded assets, which have been excluded from Yahoo Operating Business operations. Management considers the expense allocation methodology and results to be reasonable for all periods presented. However, the financial information
presented in these combined financial statements may not reflect the combined financial position, operating results, and cash flows of Yahoo Operating Business had Yahoo Operating Business been a separate stand-alone entity during the periods
presented. The accompanying combined financial statements have been derived from the combined financial statements and accounting records of Yahoo. These combined financial statements have been prepared in accordance with accounting principles
generally accepted (GAAP) in the United States of America (U.S.). These principles require management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, and
expenses and the related disclosure of contingent assets and liabilities. Yahoo Operating Business evaluates its estimates, including those related to revenue, the useful lives of long-lived assets including property and equipment and intangible
assets, originally developed content, acquired content, stock-based compensation, goodwill, income taxes, contingencies, and restructuring charges. Yahoo Operating Business bases its estimates of the carrying value of certain assets and liabilities
on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, when these carrying values are not readily available from other sources. Actual results may differ from these estimates.
The income tax amounts in these combined financial statements have been calculated based on a separate income tax return methodology and presented as if Yahoo
Operating Business operations were separate taxpayers in the applicable jurisdictions.
Yahoo Operating Business maintains various share-based
compensation plans. Yahoo Operating Business employees participate in those programs and a portion of the cost of those plans is included in Yahoo Operating Business combined financial statements. See Note 9Employee
Benefits for further description of the accounting for share-based compensation plans.
The accompanying combined financial statements have been
prepared in connection with the Sale Transaction to demonstrate the historical results of operations, financial position, and cash flows of Yahoo Operating Business for the indicated periods under Yahoos management.
Concentration of Risk.
Financial instruments that potentially subject Yahoo Operating Business to significant concentration of credit risk
consist primarily of accounts receivable and derivative financial instruments.
Accounts receivable are typically unsecured and are derived from revenue
earned from customers. Yahoo Operating Business performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.
Yahoo Operating Business derivative instruments expose Yahoo Operating Business to credit risk to the extent that its derivative counterparties become
unable to meet their financial obligations under the terms of the agreements. Yahoo Operating Business seeks to mitigate this risk by limiting its derivative counterparties to major financial institutions and by spreading the risk across several
major financial institutions. In addition, the
Annex 2-8
potential risk of loss with any one counterparty resulting from this type of credit risk is monitored on an ongoing basis. See Note 7Foreign Currency Derivative Financial
Instruments for additional information related to Yahoo Operating Business derivative instruments.
Revenue under the Search and Advertising
Sales Agreement (as amended, the Microsoft Search Agreement) with Microsoft Corporation (Microsoft) represented approximately 35 percent and 37 percent of Yahoo Operating Business revenue for the years ended December
31, 2015 and 2016, respectively, and no other individual customer accounted for 10 percent or more of Yahoo Operating Business revenue for 2015 or 2016. As of December 31, 2015 and 2016, no one customer accounted for 10 percent or
more of the accounts receivable balance.
Comprehensive Loss.
Comprehensive loss consists of two components, net loss and other
comprehensive loss. Other comprehensive loss refers to revenue, expenses, and gains and losses that under GAAP are recorded as an element of Yahoo Operating Business equity but are excluded from net loss. Yahoo Operating Business other
comprehensive loss consists of foreign currency translation adjustments from those subsidiaries and unrealized gains and losses on cash flow hedges.
Foreign Currency.
The functional currency of Yahoo Operating Business international subsidiaries is evaluated on a case-by-case basis and
is often the local currency. The financial statements of these subsidiaries are translated into U.S. dollars using period-end rates of exchange for assets and liabilities, historical rates of exchange for equity, and average rates of exchange for
the period for revenue and expenses. Translation gains (losses) are recorded in accumulated other comprehensive loss as a component of Yahoo Operating Business equity. Yahoo Operating Business records foreign currency transaction gains and
losses, realized and unrealized and foreign exchange gains and losses due to re-measurement of monetary assets and liabilities denominated in non-functional currencies in other (expense) income, net in the combined statements of operations. Yahoo
Operating Business recorded a $22 million net loss in 2015 and a $4 million net gain in 2016.
Cash and Cash Equivalents.
Yahoo Operating
Business invests its excess cash in time deposits at high-credit corporate issuers which are classified as cash equivalents. All time deposits with an original maturity of 90 days or less are considered cash equivalents.
Allowance for Doubtful Accounts.
Yahoo Operating Business records its allowance for doubtful accounts based upon its assessment of various
factors. Yahoo Operating Business considers historical experience, the age of the accounts receivable balances, the credit quality of its customers, current economic conditions, and other factors that may affect customers ability to pay to
determine the level of allowance required.
Foreign Currency Derivative Financial Instruments.
Yahoo Operating Business uses derivative
financial instruments, primarily foreign currency forward contracts, to mitigate certain foreign currency exposures.
For derivatives designated as cash
flow hedges, the effective portion of the unrealized gains or losses on these forward contracts is recorded in accumulated other comprehensive loss on Yahoo Operating Business combined balance sheets and reclassified into revenue in the
combined statements of operations when the underlying hedged revenue is recognized. If the cash flow hedges were to become ineffective, the ineffective portion would be immediately recorded in other (expense) income, net in Yahoo Operating
Business combined statements of operations.
Yahoo Operating Business hedges certain of its net recognized foreign currency assets and liabilities
with foreign exchange forward contracts to reduce the risk that its earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These balance sheet hedges are used to partially offset the foreign currency
exchange gains and losses generated by the re-measurement of certain assets and liabilities denominated in non-functional currency. Changes in the fair value of these derivatives are recorded in other (expense) income, net in Yahoo Operating
Business combined statements of operations. The fair values of the balance sheet hedges are determined using quoted observable inputs.
Annex 2-9
Yahoo Operating Business recognizes all derivative instruments as other assets or liabilities on Yahoo Operating
Business combined balance sheets at fair value. See Note 7Foreign Currency Derivative Financial Instruments for a full description of Yahoo Operating Business derivative financial instrument activities and related
accounting.
Property and Equipment.
Buildings are stated at cost and depreciated using the straight-line method over the estimated useful
lives of 20 to 25 years. Leasehold improvements are amortized over the lesser of their expected useful lives and the remaining lease term. Computers and equipment and furniture and fixtures are stated at cost and depreciated using the straight-line
method over the estimated useful lives of the assets, generally three to five years.
Property and equipment to be held and used are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted future cash flows
resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss for long-lived assets that management expects to hold and use is based on the excess of the carrying value of the asset over its fair value. No
impairments of such assets were identified during any of the periods presented.
Capitalized Software and Labor.
Yahoo Operating Business
capitalized certain software and labor costs totaling approximately $31 million and $25 million during 2015 and 2016, respectively. Yahoo Operating Business capitalizes eligible costs to acquire or develop internal-use software that are incurred
subsequent to the preliminary project stage through the development stage. The estimated useful life of costs capitalized is evaluated for each specific project and ranges from one to three years. Actual economic lives may differ from estimated
useful lives. Periodic reviews could result in a change in estimated useful lives and therefore amortization expense in future periods. During 2015 and 2016, the amortization of capitalized costs totaled approximately $144 million and $85 million,
respectively. Capitalized software and labor costs are included in property and equipment, net. Included in the capitalized amounts above are $5 million and $4 million, respectively, of stock-based compensation expense in the years ended
December 31, 2015 and 2016.
Goodwill.
Goodwill represents the excess of the purchase price over the fair value of the net tangible and
intangible assets acquired in a business combination. Goodwill is not amortized, but is tested for impairment on an annual basis and more frequently if impairment indicators are present. Yahoo Operating Business reporting units are at or one
level below the operating segments level. The reporting units carrying value is compared to its fair value. The estimated fair values of the reporting units are determined using either the market approach, income approach, or a combination of
the market and income approach. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its estimated fair value. The income approach uses expected future operating results and failure to achieve these expected
results may cause a future impairment of goodwill at the reporting unit. If the carrying value of the reporting unit exceeds its estimated fair value, the second step of the goodwill impairment test is performed by comparing the carrying value
of the goodwill in the reporting unit to its implied fair value. The implied fair value is calculated by allocating all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis
that calculates the implied fair value of goodwill in the same manner as if the reporting unit was being acquired in a business combination. An impairment charge is recognized for the excess of the carrying value of goodwill over its implied
estimated fair value. Yahoo Operating Business conducted its annual goodwill impairment test as of October 31. See Note 5Goodwill for results of the goodwill impairment test.
Intangible Assets.
Definite-lived intangible assets are carried at cost and are amortized over their estimated useful lives, generally
on a straight-line basis over one to seven years as the pattern of use is ratable. Yahoo Operating Business reviews identifiable amortizable intangible assets to be held and used for impairment whenever events or changes in circumstances indicate
that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. Intangible
assets with indefinite useful
Annex 2-10
lives are not amortized but are reviewed for impairment whenever events or changes in circumstances indicate that it is more likely than not that the fair value is less than its carrying
amount. If Yahoo Operating Business determines that an intangible asset with an indefinite life is more likely than not impaired, a quantitative test comparing the fair value of the indefinite-lived purchased intangible asset with its carrying
amount is performed. Yahoo Operating Business estimates the fair value of indefinite-lived purchased intangible assets using an income approach. Measurement of any impairment losses on both definite-lived and indefinite-lived intangible assets
are based on the excess of the carrying value of the asset over its fair value. See Note 6Intangible Assets, Net for additional information.
Originally Developed Content and Acquired Content.
Originally developed content and acquired content are both carried at
cost. Originally developed content is amortized based on the expected pattern of viewing. Acquired content is amortized on a straight-line basis over the shorter of each programs contractual window of availability or estimated period of
use, beginning with the month of first availability. Marketing and general and administrative costs are expensed as incurred.
For originally
developed content, Yahoo Operating Business performs regular recoverability assessments on a program-by-program basis. If there are any events or changes in circumstances indicating that Yahoo Operating Business should assess whether the fair value
of originally developed content is less than its unamortized costs, Yahoo Operating Business performs a fair value analysis using an expected cash flow approach. The amount by which the unamortized costs of the originally developed content
exceed estimated fair value is charged to expense as an asset impairment. During the year ended December 31, 2015, Yahoo Operating Business recorded an asset impairment charge of $16 million related to originally developed content.
For acquired content, Yahoo Operating Business compares the net realizable value on a program-by-program basis with the unamortized cost. The amount by which
the unamortized costs of the acquired content exceed net realizable value is charged to expense as an asset impairment. During the year ended December 31, 2015, Yahoo Operating Business recorded an asset impairment charge of $28 million related
to acquired content, primarily driven by a reduction of forecasted revenues to be generated from advertising on Yahoo Properties.
Leasing.
Yahoo Operating Business leases office space and data centers under operating leases and certain data center equipment under capital lease agreements with original lease periods up to 15 years. Assets acquired under capital leases are amortized over
the lesser of the useful life of the asset or the lease term. For the years ended December 31, 2015 and 2016, Yahoo Operating Business expensed $4 million and $3 million of interest related to capital leases, respectively, which approximated
the cash payments made for interest. As of December 31, 2015 and 2016, Yahoo Operating Business had net capital lease obligations included in other short-tem and long-term liabilities on the combined balance sheets of $33 million and $23
million, respectively. Certain of the operating lease agreements contain rent holidays and rent escalation provisions. For purposes of recognizing these lease incentives on a straight-line basis over the term of the lease, Yahoo Operating Business
uses the date that Yahoo Operating Business has the right to control the asset to begin rent expense. Lease renewal periods are considered on a lease-by-lease basis and are generally not included in the period of straight-line recognition of rent
expense.
Yahoo Operating Business establishes assets and liabilities for the estimated construction costs incurred under build-to-suit lease arrangements
to the extent Yahoo Operating Business is involved in the construction of structural improvements or take construction risk prior to commencement of a lease. Upon the right to control the facilities under build-to-suit leases, Yahoo Operating
Business assesses whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If Yahoo Operating Business continues to be the deemed owner, the facilities are accounted for as finance leases.
Income Taxes.
Deferred income taxes are determined based on the differences between the financial reporting and tax bases of assets and
liabilities and are measured using the currently enacted tax rates and laws. Yahoo Operating Business records a valuation allowance against particular deferred income tax assets if it is more likely than not that those assets will not be realized.
The provision for income taxes comprises Yahoo Operating Business current tax liability and change in deferred income tax assets and liabilities.
Annex 2-11
Significant judgment is required in evaluating Yahoo Operating Business uncertain tax positions and
determining its provision for income taxes. Yahoo Operating Business establishes liabilities for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities are established when
Yahoo Operating Business believes that certain positions might be challenged despite its belief that its tax return positions are in accordance with applicable tax laws. Yahoo Operating Business adjusts these liabilities when new information becomes
available, such as the closing of a tax audit, new tax legislation, developments in case law, or interactions with the tax authorities. To the extent that the final tax outcome of these matters is different than the amounts recorded, such
differences will affect the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the effect of changes to liabilities for tax-related uncertainties that are considered appropriate, as
well as the related net interest and penalties. Income taxes paid, net of refunds received, were $37 million and $24 million in the years ended December 31, 2015 and 2016, respectively, if Yahoo Operating Business were to file a tax return on
separate tax return basis. See Note 11Income Taxes for additional information.
Revenue Recognition.
Revenue is generated
from offerings, which include clicks on text-based links to advertisers websites that appear primarily on search results pages (search advertising), the display of graphical, non-graphical, and video advertisements (display
advertising), and other sources.
Search Revenue
. Yahoo Operating Business recognizes revenue from search advertising on Yahoo Properties and
Affiliate sites. Search revenue is recognized based on Paid Clicks. A Paid Click occurs when an end-user clicks on a sponsored listing on Yahoo Properties and Affiliate sites for which an advertiser pays on a per click basis. Yahoo Operating
Business also sells search traffic to certain customers where it does not have a direct relationship with the advertiser, in which case revenue is also recognized based on Paid Clicks. In the Microsoft Search Agreement, Yahoo Operating Business
agreed to request paid search results from Microsoft for 51 percent of search queries originating from desktop computers accessing Yahoo Properties and Affiliate sites (the Volume Commitment). There is no such Volume Commitment for
traffic generated on mobile devices.
On April 15, 2015, the Parent and Microsoft entered into the Eleventh Amendment (the Eleventh Amendment)
to the Microsoft Search Agreement. Pursuant to the Eleventh Amendment, Yahoo Operating Business completed the transition of its exclusive sales responsibilities to Microsoft for Microsofts paid search services to premium advertisers in the
United States, Canada, and Europe on April 1, 2016 and in its remaining markets (other than Taiwan and Hong Kong) on June 1, 2016. Following the transition in each respective market, Yahoo Operating Business is considered the principal in the sale
of traffic to Microsoft and other customers because Yahoo Operating Business is the primary obligor in its arrangements with Microsoft and has discretion in how search queries from Affiliate sites will be fulfilled and monetized. As a result,
amounts paid to Affiliates under the Microsoft Search Agreement in the transitioned markets are recorded as cost of revenuetraffic acquisition costs (TAC) rather than as a reduction to revenue, resulting in revenue from the
Microsoft Search Agreement being reported on a gross rather than net basis.
Effective June 3, 2016, Yahoo and Microsoft further amended the Microsoft Search Agreement to provide that sales responsibilities for premium advertisers in Taiwan
and Hong Kong will not be transitioned. TAC in those markets will continue to be reported as a reduction to revenue.
The table below presents how Yahoo
Operating Business accounted for amounts paid to Affiliates related to the Microsoft Search Agreement in transitioned markets, and shows the impact of the implementation of the Eleventh Amendment in transitioned markets (in thousands):
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|
|
|
|
|
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Years Ended
December 31,
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2015
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2016
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Cost of revenue - TAC in transitioned markets(*)
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$
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$
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812,105
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Reduction to revenue in transitioned markets
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$
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1,269,134
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$
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273,705
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(*)
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For the year ended December 31, 2016, cost of revenueTAC included $701 million in the Americas segment, $106 million in the EMEA segment, and $5 million in the Asia Pacific segment.
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Annex 2-12
See Note 14Microsoft Search Agreement for a description of the Microsoft Search Agreement.
Prior to the Eleventh Amendment, Yahoo Operating Business was entitled to receive a percentage of the revenue (the Revenue Share Rate) generated
from Microsofts services on Yahoo Properties and on Affiliate sites after deduction of the Affiliate sites share of revenue and certain Microsoft costs. The Revenue Share Rate was 88 percent for the first five years of the Microsoft
Search Agreement and then increased to 90 percent on February 23, 2015. Pursuant to the Eleventh Amendment, the Revenue Share Rate increased to 93 percent, but Microsoft now receives its 7 percent revenue share before deduction of the Affiliate
sites share of revenue . The Yahoo Operating Business is responsible for paying the Affiliate for the Affiliate sites share of revenue.
Yahoo
Operating Business also recognizes search revenue generated from mobile and desktop ads served through Yahoo Gemini (Yahoo Operating Business unified marketplace for search and native advertising on Yahoo Properties and Affiliate sites). Yahoo
Operating Business is considered the primary obligor to the advertisers who are the customers of the search advertising service. Accordingly, the search revenue generated from mobile and desktop ads served through Yahoo Gemini that involve traffic
supplied by Affiliates is reported gross of the TAC paid to Affiliates (reported as cost of revenueTAC) as Yahoo Operating Business performs the search service for advertisers.
In October 2015, Yahoo reached an agreement with Google Inc. (Google) that provides Yahoo with additional flexibility to choose among suppliers of
search results and ads. Googles offerings complement the search services provided by Microsoft and Yahoo Gemini. Yahoo Operating Business is considered the principal in the sale of traffic to Google because Yahoo Operating Business is the
primary obligor in its arrangement with Google and has discretion in how search queries from Affiliate sites will be fulfilled and monetized. As a result, amounts paid to Affiliates under the Google agreement are recorded as cost of
revenueTAC. Additionally, Yahoo Operating Business generates search revenue from a revenue sharing arrangement with Yahoo Japan for search technology and services and records the related revenue as reported.
Display Revenue
. Yahoo Operating Business recognizes revenue from display advertising on Yahoo Properties and Affiliate sites as impressions of or
clicks on display advertisements, including native ads, are delivered. Impressions are delivered when a sold advertisement appears in pages viewed by users. Clicks are delivered when a user clicks on an advertisement. Arrangements for these services
generally have terms of up to one year. For display advertising on Affiliate sites, Yahoo Operating Business pays Affiliates from the revenue generated from the display of these advertisements on the Affiliate sites. TAC are payments made to
Affiliates and payments made to companies that direct consumer and business traffic to Yahoo Properties. The display revenue derived from these arrangements that involve traffic supplied by Affiliates is reported gross of the TAC paid to Affiliates
(reported as cost of revenueTAC) when Yahoo Operating Business is the primary obligor to the advertisers who are the customers of the display advertising service.
From time-to-time, Yahoo Operating Business may offer customized display advertising solutions to advertisers. These customized display advertising solutions
combine Yahoo Operating Business standard display advertising with customized content, customer insights, and campaign analysis which are separate units of accounting. Due to the unique nature of these products, Yahoo Operating Business may
not be able to establish selling prices based on historical stand-alone sales or third-party evidence; therefore, Yahoo Operating Business may use its best estimate to establish selling prices. Yahoo Operating Business establishes best estimates
within a range of selling prices considering multiple factors including, but not limited to, class of advertiser, size of transaction, seasonality, margin objectives, observed pricing trends, available online inventory, industry pricing strategies,
and market conditions. Yahoo Operating Business believes the use of the best estimates of selling price allows revenue recognition in a manner consistent with the underlying economics of the transaction.
Other Revenue
. Other revenue includes listings-based services revenue, e-commerce, transaction revenue, royalties, patent licenses, and fees revenue.
Listings-based services revenue is generated from a variety of consumer and business listings-based services, including classified advertising such as Yahoo Local and other
Annex 2-13
services. Yahoo Operating Business recognizes listings-based services revenue when the services are performed. Transaction revenue is generated from facilitating commercial transactions through
Yahoo Properties, principally from Yahoo Small Business, Yahoo Travel, and Yahoo Shopping. Yahoo Operating Business recognizes transaction revenue when there is evidence that qualifying transactions have occurred. The revenue streams associated with
Yahoo Japan and Alibaba Group are considered operational in nature as they relate to licenses of intellectual property that are associated with the core operating business. As such, these amounts are reflected as a part of Yahoo Operating
Business condensed combined statements of operations. Yahoo Operating Business receives royalties from Yahoo Japan which are recognized when earned. Yahoo Operating Business recorded revenue from Yahoo Japan of $228 million and $257 million,
respectively, for the years ended December 31, 2015 and 2016. As of December 31, 2015 and 2016, Yahoo Operating Business had net receivable balances from Yahoo Japan of approximately $37 million and $46 million, respectively. Alibaba
Groups obligation to make royalty payments under the Technology and Intellectual Property License Agreement (the TIPLA) ceased on September 24, 2014 as a result of the Alibaba Groups initial public offering (the Alibaba
Group IPO) of American Depositary Shares (ADSs) and Yahoo Operating Business recognition of the remaining TIPLA deferred revenue was completed on September 18, 2015. Yahoo Operating Business recognized approximately $199
million for the year ended December 31, 2015, related to the TIPLA. Fees revenue consists of revenue generated from a variety of consumer and business fee-based services as well as services for small businesses. Yahoo Operating Business
recognizes fees revenue when the services are performed.
In all cases, revenue is recognized only when the price is fixed or determinable, persuasive
evidence of an arrangement exists, the service is performed, and collectability of the related fee is reasonably assured. Yahoo Operating Business arrangements generally do not include a provision for cancellation, termination, or refunds that
would significantly impact revenue recognition.
Yahoo Operating Business accounts for cash consideration given to customers, for which it does not
receive a separately identifiable benefit and cannot reasonably estimate fair value, as a reduction to revenue.
Current deferred revenue is comprised of
contractual billings in excess of recognized revenue and payments received in advance of revenue recognition. Long-term deferred revenue includes amounts received for which revenue will not be earned within the next 12 months.
Cost of revenueTAC.
TAC consists of payments made to Affiliates and payments made to companies that direct consumer and business traffic
to Yahoo Properties. TAC is either recorded as a reduction to revenue or as cost of revenue TAC.
TAC related to the Microsoft Search
Agreement was recorded as a reduction to revenue for reporting periods through March 31, 2016. Beginning in the second quarter of 2016, TAC related to the Microsoft Search Agreement is recorded as cost of revenueTAC in markets that have
completed the transition of exclusive sales responsibilities to Microsoft for paid search services to premium advertisers pursuant to the Eleventh Amendment as described above. See Note 14Microsoft Search Agreement for additional
information.
TAC recorded as cost of revenue TAC also relates to Yahoo Operating Business other offerings. Yahoo Operating Business
enters into Affiliate agreements of varying duration that involve TAC. There are generally two economic structures of the Affiliate agreements: fixed payments with or without a guaranteed minimum amount of traffic delivered or variable payments
based on a percentage of Yahoo Operating Business revenue or based on a certain metric, such as the number of searches or paid clicks. Yahoo Operating Business expenses TAC under two different methods. Agreements with fixed payments are
expensed ratably over the term the fixed payment covers or as the traffic is delivered. Agreements based on a percentage of revenue, number of searches, or other metrics are expensed based on the volume of the underlying activity or revenue
multiplied by the agreed-upon price or rate.
Annex 2-14
Yahoo Operating Business also has an agreement to compensate a third party, Mozilla Corporation
(Mozilla), to make Yahoo Operating Business the default search provider on certain of Mozillas products in the United States. Yahoo Operating Business records these payments as cost of revenue TAC.
Cost of revenueother.
Cost of revenue-other consists of bandwidth costs, stock-based compensation, content, and other expenses associated
with the production and usage of Yahoo Properties, including expense and amortization of developed technology and patents. Cost of revenueother also includes costs for Yahoos technology platforms and infrastructure, including
depreciation expense of facilities and other operating costs, directly related to revenue generating activities.
Amortization of
Intangibles.
Amortization of customer, affiliate, and advertiser-related relationships and tradenames, trademarks, and domain names are classified within amortization of intangibles. Amortization of developed technology and patents is
included in cost of revenueother.
Product Development.
Product development expenses consist primarily of compensation-related
expenses (including stock-based compensation expense) incurred for research and development, the development of, enhancements to, and maintenance and operation of Yahoo Properties, advertising products, technology platforms, and infrastructure.
Depreciation expense, third-party technology and development expense, and other operating costs are also included in product development.
Advertising Costs.
Costs of advertising are recorded as expense as advertising space or airtime is used. All other advertising costs are
expensed as incurred. Advertising expense totaled approximately $184 million and $135 million for 2015 and 2016, respectively.
Restructuring
Charges.
Yahoo Operating Business has developed and implemented restructuring initiatives to improve efficiencies across the organization, reduce its cost structure, and/or better align its resources with Yahoo Operating Business
product strategy. As a result of these plans, Yahoo Operating Business has recorded restructuring charges comprised principally of employee severance and associated termination costs related to the reduction of its workforce, the consolidation of
certain real estate facilities and data centers, losses on subleases, and contract termination costs. Yahoo Operating Business restructuring plans include one-time termination benefits as well as certain contractual termination benefits or
employee terminations under ongoing benefit arrangements. One-time termination benefits are recognized as a liability at estimated fair value when the approved plan of termination has been communicated to employees, unless employees must provide
future service, in which case the benefits are recognized ratably over the future service period. Ongoing termination benefits arrangements are recognized as a liability at estimated fair value when the amount of such benefits becomes estimable and
payment is probable. Contract termination costs are recognized at estimated fair value when the entity terminates the contract in accordance with the contract terms.
These restructuring initiatives require management to make estimates in several areas including: (i) expenses for severance and other employee separation
costs; (ii) realizable values of assets made redundant, obsolete, or excessive; and (iii) the ability to generate sublease income and to terminate lease obligations at the estimated amounts.
Stock-Based Compensation Expense.
The employees of Yahoo Operating Business participate in various Yahoo Operating Business stock compensation
plans in which equity awards were granted to Yahoo Operating Business employees. Yahoo Operating Business recognizes stock-based compensation expense, net of an estimated forfeiture rate and therefore only recognizes compensation costs for
those shares expected to vest over the service period of the award. Stock-based awards are valued based on the grant date fair value of these awards; Yahoo Operating Business records stock-based compensation expense on a straight-line basis over the
requisite service period, generally one to four years.
Calculating stock-based compensation expense related to stock options requires the input of highly
subjective assumptions, including the expected term of the stock options, stock price volatility, and the pre-vesting
Annex 2-15
forfeiture rate of stock awards. Yahoo Operating Business estimates the expected life of options granted based on historical exercise patterns, which Yahoo Operating Business believes are
representative of future behavior. Yahoo Operating Business estimates the volatility of its common stock on the date of grant based on the implied volatility of publicly traded options on its common stock, with a term of one year or greater. Yahoo
Operating Business believes that implied volatility calculated based on actively traded options on its common stock is a better indicator of expected volatility and future stock price trends than historical volatility. The assumptions used in
calculating the fair value of stock-based awards represent Yahoo Operating Business best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and Yahoo
Operating Business uses different assumptions, Yahoo Operating Business stock-based compensation expense could be materially different in the future. In addition, Yahoo Operating Business is required to estimate the expected pre-vesting award
forfeiture rate, as well as the probability that performance conditions that affect the vesting of certain awards will be achieved, and only recognizes expense for those shares expected to vest. Yahoo Operating Business estimates the forfeiture rate
based on historical experience of Yahoo Operating Business stock-based awards that are granted and cancelled before vesting. See Note 9Employee Benefits for additional information.
Yahoo Operating Business uses the with and without approach in determining the order in which tax attributes are utilized. As a result, Yahoo
Operating Business recognizes a tax benefit from stock-based awards in additional paid-in capital only if an incremental tax benefit is realized after all other tax attributes currently available to Yahoo Operating Business have been utilized. When
tax deductions from stock-based awards are less than the cumulative book compensation expense, the tax effect of the resulting difference (shortfall) is charged first to additional paid-in capital, to the extent of Yahoo Operating
Business pool of windfall tax benefits, with any remainder recognized in income tax expense. Yahoo Operating Business determined that it had a sufficient windfall pool available through the end of 2016 to absorb any shortfalls. In addition,
Yahoo Operating Business accounts for the indirect effects of stock-based awards on other tax attributes, such as the research tax credit, through the combined statements of operations.
Recent Accounting Pronouncements.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and requires entities to recognize revenue in a way that depicts the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which defers by one
year the effective date of ASU 2014-09. Accordingly, this guidance is effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted for interim and annual periods beginning after December 15, 2016. In
March 2016, the FASB issued ASU 2016-08 Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which finalizes its amendments to the guidance in the new revenue standard on assessing whether an entity is a principal
or an agent in a revenue transaction. This conclusion impacts whether an entity reports revenue on a gross or net basis. In April 2016, the FASB issued ASU 2016-10 Identifying Performance Obligations and Licensing which finalizes its
amendments to the guidance in the new revenue standard regarding the identification of performance obligations and accounting for the license of intellectual property. In May 2016, the FASB issued ASU 2016-12 Narrow-Scope Improvements and
Practical Expedients which finalizes its amendments to the guidance in the new revenue standard on collectability, noncash consideration, presentation of sales tax, and transition. The amendments are intended to make the guidance more operable
and lead to more consistent application. The amendments have the same effective date and transition requirements as the new revenue recognition standard. The standard is required to be applied either retrospectively to each prior reporting period
presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. Yahoo Operating Business has not yet selected the transition method. Yahoo Operating Business will adopt the new revenue
standards in its first quarter of 2018. Yahoo Operating Business is currently evaluating the effects, if any, that the adoption of this guidance will have on its financial position, results of operations, and cash flows.
Annex 2-16
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entitys Ability
to Continue as a Going Concern that requires management to evaluate whether there are conditions and events that raise substantial doubt about Yahoo Operating Business ability to continue as a going concern within one year after the
financial statements are issued on both an interim and annual basis. Management is required to provide certain footnote disclosures if it concludes that substantial doubt exists or when its plans alleviate substantial doubt about the Yahoo Operating
Business ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and for annual and interim reporting periods thereafter. The adoption of this ASU did not have any impact on Yahoo
Operating Business disclosures in the footnotes to its combined financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases,
which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single
lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The ASU is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within
those fiscal years. Early adoption is permitted. Yahoo Operating Business is currently evaluating the effects that the adoption of ASU 2016-02 will have on Yahoo Operating Business combined financial statements and anticipates the new
guidance will significantly impact its combined financial statements given Yahoo Operating Business has a significant number of leases.
In March 2016,
the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting as part of its simplification initiative, which involves several aspects of accounting for share-based payment transactions, including the income tax
effects, statutory withholding requirements, forfeitures, and classification on the statement of cash flows. The ASU is effective for public companies for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years.
Yahoo Operating Business will adopt this guidance in the first quarter of 2017. We are currently evaluating the impact to Yahoo Operating Business financial statements, but do not expect it to have a material impact.
In June 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), a consensus of the FASBs Emerging Issues Task
Force. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The ASU is effective for public companies for fiscal years beginning after December 15, 2017,
and interim periods within those fiscal years. Early adoption is permitted, including interim periods within those fiscal years. An entity that elects early adoption must adopt all of the amendments in the same period. The guidance requires
application using a retrospective transition method. Yahoo Operating Business is currently evaluating the effects, if any, that the adoption of this guidance will have on Yahoo Operating Business cash flows.
In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other than Inventory which amends the accounting for
income taxes. The new guidance requires the recognition of the income tax consequences of an intra-entity asset transfer, other than transfers of inventory, when the transfer occurs. For intra-entity transfers of inventory, the income tax
effects will continue to be deferred until the inventory has been sold to a third party. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The new guidance is required to be applied on
a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Yahoo Operating Business is currently evaluating the effects, if any, that the adoption of this
guidance will have on Yahoo Operating Business combined financial statements.
In November 2016, the FASB issued ASU No. 2016-18 Statement of
Cash Flows (Topic 230), Restricted Cash which provides guidance on the presentation of restricted cash and restricted cash equivalents in the statements of cash flows. The new guidance requires restricted cash and restricted cash equivalents
to be included within the cash and cash equivalents balances when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flows. The ASU is effective for reporting periods beginning after December 15, 2017
Annex 2-17
with early adoption permitted. Yahoo Operating Business is currently evaluating the effects, if any, that the adoption of this guidance will have on Yahoo Operating Business cash flows.
In January 2017, the FASB issued ASU No. 2017-04 IntangiblesGoodwill and Other (Topic 350), Simplifying the Test for Goodwill
Impairment which eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets
and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this
ASU an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount
exceeds the reporting units fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill
on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The ASU also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and,
if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit
with a zero or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The ASU is effective for reporting
periods beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Yahoo Operating Business is currently evaluating the effects, if any, that the
adoption of this guidance will have on Yahoo Operating Business combined financial position, results of operations and cash flows.
Note 2 Fair
Value Disclosures
The following table sets forth the financial assets and liabilities, measured at fair value, by level within the fair value
hierarchy as of December 31, 2015 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
Assets
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Time deposits
(1)
|
|
$
|
|
|
|
$
|
81,648
|
|
|
$
|
|
|
|
$
|
81,648
|
|
Foreign currency derivative contracts
(2)
|
|
|
|
|
|
|
5,063
|
|
|
|
|
|
|
|
5,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value
|
|
$
|
|
|
|
$
|
86,711
|
|
|
$
|
|
|
|
$
|
86,711
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency derivative contracts
(2)
|
|
|
|
|
|
|
(1,019
|
)
|
|
|
|
|
|
|
(1,019
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets and liabilities at fair value
|
|
$
|
|
|
|
$
|
85,692
|
|
|
$
|
|
|
|
$
|
85,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the financial assets and liabilities, measured at fair value, by level within the fair value
hierarchy as of December 31, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
Assets
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Time deposits
(1)
|
|
$
|
|
|
|
$
|
39,598
|
|
|
$
|
|
|
|
$
|
39,598
|
|
Foreign currency derivative contracts
(2)
|
|
|
|
|
|
|
11,684
|
|
|
|
|
|
|
|
11,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value
|
|
$
|
|
|
|
$
|
51,282
|
|
|
$
|
|
|
|
$
|
51,282
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency derivative contracts
(2)
|
|
|
|
|
|
|
(1,355
|
)
|
|
|
|
|
|
|
(1,355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets and liabilities at fair value
|
|
$
|
|
|
|
$
|
49,927
|
|
|
$
|
|
|
|
$
|
49,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annex 2-18
(1)
|
Money market funds and time deposits are classified as part of cash and cash equivalents on the combined balance sheets.
|
(2)
|
Foreign currency derivative contracts are classified as part of either current or noncurrent assets or liabilities on the combined balance sheets. The notional amounts of the foreign currency derivative contracts were
$300 million and $361 million as of December 31, 2015 and 2016, respectively.
|
The amount of cash included in cash and cash
equivalents as of December 31, 2015 and 2016 was $443 million and $283 million, respectively.
The fair values of Yahoo Operating
Business Level 1 financial assets and liabilities are based on quoted prices in active markets for identical assets or liabilities. The fair values of Yahoo Operating Business Level 2 financial assets and liabilities are
obtained using quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active; and inputs other than quoted prices (
e.g.
, interest rates and yield curves).
Activity between Levels of the Fair Value Hierarchy
During the years ended December 31, 2015 and 2016, Yahoo Operating Business did not make any transfers between Level 1, Level 2 and Level 3
assets or liabilities.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Goodwill and Definite-Lived Intangible Assets
The
inputs used to measure the estimated fair value of goodwill and definite-lived intangible assets are classified as a Level 3 fair value measurement due to the significance of unobservable inputs using company-specific information. The valuation
methodology used to estimate the fair value of goodwill and definite-lived intangible assets is discussed in Note 5Goodwill and Note 6Intangible Assets, Net.
Other Investments
As of both December 31, 2015
and 2016, Yahoo Operating Business held approximately $19 million of investments in equity securities of privately-held companies that are accounted for using the cost method. These investments are included within other long-term assets and
investments on the combined balance sheets. Such investments are reviewed periodically for impairment.
Note 3 Combined Financial Statement Details
Prepaid Expenses and Other Current Assets
As of
December 31, prepaid expenses and other current assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2016
|
|
Prepaid expenses
|
|
$
|
87,843
|
|
|
$
|
73,671
|
|
Foreign currency forward and option contract assets
|
|
|
4,880
|
|
|
|
11,684
|
|
Other receivables non-trade
|
|
|
167,198
|
|
|
|
33,519
|
|
Restricted cash
(*)
|
|
|
29,678
|
|
|
|
55,168
|
|
Income tax receivables
|
|
|
20,944
|
|
|
|
5,369
|
|
Other
|
|
|
12,941
|
|
|
|
12,398
|
|
|
|
|
|
|
|
|
|
|
Total prepaid expenses and other current assets
|
|
$
|
323,484
|
|
|
$
|
191,809
|
|
|
|
|
|
|
|
|
|
|
(*)
|
The amount represents customer funds received by Yahoo Operating Business in connection with its online
e-commerce services in the Asia Pacific region that are restricted in a separate bank account. In addition, the
|
Annex 2-19
|
balance as of December 31, 2016 also included customer funds received by Yahoo Operating Business in connection with its fantasy sports that are restricted in separate bank accounts.
|
Property and Equipment, Net
As of
December 31, property and equipment, net consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2016
|
|
Land
(1)
|
|
$
|
215,740
|
|
|
$
|
89,960
|
|
Buildings
(1)(2)
|
|
|
840,083
|
|
|
|
935,515
|
|
Leasehold improvements
(2)
|
|
|
252,985
|
|
|
|
249,698
|
|
Computers and equipment
(2)
|
|
|
2,143,413
|
|
|
|
1,901,619
|
|
Capitalized software and labor
|
|
|
643,758
|
|
|
|
679,902
|
|
Furniture and fixtures
(1)
|
|
|
86,418
|
|
|
|
74,526
|
|
Assets not yet in use
|
|
|
83,164
|
|
|
|
15,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,265,561
|
|
|
|
3,946,725
|
|
Less: accumulated depreciation and amortization
(2)
|
|
|
(2,718,238
|
)
|
|
|
(2,736,788
|
)
|
|
|
|
|
|
|
|
|
|
Total property and equipment, net
|
|
$
|
1,547,323
|
|
|
$
|
1,209,937
|
|
|
|
|
|
|
|
|
|
|
(1)
|
During 2016, Yahoo Operating Business completed the sale of certain property located in Santa Clara, California. The total carrying value of the property assets was $126 million, which mostly pertained to the land.
|
(2)
|
Yahoo Operating Business recorded assets under capital leases, primarily for computers and equipment and leasehold improvements, which had gross carrying values of $82 million and $57 million as of
December 31, 2015 and December 31, 2016, respectively. Accumulated amortization related to these capital leases totaled $75 million and $52 million as of December 31, 2015 and December 31, 2016, respectively.
|
Other Long-Term Assets and Investments
As of December 31, other long-term assets and investments consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2016
|
|
Deferred income taxes
|
|
$
|
21,745
|
|
|
$
|
18,228
|
|
Investments in privately-held companies
|
|
|
18,610
|
|
|
|
18,780
|
|
Foreign currency forward contracts
|
|
|
183
|
|
|
|
|
|
Other
|
|
|
70,174
|
|
|
|
39,173
|
|
|
|
|
|
|
|
|
|
|
Total other long-term assets and investments
|
|
$
|
110,712
|
|
|
$
|
76,181
|
|
|
|
|
|
|
|
|
|
|
Annex 2-20
Other Accrued Expenses and Current Liabilities
As of December 31, other accrued expenses and current liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2016
|
|
Accrued content, connection, traffic acquisition, and other costs
|
|
$
|
252,612
|
|
|
$
|
400,172
|
|
Accrued compensation and related expenses
|
|
|
310,111
|
|
|
|
342,354
|
|
Income taxes payable
|
|
|
4,181
|
|
|
|
6,143
|
|
Accrued professional service expenses
|
|
|
39,875
|
|
|
|
29,809
|
|
Accrued sales and marketing related expenses
|
|
|
40,876
|
|
|
|
13,936
|
|
Accrued restructuring costs
|
|
|
40,283
|
|
|
|
27,041
|
|
Current liability for uncertain tax contingencies
|
|
|
12,586
|
|
|
|
2,409
|
|
Other
|
|
|
232,956
|
|
|
|
175,919
|
|
|
|
|
|
|
|
|
|
|
Total other accrued expenses and current liabilities
|
|
$
|
933,480
|
|
|
$
|
997,783
|
|
|
|
|
|
|
|
|
|
|
Deferred and Other Long-Term Tax Liabilities
As of December 31, deferred and other long-term tax liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2016
|
|
Deferred and other income tax
liabilities
(1)
|
|
$
|
63,807
|
|
|
$
|
8,470
|
|
Long-term liability for uncertain tax
contingencies
(2)
|
|
|
342,964
|
|
|
|
344,553
|
|
|
|
|
|
|
|
|
|
|
Total deferred and other long-term tax contingencies
|
|
$
|
406,771
|
|
|
$
|
353,023
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Deferred and other income tax liabilities are presented on a net basis by jurisdiction.
|
(2)
|
Includes interest and penalties.
|
Accumulated Other Comprehensive Loss
As of December 31, the components of accumulated other comprehensive loss were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2016
|
|
Unrealized gains (losses) on cash flow hedges, net of tax
|
|
$
|
482
|
|
|
$
|
(19
|
)
|
Foreign currency translation adjustments, net of tax
|
|
|
(248,775
|
)
|
|
|
(264,464
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
(248,293
|
)
|
|
$
|
(264,483
|
)
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interests
As of December 31, noncontrolling interests were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2016
|
|
Beginning noncontrolling interests
|
|
$
|
43,755
|
|
|
$
|
35,883
|
|
Distributions to noncontrolling interests
|
|
|
(15,847
|
)
|
|
|
(5,948
|
)
|
Net income attributable to noncontrolling interests
|
|
|
7,975
|
|
|
|
4,858
|
|
|
|
|
|
|
|
|
|
|
Ending noncontrolling interests
|
|
$
|
35,883
|
|
|
$
|
34,793
|
|
|
|
|
|
|
|
|
|
|
Annex 2-21
Other (Expense) Income, Net
Other (expense) income, net for 2015 and 2016 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
Interest and investment income
|
|
$
|
4,298
|
|
|
$
|
2,834
|
|
Interest expense
|
|
|
(8,803
|
)
|
|
|
(7,322
|
)
|
Foreign exchange (loss) gain
|
|
|
(23,311
|
)
|
|
|
4,283
|
|
Other
|
|
|
3,127
|
|
|
|
4,297
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income, net
|
|
$
|
(24,689
|
)
|
|
$
|
4,092
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income consists of income earned from cash and cash equivalents in bank accounts.
Interest expense consists of notes payable related to building and capital lease obligations for data centers.
Foreign exchange (loss) gain consists of foreign exchange gains and losses due to re-measurement of monetary assets and liabilities denominated in
non-functional currencies, and unrealized and realized foreign currency transaction gains and losses, including gains and losses related to balance sheet hedges. Additionally, in 2016, Yahoo Operating Business reclassified certain unrealized
currency translation adjustments from accumulated other comprehensive loss and realized a net gain of $20 million due to the liquidation of foreign subsidiaries.
Other consists of gains from other non-operational items.
Reclassifications Out of Accumulated Other Comprehensive Loss
Reclassifications out of accumulated other comprehensive loss for the period ended December 31, 2015 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Amount
Reclassified from
Accumulated
Other
Comprehensive
Loss
|
|
|
Affected Line Item in the
Statement of Operations
|
|
Realized losses on cash flow hedges, net of tax
|
|
$
|
4,421
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
|
$
|
4,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications out of accumulated other comprehensive loss for the period ended December 31, 2016 were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
Amount
Reclassified from
Accumulated
Other
Comprehensive
Loss
|
|
|
Affected Line Item in the
Statement of Operations
|
Realized losses on cash flow hedges, net of tax
|
|
$
|
4,298
|
|
|
Revenue
|
Realized (gains) losses on foreign currency translation adjustments (CTA):
|
|
|
|
|
|
|
Liquidation of foreign subsidiary CTA reclassification
|
|
|
1,110
|
|
|
Restructuring charges, net
|
Liquidation of foreign subsidiary CTA reclassification
|
|
|
(21,204
|
)
|
|
Other (expense) income, net
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
|
$
|
(15,796
|
)
|
|
|
|
|
|
|
|
|
|
Annex 2-22
Note 4 Acquisitions And Dispositions
The following table summarizes acquisitions (including business combinations and asset acquisitions) completed during the year ended December 31, 2015 (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
Price
|
|
|
Goodwill
|
|
|
Amortizable
Intangibles
|
|
Polyvore
|
|
$
|
161
|
|
|
$
|
131
|
|
|
$
|
19
|
|
Other acquisition
|
|
$
|
23
|
|
|
$
|
22
|
|
|
$
|
5
|
|
At the completion date of each acquisition, Yahoo Operating Business recorded goodwill where the purchase price exceeded the
fair value of the net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but is tested for impairment at the reporting unit level on an annual basis and more frequently if impairment indicators are present. The majority
of the goodwill originating from these acquisitions was subsequently impaired in the fourth quarter of 2015. See Note 5Goodwill for results of the goodwill impairment test.
Transactions completed in 2015
Polyvore.
On
September 2, 2015, Yahoo Operating Business acquired Polyvore, Inc. (Polyvore), a social commerce website that lets users across the globe discover and shop for their favorite products in fashion, beauty and home décor.
The total purchase price of approximately $161 million consisted of cash consideration. Under the terms of the agreement, Yahoo Operating Business acquired
all of the equity interests (including all outstanding vested options) of Polyvore. Outstanding Polyvore unvested options were assumed and converted into equivalent awards for Yahoo common stock valued at $7 million, which is being recognized by
Yahoo Operating Business as stock-based compensation expense as the options vest over periods of up to four years from the date of the acquisition.
Separately, in connection with the acquisition, Yahoo Operating Business is also recognizing stock-based compensation expense of $15 million over a period of
four years from the date of the acquisition. This amount is comprised of Yahoo common stock issued to the founders (which had a fair value of $15 million at the acquisition date). As part of the Sale Transaction, the Parent retains the obligation to
distribute the Yahoo common stock held in escrow that was issued to the founders, but is subject to forfeiture and will be released over four years from the date of the acquisition provided they remain employees of Yahoo Operating Business (or a
successor company).
The allocation of the purchase price of the assets acquired and liabilities assumed based on their fair values was as follows (in
thousands):
|
|
|
|
|
Cash acquired
|
|
$
|
6,019
|
|
Other tangible assets acquired
|
|
|
12,057
|
|
Amortizable intangible assets:
|
|
|
|
|
Developed technology
|
|
|
17,550
|
|
Tradename
|
|
|
1,150
|
|
Customer contracts and related relationships
|
|
|
225
|
|
Goodwill
|
|
|
131,084
|
|
|
|
|
|
|
Total assets acquired
|
|
|
168,085
|
|
Liabilities assumed
|
|
|
(7,503
|
)
|
|
|
|
|
|
Total
|
|
$
|
160,582
|
|
|
|
|
|
|
Annex 2-23
The amortizable intangible assets have useful lives not exceeding five years and a weighted average useful life
of three years. The purchase price of $161 million exceeded the estimated fair value of the tangible and identifiable intangible assets and liabilities acquired and, as a result of the allocation, Yahoo Operating Business recorded goodwill of $131
million in connection with this transaction. Goodwill represented the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired and is not deductible for tax purposes. The entire
goodwill amount was recorded in the Americas segment.
Other Acquisitions
During the year ended December 31, 2015, Yahoo Operating Business
acquired one other company which was accounted for as a business combination. The total purchase price for this acquisition was $23 million. The purchase price allocation of the assets acquired and liabilities assumed based on their estimated fair
values was as follows: $5 million to amortizable intangibles; $4 million to net liabilities assumed; and the remainder of $22 million to goodwill. Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible
and identifiable intangible assets acquired and is not deductible for tax purposes. The entire goodwill amount was recorded in the EMEA segment.
Yahoo Operating Business business combinations completed during the year ended December 31, 2015 did not have a material impact on Yahoo Operating
Business combined statements of operations, and therefore proforma disclosures have not been presented.
Yahoo Operating Business did not make any
acquisitions during the year ended December 31, 2016.
Patent Sale and License Agreement
During 2014, Yahoo Operating Business entered into a patent sale and license agreement for total cash consideration of $460 million. The total
consideration was allocated based on the estimated relative fair value of each of the elements of the agreement: $61 million was allocated to the sale of patents (Sold Patents), $135 million to the license to existing patents
(Existing Patents) and $264 million to the license of patents developed or acquired in the five years following the date Yahoo Operating Business entered into such agreement (Capture Period Patents).
The amounts allocated to the license of the Existing Patents are being recorded as revenue over the four-year payment period under the license when payments
are due. The amounts allocated to the Capture Period Patents are being recorded as revenue over the five-year capture period. Yahoo Operating Business recognized $86 million in revenue related to the Existing Patents and the Capture Period
Patents in each of the years ended December 31, 2015 and 2016.
Patent Sale Agreements
During 2015 and 2016, Yahoo Operating Business sold certain patents and recorded a gain on sale of patents of approximately $11 million and
$2 million, respectively.
Sale of Santa Clara Property
During 2016, Yahoo Operating Business entered into a purchase agreement to sell certain property located in Santa Clara, California. The total carrying value
of the property assets was $126 million, which mostly pertained to the land, and was reported within the Americas segment. The decision to sell this property was largely based upon a general lack of operational need for the land and recent
improvements in market conditions for commercial real estate in the area. The sale under the purchase agreement was finalized on June 16, 2016 for total proceeds of $246 million, net of closing costs of $4 million. During the year
ended December 31, 2016, Yahoo Operating Business recorded a gain of $120 million, net of closing costs, on the sale of the property assets which is included in gain on sale of patents and land in our combined statements of operations.
Annex 2-24
Note 5 Goodwill
The changes in the carrying amount of goodwill for the years ended December 31, 2015 and 2016 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
(1)
|
|
|
EMEA
(2)
|
|
|
Asia Pacific
(3)
|
|
|
Total
|
|
Net balance as of January 1, 2015
|
|
$
|
4,322,219
|
|
|
$
|
532,469
|
|
|
$
|
297,882
|
|
|
$
|
5,152,570
|
|
Acquisitions and related adjustments
|
|
|
130,450
|
|
|
|
21,606
|
|
|
|
|
|
|
|
152,056
|
|
Goodwill impairment charge
|
|
|
(3,929,576
|
)
|
|
|
(531,261
|
)
|
|
|
|
|
|
|
(4,460,837
|
)
|
Foreign currency translation adjustments
|
|
|
(4,207
|
)
|
|
|
(22,814
|
)
|
|
|
(8,654
|
)
|
|
|
(35,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance as of December 31, 2015
|
|
$
|
518,886
|
|
|
$
|
|
|
|
$
|
289,228
|
|
|
|
808,114
|
|
Goodwill impairment charge
|
|
|
(394,901
|
)
|
|
|
|
|
|
|
|
|
|
|
(394,901
|
)
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
2,596
|
|
|
|
2,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance as of December 31, 2016
|
|
$
|
123,985
|
|
|
|
|
|
|
$
|
291,824
|
|
|
$
|
415,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Gross goodwill balances for the Americas segment were $4.3 billion as of January 1, 2015 and $4.4 billion as of December 31, 2016. The Americas segment includes accumulated impairment losses of
$4.3 billion as of December 31, 2016.
|
(2)
|
Gross goodwill balances for the EMEA segment were $1.2 billion as of January 1, 2015 and December 31, 2016. The EMEA segment includes accumulated impairment losses of $630 million as of
January 1, 2015, and $1.2 billion as of December 31, 2016
|
(3)
|
Gross goodwill balances for the Asia Pacific segment were $457 million as of January 1, 2015 and $451 million as of December 31, 2016. The Asia Pacific segment includes accumulated impairment losses
of $159 million as of January 1, 2015 and December 31, 2016.
|
Goodwill Impairment Testing
Goodwill is not amortized but is tested for impairment annually (as of October 31) at the reporting unit level or whenever Yahoo Operating Business identifies
certain triggering events or circumstances that would more likely than not reduce the estimated fair value of a reporting unit below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted include, among
other things, unexpected adverse business conditions, regulatory changes, loss of key personnel and reporting unit and macro-economic factors such as deterioration in general economic conditions, limitations on accessing capital, fluctuations in
foreign exchange rates, or other developments in equity and credit markets.
Goodwill is tested for impairment at the reporting unit level, which is at or
one level below Yahoo Operating Business operating segments. Yahoo Operating Business identified U.S. & Canada, Latin America, and Tumblr as the reporting units below the Americas operating segment; EMEA is the reporting unit as well
as the operating segment; and Taiwan, Hong Kong, Australia & New Zealand, India & Southeast Asia as the reporting units below the Asia Pacific operating segment. These operating segments are the same as Yahoo Operating
Business reportable segments.
To test for impairment, Yahoo Operating Business uses the two-step quantitative test.
Step One
The first step of the quantitative test
involves comparing the estimated fair value of Yahoo Operating Business reporting units to their carrying values, including goodwill.
To estimate
fair value, the company uses the market approach, income approach, or a combination of the two. Under the market approach, Yahoo Operating Business utilizes publicly-traded comparable company information to determine revenue and earnings multiples
that are used to value Yahoo Operating Business reporting units.
Annex 2-25
Under the income approach, Yahoo Operating Business determines fair value based on estimated future cash flows of each reporting unit discounted by an estimated weighted-average cost of capital,
reflecting the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn. Yahoo Operating Business bases cash flow projections for each reporting unit using a forecast of cash flows and a
terminal value based on the Perpetuity Growth Model.
Step Two
For any reporting units, where the carrying value exceeds the estimated fair value, as determined in step one, Yahoo Operating Business performs step two to
measure the amount of impairment, if any. The second step of the quantitative test is performed by comparing the carrying value of the goodwill in the reporting unit to its implied fair value. The implied fair value is calculated by allocating all
of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the reporting unit was being acquired in a
business combination. An impairment charge is recognized for the excess of the carrying value of goodwill over its implied fair value.
2016
Impairment Testing
Interim
Test
.
After recording the goodwill impairment charge for Tumblr during the fourth quarter of 2015,
the fair value of the Tumblr reporting unit approximated its carrying value. As such, any significant unfavorable changes in the forecast would result in the fair value being less than the carrying value. During the second quarter of 2016, Yahoo
Operating Business determined that there were indicators present to suggest that it was more likely than not that the fair value of the Tumblr reporting unit was less than its carrying amount. The significant changes for the Tumblr reporting unit
subsequent to the annual goodwill impairment test performed as of October 31, 2015 included a decline in the 2016 and beyond forecasted revenue, operating income and cash flows.
To test the Tumblr reporting unit for impairment, Yahoo Operating Business used the two-step quantitative test. Consistent with methodology used for the prior
years annual goodwill impairment testing, Yahoo Operating Business estimated the fair value of the Tumblr reporting unit using an income approach which was deemed to be the most indicative of fair value in an orderly transaction between market
participants. Under the income approach, Yahoo Operating Business determined fair value based on estimated future cash flows of the Tumblr reporting unit discounted by an estimated weighted-average cost of capital, reflecting the overall level of
inherent risk of the Tumblr reporting unit and the rate of return an outside investor would expect to earn. Yahoo Operating Business based its cash flow projections for the Tumblr reporting unit using a forecast of cash flows and a terminal value
based on the Perpetuity Growth Model. The forecast and related assumptions were derived from an updated financial forecast prepared during the second quarter of 2016. As a result of the analysis, Yahoo Operating Business concluded that the carrying
value of the Tumblr reporting unit exceeded its estimated fair value.
The second step of the quantitative test was performed by comparing the carrying value of the goodwill in the Tumblr reporting unit to its implied fair value. The step two
quantitative test for the Tumblr reporting unit resulted in an impairment for the Tumblr reporting unit, and Yahoo Operating Business recorded a goodwill impairment charge of $395 million during the second quarter of 2016.
Annual
Test
.
As of October 31, 2016, Yahoo Operating Business conducted its annual impairment test and no additional impairment was
identified.
The remaining goodwill related to the Tumblr reporting unit as of December 31, 2016 was $124 million, which is included in the
Americas operating segment. As of December 31, 2016, there was also goodwill remaining for Taiwan, Hong Kong, and Australia & New Zealand reporting units, which are included in the Asia Pacific operating segment.
Annex 2-26
2015 Impairment Testing
In 2015, the estimated fair values of the reporting units for all reporting units identified, except for Tumblr and Latin America, were estimated using a
combination of a market approach and an income approach, giving equal weighting to each. This combination is deemed to be the most indicative of the reporting units estimated fair value in an orderly transaction between market participants and
is consistent with the methodology used for the goodwill impairment test in prior years. For the Tumblr reporting unit, the fair value was estimated using an income approach which was deemed to be the most indicative of fair value in an orderly
transaction between market participants. For the Latin America reporting unit, the fair value was estimated using the market approach as the income approach yielded negative cash flows and was not deemed to be comparable. The forecast and
related assumptions were derived from the most recent annual financial forecast for which the planning process commenced in the fourth quarter of 2015. The estimated fair values of Yahoo Operating Business Taiwan, Hong Kong, and Australia
& New Zealand reporting units exceeded their estimated carrying values and therefore goodwill in those reporting units was not impaired. In 2015, the carrying value exceeded the fair value for the following reporting units: U.S. &
Canada, Europe, Tumblr and Latin America. Yahoo Operating Business completed an assessment of the implied fair value of these reporting units, which resulted in an impairment of all goodwill for the U.S. & Canada, Europe, and Latin America
reporting units and a partial impairment for the Tumblr reporting unit. Yahoo Operating Business recorded goodwill impairment charges of $3,692 million, $531 million, $230 million and $8 million, associated with the U.S. &
Canada, Europe, Tumblr, and Latin America reporting units, respectively, for the year ended December 31, 2015. The impairments were a result of a combination of factors, including a sustained decrease in Yahoo Operating Business market
capitalization in fourth quarter of 2015 and lower estimated projected revenue and profitability in the near term. The lower estimated projected cash flows and higher discount rates were used to estimate the fair value of each reporting unit
affected by such changes.
Note 6 Intangible Assets, Net
The following table summarizes Yahoo Operating Business intangible assets, net (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
(*)
|
|
|
Net
|
|
Customer, affiliate, and advertiser related relationships
|
|
$
|
355,568
|
|
|
$
|
(135,513
|
)
|
|
$
|
220,055
|
|
Developed technology and patents
|
|
|
170,289
|
|
|
|
(83,380
|
)
|
|
|
86,909
|
|
Tradenames, trademarks, and domain names
|
|
|
67,119
|
|
|
|
(26,814
|
)
|
|
|
40,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets, net
|
|
$
|
592,976
|
|
|
$
|
(245,707
|
)
|
|
$
|
347,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
(*)
|
|
|
Impairment
Charge
|
|
|
Net
|
|
Customer, affiliate, and advertiser related relationships
|
|
$
|
350,896
|
|
|
$
|
(181,451
|
)
|
|
$
|
(66,680
|
)
|
|
$
|
102,765
|
|
Developed technology and patents
|
|
|
128,732
|
|
|
|
(81,489
|
)
|
|
|
|
|
|
|
47,243
|
|
Tradenames, trademarks, and domain names
|
|
|
66,631
|
|
|
|
(34,340
|
)
|
|
|
(20,655
|
)
|
|
|
11,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets, net
|
|
$
|
546,259
|
|
|
$
|
(297,280
|
)
|
|
$
|
(87,335
|
)
|
|
$
|
161,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Cumulative foreign currency translation adjustments, reflecting movement in the currencies of the underlying entities, totaled approximately $18 million and $17 million for the years ended as of
December 31, 2015 and 2016, respectively.
|
Annex 2-27
Definite-lived intangible assets are carried at cost and are amortized over their estimated useful lives,
generally on a straight-line basis, as follows:
|
|
|
Customer, affiliate, and advertiser related relationshipsone to six years;
|
|
|
|
Developed technology and patentsthree to six years; and
|
|
|
|
Tradenames, trademarks, and domain namesthree to seven years.
|
Yahoo Operating Business recognized
amortization expense for intangible assets of $137 million and $100 million for 2015 and 2016, respectively, including $58 million and $42 million, respectively, included in cost of revenue-other. Based on the current amount of
intangibles subject to amortization, the estimated amortization expense for each of the succeeding years is as follows: 2017: $76 million; 2018: $55 million; 2019: $30 million; and 2020 and after: $1 million.
Intangibles Impairment Testing
Yahoo Operating Business
reviews identifiable intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level
of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. Intangible assets with indefinite useful lives are not amortized but are reviewed for impairment whenever events or changes in
circumstances indicate that it is more likely than not that the fair value is less than its carrying amount. If Yahoo Operating Business determines that an intangible asset with an indefinite life is more likely than not impaired, a quantitative
test comparing the fair value of the indefinite-lived purchased intangible asset with its carrying amount is performed. Yahoo Operating Business estimates the fair value of indefinite-lived purchased intangible assets using an income approach.
Measurement of any impairment losses on both definite-lived and indefinite-lived intangible assets are based on the excess of the carrying value of the asset over its fair value.
As a result of the impairment testing performed in the fourth quarter of 2015, the entire carrying value of the indefinite-lived intangible assets were fully
impaired as of December 31, 2015, and Yahoo Operating Business did not purchase any indefinite-lived intangibles during 2016. As of December 31, 2016, Yahoo Operating Business only had definite-lived intangible assets.
2016 Testing
During the second quarter of 2016,
Yahoo Operating Business reviewed its Tumblr asset group for impairment as there were events and changes in circumstances that indicated that the carrying value of the long-lived assets may not be recoverable. As a result, Yahoo Operating Business
performed a quantitative test comparing the fair value of the Tumblr long-lived assets with the carrying amounts and recorded a partial impairment charge of $87 million associated with its definite-lived intangible assets, which were included
within customer, affiliate, and advertiser related relationships and tradenames, trademarks, and domain names in the Americas segment.
In the fourth
quarter of 2016, Yahoo Operating Business reviewed its definite-lived intangible assets for impairment. No impairment was identified for definite-lived intangibles.
2015 Testing
In the fourth quarter of 2015, Yahoo
Operating Business reviewed both definite-lived and indefinite-lived intangible assets for impairment. No impairment was identified for definite-lived intangibles. For indefinite-lived intangibles, Yahoo Operating Business performed a
quantitative test comparing the fair value of the indefinite-lived intangible assets with their carrying amount and recorded an impairment charge of $15 million related to certain indefinite-lived intangible assets in the EMEA segment. As a
result, the entire carrying value of the indefinite-lived intangible assets was fully impaired as of December 31, 2015.
Annex 2-28
Note 7 Foreign Currency Derivative Financial Instruments
Yahoo Operating Business uses derivative financial instruments, primarily forward contracts, to mitigate risk associated with adverse movements in foreign
currency exchange rates.
Yahoo Operating Business records all derivatives in the combined balance sheets at fair value, with assets included in prepaid
expenses and other current assets or other long-term assets, and liabilities included in accrued expenses and other current liabilities or other long-term liabilities. Yahoo Operating Business accounting treatment for these instruments is
based on whether or not the instruments are designated as a hedging instrument. The effective portions of cash flow hedges are recorded in accumulated other comprehensive loss until the hedged item is recognized in revenue on the combined statements
of operations when the underlying hedged revenue is recognized. Any ineffective portions of cash flow hedges are recorded in other (expense) income, net on Yahoo Operating Business combined statements of operations. For balance sheet hedges,
changes in the fair value are recorded in other (expense) income, net on Yahoo Operating Business combined statements of operations.
Yahoo
Operating Business enters into master netting arrangements, which are designed to reduce credit risk associated with contracts held by Yahoo Operating Business by permitting net settlement of foreign exchange contracts with the same counterparty,
subject to applicable requirements. Yahoo Operating Business presents its derivative assets and liabilities at their gross fair values on the combined balance sheets. Yahoo Operating Business is not required to pledge, and is not entitled to
receive, cash collateral related to these derivative transactions.
Designated as Hedging Instruments
Cash Flow Hedges.
Yahoo Operating Business entered into foreign currency forward contracts designated as cash flow hedges of varying maturities
through January 31, 2017. The cash flow hedges were considered to be effective as of December 31, 2015 and 2016. All of the forward contracts designated as cash flow hedges that were settled were reclassified to revenue within fiscal years
2015 and 2016, and Yahoo Operating Business recognized the hedge forecasted revenue related to these contacts as of December 31, 2015 and 2016. These trades were de-designated as of December 31, 2016 and all current outstanding cash flow
hedges have been reclassified into revenue during 2016. For the years ended December 31, 2015 and 2016, the amounts recorded in other (expense) income, net as a result of hedge ineffectiveness were not material.
Not Designated as Hedging Instruments
Balance
Sheet Hedges.
Yahoo Operating Business hedges certain of its net recognized foreign currency assets and liabilities with foreign exchange forward contracts to reduce the risk that its earnings and cash flows will be adversely affected by
changes in foreign currency exchange rates. These derivative instruments hedge assets and liabilities, including intercompany transactions, which are denominated in foreign currencies.
Notional amounts of Yahoo Operating Business outstanding derivative contracts as of December 31, 2015 and 2016 (in millions) were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2016
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
Cash flow hedge forwards
|
|
$
|
75
|
|
|
$
|
19
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
Balance sheet hedges
|
|
$
|
225
|
|
|
$
|
342
|
|
Annex 2-29
Foreign currency derivative activity for the year ended December 31, 2015 was as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
Fair Value
|
|
|
Settlement
Payment
(Receipt), Net
|
|
|
Gain (Loss)
Recorded in
Other (Expense)
Income, Net
|
|
|
Gain (Loss)
Recorded in
Other
Comprehensive
Loss
|
|
|
Gain
(Loss)
Recorded
in
Revenue
|
|
|
Ending Fair
Value
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
|
$
|
8
|
|
|
$
|
|
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
$
|
(3
|
)
|
|
$
|
2
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet hedges
|
|
$
|
4
|
|
|
$
|
(21
|
)
|
|
$
|
19
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2
|
|
Foreign currency derivative activity for the year ended December 31, 2016 was as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
Fair Value
|
|
|
Settlement
Payment
(Receipt), Net
|
|
|
Gain (Loss)
Recorded in
Other (Expense)
Income, Net
|
|
|
Gain (Loss)
Recorded in
Other
Comprehensive
Loss
|
|
|
Gain
(Loss)
Recorded
in
Revenue
|
|
|
Ending Fair
Value
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
|
$
|
2
|
|
|
$
|
5
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
(7
|
)
|
|
$
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet hedges
|
|
$
|
2
|
|
|
$
|
(4
|
)
|
|
$
|
13
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
11
|
|
Foreign currency derivative contracts balance sheet location and ending fair value was as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
Location
|
|
|
December 31,
2015
|
|
|
December 31,
2016
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
|
|
Asset
(1)
|
|
|
$
|
2
|
|
|
$
|
|
|
|
|
|
Liability
(2)
|
|
|
$
|
|
|
|
$
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet hedges
|
|
|
Asset
(1)
|
|
|
$
|
3
|
|
|
$
|
12
|
|
|
|
|
Liability
(2)
|
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
(1)
|
Included in prepaid expenses and other current assets or other long-term assets and investments on the combined balance sheets.
|
(2)
|
Included in other accrued expenses and current liabilities or other long-term liabilities on the combined balance sheets.
|
See the Foreign Currency Derivative Financial Instruments section within Note 1Yahoo Operating Business and Summary of Significant Accounting
Policies for additional information.
Note 8 Commitments And Contingencies
Lease Commitments.
Yahoo Operating Business leases office space and data centers under operating and capital lease agreements with original lease
periods of up to 15 years which expire between 2017 and 2025.
Rent expense for all operating leases was approximately $77 million and
$60 million for 2015 and 2016, respectively.
Annex 2-30
Many of Yahoo Operating Business leases contain one or more of the following options which Yahoo Operating
Business can exercise at the end of the initial lease term: (i) renewal of the lease for a defined number of years at the then fair market rental rate or at a slight discount to the fair market rental rate; (ii) purchase of the property at
the then fair market value; or (iii) right of first offer to lease additional space that becomes available.
A summary of gross and net lease
commitments as of December 31, 2016 was as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Operating
Lease
Commitments
|
|
|
Sublease
Income
|
|
|
Net Operating
Lease
Commitments
|
|
Years ending December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
$
|
103
|
|
|
$
|
(16
|
)
|
|
$
|
87
|
|
2018
|
|
|
75
|
|
|
|
(12
|
)
|
|
|
63
|
|
2019
|
|
|
60
|
|
|
|
(9
|
)
|
|
|
51
|
|
2020
|
|
|
47
|
|
|
|
(7
|
)
|
|
|
40
|
|
2021
|
|
|
37
|
|
|
|
(5
|
)
|
|
|
32
|
|
Due after 5 years
|
|
|
86
|
|
|
|
(2
|
)
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross and net lease commitments
|
|
$
|
408
|
|
|
|
(51
|
)
|
|
$
|
357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Lease
Commitments
|
|
Years ending December 31,
|
|
|
|
|
2017
|
|
$
|
11
|
|
2018
|
|
|
9
|
|
2019
|
|
|
5
|
|
2020
|
|
|
|
|
2021
|
|
|
|
|
Due after 5 years
|
|
|
3
|
|
|
|
|
|
|
Gross capital lease commitments
|
|
$
|
28
|
|
Less: interest
|
|
|
5
|
|
|
|
|
|
|
Net capital lease commitments included in other accrued expenses and current liabilities and other
long-term liabilities
|
|
$
|
23
|
|
|
|
|
|
|
Affiliate Commitments.
Yahoo Operating Business is obligated to make payments, which represent TAC, to its
Affiliates. As of December 31, 2016, these commitments totaled $925 million, of which $300 million will be payable in each of 2017, 2018, and 2019, and $25 million will be payable in 2020.
Non-cancelable Obligations.
Yahoo Operating Business is obligated to make payments under various non-cancelable arrangements with vendors and
other business partners, principally for content, bandwidth, and marketing arrangements. As of December 31, 2016, these commitments totaled $172 million, of which $86 million will be payable in 2017, $55 million will be payable
in 2018, $17 million will be payable in 2019, $4 million will be payable in 2020, $3 million will be payable in 2021, and $7 million will be payable thereafter.
Intellectual Property Rights.
Yahoo Operating Business is committed to make certain payments under various intellectual property arrangements of
up to $12 million through 2023.
Note Payable Obligations.
Yahoo Operating Business is obligated to make payments for
notes payable related to two buildings in Sunnyvale, California. The estimated timing and amounts of payments totaled $52 million, of which $5 million will be payable each year from 2017 through 2021, and $27 million will be payable
thereafter.
Annex 2-31
Standby Letters of Credit.
As of December 31, 2016, Yahoo Operating Business had
outstanding potential obligations relating to standby letters of credit of $38 million. Standby letters of credit are financial guarantees provided by third parties for ongoing operating liabilities such as leases, utility bills, taxes, and
insurance. If any letter of credit is drawn upon by a beneficiary, Yahoo Operating Business is obligated to reimburse the provider of the guarantee. The standby letters of credit generally renew annually.
Other Commitments.
In the ordinary course of business, Yahoo Operating Business may provide indemnifications of varying scope and terms to
customers, vendors, lessors, joint ventures and business partners, purchasers of assets or subsidiaries and other parties with respect to certain matters, including, but not limited to, losses arising out of Yahoo Operating Business breach of
agreements or representations and warranties made by Yahoo Operating Business, services to be provided by Yahoo Operating Business, intellectual property infringement claims made by third parties or, with respect to the sale, lease, or assignment of
assets, or the sale of a subsidiary, matters related to Yahoo Operating Business conduct of the business and tax matters prior to the sale, lease or assignment. In addition, Yahoo Operating Business has also agreed to indemnify certain former
officers, directors, and employees of acquired companies in connection with the acquisition of such companies. Yahoo Operating Business maintains director and officer insurance, which may cover certain liabilities arising from its obligation to
indemnify its current and former directors and officers, and former directors and officers of acquired companies, in certain circumstances. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements
due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements might not be subject to maximum loss clauses. Historically, Yahoo Operating
Business has not incurred material costs as a result of obligations under these agreements and it has not accrued any material liabilities related to such indemnification obligations in Yahoo Operating Business combined financial statements.
As of December 31, 2016, Yahoo Operating Business did not have any relationships with uncombined entities or financial partnerships, such as
entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Accordingly, Yahoo Operating Business is not
exposed to any financing, liquidity, market, or credit risk that could arise if Yahoo Operating Business had such relationships. In addition, Yahoo Operating Business identified no variable interests currently held in entities for which it is the
primary beneficiary.
Legal Contingencies
Patent Matters.
From time to time, third parties assert patent infringement claims against Yahoo Operating Business.
Currently, Yahoo Operating Business is engaged in lawsuits regarding patent issues and has been notified of other potential patent disputes.
TCPA Litigation Concerning Yahoo Messenger.
On March 21, 2014 and April 16, 2014, civil complaints were filed in the U.S.
District Court for the Northern District of Illinois by plaintiffs Rachel Johnson and Zenaida Calderin, respectively, against Yahoo, alleging that the process by which Yahoo Messenger sends a notification SMS message in addition to delivering a
users instant message to a recipients cellular telephone constitutes a violation of the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227. The penalty per violation ranges from $500 to $1,500. The
complaints, which were consolidated, seek statutory damages for a purported class of plaintiffs. In January 2016, the District Court denied class certification treatment proposed by plaintiff Calderin, who accepted a $1,500 offer of
judgment to resolve her case in its entirety. The District Court certified a class proposed by plaintiff Johnson comprising more than 300,000 potential members. Yahoo sought permission from the United States Court of Appeals for the Seventh Circuit
to appeal the District Courts certification order, which the Court of Appeals denied. On March 1, 2017, Yahoo filed a motion for decertification of the class. No decision has been made on the merits of plaintiffs claims, which Yahoo is
defending vigorously. Yahoo also previously defended related litigation in the United States District Court for the Southern District of California, which denied class certification in September 2015; that case was dismissed with prejudice in March
2016.
Annex 2-32
General.
Yahoo Operating Business is regularly involved in claims, suits, government
investigations, and proceedings arising from the ordinary course of Yahoo Operating Business business, including actions with respect to intellectual property claims, privacy, consumer protection, information security, data protection or law
enforcement matters, tax matters, labor and employment claims, commercial claims, as well as actions involving content generated by users, stockholder derivative actions, purported class action lawsuits, and other matters.
Yahoo has determined, based on current knowledge, that the amount or range of reasonably possible losses, including reasonably possible losses in excess of
amounts already accrued, is not reasonably estimable with respect to certain matters described above. Yahoo has also determined, based on current knowledge, that the aggregate amount or range of losses that are estimable with respect to Yahoo
Operating Business legal proceedings, including the matters described above, would not have a material adverse effect on Yahoo Operating Business combined financial position, results of operations or cash flows. Amounts accrued as of
December 31, 2016 were not material. The ultimate outcome of legal proceedings involves judgments, estimates and inherent uncertainties, and cannot be predicted with certainty. In the event of a determination adverse to Yahoo, its subsidiaries,
directors, or officers in these matters, Yahoo Operating Business may incur substantial monetary liability, and be required to change its business practices. Either of these events could have a material adverse effect on Yahoo Operating
Business combined financial position, results of operations, or cash flows. Yahoo Operating Business may also incur substantial legal fees, which are expensed as incurred, in defending against these claims.
Security Incidents Contingencies
On September 22,
2016, Yahoo disclosed that a copy of certain user account information for approximately 500 million user accounts was stolen from Yahoo Operating Business network in late 2014 (the 2014 Security Incident). On December 14, 2016,
Yahoo disclosed that, based on its outside forensic experts analysis of data files provided to Yahoo in November 2016 by law enforcement, Yahoo believes an unauthorized third party stole data associated with more than one billion user accounts
in August 2013 (the 2013 Security Incident). In November and December 2016, Yahoo disclosed that based on an investigation by its outside forensic experts, it believes an unauthorized third party accessed Yahoo Operating Business
proprietary code to learn how to forge certain cookies. The outside forensic experts have identified approximately 32 million user accounts for which they believe forged cookies were used or taken in 2015 and 2016 (the Cookie Forging
Activity). The 2013 Security Incident, the 2014 Security Incident, and the Cookie Forging Activity are collectively referred to herein as the Security Incidents.
As of April 20, 2017, approximately 43 putative consumer class action lawsuits had been filed against Yahoo in U.S. federal and state courts, and in
foreign courts, relating to the Security Incidents, one of which was voluntarily dismissed. The plaintiffs, who purport to represent various classes of users, generally claim to have been harmed by Yahoos alleged actions and/or omissions in
connection with the Security Incidents and assert a variety of common law and statutory claims seeking monetary damages or other related relief.
Additional lawsuits and claims related to the Security Incidents may be asserted by or on behalf of users, partners, or others seeking damages or other
related relief.
Following the consummation of the Sale, pursuant to the Reorganization Agreement, Yahoo Operating Business will be responsible for 50
percent of certain post-closing cash liabilities related to the Security Incidents. The Parent will be responsible for 100 percent of any such liabilities that are finally determined and entered or stipulated against the Parent or any of its
subsidiaries prior to the consummation of the Sale.
While a loss from these matters is reasonably possible, Yahoo cannot reasonably estimate a range of
possible losses related to these legal proceedings at this time because the legal proceedings remain in the early stages, alleged damages have not been specified, there is uncertainty as to the likelihood of a class or classes being certified or the
ultimate size of any class if certified, and there are significant factual and legal issues to be resolved. Based on current information, Yahoo does not believe that a loss from these matters is probable and therefore has not recorded an accrual for
litigation or other contingencies relating to the Security Incidents. Yahoo will continue to evaluate information as it
Annex 2-33
becomes known and will record an accrual for estimated losses at the time or times it is determined that a loss is both probable and reasonably estimable.
Note 9 Employee Benefits
Benefit
Plans
.
Yahoo Operating Business full-time employees in the U.S. participated in the Yahoo! Inc. 401(k) Plan (the 401(k) Plan) The 401(k) Plan allows employees of Yahoo Operating Business to contribute up to the
Internal Revenue Code prescribed maximum amount. Employees may elect to contribute from 1 to 100 percent of their annual compensation to the 401(k) Plan. Yahoo Operating Business matches employee contributions at a rate of 25 percent, up to the IRS
prescribed amount. Both employee and employer contributions vest immediately upon contribution. During 2015 and 2016, Yahoo Operating Business contributions to the 401(k) Plan amounted to approximately $21 million and $18 million,
respectively. Yahoo Operating Business also contributed approximately $15 million and $12 million to its other defined contribution retirement benefit plans outside of the U.S. for 2015 and 2016, respectively.
Stock Plans
.
The employees of Yahoo Operating Business participate in various stock compensation plans in which equity awards were
granted to Yahoo Operating Business employees with respect to shares of Yahoo common stock. Yahoo Operating Business records stock-based compensation expense for the equity awards granted to the employees of Yahoo Operating Business. The
amounts presented are not necessarily indicative of future performance and do not necessarily reflect the results that Yahoo Operating Business would have experienced as an independent company for the periods presented.
The Stock Plan provides for the issuance of stock-based awards to employees, including executive officers, and consultants. The Stock Plan permits the
granting of incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, and dividend equivalents.
Options granted under the Stock Plan before May 19, 2005 generally expire 10 years after the grant date, and options granted after May 19, 2005
generally expire seven years after the grant date. Options generally become exercisable over a four-year period based on continued employment and vest either monthly, quarterly, semi-annually, or annually.
The Stock Plan permits the granting of restricted stock and restricted stock units (collectively referred to as restricted stock awards). The
restricted stock award vesting criteria are generally the passing of time, meeting certain performance-based objectives, or a combination of both, and continued employment through the vesting period (which varies but generally does not exceed four
years). Restricted stock award grants are generally measured at fair value on the date of grant based on the number of shares granted and the quoted price of Yahoos common stock. Such value is recognized as an expense over the corresponding
service period.
The Stock Plan provides for the issuance of a maximum of 784 million shares of which 96 million shares were still available for
award grant purposes as of December 31, 2016. Each share of Yahoos common stock issued in settlement of full-value awards (which include all awards other than options and stock appreciation rights) granted on or after
June 25, 2009 under the Stock Plan counted as 1.75 shares against the Stock Plans share limit. Each share of Yahoos common stock issued in settlement of full-value awards granted on or after June 25, 2014 under the
Stock Plan is counted as 2.5 shares against the Stock Plans share limit.
The Directors Plan provides for the grant of nonqualified stock
options and restricted stock units to non-employee directors of Yahoo Operating Business. The Directors Plan provides for the issuance of up to 9 million shares of Yahoos common stock, of which approximately 4 million were
still available for award grant purposes as of December 31, 2016. Each share of Yahoos common stock issued in settlement of restricted stock units granted after Yahoos 2006 annual meeting of shareholders under the Directors
Plan is counted as 1.75 shares against the Directors Plans share limit.
Annex 2-34
Options granted under the Directors Plan before May 25, 2006 generally become exercisable, based on
continued service as a director, for initial grants to new directors, in equal monthly installments over four years, and for annual grants, with 25 percent of such options vesting on the one year anniversary of the date of grant and the remaining
options vesting in equal monthly installments over the remaining 36-month period thereafter. Such options generally expire seven to 10 years after the grant date. Options granted on or after May 25, 2006 become exercisable, based on continued
service as a director, in equal quarterly installments over one year. Such options generally expire seven years after the grant date.
Restricted stock
units granted under the Directors Plan generally vest in equal quarterly installments over a one-year period following the date of grant and, once vested, are generally payable in an equal number of shares of Yahoos common stock on the
earlier of the end of the one-year vesting period or the date the director ceases to be a member of Yahoos Board of Directors (the Board) (subject to any deferral election that may be made by the director).
Non-employee directors are also permitted to elect an award of restricted stock units or a stock option under the Directors Plan in lieu of a cash
payment of their quarterly Board retainer and any cash fees for serving on committees of the Board. Such stock options or restricted stock unit awards granted in lieu of cash fees are fully vested on the grant date.
Employee Stock Purchase Plan
.
During the first quarter of 2015, Yahoo discontinued the offering of the Employee Stock Purchase Plan to
the employees of Yahoo Operating Business. The Employee Stock Purchase Plan allowed employees of Yahoo Operating Business to purchase shares of Yahoos common stock through payroll deductions of up to 15 percent of their compensation
subject to certain Internal Revenue Code limitations. The price of the common stock purchased under the plan after November 2012 was equal to 90 percent of the lower of the fair market value of the common stock on the commencement date of each
three-month offering period or the specified purchase date.
For the year ended December 31, 2015, stock-based compensation expense related to the
activity under the plan was $2 million.
Stock Options.
Yahoos Stock Plan, the Directors Plan, and stock-based awards
assumed through acquisitions (including stock-based commitments related to continued service of acquired employees, such as holdbacks by Yahoo of shares of Yahoo common stock issued to founders of acquired companies in connection with certain of
Yahoos acquisitions) are collectively referred to as the Plans. Stock option activity under Yahoos Plans for the year ended December 31, 2016 is summarized as follows (in thousands, except years and per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price per
Share
|
|
|
Weighted
Average
Remaining
Contractual
Life
(in years)
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding at December 31,
2015
(1)
|
|
|
6,522
|
|
|
$
|
18.82
|
|
|
|
4.03
|
|
|
$
|
103,230
|
|
Options granted
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Options assumed in acquisitions
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Options exercised
(2)
|
|
|
(1,203
|
)
|
|
$
|
14.56
|
|
|
|
|
|
|
|
|
|
Options expired
|
|
|
(442
|
)
|
|
$
|
18.71
|
|
|
|
|
|
|
|
|
|
Options cancelled/forfeited
|
|
|
(383
|
)
|
|
$
|
18.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,
2016
(1)
|
|
|
4,494
|
|
|
$
|
20.04
|
|
|
|
2.99
|
|
|
$
|
92,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest, at December 31,
2016
(3)
|
|
|
4,467
|
|
|
$
|
18.11
|
|
|
|
2.98
|
|
|
$
|
91,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2016
|
|
|
3,537
|
|
|
$
|
18.15
|
|
|
|
2.77
|
|
|
$
|
72,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annex 2-35
(1)
|
Includes shares subject to performance-based stock options for which performance goals had not been set as of the date shown.
|
(2)
|
The Parent generally issues new shares to satisfy stock option exercises.
|
(3)
|
The expected to vest options are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding options.
|
The weighted average grant date fair values of all options granted and assumed in the year ended December 31, 2015 was $20.31. Yahoo did not grant any
options in 2016.
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the aggregate difference between the
closing stock price of Yahoos common stock on December 31, 2016 and the exercise price for in-the-money options) that would have been received by the option holders if all in-the-money options had been exercised on December 31, 2016.
The total intrinsic values of options exercised in the years ended December 31, 2015 and 2016 were $53 million and $27 million, respectively.
As of December 31, 2016, there was $7 million of unamortized stock-based compensation expense related to unvested stock options, which is expected to be
recognized over a weighted average period of 0.9 years.
Cash received from option exercises and purchases of shares under the Employee Stock Purchase
Plan for the year ended December 31, 2016 was $18 million.
The total net tax benefit attributable to stock options exercised in the year ended
December 31, 2016 was $6 million.
The fair value of option grants, including assumed options from acquisitions, is determined using the
Black-Scholes option pricing model with the following weighted average assumptions:
|
|
|
|
|
|
|
Stock Options
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
Expected dividend yield
(1)
|
|
|
0
|
%
|
Risk-free interest rate
(2)
|
|
|
0.9
|
%
|
Expected volatility
(3)
|
|
|
34.5
|
%
|
Expected life (in years)
(4)
|
|
|
2.50
|
|
(1)
|
Yahoo currently has no history or expectation of paying cash dividends on its common stock in the near future.
|
(2)
|
The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected term of the awards in effect at the time of grant.
|
(3)
|
Yahoo estimates the volatility of its common stock at the date of grant based on the implied volatility of publicly traded options on its common stock, with a term of one year or greater.
|
(4)
|
The expected life of stock options granted under the Plans is based on historical exercise patterns, which Yahoo believes are representative of future behavior. In 2015 and 2016, Yahoo did not issue new stock options.
Options assumed in acquisitions had expected lives of less than 3 years.
|
Annex 2-36
Restricted Stock and Restricted Stock Units
. Restricted stock and restricted stock unit activity
under the Plans for the year ended December 31, 2016 is summarized as follows (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted Average
Grant Date Fair Value
Per Share
|
|
Awarded and unvested at December 31,
2015
(1)
|
|
|
28,739
|
|
|
$
|
39.15
|
|
Granted
(2)
|
|
|
14,893
|
|
|
$
|
34.54
|
|
Vested
|
|
|
(14,427
|
)
|
|
$
|
32.49
|
|
Cancelled/Forfeited
|
|
|
(6,955
|
)
|
|
$
|
35.88
|
|
|
|
|
|
|
|
|
|
|
Awarded and unvested at December 31,
2016
(1)
|
|
|
22,250
|
|
|
$
|
41.40
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes the maximum number of shares issuable under Yahoos performance-based restricted stock unit awards (including future-year tranches for which performance goals had not been set) as of the date shown.
|
(2)
|
Includes the maximum number of shares issuable under Yahoos performance-based restricted stock unit awards granted during the year ended December 31, 2016 (including future-year tranches for which performance
goals had not been set during the period); excludes tranches of previously granted performance-based restricted stock units for which performance goals were set during the year ended December 31, 2015.
|
As of December 31, 2016, there was $497 million of unamortized stock-based compensation expense related to unvested restricted stock and restricted stock
units, which is expected to be recognized over a weighted average period of 2.3 years.
The total fair value of restricted stock awards vested during the
years ended December 31, 2015 and 2016 was $502 million and $470 million, respectively.
During the year ended December 31, 2016,
14 million shares that were subject to previously granted restricted stock units vested. These vested restricted stock awards were net share settled. Yahoo Operating Business withheld 5 million shares based upon Yahoos closing stock
price on the vesting date, to satisfy the Yahoo Operating Business tax withholding obligation relating to the employees minimum statutory obligation for the applicable income and other employment taxes. Yahoo Operating Business then
remitted cash to the appropriate taxing authorities.
Total payments for the employees tax obligations to the relevant taxing authorities were $209
million for the year ended December 31, 2016 and are reflected as a financing activity within the combined statements of cash flows. The payments were used for tax withholdings related to the net share settlements of restricted stock units.
In 2015 and 2016, $3 million and $1 million, respectively, of excess tax benefits from stock-based awards for options exercised and restricted stock
awards that vested in current and prior periods were included as a source of cash flows from financing activities. These excess tax benefits represent the reduction in income taxes otherwise payable during the period, attributable to the actual
gross tax benefits in excess of the expected tax benefits for options exercised and restricted stock awards that vested in current and prior periods. Yahoo Operating Business has accumulated excess tax deductions relating to stock options exercised
and restricted stock awards that vested prior to January 1, 2006 available to reduce income taxes otherwise payable. To the extent such deductions reduce income taxes payable in the current year, they are reported as financing activities in the
combined statements of cash flows.
Performance-Based Executive Incentive Equity Awards
Performance Options.
The financial performance stock options awarded by Yahoo in
November 2012 to Ms. Mayer and Mr. Goldman include multiple performance periods. The number of stock options that ultimately
Annex 2-37
vest for each performance period will range from 0 percent to 100 percent of the target amount for such period stated in each executives award agreement based on Yahoo Operating
Business performance relative to goals. The financial performance goals are established at the beginning of each performance period and the portion (or tranche) of the award related to each performance period is treated as a
separate grant for accounting purposes. In March 2016, the Compensation Committee established performance goals under these stock options for the 2016 performance year. The 2016 financial performance metrics (and their weightings) under the
performance stock options are GAAP revenue (one-third), revenue ex-TAC (one-third), and adjusted EBITDA (one-third). The grant date fair value of the 2016 tranche of the November 2012 financial performance stock options was $13 million, and is
being recognized over the twelve-month service period. Yahoo Operating Business began recording stock-based compensation expense for this tranche in March 2016, when the financial performance goals were established.
Performance RSUs.
In March 2016, the Compensation Committee approved additional annual financial performance-based RSU awards to Ms. Mayer and other
senior officers, and established the 2016 annual performance goals for these awards as well as for the similar performance-based RSUs granted in February 2013, February 2014, and March 2015. The 2013, 2014, 2015, and 2016 performance-based RSU
awards are generally eligible to vest in equal annual target amounts over four years (three years for Ms. Mayer) based on Yahoo Operating Business attainment of annual financial performance goals as well as the executives continued
employment through each vesting date. The number of shares that ultimately vest each year will range from 0 percent to 200 percent of the annual target amount, based on Yahoo Operating Business performance. Annual financial performance metrics
and goals are established for these RSU awards at the beginning of each year and the tranche of each RSU award related to that years performance goal is treated as a separate annual grant for accounting purposes. The 2016 financial performance
metrics (and their weightings) established for the performance RSUs are: GAAP revenue (one-third), revenue ex-TAC (one-third), and adjusted EBITDA (one-third). The grant date fair value of the first tranche of the March 2016 performance RSUs was
$10 million, the grant date fair value of the second tranche of the March 2015 performance RSUs was $8 million, the grant date fair value of the third tranche of the February 2014 performance RSUs was $4 million, and the grant date fair value
of the fourth tranche of the February 2013 performance RSUs was $8 million. These values are being recognized over the tranches twelve-month service periods. Yahoo Operating Business began recording stock-based compensation expense for these
tranches in March 2016, when the financial performance goals were established.
Note 10 Restructuring Charges, Net
Restructuring charges, net consists of employee severance pay and related costs, accelerations of stock-based compensation expense, facility restructuring
costs, contract termination and other non-cash charges associated with the exit of facilities, as well as reversals of restructuring charges arising from changes in estimates.
For the years ended December 31, 2015 and 2016, restructuring charges, net was comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
Employee severance pay and related costs
|
|
$
|
69,042
|
|
|
$
|
57,940
|
|
Non-cancelable lease, contract termination, and other charges
|
|
|
36,526
|
|
|
|
26,126
|
|
Reversals of previous charges
|
|
|
(7,404
|
)
|
|
|
(4,038
|
)
|
Non-cash accelerations of stock-based compensation expense
|
|
|
2,705
|
|
|
|
7,374
|
|
Other non-cash charges, net
|
|
|
3,150
|
|
|
|
1,227
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges, net
|
|
$
|
104,019
|
|
|
$
|
88,629
|
|
|
|
|
|
|
|
|
|
|
Annex 2-38
Although Yahoo Operating Business does not allocate restructuring charges to its segments, the amounts of the
restructuring charges relating to each segment are presented below. For the years ended December 31, 2015 and 2016, restructuring charges, net consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
Americas
|
|
$
|
68,637
|
|
|
$
|
65,300
|
|
EMEA
|
|
|
31,251
|
|
|
|
19,379
|
|
Asia Pacific
|
|
|
4,131
|
|
|
|
3,950
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges, net
|
|
$
|
104,019
|
|
|
$
|
88,629
|
|
|
|
|
|
|
|
|
|
|
Yahoo Operating Business has implemented multiple restructuring plans to reduce its cost structure, align resources with its
product strategy and improve efficiency, which have resulted in workforce reductions and the consolidation of certain real estate facilities and data centers.
The amounts recorded during the year ended December 31, 2016 were primarily related to Yahoo Operating Business plan announced in February 2016 to
reduce its workforce by approximately 15 percent by the end of 2016 and exit six offices in Dubai, Mexico City, Buenos Aires, Madrid, Milan and Burbank, California, subject to applicable laws and consultation processes, as a part of the strategic
plan to simplify Yahoo Operating Business product portfolio. During the year ended December 31, 2016, in connection with this action, Yahoo Operating Business incurred pre-tax cash charges of $47 million for severance pay expenses and related
cash expenditures, pre-tax cash charges of $17 million related to the consolidation and exit of facilities related to noncancelable lease costs and other related costs, pre-tax non-cash charges of $7 million related to stock-based compensation
expense and less than $1 million related to impairment costs.
Yahoo Operating Business restructuring accrual activity for the years ended
December 31, 2015 and 2016 is summarized as follows (in thousands):
|
|
|
|
|
|
|
Total
|
|
Accrual balance as of December 31, 2014
|
|
$
|
83,608
|
|
Restructuring charges
|
|
|
104,019
|
|
Cash paid
|
|
|
(114,749
|
)
|
Non-cash accelerations of stock-based compensation expense
|
|
|
(2,705
|
)
|
Foreign currency translation and other adjustments
|
|
|
(4,282
|
)
|
|
|
|
|
|
Accrual Balance as of December 31, 2015
|
|
$
|
65,891
|
|
Restructuring charges
|
|
|
88,629
|
|
Cash paid
|
|
|
(102,277
|
)
|
Non-cash accelerations of stock-based compensation expense
|
|
|
(7,374
|
)
|
Foreign currency translation and other adjustments
|
|
|
(1,411
|
)
|
|
|
|
|
|
Accrual balance as of December 31, 2016
|
|
$
|
43,458
|
|
|
|
|
|
|
The $43 million restructuring liability as of December 31, 2016 consisted of $3 million for employee severance expenses,
which Yahoo Operating Business expects to substantially pay out by the end of second quarter of 2017, and $40 million related to non-cancelable lease costs, which Yahoo Operating Business expects to pay over the terms of the related obligations
through the fourth quarter of 2025, less estimated sublease income.
Annex 2-39
As of December 31, restructuring accruals were included on Yahoo Operating Business combined balance
sheets as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2016
|
|
Accrued expenses and other current liabilities
|
|
$
|
40,283
|
|
|
$
|
27,041
|
|
Other long-term liabilities
|
|
|
25,608
|
|
|
|
16,417
|
|
|
|
|
|
|
|
|
|
|
Total restructuring accruals
|
|
$
|
65,891
|
|
|
$
|
43,458
|
|
|
|
|
|
|
|
|
|
|
As of December 31, restructuring accruals by segment consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2016
|
|
Americas
|
|
$
|
47,054
|
|
|
$
|
38,041
|
|
EMEA
|
|
|
18,389
|
|
|
|
5,263
|
|
Asia Pacific
|
|
|
448
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
Total restructuring accruals
|
|
$
|
65,891
|
|
|
$
|
43,458
|
|
|
|
|
|
|
|
|
|
|
Note 11 Income Taxes
Yahoo Operating Business is included in the Yahoo consolidated group and its U.S. taxable income is included in the consolidated U.S. federal income tax return
of Yahoo as well as in returns filed by Yahoo with certain state and local taxing jurisdictions. Foreign subsidiaries tax returns are filed on a separate company basis. Yahoo Operating Business income tax liability has been computed
and presented herein under the separate return method. Under the separate return method, Yahoo Operating Business calculated its tax provision as if it were filing its own separate tax return based on Yahoo Operating Business
pre-tax financial results. This can result in perceived inconsistencies between the tax provision of Yahoo Operating Business and the tax provision of the Yahoo consolidated group.
The components of loss before income taxes are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
United States
|
|
$
|
(4,329,592
|
)
|
|
$
|
(705,248
|
)
|
Foreign
|
|
|
(429,815
|
)
|
|
|
120,864
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(4,759,407
|
)
|
|
$
|
(584,384
|
)
|
|
|
|
|
|
|
|
|
|
The provision for income taxes is composed of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
Current:
|
|
|
|
|
|
|
|
|
United States federal
|
|
$
|
54,139
|
|
|
$
|
10,514
|
|
State
|
|
|
3,544
|
|
|
|
(3,372
|
)
|
Foreign
|
|
|
32,816
|
|
|
|
26,643
|
|
|
|
|
|
|
|
|
|
|
Total current provision for income taxes
|
|
$
|
90,499
|
|
|
$
|
33,785
|
|
Deferred:
|
|
|
|
|
|
|
|
|
United States federal
|
|
|
116,490
|
|
|
|
|
|
State
|
|
|
10,662
|
|
|
|
|
|
Foreign
|
|
|
9,540
|
|
|
|
(633
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred provision (benefit) for income taxes
|
|
$
|
136,692
|
|
|
$
|
(633
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
227,191
|
|
|
$
|
33,152
|
|
|
|
|
|
|
|
|
|
|
Annex 2-40
The provision for income taxes differs from the amount computed by applying the federal statutory income tax rate
to income before income taxes is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2015
|
|
|
2016
|
|
Income tax at the U.S. federal statutory rate of 35 percent
|
|
$
|
(1,665,792
|
)
|
|
$
|
(204,534
|
)
|
State income taxes, net of federal benefit
|
|
|
10,070
|
|
|
|
(8,395
|
)
|
Stock-based compensation expense
|
|
|
9,509
|
|
|
|
10,482
|
|
Research tax credits
|
|
|
(22,370
|
)
|
|
|
(23,368
|
)
|
Effect of non-U.S. operations
|
|
|
62,481
|
|
|
|
2,705
|
|
Settlement with tax authorities
|
|
|
(1,981
|
)
|
|
|
(12,710
|
)
|
Remeasurement of prior year tax positions
|
|
|
(5,286
|
)
|
|
|
|
|
Acquisition related non-deductible expenses
|
|
|
15,971
|
|
|
|
13,059
|
|
Tax liquidation of acquired entities
|
|
|
(56,170
|
)
|
|
|
|
|
Goodwill impairment charge
|
|
|
1,486,792
|
|
|
|
138,215
|
|
Intangible assets impairment charge
|
|
|
2,468
|
|
|
|
|
|
Valuation allowance
|
|
|
413,258
|
|
|
|
119,969
|
|
Other
|
|
|
(21,759
|
)
|
|
|
(2,271
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
227,191
|
|
|
$
|
33,152
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. The components of deferred income tax assets and liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2016
|
|
Deferred income tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss and tax credit carryforwards
|
|
$
|
355,000
|
|
|
$
|
258,594
|
|
Stock-based compensation expense
|
|
|
34,644
|
|
|
|
39,211
|
|
Non-deductible accrued expenses
|
|
|
187,271
|
|
|
|
216,055
|
|
Deferred revenue
|
|
|
10,153
|
|
|
|
12,345
|
|
Fixed assets
|
|
|
14,096
|
|
|
|
12,181
|
|
Federal benefits relating to tax positions
|
|
|
101,363
|
|
|
|
147,027
|
|
Other
|
|
|
6,557
|
|
|
|
5,477
|
|
|
|
|
|
|
|
|
|
|
Gross deferred income tax assets
|
|
|
709,084
|
|
|
|
690,890
|
|
Valuation allowance
|
|
|
(459,175
|
)
|
|
|
(564,472
|
)
|
|
|
|
|
|
|
|
|
|
Deferred income tax assets
|
|
$
|
249,909
|
|
|
$
|
126,418
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities:
|
|
|
|
|
|
|
|
|
Purchased intangible assets
|
|
$
|
(86,905
|
)
|
|
$
|
(25,833
|
)
|
Fixed assets
|
|
|
(146,234
|
)
|
|
|
(89,344
|
)
|
Restructuring liabilities
|
|
|
(4,046
|
)
|
|
|
(95
|
)
|
Other
|
|
|
(2,518
|
)
|
|
|
(1,278
|
)
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities
|
|
$
|
(239,703
|
)
|
|
$
|
(116,550
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred income tax assets
|
|
$
|
10,206
|
|
|
$
|
9,868
|
|
|
|
|
|
|
|
|
|
|
Yahoo Operating Business is included in the Yahoo consolidated group and its U.S. taxable income is included in the
consolidated U.S. federal income tax return of Yahoo as well as in returns filed by Yahoo with certain state and local taxing jurisdictions. If Yahoo Operating Business was filing on separate return basis as of December 31, 2016, its federal
and California net operating loss carryforwards for income tax purposes would be approximately $172 million and $158 million, respectively.
Annex 2-41
Yahoo Operating Business has a valuation allowance of approximately $459 million and $564 million as of December
31, 2015 and 2016 against certain deferred income tax assets that are not more likely than not to be realized in future periods. In evaluating Yahoo Operating Business ability to realize its deferred income tax assets, Yahoo Operating Business
considers all available positive and negative evidence, including operating results, ongoing tax planning, and forecasts of future taxable income on a jurisdiction by jurisdiction basis. As of December 31, 2016, Yahoo Operating Business recorded a
valuation allowance against all of its U.S. federal and state deferred tax assets. Yahoo Operating Business expects to provide a valuation allowance on future U.S. tax benefits until it can sustain a level of profitability or until other
significant positive evidence arises that suggest that these benefits are more likely than not to be realized.
As of December 31, 2016, Yahoo Operating
Business repatriated cumulative earnings from its wholly-owned foreign subsidiaries and recorded a $17 million tax expense (primarily related to $172 million of dividend income recognizable in the U.S. with an associated $67 million U.S. tax credit
for foreign income taxes that have been paid on such earnings) related to this repatriation in Yahoo Operating Businesss effect of non-US operations. This is included as part of the total income tax benefit for the year ended December 31,
2016. Yahoo Operating Business also intends to repatriate its future earnings from these foreign subsidiaries.
The total amount of gross unrecognized tax
benefits was $484 million as of December 31, 2016, of which up to $297 million would affect Yahoo Operating Business effective tax rate if realized. A reconciliation of the beginning and ending amount of unrecognized tax benefits in
2015 and 2016 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2016
|
|
Unrecognized tax benefits balance at January 1
|
|
$
|
405,953
|
|
|
$
|
451,483
|
|
Gross increase for tax positions of prior years
|
|
|
27,583
|
|
|
|
10,848
|
|
Gross decrease for tax positions of prior years
|
|
|
(15,700
|
)
|
|
|
(5,732
|
)
|
Gross increase for tax positions of current year
|
|
|
41,428
|
|
|
|
44,556
|
|
Settlements
|
|
|
(4,700
|
)
|
|
|
(11,326
|
)
|
Lapse of statute of limitations
|
|
|
(3,080
|
)
|
|
|
(6,278
|
)
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits balance at December 31
|
|
$
|
451,484
|
|
|
$
|
483,551
|
|
|
|
|
|
|
|
|
|
|
The remaining balances are recorded on Yahoo Operating Business combined balance sheets as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2016
|
|
Total unrecognized tax benefits balance
|
|
$
|
451,484
|
|
|
$
|
483,551
|
|
Amounts netted against related deferred tax assets
|
|
|
(141,251
|
)
|
|
|
(186,234
|
)
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits recorded on consolidated balance sheets
|
|
$
|
310,233
|
|
|
$
|
297,317
|
|
|
|
|
|
|
|
|
|
|
Amounts classified as accrued expenses and other current liabilities
|
|
$
|
12,586
|
|
|
$
|
2,409
|
|
Amounts classified as deferred and other long-term tax liabilities, net
|
|
|
297,647
|
|
|
|
294,908
|
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits recorded on consolidated balance sheets
|
|
$
|
310,233
|
|
|
$
|
297,317
|
|
|
|
|
|
|
|
|
|
|
Yahoo Operating Business gross amount of unrecognized tax benefits as of December 31, 2016 increased by
$32 million from the recorded balance as of December 31, 2015 primarily related to transfer pricing among entities in different tax jurisdictions. Yahoo Operating Business recognizes interest and/or penalties related to uncertain tax
positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is
made. During 2015 and 2016, interest and penalties recorded in the combined statements of operations were a charge of $1 million and $4 million, respectively. The amounts of
Annex 2-42
accrued interest and penalties recorded on the combined balance sheets as of December 31, 2015 and 2016 were approximately $46 million and $50 million, respectively.
The Parent is in various stages of examination and appeal in connection with its taxes both in the U.S. and in foreign jurisdictions. Those audits generally
span tax years 2005 through 2015. As of December 31, 2016, the Parents 2011 through 2015 U.S. federal income tax returns are currently under examination. Yahoo has appealed the proposed California Franchise Tax Boards adjustments to the
2005 through 2008 returns, but no conclusions have been reached to date. Yahoo Operating Business 2009 through 2010 California tax returns are currently under examination. Yahoo Operating Business 2011 through 2015 tax years remain
subject to examination by the California Franchise Tax Board for California tax purposes. While it is difficult to determine when the examinations will be settled or their final outcomes, certain audits in various jurisdictions are expected to be
resolved in the foreseeable future. Yahoo Operating Business believes that it has adequately provided for any reasonably foreseeable adverse adjustment to the Parents tax returns and that any settlement will not have a material adverse effect
on its combined financial position, results of operations, or cash flows. It is reasonably possible that Yahoo Operating Business unrecognized tax benefits could be reduced by up to approximately $20 million in the next twelve months.
Tax authorities from the Brazilian State of Sao Paulo have assessed certain indirect taxes against Yahoo Operating Business Brazilian subsidiary, Yahoo!
do Brasil Internet Ltda., related to online advertising services. The assessment is for calendar years 2008 through 2012 and as of December 31, 2016 totals approximately $140 million. Yahoo Operating Business currently believes the assessment
is without merit. Yahoo Operating Business believes the risk of loss is remote and has not recorded an accrual for the assessment.
Note 12
Transactions With Related Parties
Net parent company investment is primarily impacted by contributions from and distributions to Yahoo which are the
result of centrally managed treasury activities and net funding distributed to or provided by Yahoo. The other components impacting the net parent company investment are corporate cost allocations and income tax related transfers.
Revenue from related parties, represented approximately 1 percent of total revenue for the years ended December 31, 2015 and 2016. Management believes
that the terms of the agreements with these related parties are comparable to the terms obtained in arms-length transactions with unrelated similarly situated customers of Yahoo Operating Business.
Note 13 Segments
Yahoo Operating Business continues to
manage its business geographically. The primary areas of measurement and decision-making are Americas, EMEA (Europe, Middle East, and Africa), and Asia Pacific. Management relies on an internal reporting process that provides revenue, revenue ex-TAC
(which is defined as revenue less cost of revenueTAC), direct costs excluding TAC by segment, and combined loss from operations for making decisions related to the evaluation of the financial performance of, and allocating resources to, the
Yahoo Operating Business segments.
Annex 2-43
The following tables present summarized information by segment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2015
|
|
|
2016
|
|
Revenue by segment
(1)
:
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
3,976,770
|
|
|
$
|
4,172,836
|
|
EMEA
|
|
|
343,646
|
|
|
|
397,768
|
|
Asia Pacific
|
|
|
647,885
|
|
|
|
598,531
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
4,968,301
|
|
|
|
5,169,135
|
|
TAC by segment
(1)
:
|
|
|
|
|
|
|
|
|
Americas
|
|
|
788,725
|
|
|
|
1,463,221
|
|
EMEA
|
|
|
57,284
|
|
|
|
144,547
|
|
Asia Pacific
|
|
|
31,505
|
|
|
|
43,018
|
|
|
|
|
|
|
|
|
|
|
Total TAC
|
|
|
877,514
|
|
|
|
1,650,786
|
|
Revenue ex-TAC by segment:
|
|
|
|
|
|
|
|
|
Americas
|
|
|
3,188,045
|
|
|
|
2,709,615
|
|
EMEA
|
|
|
286,362
|
|
|
|
253,221
|
|
Asia Pacific
|
|
|
616,380
|
|
|
|
555,513
|
|
|
|
|
|
|
|
|
|
|
Total Revenue ex-TAC
|
|
|
4,090,787
|
|
|
|
3,518,349
|
|
Direct costs by segment
(2)
:
|
|
|
|
|
|
|
|
|
Americas
|
|
|
284,875
|
|
|
|
263,010
|
|
EMEA
|
|
|
95,789
|
|
|
|
51,597
|
|
Asia Pacific
|
|
|
196,056
|
|
|
|
185,195
|
|
Global operating costs
(3)
|
|
|
2,570,327
|
|
|
|
2,160,407
|
|
Gains on sales of patents and land
|
|
|
(11,100
|
)
|
|
|
(121,559
|
)
|
Asset impairment charge
|
|
|
44,381
|
|
|
|
-
|
|
Goodwill impairment charge
|
|
|
4,460,837
|
|
|
|
394,901
|
|
Intangible assets impairment charge
|
|
|
15,423
|
|
|
|
87,335
|
|
Restructuring charges, net
|
|
|
104,019
|
|
|
|
88,629
|
|
Depreciation and amortization
|
|
|
609,613
|
|
|
|
507,555
|
|
Stock-based compensation expense
|
|
|
455,285
|
|
|
|
489,755
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(4,734,718
|
)
|
|
$
|
(588,476
|
)
|
|
|
|
|
|
|
|
|
|
(1)
|
Commencing in the second quarter of 2016, TAC payments related to the Microsoft Search Agreement, which previously would have been recorded as a reduction to revenue, began to be recorded as cost of revenue TAC
due to a required change in revenue presentation. See Note 1Yahoo Operating Business and Summary of Significant Accounting Policies and Note 14Microsoft Search Agreement for additional information.
|
(2)
|
Direct costs for each segment include certain cost of revenue other and costs associated with the local sales teams. Prior to the second quarter of 2016, certain account management costs associated with Yahoo
Properties were managed locally and included as direct costs for each segment. Prior period amounts have been revised to conform to the current presentation.
|
Annex 2-44
(3)
|
Global operating costs include product development, marketing, real estate workplace, general and administrative, account management costs, and other corporate expenses that are managed on a global basis and that are
not directly attributable to any particular segment. Beginning in the second quarter of 2016, certain account management costs associated with Yahoo Properties are managed globally and included as global costs. Prior period amounts have been revised
to conform to the current presentation.
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
Capital expenditures, net:
|
|
|
|
|
|
|
|
|
Americas
(1)
|
|
$
|
490,780
|
|
|
$
|
(46,455
|
)
|
EMEA
|
|
|
25,479
|
|
|
|
14,637
|
|
Asia Pacific
|
|
|
26,728
|
|
|
|
21,140
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures, net
|
|
$
|
542,987
|
|
|
$
|
(10,678
|
)
|
|
|
|
|
|
|
|
|
|
(1)
|
2016 includes net proceeds of $246 million associated with the sale of certain property assets located in Santa Clara, California. See Note 4 Acquisitions and Dispositions for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2016
|
|
Property and equipment, net:
|
|
|
|
|
|
|
|
|
Americas:
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
1,447,995
|
|
|
$
|
1,120,124
|
|
Other
|
|
|
353
|
|
|
|
3,086
|
|
|
|
|
|
|
|
|
|
|
Total Americas
|
|
$
|
1,448,348
|
|
|
$
|
1,123,210
|
|
|
|
|
|
|
|
|
|
|
EMEA
|
|
|
33,940
|
|
|
|
28,360
|
|
Asia Pacific
|
|
|
65,035
|
|
|
|
58,367
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment, net
|
|
$
|
1,547,323
|
|
|
$
|
1,209,937
|
|
|
|
|
|
|
|
|
|
|
See also Note 5Goodwill and Note 10Restructuring Charges, Net for additional information
regarding segments.
Enterprise Wide Disclosures:
The
following table presents revenue for groups of similar services (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
Search
(1)
|
|
$
|
2,113,848
|
|
|
$
|
2,673,100
|
|
Display
|
|
|
2,085,754
|
|
|
|
1,981,535
|
|
Other
|
|
|
768,699
|
|
|
|
514,500
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
4,968,301
|
|
|
$
|
5,169,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
Revenue
(1)
:
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
3,865,772
|
|
|
$
|
4,048,156
|
|
International
|
|
|
1,102,529
|
|
|
|
1,120,979
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
4,968,301
|
|
|
$
|
5,169,135
|
|
|
|
|
|
|
|
|
|
|
Annex 2-45
(1)
|
Commencing in the second quarter of 2016, TAC payments related to the Microsoft Search Agreement, which previously would have been recorded as a reduction to revenue, began to be recorded as cost of revenue TAC
due to a required change in revenue presentation. See Note 1 Yahoo Operating Business and Summary of Significant Accounting Policies and Note 14 Microsoft Search Agreement for additional information.
|
Revenue is attributed to individual countries according to the online property that generated the revenue. No single foreign country
accounted for more than 10 percent of Yahoo Operating Business revenue, in 2015 and 2016, respectively.
Note 14 Microsoft Search Agreement
On December 4, 2009, Yahoo Operating Business entered into the Microsoft Search Agreement. On February 18, 2010, Yahoo Operating Business received
regulatory clearance from both the U.S. Department of Justice and the European Commission and on February 23, 2010 the Parent commenced implementation of the Microsoft Search Agreement on a market-by-market basis.
On April 15, 2015, Yahoo Operating Business and Microsoft entered into the Eleventh Amendment, pursuant to which the terms of the Microsoft Search Agreement
were amended. Previously under the Microsoft Search Agreement, Microsoft was the exclusive algorithmic and paid search services provider to Yahoo Operating Business on personal computers for Yahoo Properties and for search services provided by Yahoo
Operating Business to Affiliate sites. Microsoft was the non-exclusive provider on mobile devices. Pursuant to the Eleventh Amendment, Microsoft will provide such services on a non-exclusive basis for Yahoo Properties and Affiliate sites on all
devices. Commencing on May 1, 2015, Yahoo Operating Business agreed to the Volume Commitment and displays only Microsofts paid search results on such search result pages.
Prior to the Eleventh Amendment, Yahoo Operating Business was entitled to receive the Revenue Share Rate with respect to revenue generated from paid search
results on Yahoo Properties and on Affiliate sites after deduction of the Affiliate sites share of revenue and certain Microsoft costs. The Revenue Share Rate was 88 percent for the first five years of the Microsoft Search Agreement and then
increased to 90 percent on February 23, 2015. Pursuant to the Eleventh Amendment, the Revenue Share Rate increased to 93 percent, but Microsoft now receives its 7 percent revenue share before deduction of the Affiliate sites share of revenue.
Yahoo Operating Business is responsible for paying the Affiliate for the Affiliate sites share of revenue.
Additionally, pursuant to the Eleventh
Amendment, Yahoo Operating Business has the ability in response to queries on both personal computers and mobile devices to request algorithmic listings only, paid listings only or both algorithmic and paid listings from Microsoft. To the extent
Yahoo Operating Business requests algorithmic listings only or requests paid listings but elects not to display such paid listings, Yahoo Operating Business pays Microsoft serving costs but not a revenue share. In other cases and with respect to the
Volume Commitment, the Revenue Share Rate applies.
Previously under the Microsoft Search Agreement, Yahoo Operating Business had sales exclusivity for
both Yahoo Operating Business and Microsofts premium advertisers. For reporting periods ending December 31, 2015 and March 31, 2016, TAC related to Yahoo Operating Business Microsoft Search Agreement was recorded as a reduction to
revenue. Pursuant to the Eleventh Amendment, Yahoo Operating Business completed the transition of its exclusive sales responsibilities to Microsoft for Microsofts paid search services to premium advertisers in the United States, Canada,
and Europe on April 1, 2016 and in its remaining markets (other than Taiwan and Hong Kong) on June 1, 2016. Following the transition in each respective market, Yahoo Operating Business is considered the principal in the sale of traffic to Microsoft
and other customers because Yahoo Operating Business is the primary obligor in its arrangements with Microsoft and has discretion in how search queries from Affiliate sites will be fulfilled and monetized. As a result, the amounts paid to Affiliates
under the
Annex 2-46
Microsoft Search Agreement in the transitioned markets are recorded as cost of revenueTAC rather than as a reduction to GAAP revenue, resulting in GAAP revenue from the Microsoft Search
Agreement being reported on a gross rather than net basis.
Effective June 3, 2016, Yahoo Operating Business and Microsoft further amended the Microsoft
Search Agreement to provide that sales responsibilities for premium advertisers in Taiwan and Hong Kong will not be transitioned. TAC in those markets will continue to be reported as a reduction to revenue.
The term of the Microsoft Search Agreement is 10 years from its commencement date, February 23, 2010, subject to earlier termination as provided in the
Microsoft Search Agreement. As of October 1, 2015, either Yahoo Operating Business or Microsoft may terminate the Microsoft Search Agreement by delivering a written notice of termination to the other party. The Microsoft Search Agreement will remain
in effect for four months from the date of the termination notice to provide for a transition period; however, Yahoo Operating Business Volume Commitment will not apply in the third and fourth months of this transition period.
Approximately 35 percent and 37 percent of Yahoo Operating Business revenue for the years ended December 31, 2015 and 2016, was attributable to the
Microsoft Search Agreement. Commencing in the second quarter of 2016, TAC payments related to the Microsoft Search Agreement for transitioned markets, which previously would have been recorded as a reduction to revenue, began to be recorded as a
cost of revenue due to a required change in revenue presentation. During the year ended December 31, 2016, $812 million of GAAP revenue and cost of revenueTAC was due to the change in revenue presentation. See Note 1Yahoo
Operating Business and Summary of Significant Accounting Policies for additional information on change in revenue presentation.
Yahoo Operating
Business uncollected revenue share in connection with the Microsoft Search Agreement was $267 million and $392 million, respectively, which is included in accounts receivable, net, as of December 31, 2015 and 2016, respectively.
On December 4, 2009, in connection with entering into the Microsoft Search Agreement, Yahoo Operating Business also entered into a License Agreement with
Microsoft (as amended, the License Agreement). Under the License Agreement, Microsoft acquired an exclusive 10-year license to Yahoo Operating Business core search technology and has the ability to integrate this technology into
its existing Web search platforms. Pursuant to the Eleventh Amendment, the exclusive licenses granted to Microsoft under the License Agreement became non-exclusive. Yahoo Operating Business also agreed pursuant to the Eleventh Amendment to license
certain sales tools to Microsoft to use solely in connection with Microsofts paid search services pursuant to the terms of the License Agreement.
Annex 2-47
Exhibit A-1
EXECUTION VERSION
STOCK PURCHASE
AGREEMENT
by and among
YAHOO! INC.
and
VERIZON COMMUNICATIONS INC.
dated as of July 23, 2016
TABLE OF CONTENTS
Exhibit A-1-i
Exhibit A-1-ii
|
|
|
Exhibits
|
|
|
|
|
Exhibit A
|
|
Reorganization Agreement
|
Exhibit B
|
|
Non-Foreign Status Affidavit
|
Exhibit C
|
|
Accounting Principles and Net Working Capital Illustrative Example
|
Exhibit D
|
|
Amended and Restated Patent License Agreement
|
Exhibit E
|
|
Foreign Sale Non-Foreign Status Affidavit
|
Exhibit A-1-iii
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of July 23, 2016, is made and entered into by and among Yahoo! Inc., a Delaware corporation
(
Seller
), and Verizon Communications Inc., a Delaware corporation (
Purchaser
). Capitalized terms used but not otherwise defined herein have the meanings set forth in
Section
7.01
hereof.
RECITALS
WHEREAS,
concurrently with the execution and delivery of this Agreement, Seller and Yahoo Holdings, Inc., a Delaware corporation (the
Company
), are entering into a Reorganization Agreement substantially in the form attached hereto as
Exhibit
A
(the
Reorganization Agreement
), pursuant to which Seller and the Company will complete the Reorganization Transactions at or prior to the Closing;
WHEREAS, concurrently with the execution and delivery of this Agreement, Excalibur IP, LLC, a Delaware limited liability company
(
Excalibur
), and Seller are entering into an Amended and Restated Patent License Agreement substantially in the form attached hereto as
Exhibit
D
(the
License Agreement
);
WHEREAS, Seller owns, and immediately prior to the Closing will own, all of the Shares;
WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, Seller desires to sell to Purchaser, and Purchaser desires
to purchase from Seller, the Shares (the
Sale
);
WHEREAS, the board of directors of Purchaser has approved this
Agreement and the transactions contemplated hereby; and
WHEREAS, the board of directors of Seller has (i) approved this Agreement
and the Transactions, (ii) determined that this Agreement and Sale and the Reorganization Transactions are expedient and for the best interests of Seller and its stockholders and (iii) resolved, subject to the terms of this Agreement, to
recommend that the stockholders of Seller authorize the Sale and the Reorganization Transactions.
NOW, THEREFORE, in consideration of the
mutual representations, warranties, covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES; CLOSING
1.01
Purchase and Sale of
Shares
. Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, Purchaser shall purchase from Seller, and Seller shall sell, assign, transfer and deliver to Purchaser, the Shares. At the Closing, in consideration for the purchase of the Shares, Purchaser shall pay in cash to
Seller or its designee (a) $4,825,800,000 (the
Base Purchase Price
), plus or minus (b) the Equity Award Adjustment Amount, plus or minus (c) the Estimated Closing Adjustment Amount, minus (d) solely to the
extent required pursuant to
Section
4.18(b)(iii)
, the Principal Amount (the
Estimated Purchase Price
). The Estimated Purchase Price shall be adjusted pursuant to
Section
1.04
(as so adjusted, the
Purchase Price
).
1.02
Closing
.
(a) Upon the terms and subject to the conditions set forth in this Agreement, the closing of the Sale (the
Closing
) shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times
Exhibit A-1-1
Square, New York, New York 10036 or at such other place as Purchaser and Seller mutually agree, commencing at 10:00 a.m. local time, on the third (3rd) Business Day following the satisfaction or
waiver of each of the conditions set forth in
Article V
(excluding conditions that, by their terms, cannot be satisfied until the Closing, but the Closing shall be subject to the satisfaction or waiver of those conditions) or at such other
time or date as Purchaser and Seller may mutually agree (the
Closing Date
).
(b) At the Closing:
(i) Purchaser shall deliver or cause to be delivered to Seller or its designee:
(1) the Estimated Purchase Price, by wire transfer of immediately available funds, free and clear of any withholdings or
deductions, to an account designated by Seller by written notice delivered to Purchaser at least two (2) Business Days before the Closing Date; and
(2) the certificate contemplated by
Section
5.03(c)
.
(ii) Seller shall deliver to Purchaser:
(1) if certificated, a certificate or certificates representing the Shares, each duly endorsed in blank or accompanied by a
duly executed stock power or other appropriate form of sale, assignment and transfer with respect to the Shares;
(2) the
certificate contemplated by
Section
5.02(c)
;
(3) a duly executed certificate of non-foreign
status of Seller in accordance with Section 1445 of the Code and the Treasury Regulations promulgated thereunder substantially in the form attached hereto as
Exhibit
B
;
(4) in the event that the Foreign Sale occurs (or will occur), a duly executed certificate of non-foreign status of the
Company in accordance with Section 1445 of the Code and the Treasury Regulations promulgated thereunder substantially in the form attached hereto as
Exhibit
E
; and
(5) written resignation letters, effective as of the Closing Date, of each of the directors of each of the Business
Subsidiaries that is requested by Purchaser in writing at least three (3) Business Days prior to the Closing, effectuating his or her resignation from such position as a member of the board of directors (or equivalent governing body).
1.03
Equity Awards
.
(a) Each Seller Stock Option, whether vested or unvested, that is outstanding and unexercised immediately prior to the Closing shall,
effective as of the Closing, become fully vested and shall remain outstanding in accordance with its terms. Seller shall retain all Liabilities and obligations in respect of all Seller Stock Options, including all responsibility for the
administration, exercise and settlement of such Seller Stock Options in accordance with the terms of the applicable Seller Equity Plan, and any tax withholding, payroll tax or other tax obligations that arise in connection with any such exercise or
settlement.
(b) At the Closing, each Seller RSU Award, or portion thereof, that is held by an Employee and is outstanding and unvested
immediately prior to the Closing shall, without any further action on the part of any holder thereof, be substituted for a cash-settled restricted stock unit award with respect to Purchaser Common Stock (or, in the case of any Seller RSU Award held
by an Employee located in a non-U.S. jurisdiction, a stock-settled Purchaser RSU Award, if determined by Purchaser in its discretion following the date of this Agreement in accordance with
Section
4.09(f)
of the Disclosure
Schedules) (a
Purchaser RSU Award
) as follows:
(i) The number of shares of Purchaser Common Stock
subject to each Purchaser RSU Award shall be equal to the product (rounded up to the nearest whole share unless otherwise agreed by Seller and Purchaser) of (A) the number of shares of Seller Common Stock subject to the
Exhibit A-1-2
corresponding Seller RSU Award immediately prior to the Closing and (B) the Purchaser Ratio;
provided
that, with respect to any Seller RSU Award that is subject to performance-based
vesting (A) with respect to any performance year that includes the Closing Date, the number of shares of Purchaser Common Stock subject to each Purchaser RSU Award shall be based on target-level performance, and such Purchaser RSU Awards shall
not be subject to performance-based vesting criteria for such performance year, and (B) with respect to any performance year that commences after the Closing Date, Purchaser or its Affiliates shall establish the applicable performance goals
following the Closing.
(ii) Except as set forth in this
Section
1.03(b)
, each Purchaser RSU
Award shall be subject to the same terms (including, with respect to performance-based vesting Purchaser RSU Awards, the same potential number of shares that were subject to the Seller RSU Award, as adjusted under this
Section
1.03
), vesting conditions, settlement dates and other terms and conditions that were in effect immediately prior to the Closing for the corresponding Seller RSU Award. With respect to each Purchaser RSU Award,
Purchaser shall give each holder of such award full vesting service credit for such holders service with Seller or any of its Subsidiaries prior to the Closing Date to the same extent such service was recognized with respect to the
corresponding Seller RSU Award immediately prior to the Closing.
1.04
Purchase Price Adjustments
.
(a)
Equity Award Adjustment Amount
. For purposes of this Agreement,
Equity Award Adjustment Amount
means
an amount (positive or negative) equal to the product of (a) the difference of (i) the Seller Closing Equity Award Value minus (ii) the Seller Pre-Signing Equity Award Value, multiplied by (b) sixty percent (60%). If the
Equity Award Adjustment Amount is a positive number, the Estimated Purchase Price shall be reduced by the amount of the Equity Award Adjustment Amount on a dollar-for-dollar basis pursuant to
Section
1.01
(
b)
. If the Equity Award Adjustment Amount is a negative number, the Estimated Purchase Price shall be increased by the absolute value of the amount of the Equity Award Adjustment Amount on a
dollar-for-dollar basis pursuant to
Section
1.01
(
b
)
.
(b)
Estimated Closing Adjustment
Amount
. At least five (5) Business Days prior to the Closing Date, Seller shall prepare and deliver to Purchaser a statement (the
Estimated Closing Statement
) setting forth Sellers good faith estimate of, as of the
open of business on the Closing Date (assuming completion of the Reorganization Transactions), (i) the Net Working Capital (the
Estimated Net Working Capital
), (ii) the amount of Cash and the amount of Adjusted Cash
(such estimated amount of Adjusted Cash, the
Estimated Cash
), (iii) the amount of Debt (the
Estimated Debt
) and (iv) the amount of Transaction Expenses (the
Estimated Transaction
Expenses
), along with reasonable supporting documentation with respect to the calculation of such amounts. For purposes of this Agreement,
Estimated Closing Adjustment Amount
means an amount (positive or negative) equal
to the Estimated Net Working Capital, minus the Target Working Capital, plus the Estimated Cash, minus the Estimated Debt, minus the Estimated Transaction Expenses. If the Estimated Closing Adjustment Amount is a positive number, the Estimated
Purchase Price shall be calculated by adding the amount of the Estimated Closing Adjustment Amount to the Base Purchase Price on a dollar-for-dollar basis pursuant to
Section
1.01
(
c)
. If the Estimated
Closing Adjustment Amount is a negative number, the Estimated Purchase Price shall be calculated by subtracting the absolute value of the amount of the Estimated Closing Adjustment Amount from the Base Purchase Price on a dollar-for-dollar basis
pursuant to
Section
1.01
(
c
)
. The Estimated Closing Statement shall be prepared in accordance with GAAP applied on a basis that is consistent with past practices and prior periods and the accounting
principles, practices, procedures, policies and methods set forth on
Exhibit
C
;
provided
, that in the event of any conflict between GAAP and the sample calculation set forth on
Exhibit C
,
Exhibit C
shall govern.
(c)
Post-Closing Statement
. As soon as reasonably practicable after the Closing Date (but not later than
ninety (90) days thereafter), Purchaser will prepare and deliver to Seller a statement (the
Post-Closing
Exhibit A-1-3
Statement
) setting forth, as of the open of business on the Closing Date (assuming completion of the Reorganization Transactions), (i) the Net Working Capital (the
Closing Net Working Capital
), (ii) the amount of Cash and the amount of Adjusted Cash (such amount of Adjusted Cash, the
Closing Cash
), (iii) the amount of Debt (the
Closing Debt
)
and (iv) the amount of Transaction Expenses (the
Closing Transaction Expenses
), along with reasonable supporting documentation with respect to the calculation of such amounts. The Post-Closing Statement shall be prepared in
accordance with GAAP applied on a basis that is consistent with past practices and prior periods and the accounting principles, practices, procedures, policies and methods set forth on
Exhibit
C
;
provided
, that in
the event of any conflict between GAAP and the sample calculation set forth on
Exhibit C
,
Exhibit C
shall govern. In preparation of the Post-Closing Statement, Purchaser and its Representatives shall have the access afforded to
them pursuant to
Section
4.10(b)
.
(d)
Dispute Notice
. In its review of the Post-Closing Statement,
Seller and its Representatives shall have the access afforded to them pursuant to
Section
4.10(b)
. The Post-Closing Statement shall be binding and conclusive upon, and deemed accepted by, Seller unless Seller shall
have notified Purchaser in writing (the
Dispute Notice
) of any objections thereto consistent with the provisions of this
Section
1.04(d)
within forty-five (45) calendar days after the delivery of the
Post-Closing Statement to Seller. The Dispute Notice shall specify in reasonable detail each item on the Post-Closing Statement that Seller disputes and Sellers calculation of each such item. Any item not included as disputed in such
notice shall be deemed accepted by Seller and Purchaser.
(e)
Disputes
. Disputes between Purchaser and Seller relating to the
Post-Closing Statement that cannot be resolved by Purchaser and Seller within fifteen (15) Business Days after receipt by Purchaser of the Dispute Notice, or such longer period as Seller and Purchaser shall mutually agree in writing, may be
submitted, by notice from Seller or Purchaser to the other, for resolution to KPMG LLP or any other nationally recognized independent accounting firm selected jointly by Purchaser and Seller (the
Independent Accounting Firm
). Each
of Purchaser and Seller shall submit to the Independent Accounting Firm (with a copy delivered to the other party hereto on the same day), within ten (10) Business Days after the date of engagement of the Independent Accounting Firm, a memorandum
(which may include supporting exhibits) setting forth their respective positions in any disputed items. Each of Purchaser and Seller may (but shall not be required to) submit to the Independent Accounting Firm (with a copy delivered to the
other party hereto on the same day), within forty-five (45) days after the date of the engagement of the Independent Accounting Firm, a memorandum responding to the initial memorandum submitted to the Independent Accounting Firm by the other party
hereto. Unless requested by the Independent Accounting Firm in writing, no party hereto may present any additional information or arguments to the Independent Accounting Firm, either orally or in writing. During the review by the
Independent Accounting Firm, Purchaser and Seller and their respective accountants will each make available to the Independent Accounting Firm such personnel, and such information, books and records and work papers and otherwise cooperate in good
faith with the Independent Accounting Firm, as may be reasonably required by the Independent Accounting Firm to fulfill its obligations under this
Section
1.04
;
provided
,
however
, that the accountants of
Seller or Purchaser shall not be obliged to make any work papers available to the Independent Accounting Firm, except in accordance with such accountants normal disclosure procedures and then only after the Independent Accounting Firm has
signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable to such accountants.
(f)
Independent Accounting Firm
s Determination
. The Independent Accounting Firm shall act as an expert and not as an arbitrator. Promptly, but no later than ninety (90) days after its acceptance of its appointment as
the Independent Accounting Firm, the Independent Accounting Firm shall determine, based solely on the written submissions of Purchaser and Seller and not by independent review, those items in dispute on the Post-Closing Statement and shall render a
written report as to the resolution of each dispute and the resulting calculation of the Final Closing Adjustment Amount. Any such determination of an item in dispute shall be (i) with respect to Cash (including Adjusted Cash) and Net
Working Capital, neither lower than the amount specified by Purchaser in the Post-Closing Statement nor higher than the amount specified by Seller in the Dispute Notice and (ii) with respect to Debt and Transaction Expenses, neither higher than
the amount
Exhibit A-1-4
specified by Purchaser in the Post-Closing Statement nor lower than the amount specified by Seller in the Dispute Notice. The Independent Accounting Firm shall have exclusive jurisdiction
over, and resort to the Independent Accounting Firm as provided in this
Section
1.04(f)
shall be the sole and exclusive remedy of the parties hereto against one another or any other Person with respect to, any disputes
arising out of or relating to the Post-Closing Statement and shall be enforceable in a court of law. The substance of the Independent Accounting Firms determination shall not be subject to review or appeal, absent a showing of
fraud. The fee of the Independent Accounting Firm shall be borne fifty percent (50%) by Seller and fifty percent (50%) by Purchaser.
(g)
Final Closing Adjustment Amount
. The Post-Closing Statement shall become final and binding upon Purchaser and Seller upon the
earliest of (i) the failure by Seller to object thereto within the period permitted under, and otherwise in accordance with the requirements of,
Section
1.04(d)
(it being understood, for the avoidance of doubt, that
Seller and Purchaser shall be deemed to have agreed upon all items and amounts that are not disputed by Seller in the Dispute Notice), (ii) the written agreement between Purchaser and Seller with respect thereto and (iii) the decision by
the Independent Accounting Firm with respect to disputes under
Section
1.04(f)
. The Post-Closing Statement, as deemed to be agreed pursuant to clause (i) above, or as adjusted pursuant to the written agreement of Purchaser
and Seller or the decision of the Independent Accounting Firm, when final and binding, is referred to herein as the
Final Post-Closing Statement
. The
Final Closing Adjustment Amount
determined using the Final
Post-Closing Statement means an amount equal to the Closing Net Working Capital, minus the Target Working Capital, plus the Closing Cash, minus the Closing Debt, minus the Closing Transaction Expenses. The Estimated Purchase Price
shall be either (1) decreased by the amount, if any, by which the Final Closing Adjustment Amount is less than the Estimated Closing Adjustment Amount, or (2) increased by the amount, if any, by which the Final Closing Adjustment Amount is greater
than the Estimated Closing Adjustment Amount. Any adjustment to the Estimated Purchase Price provided for in this
Section
1.04(g)
is referred to as the
Purchase Price Adjustment
.
(h) If the Final Closing Adjustment Amount is greater than the Estimated Closing Adjustment Amount, Purchaser shall, within five (5) Business
Days after the Final Closing Adjustment Amount is determined and the Final Post-Closing Statement becomes final and binding, pay or cause to be paid, to Seller cash in the amount of such Purchase Price Adjustment. If the Final Closing Adjustment
Amount is less than the Estimated Closing Adjustment Amount, Seller shall, within five (5) Business Days after the Final Closing Adjustment Amount is determined and the Final Post-Closing Statement becomes final and binding, pay or cause to be paid,
to Purchaser cash in the amount of such Purchase Price Adjustment.
(i) Payments made under
Section
1.04(h)
shall be adjustments to the Purchase Price for all purposes.
1.05
Withholding
.
(a) Purchaser and each of its Affiliates shall be entitled to deduct and withhold from any amounts otherwise payable pursuant to this
Agreement such amounts as are required to be deducted and withheld with respect to the making of such payment under any applicable Tax Law. To the extent that Purchaser or a Purchaser Designee determines that any such withholding is required
with respect to any payment hereunder, Purchaser shall notify Seller no less than fifteen (15) Business Days prior to making such payment, and Purchaser and Seller shall cooperate (and Purchaser shall cause any Purchaser Designee to cooperate) in
good faith to take such commercially reasonable actions as may be necessary to minimize any such withholding. To the extent that any amounts are deducted or withheld pursuant to this
Section 1.05
, such amounts shall be treated for all
purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
Exhibit A-1-5
1.06
Foreign Transfer
.
(a) In the event that the SaleCo2 Contribution occurs pursuant to the terms of the Reorganization Agreement, at the Closing, immediately
prior to the Sale in respect of the Shares, Seller shall cause the Company to (i) sell, assign, transfer and deliver to Purchaser Designee, and Purchaser Designee shall acquire from the Company, 100% of the issued and outstanding equity interests in
SaleCo2 (the
Foreign Sale
and the consummation of the Foreign Sale, the
Foreign Sale Closing
) and (ii) immediately after the Foreign Sale Closing and prior to the Sale in respect of the Shares, distribute the
cash received by the Company in respect of the Foreign Sale Purchase Price at the Foreign Sale Closing to Seller;
provided
, that none of the foregoing shall modify or limit in any manner any of Purchasers or Sellers rights or
obligations under this Agreement or any other Transaction Document.
Purchaser Designee
means a direct or indirect wholly-owned Subsidiary of Purchaser, organized in a jurisdiction other than the United States or any political
subdivision thereof, designated by Purchaser in the Foreign Sale Notice. For the avoidance of doubt, the occurrence of the Foreign Sale and the other transactions contemplated by this
Section 1.06
shall not duplicate or otherwise
increase (or for the avoidance of doubt, decrease) the aggregate Base Purchase Price, Estimated Purchase Price and Purchase Price. Within twenty (20) Business Days) following the date hereof, the Purchaser and Seller shall cooperate in good faith to
determine the portion of the Purchase Price allocated to, and to be paid by the Purchaser Designee to the Company in respect of, the Foreign Sale (the
Foreign Sale Purchase Price
). If at the end of such period Purchaser and Seller
are unable to agree upon the Foreign Sale Purchase Price, Seller and Purchaser shall promptly thereafter cause the Independent Accounting Firm to resolve such dispute. Any costs and expenses of the Independent Accounting Firm shall be borne equally
by the Seller, on the one hand, and Purchaser, on the other hand. The Foreign Sale Purchase Price, as agreed by Seller and Purchaser or as determined by the Independent Accounting Firm, as applicable, shall be conclusive and binding on Purchaser and
Seller.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except (i) as otherwise set forth in the Disclosure Schedules or (ii) as set forth in the SEC Documents filed or furnished and
publicly available prior to the date of this Agreement (excluding any disclosures set forth under the heading Risk Factors and any disclosures included in any forward-looking statements section or that are similarly
cautionary, predictive or forward-looking in nature), Seller represents and warrants to Purchaser as follows:
2.01
Organization
.
(a) Seller is a corporation, duly incorporated, validly existing and in good standing under the Laws of the State of Delaware. Seller is
qualified to do business under the Laws of every other jurisdiction in which such qualification is necessary under applicable Law, except where the failure to be so qualified or otherwise authorized would not, individually or in the aggregate,
reasonably be expected to have a Business Material Adverse Effect.
(b) Each of the Business Subsidiaries is a corporation or other
entity duly incorporated or organized, validly existing and, to the extent legally applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization. Each of the Business Subsidiaries is qualified to do business
under the Laws of every other jurisdiction in which such qualification is necessary under applicable Law, except where the failure to be so qualified or otherwise authorized would not, individually or in the aggregate, reasonably be expected to have
a Business Material Adverse Effect. Seller has made available to Purchaser a true and correct copy of the Companys certificate of incorporation and bylaws, and the comparable constituent or organizational documents for each other Business
Subsidiary that constitutes a significant subsidiary as defined in Section 1-02 of Regulation S-X under the Exchange Act, in each case as in effect as of the date of this Agreement.
Exhibit A-1-6
2.02
Authority and Enforceability
.
(a) Seller (to the extent related to the Business) and the Business Subsidiaries have all requisite corporate or other organizational power
and authority to own, lease and operate their properties and to carry on the Business as now conducted, except where the failure to have such power and authority would not, individually or in the aggregate, reasonably be expected to have a Business
Material Adverse Effect.
(b) Seller has all necessary corporate power and authority to enter into, execute, deliver and, subject to
obtaining the Seller Stockholder Approval, perform its obligations under this Agreement, the Reorganization Agreement and the License Agreement. The execution, delivery and, subject to obtaining the Seller Stockholder Approval, performance of
this Agreement, the Reorganization Agreement and the License Agreement by Seller have been duly authorized by all requisite action on the part of Seller. This Agreement has been duly executed and delivered by Seller and, assuming due
authorization, execution and delivery of this Agreement by Purchaser, this Agreement is a legal, valid and binding obligation of Seller, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, general equity principles, other similar Laws of general application affecting enforcement of creditors rights generally and rules of Law governing specific
performance, injunctive relief and other equitable remedies (the
Enforceability Limitations
). The Reorganization Agreement and the License Agreement have been duly executed and delivered by Seller and are legal, valid and
binding obligations of Seller, enforceable against it in accordance with their terms, except as such enforceability may be limited by the Enforceability Limitations.
(c) The Company has all necessary corporate power and authority to enter into, execute, deliver and perform its obligations under the
Reorganization Agreement. The execution, delivery and performance of the Reorganization Agreement by the Company have been duly authorized by all requisite action on the part of the Company. The Reorganization Agreement has been duly
executed and delivered by the Company and is a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except as such enforceability may be limited by the Enforceability Limitations. Excalibur
has all necessary limited liability company power and authority to enter into, execute, deliver and perform its obligations under the License Agreement. The execution, delivery and performance of the License Agreement by Excalibur have been
duly authorized by all requisite action on the part of Excalibur. The License Agreement has been duly executed and delivered by Excalibur and is a legal, valid and binding obligation of Excalibur, enforceable against it in accordance with its
terms, except as such enforceability may be limited by the Enforceability Limitations.
(d) At a meeting duly called and held, the board
of directors of Seller (i) determined that this Agreement, the Reorganization Agreement and the Sale and the Reorganization Transactions are expedient and for the best interests of Seller and its stockholders, (ii) approved this Agreement,
the other Transaction Documents and the Transactions, (iii) resolved, subject to the terms of this Agreement, to recommend that the stockholders of Seller adopt a resolution authorizing the Sale and the Reorganization Transactions (the
Seller Recommendation
) (provided that any change, modification or rescission of such recommendation by the board of directors of Seller in accordance with
Section 4.06
shall not be a breach of this
Section 2.02(d)
),
and (iv) directed that such matter be submitted for consideration of the stockholders of Seller at the Stockholders Meeting, which resolutions, subject to
Section 4.06(f)
, have not been rescinded, modified or withdrawn.
2.03
Capitalization
and Title
.
(a) The Shares represent all of the issued and outstanding shares of capital stock of the Company. Seller is the sole record and
beneficial owner of the Shares, and, at the Closing, Seller will transfer and deliver to Purchaser valid title, in each case free and clear of any Encumbrances, other than (i) any Encumbrance arising out of, under or in connection with the
Securities Act or any other applicable securities Laws, (ii) any Encumbrance arising out of or in connection with this Agreement or (iii) any Encumbrance created by or through, or resulting from any facts or circumstances relating to,
Purchaser or its Affiliates. The Shares have been duly authorized, validly issued, and are fully paid and nonassessable and not subject to preemptive rights.
Exhibit A-1-7
(b) As of the close of business on July 18, 2016 (the
Capitalization Date
),
(i) 4,959,526 shares of Seller Common Stock were issuable upon exercise of outstanding and unexercised Seller Stock Options and (ii) 28,427,473 shares of Seller Common Stock were subject to Seller RSU Awards that were held by Employees and
were outstanding and unvested, assuming, in the case of clause (ii), achievement of all applicable performance goals at the maximum level. Since the Capitalization Date through the execution of this Agreement, there have been no issuances,
repurchases or redemptions of any Seller Equity Awards, other than (A) the issuance of shares of Seller Common Stock upon the exercise of Seller Stock Options or the settlement of Seller RSU Awards, in each case, outstanding as of the
Capitalization Date in accordance with their terms, (B) the acquisition by Seller of shares of Seller Common Stock in connection with the surrender of such shares by holders of Seller Stock Options outstanding on the Capitalization Date to be
able to pay the exercise price of such options in accordance with the terms of such options, (C) the withholding or disposition of shares of Seller Common Stock to satisfy withholding tax obligations with respect to any Seller Stock Options or
Seller RSU Awards (collectively,
Seller Equity Awards
) outstanding on the Capitalization Date, and (D) upon the forfeiture of any Seller Equity Award outstanding on the Capitalization Date pursuant to its terms.
(c) Except as set forth in this
Section 2.03
, there are no options, warrants, convertible or exchangeable securities or other rights
or Contracts obligating Seller or the Business Subsidiaries to issue or sell any shares of capital stock, or other equity or voting interests in, or securities convertible into, or exchangeable or exercisable for, shares of capital stock, or other
equity or voting interests in, any Business Subsidiary and no capital stock, equity securities or other equity interests of any Business Subsidiaries are reserved for issuance for any purpose. There are no outstanding obligations of Seller or
the Business Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock, or other equity or voting interests in, or securities convertible into, or exchangeable or exercisable for, shares of capital stock, or other equity or
voting interests in, the Business Subsidiaries. Other than as set forth in
Section
4.15
, none of Seller or the Business Subsidiaries is a party to any voting trust, proxy, voting agreement or other similar Contract with
respect to the voting of any shares of capital stock, or other equity or voting interests in, Seller or the Business Subsidiaries.
(d)
There are no outstanding bonds, debentures, notes or other indebtedness of Seller or the Business Subsidiaries having the right to vote (whether on an as-converted basis or otherwise) (or convertible into, or exchangeable or exercisable for,
securities having the right to vote) on any matters on which stockholders of Seller or the Business Subsidiaries may vote. Excalibur IP, LLC does not hold or own or otherwise have the right to license any assets other than the Intellectual
Property Rights that are the subject of the License Agreement (and any ministerial or miscellaneous assets that are not material and that are ancillary to such Intellectual Property Rights).
(e)
Section 2.03(e)
of the Disclosure Schedules sets forth a true and complete list, as of the close of business on the Capitalization
Date, of (i) each Seller RSU Award that was held by an Employee, (ii) the employee identification number of the Seller RSU Award holder, (iii) the number of shares of Seller Common Stock underlying each Seller RSU Award, (iv) the
date on which the Seller RSU Award was granted and (v)
the Seller Equity Plan under which the Seller RSU Award was granted.
2.04
Business Subsidiaries
.
(a) All the outstanding shares of capital stock of, or other equity or voting interests in, each Business Subsidiary (other than the
Shares) have been duly authorized and validly issued, are fully paid and nonassessable and are owned, directly or indirectly, as of the date hereof, by Seller, and, as of the Closing, by the Company, in each case free and clear of all Encumbrances,
other than (i) any Encumbrance arising out of, under or in connection with the Securities Act or any other applicable securities Laws, (ii) any Encumbrance arising out of or in connection with this Agreement or (iii) any Encumbrance
created by or through, or resulting from any facts or circumstances relating to, Purchaser or its Affiliates.
Section
2.04
of the Disclosure Schedules sets forth a true and complete list, as of the date hereof, of all
Business Subsidiaries and any joint ventures, partnerships, minority investments (other than Excluded Assets) or other arrangements in which Seller or any Business
Exhibit A-1-8
Subsidiary has a limited liability company, partnership or other equity interest (and, to the Knowledge of Seller (except with respect to wholly-owned Subsidiaries), the percentage of any such
interest). None of the Business Subsidiaries has any obligation to acquire any equity interest or other security in, or any commitment to make any capital contribution or investment in, or loan to, any Person (other than another Business
Subsidiary).
2.05
No Conflicts
. Assuming that the Seller Stockholder Approval and all Consents
contemplated by
Section
2.06
have been obtained, the execution, delivery and performance of this Agreement and the other Transaction Documents by Seller and/or its applicable Subsidiaries (including of the Reorganization
Agreement by the Company) do not and will not: (a) violate or conflict with the organizational documents of Seller or any of its Subsidiaries (including the Business Subsidiaries); (b) conflict with or violate any Law or Governmental
Order applicable to Seller or its properties or to any of its Subsidiaries (including the Business Subsidiaries) or their respective properties; or (c) violate, conflict with or result in a breach of or default under (with or without due notice
or lapse of time or both), require any consent, waiver or approval under or give rise to any right of termination, amendment, acceleration or cancellation of, or result in the creation of an Encumbrance, other than a Permitted Encumbrance, upon any
of the properties or assets of Seller or any of its Subsidiaries (including the Business Subsidiaries) pursuant to, any Material Contract or other material Contract (other than a lease or sublease of real property) or Lease, except, in the case of
clauses (b) and (c), as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.
2.06
Governmental Consents and Approvals
. Assuming the accuracy of Purchasers representation in
Section 3.04
, the execution, delivery and performance of this Agreement and the other Transaction Documents by Seller and/or its applicable Subsidiaries (including of the Reorganization Agreement by the Company) do not require any Consent of
any Governmental Authority, except: (a) pursuant to the requirements of the Antitrust Laws of the jurisdictions set forth on
Section 2.06(a)(i)
of the Disclosure Schedules; (b) for any notification, or where appropriate,
consultation or negotiations with a labor union, labor board, works council or relevant Governmental Authority concerning the transactions contemplated hereby pursuant to the Contracts set forth in
Section 2.14(a)
of the Disclosure Schedules;
(c) as required by the Securities Act, the Exchange Act and any other applicable state or federal securities Laws; (d) as required by Nasdaq; or (e) to the extent that the failure to obtain any such Consents would not, individually or
in the aggregate, reasonably be expected to have a Business Material Adverse Effect.
2.07
SEC
Documents
.
(a) Since January 1, 2014, Seller has filed or furnished with the SEC all material forms, schedules, prospectuses,
registration statements, reports and other documents required to be filed or furnished by it with the SEC (the
SEC Documents
). For the avoidance of doubt, the SEC Documents do not include any forms, schedules, prospectuses,
registration statements, reports and other documents filed or furnished by Aabaco Holdings, Inc. As of their respective dates, or, if amended or superseded, as of the date of such amendment or superseding filing or document so furnished,
(i) the SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act or the Sarbanes-Oxley Act, as the case may be, and the applicable rules and regulations promulgated thereunder and
(ii) none of the SEC Documents contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they
were made, not misleading in any material respect. No executive officer of Seller has failed to make the certifications required by him or her under Section 302 or 906 of the Sarbanes-Oxley Act, with respect to any SEC Document, except as
disclosed in certifications filed with the SEC Documents. As of the date hereof, there are no outstanding or unresolved comments in any comment letters of the staff of the SEC received by Seller relating to the SEC Documents.
(b) The consolidated financial statements (including all related notes and schedules) of Seller included in the SEC Documents (i) complied as
to form, as of their respective dates of filing with the SEC, in all material respects with the published rules and regulations of the SEC with respect thereto, (ii) fairly present in all material respects the consolidated financial position of
Seller and its consolidated Subsidiaries as at the
Exhibit A-1-9
respective dates thereof and their consolidated results of operations and consolidated cash flows for the respective periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments, to the absence of notes and to any other adjustments described therein, including in any notes thereto), (iii) have been prepared in all material respects in accordance with the Books and Records of Seller and its
consolidated Subsidiaries, and (iv) have been prepared in accordance with GAAP applied on a consistent basis during the periods indicated (except as may be indicated therein or in the notes thereto and subject, in the case of unaudited
statements, to normal year-end audit adjustments and to the absence of notes).
(c) Neither Seller (to the extent related to the
Business) nor any of the Business Subsidiaries is a party to, nor does it have any commitment to become a party to material off-balance sheet arrangements (as defined in Item 303(a) of Regulation S-K of the SEC).
2.08
No Undisclosed Liabilities
. Except (a) as reflected or expressly reserved against in
Sellers financial statements, or the notes thereto, included in the SEC Documents filed with the SEC and publicly available prior to the date of this Agreement, (b) for Liabilities incurred in the ordinary course of business consistent
with past practice since the date of such financial statements, (c) for Liabilities arising out of or in connection with this Agreement and (d) Retained Liabilities, neither Seller nor any of the Business Subsidiaries has any Liabilities that
would be required to be reflected or reserved against in a consolidated balance sheet of Seller and its consolidated Subsidiaries prepared in accordance with GAAP, as in effect on the date hereof, other than those which would not, individually or in
the aggregate, reasonably be expected to have a Business Material Adverse Effect.
2.09
Disclosure
Controls and Procedures
. Seller has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange
Act) as required by Rule 13a-15 under the Exchange Act. Sellers disclosure controls and procedures are designed to ensure that information required to be disclosed in Sellers periodic reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the required time periods. Sellers management has completed an assessment of the effectiveness of Sellers internal control over financial reporting in compliance with the requirements
of Section 404 of the Sarbanes-Oxley Act for the year ended December 31, 2015, and such assessment concluded that such controls were effective. Seller is in compliance in all material respects with the applicable listing and corporate governance
rules and regulations of Nasdaq. Since January 1, 2014 through the date hereof, Seller has not identified (i) any significant deficiencies or material weakness in the design or operation of internal control over financial reporting which
reasonably could adversely affect Sellers ability to record, process, summarize and report financial information or (ii) any fraud or allegation of fraud, whether or not material, that involves management or other employees who have a
significant role in Sellers internal control over financial reporting.
2.10
Litigation
. As
of the date hereof, there are no Actions pending or, to the Knowledge of Seller, threatened against Seller (to the extent related to the Business), any of the Business Subsidiaries or any of their respective assets, rights or properties, by or
before any Governmental Authority, and Seller (to the extent related to the Business), the Business Subsidiaries and their respective assets, rights and properties are not subject to any Governmental Orders, in each case which would, individually or
in the aggregate, reasonably be expected to have a Business Material Adverse Effect.
2.11
Compliance
with Laws; Permits
. Except with respect to those matters described in
Sections 2.12
(Taxes),
2.13
(Employee Benefit Plans; ERISA),
2.14
(Labor Matters), and
2.17
(Environmental Matters):
(a) Since January 1, 2014, each of Seller (to the extent related to the Business) and the Business Subsidiaries has been in compliance with
all Laws applicable to Seller or any of its assets and properties (in each case, to the extent related to the Business) and the Business Subsidiaries or any of their assets and properties, and none of Seller or the Business Subsidiaries has received
any written notice from a Governmental Authority alleging noncompliance, except in each case as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.
Exhibit A-1-10
(b) Since January 1, 2014, Seller (to the extent related to the Business) and the Business
Subsidiaries are and have been in possession of, and in compliance with, all Permits necessary to carry on the Business as currently conducted, and all such Permits are in full force and effect and are not subject to any Action that would result in
any modification, termination or revocation thereof, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.
(c) None of Seller or its Subsidiaries, or to the Knowledge of Seller, any director, officer, employee, agent or other person acting on
behalf of Seller or its Subsidiaries has, directly or indirectly, (i) used any funds of Seller or its Subsidiaries for unlawful contributions, unlawful gifts, unlawful entertainment or other unlawful expenses relating to political activity;
(ii) made any unlawful payment to foreign or domestic governmental officials or employees or to foreign or domestic political parties or campaigns from funds of Seller or its Subsidiaries; (iii) violated or is in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any other applicable Law that relates to bribery or corruption; (iv) established or maintained any unlawful fund of monies or other assets of Seller or its Subsidiaries; (v) made any fraudulent
entry on the books or records of Seller or its Subsidiaries; or (vi) made any unlawful bribe, unlawful kickback or other unlawful payment to any person, private or public, regardless of form, whether in money, property or services, to obtain
favorable treatment in securing business to obtain special concessions for Seller or its Subsidiaries, except in each case as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.
2.12
Taxes
.
(a) All material Tax Returns required to be filed by Seller (to the extent related to the Business, the Transferred Assets or the Assumed
Liabilities) or any Business Subsidiary have been timely filed (taking into account extensions), and all such Tax Returns are true, correct and complete in all material respects.
(b) All material Taxes required to be paid with respect to the Transferred Assets, the Assumed Liabilities or the Business and all material
Taxes required to be paid by or with respect to the Business Subsidiaries (including any consolidated, combined, unitary or affiliated group of which any of them is or has been a member), whether or not shown as due and payable on any Tax Return,
have been duly and timely paid.
(c) There are no material audits, claims, proceedings or assessments regarding Taxes pending or
threatened in writing as of the date hereof against Seller (to the extent related to the Business, the Transferred Assets or the Assumed Liabilities), the Business Subsidiaries or the Business.
(d) Each of Seller (to the extent related to the Business, the Transferred Assets or the Assumed Liabilities) and the Business Subsidiaries
has collected, deducted and withheld and timely paid to the appropriate Governmental Authority all material Taxes required to be collected, deducted, withheld or paid in connection with amounts paid or owning to, or received or owing from, any
employee, independent contractor, creditor, stockholder or other third party.
(e) There are no Encumbrances for material Taxes on any
asset of Seller (to the extent related to the Business, the Transferred Assets or the Assumed Liabilities) or of any Business Subsidiary other than Permitted Encumbrances.
(f) Neither the Seller (to the extent related to the Business, the Transferred Assets or the Assumed Liabilities) nor any Business Subsidiary
is a party to any Tax sharing agreement or Tax indemnity agreement pursuant to which it will have any obligation to make any payments for or in respect of Taxes after the Closing Date.
(g) Neither the Seller nor any Business Subsidiary has been either a distributing corporation or a controlled
corporation in a distribution during the last two (2) years that was purported or intended to be governed in whole or in part by Section 355 of the Code.
Exhibit A-1-11
(h) During the past three (3) years, no jurisdiction in which neither the Seller nor any
Business Subsidiary files Tax Returns has asserted that the Seller (to the extent related to the Business, the Transferred Assets or the Assumed Liabilities) or such Business Subsidiary is liable for a material amount of Taxes in that jurisdiction.
(i) Neither the Seller (to the extent related to the Business, the Transferred Assets or the Assumed Liabilities) nor any Business
Subsidiary has extended or waived the application of any statute of limitations applicable to any claim for, or the period for the assessment or collection of, any material Tax.
(j) Neither Seller (to the extent related to the Business, the Transferred Assets or the Assumed Liabilities) nor any Business Subsidiary is
or has been a party to any listed transaction, as defined in Treasury Regulations Section 1.6011-4(b)(2).
(k) None of the
Business Subsidiaries (i) has ever been a member of an affiliated, combined, consolidated, unitary, loss sharing or similar group for purposes of filing any Tax Return or paying Taxes (other than any such group of which Seller is or was the common
parent), or (ii) has any liability for Taxes of any other Person under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign Law), or as a transferee or successor, by contract or otherwise.
(l) None of the assets held by any Business Subsidiary that is not a U.S. person within the meaning of the Code is a United
States real property interest within the meaning of Section 897(c) of the Code.
2.13
Employee
Benefit Plans; ERISA
.
(a)
Section 2.13(a)
of the Disclosure Schedules sets forth a complete and accurate list, as of the date
of this Agreement, identifying each material Benefit Plan and each material Non-U.S. Benefit Plan. With respect to each material Benefit Plan and each material Non-U.S. Benefit Plan, Seller has furnished or made available to Purchaser (or, with
respect to Non-U.S. Benefit Plans, will furnish or make available to Purchaser within sixty (60) days following the date of this Agreement), as applicable, accurate and complete copies of (other than any documents that are prohibited from being made
available as a result of applicable Laws regarding the safeguarding of data privacy) (i) such Benefit Plan or such Non-U.S. Benefit Plan, as applicable, and all material amendments thereto; and (ii) to the extent applicable, (A) the
most recent annual report on Form 5500 filed and all schedules thereto filed with respect to such Benefit Plan, (B) each current trust agreement, insurance contract or policy, group annuity contract and any other funding arrangement
relating to such Benefit Plan or such Non-U.S. Benefit Plan, as applicable, (C) the most recent actuarial report, financial statement or valuation report relating to such Benefit Plan or such Non-U.S. Benefit Plan, as applicable, (D) a
current IRS opinion or favorable determination letter with respect to such Benefit Plan, (E) the most recent summary plan description, if any, required under ERISA with respect to such Benefit Plan, and (F) all material correspondence to
or from any Governmental Authority relating to such Benefit Plan or such Non-U.S. Benefit Plan, as applicable, during the past twelve (12) months;
provided
, that any such correspondence with respect to Non-U.S. Benefit Plans will be furnished
by Purchaser within sixty (60) days following the date of this Agreement.
(b) With respect to each Benefit Plan and Non-U.S. Benefit
Plan, as applicable, except as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect: (i) if intended to be qualified under Section 401(a) of the Code, such Benefit Plan is the
subject of an unrevoked favorable determination or opinion letter from the IRS, and, to the Knowledge of Seller, nothing has occurred since the date of the most recent such determination that would adversely affect such qualification, (ii) such
Benefit Plan has been established, maintained and administered in accordance with its terms and in compliance with applicable Law, including ERISA and the Code, and (iii) no disputes are pending, or, to the Knowledge of Seller, threatened
against such Benefit Plan or such Non-U.S. Benefit Plan (or any assets or fiduciary thereof) other than routine claims for benefits made in the ordinary course of the Benefit Plans or Non-U.S. Benefit Plans, as applicable, operations,
and there are no current or threatened audits, investigations or non-routine
Exhibit A-1-12
requests for information by any Governmental Authority with respect to such Benefit Plan or such Non-U.S. Benefit Plan.
(c) Except as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect, none of Seller,
any of the Business Subsidiaries nor any of their respective ERISA Affiliates sponsors or contributes to, or has any liability (whether actual or contingent) with respect to, (i) a defined benefit plan (as defined in ERISA
Section 3(35)) that is subject to ERISA; (ii) a multiemployer plan (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)) that is subject to ERISA; (iii) a pension plan subject to Section 302 or Title IV of ERISA
or Section 412 or 4971 of the Code, in any case, either directly or through any ERISA Affiliate; (iv) a multiple employer welfare arrangement (as defined in Section 3(40) of ERISA) that is subject to ERISA; (v) a multiple
employer plan (as defined in Section 413(c) of the Code) that is intended to be qualified under Section 401(a) of the Code; or (vi) any plan, program or arrangement that provides for post-retirement or other post-employment health or
welfare benefits (other than health care continuation coverage as required by Section 4980B of the Code or similar applicable Law).
(d)
During the immediately preceding six (6) years, (i) no Liability under Section 302 or Title IV has been incurred by Seller, the Business Subsidiaries or their respective ERISA Affiliates or their respective predecessors that has not
been satisfied in full, and no condition exists that presents a risk to Seller, the Business Subsidiaries or any such ERISA Affiliates of incurring any such Liability; and (ii) no event has occurred and, to the Knowledge of Seller, there
currently exists no condition or circumstances that would subject Seller or the Business Subsidiaries to any Controlled Group Liability with respect to any employee benefit plan that is not a Benefit Plan, except as would not, individually or in the
aggregate, reasonably be expected to have a Business Material Adverse Effect.
(e) All contributions required to be made under the terms
of any of the Benefit Plans or Non-U.S. Benefit Plans have been timely made or, if not yet due, have been properly reflected on the most recent consolidated balance sheet filed or incorporated by reference in Sellers financial statements,
except as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.
(f) The
consummation of the Transactions will not (either alone or together with any other event, whether contingent or otherwise, and including a subsequent termination of employment or services) (i) entitle any current or former employee, director or
independent contractor of Seller (to the extent related to the Business) or any of the Business Subsidiaries to any material payment or benefit, (ii) accelerate the time of payment or vesting, trigger any material payment of funding (through a
grantor trust or otherwise) of compensation or benefits under, or materially increase the amount payable or trigger any other material obligation pursuant to, any Benefit Plan or Non-U.S. Benefit Plan, or (iii) result in any excess
parachute payment (within the meaning of Section 280G of the Code) becoming due to any current or former employee, director or independent contractor of Seller or any of the Business Subsidiaries, except, in the case of clauses (i)
and (ii), as provided in this Agreement or as required by applicable Law.
(g) There is no Contract, Benefit Plan, Non-U.S. Benefit Plan
or other plan, policy, program or arrangement by which Seller or any of the Business Subsidiaries is bound to compensate any employee, director or independent contractor for excise taxes paid pursuant to Section 409A or 4999 of the Code.
(h) Each Non-U.S. Benefit Plan (i) has been established, administered and maintained in accordance with all applicable requirements
(including applicable Law and the terms of such plan), except as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect and (ii) that is intended to qualify for special Tax treatment meets
all material requirements for such treatment, and, to the Knowledge of Seller, no condition exists and no event has occurred that would reasonably be expected to result in the loss or revocation of such qualification.
(i) This
Section 2.13
and
Section 2.14
, together with
Section
2.03
,
Section
2.06(b)
, and the second sentence of
Section
2.18
, contain the sole and exclusive representations and warranties provided with respect to
Exhibit A-1-13
all matters relating to employee benefits, employment and employment practices with respect to each of Seller, the Business Subsidiaries and the Business.
2.14
Labor Matters
.
(a)
Section
2.14(a)
of the Disclosure Schedules sets forth a complete and accurate list, as of the date of this
Agreement, of each collective bargaining agreement or other material Contract with any labor organization, works council, union or similar employee representative body with respect to the Employees. Except as would not, individually or in the
aggregate, reasonably be expected to have a Business Material Adverse Effect, (i) there are no strikes, work stoppages, work slowdowns, lockouts, picketing or other similar labor activities pending or, to the Knowledge of Seller, threatened in
writing against Seller (to the extent related to the Business) or any of the Business Subsidiaries, and (ii) there are no unfair labor practice charges, grievances or complaints pending or, to the Knowledge of Seller, threatened in writing by
or on behalf of any Employee or group of Employees of Seller (to the extent related to the Business) or any of the Business Subsidiaries against Seller (to the extent related to the Business) or any of the Business Subsidiaries before the National
Labor Relations Board or any other similar labor tribunal or authority.
(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Business Material Adverse Effect, Seller (to the extent related to the Business) and the Business Subsidiaries are, and since January 1, 2015 have been, in compliance with all applicable Laws respecting
employment and employment practices, including all Laws respecting terms and conditions of employment, health and safety, wages and hours, immigration, employment discrimination, disability rights or benefits, equal opportunity, plant closures and
layoffs, worker classification, affirmative action, workers compensation, labor relations, employee leave issues and unemployment insurance.
(c) Prior to the date of this Agreement, except as would not, individually or in the aggregate, reasonably be expected to have a Business
Material Adverse Effect, Seller (to the extent related to the Business) and the Business Subsidiaries have satisfied any legal or contractual requirement to provide notice to, enter into any consultation procedure with or obtain an opinion from any
labor or trade union, works council, employee forum or other employee representative body recognized by Seller or any of the Business Subsidiaries for collective consultation purposes in relation to any Employee, in connection with the execution of
this Agreement or the Transactions.
(d)
Section 2.13
and this
Section 2.14
, together with
Section
2.03
,
Section
2.06(b)
and the second sentence of
Section
2.18
, contain the sole and exclusive representations and warranties provided with respect to all matters
relating to employee benefits, employment and employment practices with respect to each of Seller, the Business Subsidiaries and the Business.
2.15
Real Property
.
(a) (i) Each material lease or sublease (a
Lease
) pursuant to which Seller (to the extent related to the Business) or any
of the Business Subsidiaries leases or subleases real property (excluding all leases or subleases for data centers) (the
Leased Real Property
) is in full force and effect and Seller or the applicable Business Subsidiary has good
and valid leasehold title in each parcel of the Leased Real Property pursuant to such Lease, free and clear of all Encumbrances other than Permitted Encumbrances, except in each case where such failure would not, individually or in the aggregate,
reasonably be expected to have a Business Material Adverse Effect and (ii) there are no defaults by Seller or a Business Subsidiary (or any conditions or events that, after notice or the lapse of time or both, would constitute a default by
Seller or a Business Subsidiary) and to the Knowledge of Seller, there are no defaults by any other party to such Lease (or any conditions or events that, after notice or the lapse of time or both, would constitute a default by such other party)
under such Lease, except where such defaults would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.
Exhibit A-1-14
(b) (i) Seller and the Business Subsidiaries have good and marketable title to all of the real
property owned in fee by Seller (to the extent related to the Business) or any of the Business Subsidiaries (the
Owned Real Property
), free and clear of any Encumbrances other than Permitted Encumbrances; (ii) there are no
leases, licenses or occupancy agreements pursuant to which any third party is granted the right to use the Owned Real Property; (iii) there are no outstanding options or rights of first refusal to purchase the Owned Real Property, except, in
each case, as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect; and (iv) neither Seller nor any of the Business Subsidiaries has received written notice of any default under any
restrictive covenants affecting the Owned Real Property and the Leased Real Property that remains uncured, and no event has occurred that, after notice or the lapse of time or both, would constitute such a default, except, in each case, as would
not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.
(c)
Section 2.15(c)
of
the Disclosure Schedules contains a complete and correct list of the (i) Owned Real Property and (ii) Leases. Seller has made available to Purchaser a true, correct and complete copy of each Lease with respect thereto (including all
material amendments, modifications and supplements thereto).
2.16
Intellectual Property
.
(a) To the Knowledge of Seller,
Section 2.16(a)
of the Disclosure Schedules sets forth a true and complete list of all Owned Business
Intellectual Property that, as of the date hereof, is issued by, registered with, or subject to a pending application for issuance or registration with, any Governmental Authority (
Registered Owned Business IP
). To the Knowledge
of Seller, except as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect, Seller (to the extent related to the Business) or one of the Business Subsidiaries exclusively owns the Owned
Business Intellectual Property.
(b) To the Knowledge of Seller, except as would not, individually or in the aggregate, reasonably be
expected to have a Business Material Adverse Effect, Seller or one of the Business Subsidiaries has the right to use, all Seller Licensed Software. All material issued Patents and material Mark and Copyright registrations included in the
Registered Owned Business IP are (i) to the Knowledge of Seller, subsisting, valid and enforceable, and (ii) free and clear of all Encumbrances, other than Permitted Encumbrances; provided that the foregoing representation and warranty does not
apply to any Intellectual Property Rights owned by any Person acquired by Seller after January 1, 2013 that Seller paid less than $100 million dollars of total consideration to acquire such Person (with any non-cash consideration being valued at the
fair market value thereof as of the consummation of such acquisition). Except as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect, as of the date hereof, there are no Actions
pending, or, to the Knowledge of Seller, threatened in writing since January 1, 2013 and not resolved, against Seller (to the extent related to the Business, the Transferred Assets or the Assumed Liabilities) or the Business Subsidiaries
contesting the validity, enforceability, use or ownership of any Owned Business Intellectual Property.
(c) To the Knowledge of Seller,
neither Seller (to the extent related to the Business, the Transferred Assets or the Assumed Liabilities) nor the Business Subsidiaries, nor any of their respective products or services, or the manufacture, use, sale, offer for sale, importation,
and other commercial exploitation of any such products and services by or on behalf of Seller or the Business Subsidiaries, nor the conduct of the Business infringes or misappropriates any Intellectual Property Rights of any third party (provided
that the foregoing representation and warranty does not apply to any third party products or services sold or otherwise provided or made available through any products or services of Seller or any of the Business Subsidiaries). As of the date
hereof, to the Knowledge of the Seller, there are no Actions pending, or threatened in writing since January 1, 2013 and not resolved (other than any such threatened Actions with respect to which there has been no communication for over one (1)
year between Seller or any Business Subsidiary and the threatening party), against Seller (to the extent related to the Business) or any of the Business Subsidiaries that involve a claim against Seller (to the extent related to the Business) or any
of the Business Subsidiaries of infringement or misappropriation of any Intellectual Property Rights of any Person. Notwithstanding any other representation,
Exhibit A-1-15
warranty or other provision in this Agreement, this
Section 2.16(c)
contains the only representations and warranties made by Seller with respect to infringement or misappropriation by
Seller or any of the Business Subsidiaries of any Intellectual Property Rights of any other Person. Notwithstanding any of the foregoing in this
Section 2.16(c)
, the representations, warranties and other provisions in this
Section 2.16(c)
do not apply to any Intellectual Property Rights owned by any Person acquired by Seller after January 1, 2013 that Seller paid less than $100 million dollars of total consideration to acquire such Person (with any non-cash
consideration being valued at the fair market value thereof as of the consummation of such acquisition).
(d) To the Knowledge of Seller,
except as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect, as of the date hereof, no Person is infringing or misappropriating any Owned Business Intellectual Property as of the date
hereof. Except as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect, as of the date hereof, there are no Actions pending, or, to the Knowledge of Seller, threatened in writing since
January 1, 2013 and not resolved, by Seller (to the extent related to the Business, the Transferred Assets or the Assumed Liabilities) or any of the Business Subsidiaries that involve a claim against any Person of infringement or
misappropriation of any Owned Business Intellectual Property.
(e) Except as would not, individually or in the aggregate, reasonably be
expected to have a Business Material Adverse Effect, Seller and the Business Subsidiaries have taken commercially reasonable steps to protect and preserve the confidentiality of all Trade Secrets included in the Owned Business Intellectual
Property. To the Knowledge of Seller, except as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect, no Trade Secrets included in the Owned Business Intellectual Property have been
authorized to be disclosed or actually disclosed by Seller or any of the Business Subsidiaries to any other Person other than pursuant to a written confidentiality agreement that imposes restrictions on the use and disclosure of such Trade Secrets.
(f) To the Knowledge of Seller, the execution, delivery and performance of this Agreement and the Reorganization Agreement and the
consummation of the Transactions will not, pursuant to any Contract to which Seller or any of the Business Subsidiaries is a party, require Seller or any of the Business Subsidiaries to assign or exclusively license to a third party any material
Owned Business Intellectual Property.
(g) Except as would not, individually or in the aggregate, reasonably be expected to have a
Business Material Adverse Effect, since January 1, 2013, all Persons (including current and former employees and independent contractors) who have created or contributed to the creation of any Owned Business Intellectual Property have executed
enforceable written agreements that validly and irrevocably assign to Seller or one of the Business Subsidiaries, to the extent permitted under applicable Law, all of their rights in and to such Owned Business Intellectual Property, or Seller and
the Business Subsidiaries own all such Owned Business Intellectual Property pursuant to applicable Law. Seller and the Business Subsidiaries have taken commercially reasonable actions to maintain the validity and enforceability of any material
issued Patent or material Mark or Copyright registration included in the Registered Owned Business IP under applicable Law.
(h) To the
Knowledge of Seller, neither Seller nor the Business Subsidiaries has included, incorporated or embedded any Open Source Software that is subject to any Copyleft License in any Owned Business Software that is distributed by Seller or any of the
Business Subsidiaries to any Person (other than Seller or any Business Subsidiary).
(i) To the Knowledge of Seller, except as would not,
individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect, neither Seller nor any of the Business Subsidiaries has disclosed or delivered or authorized to be disclosed to any escrow agent or any other Person
(other than an employee) any of the source code for any Owned Business Software other than pursuant to a written Contract that imposes restrictions on the use and disclosure of such source code.
Exhibit A-1-16
(j) The Intellectual Property Rights licensed to Seller and the Business Subsidiaries under the
License Agreement and the Business Intellectual Property constitute, in all material respects, all Intellectual Property Rights necessary to operate the Business as currently conducted.
(k) Seller and the Business Subsidiaries post policies with respect to Personal Data in their possession or Processed on their behalf on any
websites or online services operated by Seller or the Business Subsidiaries in conformance in all material respects with all applicable Privacy Laws. To the Knowledge of Seller, Seller and the Business Subsidiaries written public-facing
privacy policies fully and accurately disclose how the Business Processes Personal Data except where the failure to disclose would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.
(l) To the Knowledge of Seller, Seller and the Business Subsidiaries are, and in the past have made themselves, in compliance, in all
material respects with: (i) all applicable Privacy Laws; (ii) all of Sellers and the Business Subsidiaries written public-facing policies regarding privacy and data security; and (iii) any existing and currently effective written
contractual commitment made by Seller or the Business Subsidiaries with respect to Personal Data; in each case (i), (ii) and (iii) except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to
have a Business Material Adverse Effect.
(m) To the Knowledge of Seller, Seller and the Business Subsidiaries have contractually
obligated all third-party service providers, outsourcers, processors, or other third parties Processing Personal Data, in each case on behalf of Seller or the Business Subsidiaries to (i) comply with applicable Privacy Laws (except where the failure
to obligate such third-party would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect); and (ii) take reasonable steps to protect and secure Personal Data from loss, theft, unauthorized access,
use, modification, disclosure or other misuse.
(n) Seller and the Business Subsidiaries have obtained or will obtain any and all
necessary rights, permissions, and consents to permit the transfer of Personal Data in connection with the Transactions, and such transfer will not violate in any material respect any applicable Privacy Laws.
(o) To the Knowledge of Seller, Seller and the Business Subsidiaries have implemented and maintain organizational, physical, administrative,
and technical measures applicable to Personal Data that are reasonably consistent with (i) reasonable practices in the industry in which Seller and the Business Subsidiaries operate, (ii) any existing and currently effective written contractual
commitment made by Seller or the Business Subsidiaries that is applicable to Personal Data, and (iii) any written public-facing policy adopted by Seller or the Business Subsidiaries related to privacy, information security or data security, in each
case (i), (ii) and (iii) that are intended to protect the integrity, security and operations of Seller or the Business Subsidiaries information technology systems (and data therein) against loss, theft, unauthorized access or acquisition,
modification, disclosure, corruption, or other misuse, except in each case (i), (ii) and (iii) where the failure to have implemented and maintain any such measures would not, individually or in the aggregate, reasonably be expected to have a
Business Material Adverse Effect. Seller and the Business Subsidiaries maintain, and contractually require any third parties acting on their respective behalf to maintain, a written public-facing information privacy and security program that
maintains reasonable and appropriate measures to protect the privacy, operation, confidentiality, integrity, and security of all Personal Data against any Security Breach. Seller and the Business Subsidiaries use reasonable efforts to inform all
employees of and consultants to Seller and the Business Subsidiaries who have access to or Process Personal Data of Sellers or the Business Subsidiaries applicable current written public-facing privacy and security policies. Seller has
delivered or made available true and complete copies of all current written public-facing policies and procedures relating to the Processing and security of Personal Data.
(p) To the Knowledge of Seller, there have not been any incidents of, or third party claims alleging, (i) Security Breaches, unauthorized
access or unauthorized use of any of Sellers or the Business Subsidiaries information technology systems or (ii) loss, theft, unauthorized access or acquisition, modification,
Exhibit A-1-17
disclosure, corruption, or other misuse of any Personal Data in Sellers or the Business Subsidiaries possession, or other confidential data owned by Seller or the Business
Subsidiaries (or provided to Seller or the Business Subsidiaries by their customers) in Sellers or the Business Subsidiaries possession, in each case (i) and (ii) that could reasonably be expected to have a Business Material Adverse
Effect. Neither Seller nor the Business Subsidiaries have notified in writing, or to the Knowledge of Seller, been required by applicable Law or a Governmental Authority to notify in writing, any Person of any Security Breach. To the Knowledge of
Seller, neither Seller nor the Business Subsidiaries have received any notice of any claims, investigations (including investigations by a Governmental Authority), or alleged violations of Laws with respect to Personal Data possessed by Seller or
the Business Subsidiaries, in each case that could reasonably be expected to have a Business Material Adverse Effect.
(q) This
Section 2.16
,
Section
2.05
, the second sentence of
Section 2.18
,
Section
2.19
and
Section 2.20
contains the sole and exclusive representations and warranties provided
with respect to all matters relating to Intellectual Property Rights or the collection, use, storage, retention, disclosure or disposal of personally identifiable information with respect to each of Seller, the Business Subsidiaries and the
Business.
2.17
Environmental Matters
. Except as would not, individually or in the aggregate,
reasonably be expected to have a Business Material Adverse Effect: (a) Seller (to the extent related to the Business) and the Business Subsidiaries are, and their activities at the Owned Real Property and Leased Real Property are, in
compliance with all applicable Environmental Laws; (b) since January 1, 2012, Seller (to the extent related to the Business) and the Business Subsidiaries have obtained and are in compliance with all Permits required for the operation of the
Business under applicable Environmental Laws; (c) since January 1, 2012, neither Seller (to the extent related to the Business) nor the Business Subsidiaries have been subject to any pending or, to the Knowledge of Seller, threatened
Environmental Claim; (d) there has been no Release of Hazardous Materials at, from, to, on or under any of the properties that are currently or formerly owned, leased, or operated by Seller or any of the Business Subsidiaries or, any properties to
which Seller or any of Business Subsidiaries has sent Hazardous Materials for which Release Seller or any of the Business Subsidiaries could reasonably be expected to have liability under Environmental Laws; (e) since January 1, 2012, neither Seller
(to the extent related to the Business) nor the Business has paid any material fine or penalty relating to any Environmental Law, Hazardous Materials or an Environmental Claim; and (f) neither Seller (to the extent related to the Business) nor the
Business have entered into any agreement to indemnify, any Person for any conditions or claims involving any Releases of Hazardous Substances into soil or groundwater that remains legally binding. This
Section 2.17
,
Section 2.05
,
Section 2.06
,
Section 2.08
and the second sentence of
Section 2.18
contain the sole and exclusive representations and warranties in this Agreement relating to environmental matters, including matters arising under Environmental
Laws or otherwise relating to Hazardous Materials.
2.18
Absence of Certain Changes
. Except
(i) in connection with the negotiation and execution of this Agreement, the Reorganization Transactions, the Debt Tender Offer, or, for the avoidance of doubt, the IP Monetization or (ii) as otherwise contemplated or permitted by this
Agreement, since December 31, 2015 through the date hereof, the Business has been conducted in the ordinary course consistent with prior practice. Since December 31, 2015, there has not occurred a Business Material Adverse Effect.
2.19
Material Contracts
.
Section 2.19
of the Disclosure Schedules contains an accurate list as
of the date of this Agreement of all the Contracts, excluding any Leases, currently in effect of the following types to which Seller (to the extent related to the Business) or any of the Business Subsidiaries is a party or to which any of their
assets or properties is subject (the
Material Contracts
):
(a) any Contract that (i) is a material contract
(as such term is defined in Item 601(b)(10) of Regulation S-K of the Exchange Act other than any such Contract that is not required to be filed under clause (iii)(C) thereof) or (ii) that would be required to be disclosed under Item 404 of
Regulation S-K under the Securities Act;
Exhibit A-1-18
(b) any Contract that restricts or prohibits, or purports to restrict or prohibit, Seller (to
the extent related to the Business) or any of the Business Subsidiaries (i) from engaging or competing in any business or soliciting any client or customer in any geographic area (in each case, other than (A) non-exclusive, inbound licenses to
Intellectual Property Rights that are subject to territorial limitations and (B) covenants not to assert, sue or challenge), including Contracts that contain a exclusivity or similar term, or acquiring or disposing of securities of
another person (or that following the Closing would materially restrict Purchaser or its Subsidiaries in any such manner) or (ii) from soliciting individuals for employment;
(c) any loan, guarantee of indebtedness or credit agreement, note, mortgage, indenture or other binding commitment (other than those solely
between or among Seller and/or the Business Subsidiaries) relating to indebtedness for borrowed money in an amount in excess of $25,000,000;
(d) (i) any Contract establishing or governing the management of any joint venture or partnership that is material to the operations of the
Business, and (ii) any Contract material to the operations of the Business with (A) SoftBank Group Corp. and its controlled Affiliates, (B) Yahoo Japan Corporation and its controlled Affiliates, (C) Seven Network Limited and its controlled
Affiliates, (D) Microsoft Corporation and its controlled Affiliates and (E) Alphabet Inc. and its controlled Affiliates, in each case of (A) through (E), other than Contracts entered into in the ordinary course of business consistent with past
practice on standard terms;
(e) any Contract pursuant to which Seller (to the extent related to the Business) or the Business
Subsidiaries (i) was obligated to pay more than $25,000,000 for the year ended December 31, 2015 or may be obligated to pay such amount for the year ended December 31, 2016 (other than revenue share arrangements) (excluding any Contract covered
in the immediately following clause (ii)), (ii) is obligated to pay the counterparty a minimum price or revenue guarantee amount involving amounts reasonably expected to be greater than $25,000,000 annually, or (iii) received, net of traffic
acquisition costs, revenues of greater than $25,000,000 for the year ended December 31, 2015 or that is expected to result in the receipt, net of traffic acquisition costs, of revenues of greater than $25,000,000 for the year ending December 31,
2016;
(f) any Contract (i) that contains a most-favored-nation clause or similar term pursuant to which Seller or any of the
Business Subsidiaries provides preferential pricing or treatment to any other Person or (ii) that grants any put, call, right of first refusal, right of first offer or similar right with respect to any material assets, rights or properties of Seller
(to the extent related to the Business) or the Business Subsidiaries;
(g) any Contract with a sales representative with expected
aggregate annual payments by or to Seller (to the extent related to the Business) or the Business Subsidiaries in excess of $25,000,000;
(h) any Contract providing for the acquisition or disposition, including on a contingent basis, of any assets, business, securities or
otherwise outside the ordinary course of business by Seller (to the extent related to the Business) or the Business Subsidiaries or for consideration in excess of $25,000,000, other than Contracts for transactions that have closed for which there
are no remaining holdback or deferred purchase obligations, earn-out obligations, pending indemnification obligations that are not secured by funds held in escrow or other contingent or similar obligations (other than obligations with respect to
time-based retention) that would reasonably be expected to result in Liabilities in excess of $25,000,000;
(i) any Contract that
obligates Seller (to the extent related to the Business) or any of the Business Subsidiaries to make any loans, advances or capital contributions to, or investments in, any Person in excess of $25,000,000;
(j) any Contract that is material to the Business under which Seller (to the extent related to the Business) or any of the Business
Subsidiaries: (i) is a party to an express cross-license under or to any Patents that are material to the Business; (ii) has received an express license under or to any Patents that are material to the Business (excluding implied licenses to Patents
in connection with the purchase or licensing of Software,
Exhibit A-1-19
hardware or services); or (iii) has received an express license under or to any Software owned by any other Person that (A) is material to the Business and (B) has an annual cost of greater than
$15,000,000 (excluding any licenses for generally available, unmodified, commercial Software or click-wrap, shrink-wrap or freely downloadable Software (including Open Source Software) or licenses included in advertising
insertion orders);
(k) any Contract that is material to the Business under which Seller (to the extent related to the Business) or any
of the Business Subsidiaries has granted an express license under or to any Patents included in the Registered Owned Business IP that are material to the Business;
(l) any Contract pursuant to which (i) any third Person creates, develops, supports, maintains or customizes for or on behalf of Seller
(to the extent related to the Business) or any of the Business Subsidiaries any Intellectual Property Rights or Software material to the Business for aggregate annual or one-time fees in excess of $15,000,000 or (ii) Seller or any of the
Business Subsidiaries, for aggregate annual or one-time fees in excess of $15,000,000, creates, develops or customizes any Intellectual Property Rights or Software for any third Person; and
(m) any outstanding commitment or agreement to enter into any of the foregoing.
Seller has made available to Purchaser prior to the date of this Agreement a complete and correct copy of each Material Contract as in effect
on the date of this Agreement. Neither Seller nor any Business Subsidiary is in breach of or default under the terms of any Material Contract, and no event has occurred that with the lapse of time or the giving of notice or both would
constitute a breach or default thereunder by Seller or any Business Subsidiary, in each case where such breach or default would reasonably be expected to have, individually or in the aggregate, a Business Material Adverse Effect. To the Knowledge of
Seller, no other party to any Material Contract is in breach of or default under the terms of any Material Contract and, to the Knowledge of Seller, no event has occurred that with the lapse of time or the giving of notice or both would constitute a
breach or default thereunder by any other party thereto, in each case where such breach or default would reasonably be expected to have, individually or in the aggregate, a Business Material Adverse Effect. Each Material Contract is a valid and
binding obligation of Seller or the applicable Business Subsidiary and, to the Knowledge of Seller, a valid and binding obligation of each other party thereto. Each Material Contract is in full force and effect and enforceable against the other
parties thereto, except (i) as would not reasonably be expected to have, individually or in the aggregate, a Business Material Adverse Effect, (ii) as such enforceability may be limited by the Enforceability Limitations and (iii) for
any Material Contract that has expired or been terminated in accordance with its terms other than as a result of a breach thereof or default thereunder by Seller. Except as would not reasonably be expected to have, individually or in the aggregate,
a Business Material Adverse Effect, (x) there are no disputes pending or, to the Knowledge of Seller, threatened with respect to any Material Contract or counterparty thereto and (y) neither Seller nor any of the Business Subsidiaries has received
any written (or to Sellers Knowledge, oral) notice of the intention of any such counterparty to terminate for default, convenience or otherwise any Material Contract, nor, to the Knowledge of Seller, is any such party threatening to do so.
2.20
Rights and Obligations
. Assuming receipt of all Consents that are required in connection with
the consummation of the Transactions, the Business Subsidiaries (for the avoidance of doubt, including (if applicable) SaleCo2 and its Subsidiaries) (after giving effect to the Reorganization Transactions (including the transactions contemplated by
Section 1.7 of the Reorganization Agreement)) will have substantially the same rights and obligations (excluding the Excluded Assets and the Retained Liabilities) with respect to the Business immediately following the Closing as Seller and the
Business Subsidiaries had immediately prior to consummation of the Reorganization Transactions.
2.21
Seller Stockholder Approval
. Assuming the Seller Stockholder Approval is obtained, no other vote of stockholders of Seller is required in connection with the consummation of the transactions contemplated hereby.
2.22
Information Supplied
. The Proxy Statement will not, as of the date of filing and at the date it is
first mailed to the stockholders of Seller and at the time of the Stockholders Meeting, contain any untrue
Exhibit A-1-20
statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made,
not misleading. The representations and warranties contained in this
Section
2.22
will not apply to statements or omissions included in the Proxy Statement based upon information furnished to Seller by Purchaser
specifically for use therein.
2.23
State Takeover Statutes
. No fair price,
moratorium, control share acquisition or other similar antitakeover statute or regulation enacted under state or federal laws in the United States applicable to Seller or the Company is applicable to the Sale and the
Reorganization Transactions.
2.24
Brokers
. Seller shall be solely responsible for the fees and
expenses of any broker, finder or investment banker entitled to any brokerage, finders or other fee or commission in connection with the Sale and the other transactions contemplated by this Agreement, based upon arrangements made by or on
behalf of Seller or the Business Subsidiaries.
2.25
Insurance
. Seller and the Business
Subsidiaries maintain insurance in such amounts and against such risks in all material respects as is customary for the industries in which Seller (to the extent related to the Business) and the Business Subsidiaries operate and as the management of
Seller has in good faith determined to be reasonable. Except as would not reasonably be expected to have, individually or in the aggregate, a Business Material Adverse Effect, all material insurance policies maintained by or on behalf of Seller
(to the extent related to the Business) and the Business Subsidiaries are in full force and effect, all premiums and other payments due on such policies have been paid by Seller and the Business Subsidiaries and all claims thereunder have been filed
in due and timely fashion.
2.26
Disclaimer
. Except as set forth in this
Article II
or the
other Transaction Documents, none of Seller, its Affiliates or any of its Representatives makes or has made any other representation or warranty, express or implied, at law or in equity, in respect of Seller, the Business Subsidiaries or their
respective Affiliates. Any such other representation or warranty is hereby expressly disclaimed. In particular, without limiting the foregoing disclaimer, except for the representations and warranties made by Seller in this
Article
II
or the other Transaction Documents, none of Seller, its Affiliates or any of its Representatives makes or has made any representation or warranty to Purchaser or any of its Affiliates or Representatives with respect to (a) any financial
projection, forecast, estimate or budget of future results or future financial condition relating to Seller, any of the Business Subsidiaries or the Business, or (b) any oral or written information presented to Purchaser or any of its
Affiliates or Representatives in the course of their due diligence investigation of Seller, any of the Business Subsidiaries or the Business, the negotiation of this Agreement or in the course of the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
3.01
Organization
. Purchaser is a corporation duly incorporated, validly existing and in good standing
under the Laws of the State of Delaware.
3.02
Authority and Enforceability
. Purchaser has all
necessary corporate power and authority to enter into, execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement by Purchaser have been duly authorized by all requisite action
on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming due authorization, execution and delivery of this Agreement by Seller, this Agreement is a legal, valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms, except as such enforceability may be limited by the Enforceability Limitations.
Exhibit A-1-21
3.03
No Conflicts
. Assuming that all Consents contemplated
by
Section
3.04
have been obtained, the execution, delivery and performance of this Agreement by Purchaser do not and will not: (a) violate or conflict with the organizational documents of Purchaser;
(b) conflict with or violate any Law or Governmental Order applicable to Purchaser or its properties; or (c) violate, conflict with or result in a breach of or default under (with or without due notice or lapse of time or both), require
any consent, waiver or approval under or give rise to any right of termination, amendment, acceleration or cancellation of, or result in the creation of an Encumbrance, other than any Permitted Encumbrance, upon any of the properties or assets of
Purchaser pursuant to, any Contract to which Purchaser or any of its Affiliates is a party or by which Purchaser or any of its Affiliates or any of their respective properties or assets may be bound except, in the case of clauses (b) and (c),
as would not, individually or in the aggregate, reasonably be expected to materially and adversely affect the ability of Purchaser to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement.
3.04
Governmental Consents and Approvals
. Assuming the accuracy of Sellers representations in
Section 2.06
, the execution, delivery and performance of this Agreement by Purchaser do not require any Consent of any Governmental Authority, except: (a) pursuant to the requirements of the Antitrust Laws of the jurisdictions set
forth on
Section 2.06(a)
of the Disclosure Schedules; (b) for any notification, or where appropriate, consultation or negotiations with a labor union, labor board, works council or relevant Governmental Authority concerning the
Transactions; (c) as required by the Securities Act, the Exchange Act and any other applicable state or federal securities Laws; (d) as required by any applicable stock exchange; or (e) to the extent that the failure to obtain any such
Consent would not, individually or in the aggregate, reasonably be expected to materially and adversely affect the ability of Purchaser to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement.
3.05
Litigation
. As of the date hereof, there are no Actions pending or, to the knowledge of Purchaser,
threatened, against Purchaser, any of its Affiliates or any of their respective assets, rights or properties, by or before any Governmental Authority, and Purchaser, its Affiliates and their respective assets, rights or properties are not subject to
any Governmental Orders, in each case which would, individually or in the aggregate, reasonably be expected to materially and adversely affect the ability of Purchaser to carry out its obligations under, and to consummate the transactions
contemplated by, this Agreement.
3.06
Investment Purpose
. Purchaser is acquiring the Shares solely
for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof. Purchaser acknowledges that the Shares are not registered under the Securities Act, or any state securities Laws,
and that the Shares may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and subject to state securities Laws, as applicable. Purchaser acknowledges it
is a sophisticated party and has sufficient knowledge, experience and expertise to evaluate, and is fully informed as to, the merits and risks of the transactions contemplated by this Agreement and ownership of the Shares, and that Purchaser has
been adequately represented by counsel with respect to such transactions. Purchaser is able to bear the economic risk of holding the Shares for an indefinite period (including total loss of its investment). Purchaser acknowledges that
Seller has given Purchaser and its representatives the opportunity to ask questions of Seller and the Business Subsidiaries and to acquire such additional information regarding the Business and its financial condition as Purchaser has requested.
3.07
Information Supplied
. None of the information supplied or to be supplied by or on behalf of
Purchaser expressly for inclusion or incorporation by reference in the Proxy Statement will, as of the date of filing and at the date it is first mailed to the stockholders of Seller and at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading.
Exhibit A-1-22
3.08
Brokers
. Purchaser shall be solely responsible for
the fees and expenses of any broker, finder or investment banker entitled to any brokerage, finders or other fee or commission in connection with the Sale and the other transactions contemplated by this Agreement, based upon arrangements made
by or on behalf of Purchaser.
3.09
Financing
. As of the date hereof and at all times prior to the
Closing, Purchaser has and will have cash on hand and access to borrowing facilities, and, as of the Closing, Purchaser will have cash on hand, sufficient for the satisfaction of all of its obligations under this Agreement, including the payment of
the Purchase Price, and the payment of all related fees and expenses and any other amounts required to be paid by Purchaser in connection with the consummation of the transactions contemplated by this Agreement. Purchasers obligations
hereunder are not subject to a condition regarding Purchasers obtaining of funds to consummate the transactions contemplated by this Agreement.
3.10
Investigation by Purchaser
. Purchaser has conducted its own independent review and analysis of the
businesses, assets, condition, operations and prospects of Seller, the Business Subsidiaries and the Business and acknowledges that it has been provided access to the properties, premises and records of Seller, the Business Subsidiaries and the
Business for this purpose. In entering into this Agreement, Purchaser has relied solely upon its own investigation and analysis, and Purchaser acknowledges that, except for the representations and warranties of Seller expressly set forth in
Article II
and the other Transaction Documents, none of Seller nor any of its Representatives makes, and Purchaser has not relied on, any representation or warranty, either express or implied, as to the accuracy or completeness of any of the
information provided or made available to Purchaser or any of its Representatives. Without limiting the generality of the foregoing, except for the representations and warranties made by Seller in
Article II
or the other Transaction
Documents, none of Seller nor any of its Representatives or any other Person has made, and Purchaser has not relied on, a representation or warranty to Purchaser with respect to (a) any projections, estimates or budgets of future results or
future financial condition relating to Seller, any of the Business Subsidiaries or the Business or (b) any material, documents or information relating to Seller, the Business Subsidiaries or the Business made available to Purchaser or its
Representatives in any data room or otherwise, except as expressly and specifically addressed by a representation or warranty set forth in
Article II
or the other Transaction Documents.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.01
Conduct of the Business
. From the date of this Agreement until the Closing (or until the earlier termination of this Agreement in accordance with
Section
6.01
), except (i) as required by applicable Law,
(ii) as set forth on
Section 4.01
of the Disclosure Schedules, (iii) as specifically required under this Agreement, (iv) in connection with the Reorganization Transactions, the Debt Tender Offer, the Foreign Sale, or, for the
avoidance of doubt, the IP Monetization, in accordance with and as expressly contemplated by this Agreement and the Reorganization Agreement, (v) the entry into an agreement for or the consummation of a Permitted WholeCo Proposal in and of itself
(it being understood that
this clause (v) shall not be deemed to permit such Permitted WholeCo Proposal to also include another action that is otherwise expressly prohibited under clause (y) below without Purchasers consent (which
consent shall not be unreasonably withheld, conditioned or delayed)) or (vi) as otherwise waived or consented to in writing by Purchaser (which waivers or consents shall not be unreasonably withheld, conditioned or delayed), Seller (to the
extent related to the Business;
provided
, that the following clauses (x) and (y) shall apply to Seller (and not only to the Business Subsidiaries) to the extent unrelated to the Business only if the act or omission in question would or would
reasonably be expected to be adverse (other than in a
de minimis
respect) to the Business Subsidiaries, the Business, Purchaser or any of its Subsidiaries (in a manner related to the Transactions including from a Tax perspective or otherwise)
or the Transactions) shall (x) and shall cause the Business Subsidiaries to, (a) carry on the Business in all material respects in the ordinary course of business consistent with past practice and (b) use reasonable best efforts to
preserve intact the business organization and goodwill of the Business and the relationships of the Business
Exhibit A-1-23
Subsidiaries with their customers and suppliers and other persons having material business relationships with the Business in all material respects and (y) not, and shall cause the Business
Subsidiaries not to:
(a) amend the certificate or articles of incorporation or by-laws (or other comparable organizational documents) of
any of the Business Subsidiaries or take any action with respect to any such amendment;
(b) (i) split, combine, subdivide,
reclassify, purchase, redeem, repurchase or otherwise acquire, issue, sell, pledge, dispose, encumber or grant any shares of any Business Subsidiarys capital stock or any options, warrants, convertible or exchangeable securities, stock-based
performance units, equity awards denominated in shares of any Business Subsidiarys capital stock or other rights of any kind to acquire any shares of any Business Subsidiarys capital stock or enter into any agreement, understanding or
arrangement with respect to the sale or voting of any Business Subsidiarys capital stock, (ii) other than in a bona fide offering to the public where, to the Knowledge of Seller, no Third Party acquires beneficial ownership of greater
than five percent (5%) of any class of capital stock of, or other equity or voting interests in, Seller, issue, sell, pledge, dispose of, encumber or grant any such securities unless any such acquiror of such securities expressly permits the
consummation of the Transactions as contemplated hereunder and agrees to vote, or cause to be voted, all Seller securities directly or indirectly beneficially owned by such acquiror and its Affiliates in favor of the Sale and the Reorganization
Transactions at the Stockholders Meeting or any adjournment or any postponement thereof, or (iii) issue, grant, acquire, purchase, redeem or repurchase any equity-based award in respect of Seller Common Stock, other than, in the case of
clause (iii), (A) the issuance of shares of Seller Common Stock upon the exercise of Seller Stock Options or the settlement of Seller RSU Awards outstanding as of the date hereof or permitted to be granted hereunder, in each case, in
accordance with their terms, (B) the acquisition by Seller of shares of Seller Common Stock in connection with the surrender of such shares by holders of Seller Stock Options outstanding as of the date hereof or permitted to be granted
hereunder, in each case, to be able to pay the exercise price of such options in accordance with the terms of such options, (C) the withholding or disposition of shares of Seller Common Stock to satisfy withholding tax obligations with respect
to any Seller Equity Award outstanding as of the date hereof or permitted to be granted hereunder, in each case, in accordance with their terms, (D) upon the forfeiture of outstanding Seller Equity Awards pursuant to their terms or (E) the
issuance or delivery of Acquisition Holdback Stock;
(c) declare, set aside, authorize, make or pay any dividend or other distribution,
payable in stock, property or otherwise, with respect to any of its or the Business Subsidiaries capital stock, other than dividends or other distributions (i) paid by any direct or indirect Business Subsidiary to any other Business
Subsidiaries or (ii) payable in Cash, Excluded Assets, or any class of capital stock of, or other equity or voting interests in, Seller;
(d) acquire (by merger, consolidation, lease, acquisition of stock or assets or otherwise), directly or indirectly, any assets, securities,
properties, interests or businesses, other than (i) supplies, equipment, bandwidth or other assets for the purpose of being used in the ordinary course of business consistent with past practice, (ii) pursuant to Contracts in effect on the date
hereof and previously made available to Purchaser, (iii) leases or subleases under which Seller (to the extent related to the Business) or any of the Business Subsidiaries is the tenant or subtenant entered into in the ordinary course of
business consistent with past practice and involving no more than $10,000,000 in aggregate payments over the entire life of such lease or sublease, or as reasonably necessary to facilitate Sellers post-Closing operations (which leases or
subleases will not be transferred to or assumed by the Company pursuant to the Reorganization Agreement or otherwise to or by a Business Subsidiary and which would not, individually or in the aggregate, reasonably be expected to delay or prevent the
satisfaction of any of the conditions set forth in
Article V
), (iv) acquisitions with a purchase price (including assumed indebtedness) that does not exceed $25,000,000 individually or $50,000,000 in the aggregate (provided, that for any
such acquisitions below the foregoing thresholds with a purchase price (including assumed indebtedness) exceeding $10,000,000 individually, Seller shall consult in advance with Purchaser in good faith), (v) capital expenditures, which are the
subject of
Section 4.01(l)
, and (vi) assets, securities,
Exhibit A-1-24
properties, interests or businesses which are acquired by Seller as reasonably necessary to facilitate Sellers post-Closing operations, which will not be transferred to or assumed by the
Company pursuant to the Reorganization Agreement or otherwise to or by a Business Subsidiary and which would not, individually or in the aggregate, reasonably be expected to delay or prevent the satisfaction of any of the conditions set forth in
Article V
;
(e) sell, license, lease or otherwise transfer, or create or incur any Encumbrance on any of Sellers (to the
extent related to the Business) or the Business Subsidiaries assets, securities, properties, interests or businesses, other than (i) with respect to inventory or obsolete equipment in the ordinary course of business consistent with past
practice, (ii) with a sale, license, lease or other transfer price (including any related assumed indebtedness) that does not exceed $15,000,000 individually or $30,000,000 in the aggregate (provided, that for any such transactions below the
foregoing thresholds with a sale, license, lease or other transfer price (including any related assumed indebtedness) exceeding $10,000,000 individually, Seller shall consult in advance with Purchaser in good faith), (iii) pursuant to Contracts
in effect on the date hereof and previously made available to Purchaser, (iv) subject to
Section 4.19
, with respect to any capital stock of Yahoo Japan Corporation, (v) Permitted Encumbrances and (vi) non-exclusive licenses or
sublicenses or covenants not to sue or assert under or with respect to any Owned Business Intellectual Property or other Business Intellectual Property granted in the ordinary course of business consistent with past practice;
(f) make any change in financial accounting methods, principles or practices, except as required by GAAP (or any interpretation thereof) or
applicable Law;
(g) (i) increase the compensation, severance or other benefits payable or to become payable to any employee,
officer, director or independent contractor of Seller or any of the Business Subsidiaries, (ii) pay or award, or commit to pay or award, any bonuses or incentive compensation (including any equity-based awards), (iii) adopt, enter into or
establish any Benefit Plan or Non-U.S. Benefit Plan with, for or in respect of any employee of Seller or any of the Business Subsidiaries that would constitute a Benefit Plan or Non-U.S. Benefit Plan had it been in effect as of the date of this
Agreement (other than employment agreements or offer letters that do not provide sign-on, retention or other one-time bonus amounts, severance benefits (other than mandated by applicable Law or as provided for under a Benefit Plan or Non-U.S.
Benefit Plan listed in
Section
2.13(f)
of the Disclosure Schedules) or change in control payments or benefits), (iv) amend, modify or terminate any Benefit Plan, Non-U.S. Benefit Plan or any employment, individual
consulting, collective bargaining, bonus or other incentive compensation, health or other welfare, pension, retirement, severance, deferred compensation or other compensation or benefit plan with, for or in respect of any employee of Seller or any
of the Business Subsidiaries, other than any amendments to health and welfare (excluding severance) plans in the ordinary course of business, consistent with past practice, which do not materially increase Sellers (to the extent related to the
Business) or the Business Subsidiaries annual costs (relative to the prior years costs) in respect of such Benefit Plan, Non-U.S. Benefit Plan or any other plan, (v) amend the terms of any outstanding equity-based awards,
(vi) other than with respect to Acquisition Holdback Stock under any acquisition agreement set forth in
Section
4.09(e)(iii)
of the Disclosure Schedules, take any action to accelerate the vesting or payment of, or
fund, any compensation (including any equity-based awards) or benefits under, any Benefit Plan or Non-U.S. Benefit Plan, (vii) make or forgive any loans to any directors, officers or employees of Seller or any of the Business Subsidiaries, or
(viii) hire any employee, officer or independent contractor whose total target annual cash compensation exceeds $225,000, other than the hiring of any such Person to replace any employee, officer, or independent contractor whose employment or
service has terminated in the ordinary course of business, consistent with past practice and having total target annual cash compensation that does not exceed 110% of the total target annual cash compensation of the applicable employee, officer or
independent contractor whose employment or service has terminated, except, in the case of each of the foregoing clauses, (A) as required pursuant to a Benefit Plan, Non-U.S. Benefit Plan or Contract in effect as of the date hereof, (B) as
otherwise required by applicable Law or (C) for actions for which Purchaser and the Business Subsidiaries will not be liable (which shall include, for the avoidance of doubt, actions with respect to any Seller Retained Employees or current or
former non-employee directors of Seller);
Exhibit A-1-25
(h) (i) incur, assume, endorse, guarantee or otherwise become liable for, or modify in any
material respects the terms of, any indebtedness for borrowed money, or offer, issue or sell any debt securities, warrants or other rights to acquire any debt securities of Seller (to the extent related to the Business, it being understood that any
such indebtedness, securities, warrants or rights to the extent not related to the Business shall be Retained Liabilities under the Reorganization Agreement) or any of the Business Subsidiaries, except for indebtedness, debt securities, warrants or
other rights (A) solely among wholly owned Business Subsidiaries consistent with past practice or (B) not exceeding $50,000,000 in the aggregate or (ii) redeem, repurchase, prepay, defease, guarantee, cancel or otherwise acquire for
value any indebtedness, debt securities, warrants or other rights, except in each case as reasonably necessary to facilitate Sellers post-Closing operations and which indebtedness, debt securities, warrants or other rights will be Excluded
Assets or Retained Liabilities and not be transferred to or assumed by the Company pursuant to the Reorganization Agreement;
provided
, that any indebtedness incurred or for which Seller or any Business Subsidiary otherwise becomes liable
pursuant to this
Section 4.01(h)
must permit the Transactions;
(i) (i) (x) terminate, modify, waive or amend in any respect the
License Agreement or (y) terminate, modify or amend in any material respect any Material Contract or Lease in a manner adverse to the applicable Business Subsidiary, in the case of clause (y) other than terminations in connection with the expiration
or (in the case of Material Contracts) automatic renewal (
i.e.
, a renewal that becomes automatically effective unless a party thereto provides prior notice of an intention not to renew) of any such agreement in accordance with its terms;
provided
, that no such renewal shall be for an additional term of greater than two (2) years or involve a Material Contract specified under clauses (b)(i), (e), (f), (g), (i), (j) or (k) of the definition of Material Contract,
(ii) except as reasonably necessary to facilitate Sellers post-Closing operations (it being understood that any such Contract will not be transferred to or assumed by the Company pursuant to the Reorganization Agreement or otherwise to or
by a Business Subsidiary and may not, individually or in the aggregate, reasonably be expected to delay or prevent the satisfaction of any of the conditions set forth in
Article V
), enter into any Contract that would have been a Material
Contract or Lease if entered into prior to the date hereof;
provided
, that with respect to this clause (ii), any references to $25,000,000 in the definition of Material Contract shall be deemed to be $10,000,000, and the parenthetical
(other than revenue share arrangements) in clause (e) of such definition shall be disregarded; (iii) waive in any material respect any material term of, or waive any material default under, any Material Contract or Lease, or
(iv) enter into any Contract which contains a change of control, anti-assignment or similar provision, in each case that would require the consent or waiver of, or a payment to, the other party or parties thereto in connection with this
Agreement, the other Transaction Documents and the Transactions;
(j) make any loans, advances (other than accounts receivable in the
ordinary course of business consistent with past practice) or capital contributions to or investments in any other Person (other than solely among Business Subsidiaries) in excess of $25,000,000 in the aggregate;
(k) (i) make, change, adopt or revoke any material Tax election, method of Tax accounting or Tax accounting period, (ii) amend any material
Tax Return, (iii) except in the ordinary course of business consistent with past practice, extend or waive the application of any statute of limitations for any material claim, assessment or collection relating to Taxes, (iv) settle or compromise
any material claim or material assessment relating to Taxes or any refund of material Taxes in excess of any accrual or reserve reflected in Sellers financial statements in respect of such claim or assessment, except to the extent such
settlement or compromise would or would reasonably be expected to have an adverse effect on, or increase the Tax Liability of, Purchaser or any of its Affiliates (including the Business Subsidiaries after the Closing) or the Business, the
Transferred Assets and/or the Assumed Liabilities, in each case, after the Closing, (v) enter into any closing agreement with, or submit any request for rulings to, any Governmental Authority or (vi) except as required by applicable Law, file any
material Tax Return in a manner, or reflecting a position, materially inconsistent with past practices (to the extent applicable) of Seller or its relevant Subsidiary, as applicable, if the filing of such Tax Return would or would reasonably be
expected to have an adverse effect on, or increase the Tax Liability of, Purchaser or any of its
Exhibit A-1-26
Affiliates (including the Business Subsidiaries after the Closing) or the Business, the Transferred Assets and/or the Assumed Liabilities, in each case, after the Closing;
(l) (i) incur any capital expenditures or any obligations or liabilities in respect thereof, except for (A) those as may be specifically
contemplated by any plan described in
Section 4.01(l)
of the Disclosure Schedules and (B) any other capital expenditures not to exceed $75,000,000 in the aggregate or (ii) without consulting in advance with Purchaser in good faith,
materially deviate from the capital expenditure plan described in
Section 4.01(l)
of the Disclosure Schedules;
(m) adopt or enter
into, or permit to be adopted or entered into, a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of (x) any Seller Entity (provided, that this clause (x) shall not
apply to the extent such action would not and would not reasonably be expected to be adverse (other than in a
de minimis
respect) to the Business Subsidiaries, the Business, Purchaser or any of its Subsidiaries (in a manner related to the
Transactions including from a Tax perspective or otherwise) or the Transactions) or (y) any of the Business Subsidiaries;
(n) other than
pursuant to
Section
4.14
, commence, settle, pay, discharge or satisfy any Action whether civil, criminal, administrative or investigative, other than routine immaterial matters in the ordinary course of business consistent
with past practice or settlements (i) that involve only the payment of monetary damages not in excess of $17,500,000 individually or $40,000,000 in the aggregate (excluding from such dollar thresholds amounts covered by any third-party
indemnification provision in favor of Seller (to the extent related to the Business) or any of the Business Subsidiaries or covered by any insurance policy of the Business or any of the Business Subsidiaries, in each case to the extent such amounts
are actually received);
provided
, that such monetary caps shall not apply to the Actions set forth in Section 1.4(c) of the Reorganization Agreement and (ii) do not impose any non-monetary restrictions or requirements in any material
respect on or with respect to the Business;
provided
that, for the avoidance of doubt, this
Section 4.01(n)
does not apply to Tax matters, which are the subject of
Section 4.01(k)
;
(o) (i) sell, assign, divest, transfer, exclusively license, dispose of any material application, material registration or material issuance
included in the Registered Owned Business IP or (ii) permit to lapse, cancel, or abandon, in each case, intentionally, any material application, material registration or material issuance included in the Registered Owned Business IP;
(p) make any material change to its privacy or data security policies or practices, except as required by Law or as reasonably necessary to
facilitate Sellers post-Closing operations or otherwise in the ordinary course of business consistent with past practice in all material respects;
(q) make any election pursuant to Treasury Regulations Section 301.7701-3(c), or any similar provision of state, local or foreign Tax
Law, with respect to the Company or any Business Subsidiary, other than any such election for SaleCo2 required by the Reorganization Agreement;
(r) enter into any new line of business that is materially different from the existing lines of business of the Business; or
(s) announce an intention to enter into, authorize or enter into, or permit any of its Subsidiaries to authorize or enter into, any written
agreement or otherwise make any commitment to contravene the foregoing.
Nothing contained in this Agreement is intended to give
Purchaser, directly or indirectly, the right to control or direct the Business or the Business Subsidiaries operations prior to the Closing. Prior to the Closing, Seller shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over the Business Subsidiaries operations.
Exhibit A-1-27
4.02
Preparation of the Proxy Statement; Stockholders
Meeting
.
(a) Subject to Purchasers timely performance of its obligations under
Section 4.02(b)
, Seller shall, as
promptly as reasonably practicable following the date of this Agreement, prepare and cause to be filed with the SEC in preliminary form the Proxy Statement. Subject to the ability of the board of directors of Seller to make an Adverse Recommendation
Change in accordance with
Section 4.06
, the board of directors of Seller shall include the Seller Recommendation in the Proxy Statement. Seller shall promptly notify Purchaser upon the receipt of any comments from the SEC or the
staff of the SEC or any request from the SEC or the staff of the SEC for amendments or supplements to the Proxy Statement, and shall provide Purchaser with copies of all correspondence between Seller and its Representatives, on the one hand, and the
SEC or the staff of the SEC, on the other hand. Seller shall use reasonable best efforts to (i) respond as promptly as reasonably practicable to any comments of the SEC or the staff of the SEC with respect to the Proxy Statement, (ii) have the Proxy
Statement cleared by the staff of the SEC as soon as reasonably practicable after such filing and (iii) cause the Proxy Statement to be mailed to its stockholders as promptly as practicable thereafter. No filing of, or amendment or supplement to,
the Proxy Statement, or response to SEC comments with respect thereto, will be made by Seller without providing Purchaser a reasonable opportunity to review and comment thereon, which comments to Seller shall consider in good faith;
provided
,
that the foregoing shall not apply with respect to a Superior Proposal or an Adverse Recommendation Change. If at any time prior to the Closing any event or circumstance relating to Seller or any of the Business Subsidiaries or its or their
respective officers or directors should be discovered by Seller which, pursuant to the Exchange Act, should be set forth in an amendment or a supplement to the Proxy Statement, Seller shall promptly inform Purchaser. Each of Seller and Purchaser
agrees to promptly correct any information provided by such party for use in the Proxy Statement which shall have become false or misleading.
(b) Purchaser shall provide to Seller all information concerning Purchaser and its Affiliates as may be reasonably requested by Seller in
connection with the Proxy Statement and shall otherwise assist and cooperate with Seller in the preparation of the Proxy Statement and resolution of comments of the SEC or its staff related thereto. Purchaser will cause the information relating to
Purchaser and its Affiliates supplied by it for inclusion in the Proxy Statement, at the time of the mailing of the Proxy Statement or any amendments or supplements thereto, and at the time of the Stockholders Meeting, not to contain any
untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(c) In accordance with Sellers Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, applicable Law and
the rules of Nasdaq, Seller shall, as promptly as practicable, establish a record date for, duly call, give notice of, convene and hold a meeting of its stockholders (the
Stockholders Meeting
), for the purpose of obtaining
the Seller Stockholder Approval;
provided
, that if Seller determines that it is necessary or advisable to do so, Seller, at the Stockholders Meeting, may also seek stockholder approval for actions reasonably necessary to comply with the
requirements of the Investment Company Act following Sellers registration as a registered investment company at or after the Closing. Notwithstanding anything in this Agreement to the contrary, Seller may postpone or adjourn the
Stockholders Meeting (i) for up to ten (10) Business Days to solicit additional proxies for the purpose of obtaining the Seller Stockholder Approval, if Seller determines in good faith such postponement or adjournment is necessary or advisable
to obtain the Seller Stockholder Approval, (ii) for the absence of quorum and (iii) to allow reasonable additional time for the filing and/or mailing of any supplemental or amended disclosure which Seller has determined after consultation with
outside legal counsel is necessary under applicable Law and for such supplemental or amended disclosure to be disseminated and reviewed by the stockholders of Seller prior to the Stockholders Meeting.
4.03
Access to Information; Confidentiality
.
(a) From the date hereof until the Closing (or until the earlier termination of this Agreement in accordance with
Section 6.01
),
upon reasonable notice, Seller shall, as promptly as reasonably practicable: (i) afford Purchaser and its Representatives reasonable access to the personnel, properties and Books and Records of
Exhibit A-1-28
the Business; and (ii) furnish to Purchaser and its Representatives such additional Tax and operating data and other information regarding the Business (or copies thereof) as Purchaser may from
time to time reasonably request (including, in the case of each clause (i) and (ii), furnishing such access and information as may be reasonably requested by Purchaser in order to (x) determine the Foreign Sale Purchase Price or prepare the
Purchasers Allocation or (y) identify the Section 338(h)(10) Subsidiaries or determine whether to make any elections under Section 338(g) of the Code with respect to the transactions contemplated hereunder and by the Reorganization Agreement);
provided
,
however
, that any such access or furnishing of information shall be conducted at Purchasers expense, during normal business hours, under the supervision of Seller or its Representatives and in such a manner as not to
interfere unreasonably with the normal operations of the business of Seller or the Business Subsidiaries;
provided
,
further
, that neither Seller nor any of the Business Subsidiaries shall be required to disclose any information to
Purchaser if such disclosure would, in Sellers reasonable judgment (after consulting with its outside legal counsel): (w) contain information that in the reasonable, good faith judgment of Seller is competitively sensitive; (x) jeopardize any
attorney-client or other legal privilege or the protections of the work product doctrine; (y) contravene any applicable Laws, fiduciary duty or Contract to which Seller or any of the Business Subsidiaries is a party; or (z) expose Seller or any of
the Business Subsidiaries to risk of liability for disclosure of sensitive or personal information;
provided
that, in any such case, Seller or the applicable Business Subsidiaries shall provide such information in redacted form as necessary
to preserve such privilege or protections or comply with such Law or Contract or otherwise make appropriate substitute disclosure arrangements, to the extent practicable.
(b) The terms of the Confidentiality Agreement, dated as of March 22, 2016, between Seller and Purchaser (the
Confidentiality
Agreement
), shall continue in full force and effect (including with respect to any information provided to Purchaser pursuant to
Section 4.03(a)
) until the Closing, at which time such Confidentiality Agreement shall terminate, other
than with respect to the confidentiality and non-use obligations contained therein with respect to Evaluation Material (as defined therein) not related to the Business, which obligations shall continue in full force and effect for a period of five
(5) years from the Closing Date. If this Agreement is, for any reason, terminated prior to the Closing, the Confidentiality Agreement shall continue in full force and effect in all respects. Notwithstanding anything herein to the contrary, the
parties agree and acknowledge that the standstill and similar restrictions in the Confidentiality Agreement shall not apply upon the execution and delivery of this Agreement solely to the extent required to permit any action expressly contemplated
hereby and in accordance herewith and solely until any valid termination of this Agreement in accordance with its terms.
(c) For a
period of five (5) years from the Closing Date (
provided
, that with respect to trade secrets of the Business, the confidentiality obligations in this
Section 4.03(c)
shall remain in effect for so long as the relevant information
remains a trade secret under applicable Law), Seller shall, and shall cause its Subsidiaries to, hold in confidence any nonpublic information (
Business Information
) to the extent relating to the Business from and after the
Closing;
provided
that the foregoing restriction shall not apply to information that (i) is or becomes generally available to the public other than through an action or inaction by Seller or its Representatives in breach of the terms of this
Agreement, (ii) is received by Seller or its Representatives from Purchaser or any of its Representatives in the ordinary course of business pursuant to commercial or business arrangements unrelated to the Transactions (but such information shall
remain subject to the confidentiality restrictions governing such relationship), (iii) is received by Seller or its Representatives from a source other than Purchaser or any of its Representatives, or (iv) was independently developed by Seller or
its Representatives without use of Business Information;
provided
that, in the case of clause (iii) above, the source of such information was not to the knowledge of Seller (after due inquiry) bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligation of confidentiality to Purchaser or any of its Subsidiaries with respect to such information. In the event that Seller or any of its Representatives are requested or required by Law to disclose any of
the Business Information other than as expressly permitted under the terms of this Agreement, Seller or such Representative will, to the extent permitted by applicable Law, promptly notify Purchaser of any such request or requirement so that
Purchaser may, at its election (at Purchasers expense), seek a protective order or other appropriate remedy as Purchaser, in its sole discretion, deems appropriate. Nothing
Exhibit A-1-29
herein shall be deemed to prevent Seller or its Representatives, as the case may be, from complying with applicable Law that seeks disclosure of the Business Information if: (i) a motion for a
protective order, motion to quash and/or other motion that was filed to prevent the production or disclosure of the Business Information has been denied; and (ii) Sellers legal counsel has advised Seller that compliance is required by
applicable Law;
provided
,
however
, that Seller disclose only that portion of the Business Information that Sellers or its Representatives legal counsel advises Seller or such Representative is required by applicable Law to
be disclosed and that Seller and its Representatives will exercise commercially reasonable efforts to preserve the confidentiality of the remainder of the Business Information, including by providing Purchaser, if permitted by Law, advance written
notice of the information to be disclosed as far in advance of its disclosure as practicable, and reasonably cooperating with Purchaser to obtain an appropriate protective order or other reliable assurance that confidential treatment will be
afforded the information so disclosed; or (iii) Purchaser consents in writing to having the Business Information produced or disclosed. In no event shall Seller, or any of its Representatives, oppose an action by Purchaser to obtain a protective
order, motion to quash and/or other relief to prevent the production or disclosure of the Business Information or to obtain an appropriate protective order or other reliable assurance that confidential treatment will be afforded the information so
disclosed.
4.04
Reorganization Transactions
. In furtherance and not in limitation of
Section
4.05(a)
, Seller shall, and shall cause the Business Subsidiaries to, use reasonable best efforts to complete the Reorganization Transactions, subject to and in accordance with the terms and conditions of the Reorganization Agreement and
applicable Law. Seller shall provide Purchaser information regarding the Reorganization Transactions in accordance with
Section 4.03(a)
and keep Purchaser reasonably informed on a timely basis with respect to all material activity concerning
the status of the Reorganization Transactions. Seller will not (i) terminate the Reorganization Agreement, (ii) amend the Reorganization Agreement in any manner that is or could reasonably be expected to be adverse to the Business Subsidiaries,
the Business, Purchaser or any of its Subsidiaries (including from a Tax perspective or otherwise), or the Transactions (
provided
, that, if such adverse impact is reasonably expected to be only
de minimis
in nature, then
Purchasers prior written consent shall not be required so long as Seller shall have consulted in good faith with Purchaser in advance) or (iii) permit the (A) extension of the time for the performance of any obligation or other act of either
Seller or the Company thereunder, (B) waiver of any inaccuracy in the representations and warranties of Seller contained therein or in any document delivered pursuant thereto or (C) waiver of compliance with any agreement or condition contained
therein in any manner that is or could reasonably be expected to be adverse to the Business Subsidiaries, the Business, Purchaser or any of its Subsidiaries (including from a Tax perspective or otherwise), or the Transactions (provided, that, if
such adverse impact is reasonably expected to be only
de minimis
in nature, then Purchasers prior written consent shall not be required so long as Seller shall have consulted in good faith with Purchaser in advance), in the cases of
clauses (i) through (iii), without Purchasers prior written consent. Seller shall provide Purchaser with a reasonable opportunity to review and comment on all substantive documentation relating to the Reorganization Transactions.
4.05
Reasonable Best Efforts; Regulatory and Other Consents
.
(a) Subject to the terms and conditions set forth herein, each of Seller and Purchaser will cooperate with each other and use their
respective reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with each other in doing, all things necessary, proper or advisable to (a) consummate and make effective the
transactions contemplated hereby as soon as practicable, (b) cause the conditions to the consummation of the Closing set forth in
Article V
to be satisfied and (c) obtain or deliver all Consents of all Governmental Authorities and Third
Parties that may be or become necessary, proper or advisable for the performance of its and the other partys obligations pursuant to this Agreement and the consummation of the Transactions. Notwithstanding anything to the contrary herein,
neither Seller nor any of the Business Subsidiaries shall be required to pay any consent or other similar fee, profit sharing or other similar payment or other consideration, or the provision of additional security (including a guaranty)
to obtain the Consent of any Person under any Contract. For the avoidance of doubt, obtaining the Consents described in the
Exhibit A-1-30
first sentence of this
Section 4.05(a)
is not a condition to the consummation of the Closing by virtue of this
Section 4.05(a)
.
(b) In furtherance and not in limitation of the foregoing, each of Seller and Purchaser (i) agrees to (x) make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the Sale as promptly as reasonably practicable and in any event, unless otherwise agreed by Seller and Purchaser, within fifteen (15) Business Days after the date hereof, (y)
effect all other necessary notifications or registrations under the Antitrust Laws as promptly as reasonably practicable after the date hereof, and (z) supply as promptly as reasonably practicable any additional information and documentary material
that may be requested pursuant to the HSR Act or any other filing under the Antitrust Laws and use their reasonable best efforts to take, or cause to be taken, all other actions consistent with this
Section 4.05
necessary to obtain all
Consents under any Antitrust Law as soon as practicable and (ii) shall use its reasonable best efforts to (x) take all action necessary to ensure that no state takeover statute or similar Law is or becomes applicable to the transactions contemplated
by this Agreement and (y) if any state takeover statute or similar Law becomes applicable to the transactions contemplated by this Agreement (with respect to Purchasers obligations under this clause (b), to the extent caused by the actions of
Purchaser), take all action necessary to ensure that the transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise minimize the effect of such Law on the
transactions contemplated by this Agreement.
(c) If any objections are asserted with respect to the transactions contemplated hereby
under the Antitrust Laws of any applicable jurisdictions or if any Action is instituted or threatened by any Governmental Authority or any private party challenging any of the transactions contemplated hereby as violative of the Antitrust Laws of
any applicable jurisdictions, each of Seller and Purchaser shall use its reasonable best efforts to promptly resolve such objections and Actions. In furtherance of the foregoing, Purchaser, at Purchasers sole cost, shall and shall cause its
Affiliates to, promptly take any and all steps necessary to avoid or eliminate each and every impediment and obtain all Consents under any Antitrust Law that may be required by any Governmental Authority (and to avoid the entry of, or to effect the
dissolution of or vacate or lift, any Governmental Order, that would otherwise have the effect of preventing or materially delaying the consummation of the Closing) so as to enable Purchaser and Seller to consummate the Closing as promptly as
practicable, and in any event before the Outside Date, including committing to or effecting, by consent decree, hold separate orders, trust, or otherwise, (i) the sale or disposition of, or prohibition or limitation on the ownership or operation by
Purchaser and the Company or any of their respective Subsidiaries of specific assets or categories of assets or businesses; (ii) the amendment or termination of existing contracts, licenses or other relationships; (iii) the entering into of new
contracts, licenses or other relationships; and (iv) behavioral commitments limiting or modifying Purchasers or any of its Affiliates rights of ownership in, or ability to conduct the business of, one or more of its operations,
divisions, businesses, product lines or assets. Notwithstanding the foregoing, none of Seller nor any of the Business Subsidiaries shall be required to commit to or effect any such action that is not conditioned upon the substantially concurrent
consummation of the transactions contemplated hereby, and shall not effect or commit to effect any such action without Purchasers prior written consent. Further, and for the avoidance of doubt, Purchaser will take any and all actions necessary
in order to ensure that (x) no requirement for any non-action by or Consent of any Governmental Authority with respect to any Antitrust Laws, (y) no Governmental Order with respect to any Antitrust Laws and (z) no other matter relating to any
Antitrust Laws would preclude consummation of the Sale by the Outside Date. Notwithstanding the foregoing or anything to the contrary contained herein, nothing in this Agreement shall require Purchaser (or permit Seller, without Purchasers
prior written consent) to take or agree or commit to take any action, or agree to any condition or restriction or other mitigation, whether contemplated in this
Section 4.05
or otherwise, involving Seller, Purchaser or their respective
Subsidiaries, including the Business, that would have, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on Purchaser or the Business, in each case measured on a scale relative to the Business,
taken as a whole, regardless of whether any such action, condition, restriction or mitigation is in respect of Seller, Purchaser or their respective Subsidiaries or the Business (any of the foregoing, a
Burdensome Condition
).
Exhibit A-1-31
(d) Each of Seller and Purchaser shall use its reasonable best efforts to (i) cooperate in all
respects with each other in connection with any filing or submission with a Governmental Authority in connection with the transactions contemplated by this Agreement and in connection with any investigation or other inquiry by or before a
Governmental Authority relating to the transactions contemplated by this Agreement, including any inquiry, investigation or Action initiated by a Governmental Authority or a private Person, and (ii) keep the other party hereto informed in all
material respects and on a reasonably timely basis of any communication received by such party from, or given by such party to, any Governmental Authority and of any communication received or given by a private Person in connection with any inquiry,
investigation or Action, in each case regarding any of the transactions contemplated by this Agreement. In furtherance and not in limitation of the foregoing, subject to applicable Laws relating to the exchange of information, each of Seller and
Purchaser shall consult and cooperate with the other party hereto in connection with any analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal to be made or submitted in connection with any such inquiry, investigation
or Action. In addition, Seller and Purchaser shall permit counsel for the other party reasonable opportunity to review in advance, and consider in good faith the views of the other party in connection with, any proposed written communication to any
Governmental Authority. Each of Seller and Purchaser agrees not to participate in any substantive meeting or discussion, either in person or by telephone, with any Governmental Authority in connection with the transactions contemplated by this
Agreement unless it consults with the other party in advance and, to the extent not prohibited by such Governmental Authority, gives the other party the opportunity to attend and participate. Neither Seller nor Purchaser shall consent to any
voluntary extension of any statutory deadline or waiting period or to any voluntary delay of the consummation of the transactions contemplated by this Agreement or withdraw its notification and report form pursuant to the HSR Act or any other filing
made pursuant to any Antitrust Law unless the other party has given its prior written consent to such extension or delay, which consent shall not be unreasonably withheld or delayed. Purchaser and Seller may, as each deems proper, necessary or
advisable, reasonably designate any competitively sensitive material provided to the other under this
Section 4.05
as outside counsel only. Such materials and the information contained therein shall be given only to the
outside antitrust counsel of the recipient and will not be disclosed by such outside counsel to employees, officers or directors of the recipient unless express permission is obtained in advance from the source of the materials or its legal counsel.
Notwithstanding anything to the contrary in this
Section 4.05
, materials provided to the other party or its outside counsel may be redacted to remove references concerning the valuation, pricing and other competitively sensitive terms
from an antitrust perspective in the Contracts of Purchaser, Seller and their respective Subsidiaries.
4.06
No Solicitation
.
(a) From and after the date of this Agreement (and subject to
Section 4.06(c)
), Seller shall, shall cause its Subsidiaries and
its and their respective directors, officers, and employees to, and shall use reasonable best efforts to cause its and their respective other Representatives to, (i) immediately cease and cause to be terminated any existing solicitation of, or
discussions or negotiations with, any Third Party relating to any Competing Proposal or any inquiry, discussion, offer or request that would reasonably be expected to lead to a Competing Proposal, (ii) request the prompt return from, or destruction
by, all such Third Parties of all copies of confidential information previously provided to such Third Parties by Seller, its Subsidiaries or their Representatives in connection therewith and (iii) terminate access to any physical or electronic data
rooms relating to a possible Competing Proposal.
(b) Except as otherwise expressly provided in this Agreement (including
Section 4.06(c)
), from and after the date of this Agreement until the Closing or, if earlier, the termination of this Agreement in accordance with its terms, Seller shall not, shall cause its Subsidiaries and its and their respective
directors, officers, and employees not to, and shall use reasonable best efforts to cause its and their respective other Representatives not to, directly or indirectly, (i) initiate, solicit or knowingly facilitate or encourage the making of any
Competing Proposal or any inquiries regarding, or the submission of any proposal or offer that constitutes, or would reasonably be expected to lead to any Competing Proposal, (ii) engage or participate in negotiations or discussions with (it being
understood that, in response to an inquiry, Seller may inform Persons of the provisions
Exhibit A-1-32
of this
Section 4.06
), or furnish any material non-public information to, any Third Party relating to a Competing Proposal or any inquiry or proposal that would reasonably be expected
to lead to a Competing Proposal, (iii) approve, authorize, endorse, declare advisable, adopt, enter into or recommend, or publicly propose to approve, authorize, endorse, declare advisable, adopt, enter into or recommend any Competing Proposal or
any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, or other agreement providing for or constituting any Competing Proposal (other than an Acceptable Confidentiality Agreement) (a
Company Acquisition Agreement
), or (iv) resolve, agree or publicly propose to do any of the foregoing;
provided
,
however
, that, notwithstanding the foregoing, if the board of directors of Seller determines in good
faith (after consultation with outside legal counsel) that the failure to take such action could reasonably be expected to be inconsistent with the directors fiduciary duties under applicable Law, Seller shall be permitted to grant a waiver of
or terminate any standstill or similar obligation of any Third Party with respect to Seller or any of the Business Subsidiaries to allow such Third Party to submit a Competing Proposal, in which case Seller shall similarly waive or
terminate any standstill or similar obligations applicable to Purchaser and its Affiliates contained in the Confidentiality Agreement.
(c) Notwithstanding anything to the contrary in this Agreement, at any time after the date of this Agreement and prior to the date that the
Seller Stockholder Approval is obtained, in the event that Seller (or its Representatives on Sellers behalf) receives a written Competing Proposal from any Third Party that did not result from a material breach of this
Section 4.06
, (i) Seller and its Representatives, to the extent such clarification is reasonably necessary, may contact such Third Party solely to request and obtain clarification of the terms and conditions thereof (without the board of
directors of Seller being required to make a determination under clause (ii) of this
Section 4.06(c)
) and (ii) Seller and its board of directors (including any duly authorized committee thereof) and its Representatives may, subject to
compliance with
Section 4.06(d)
, engage in negotiations or substantive discussions with, or furnish any information and other access to, any Third Party making such Competing Proposal and its Representatives, Affiliates and prospective
debt and equity financing sources, in each case of this clause (ii), if Sellers board of directors determines in good faith (after consultation with its financial advisors and outside legal counsel) that such Competing Proposal either
constitutes a Superior Proposal or could reasonably be expected to lead to a Superior Proposal and that the failure to take such action could reasonably be expected to be inconsistent with the directors fiduciary duties under applicable Law;
provided
,
however
, that, (x) prior to furnishing any material non-public information relating to Seller and the Business Subsidiaries or the Transactions, Seller enters into with such Person, to the extent such Person is not already
subject to a confidentiality agreement with Seller that satisfies the definition of Acceptable Confidentiality Agreement, an Acceptable Confidentiality Agreement and (y) Seller shall substantially concurrently provide or make available to Purchaser
any non-public information that Seller provides to any Third Party if such access was not previously made available to Purchaser or its Representatives.
(d) From and after the date of this Agreement until the Closing (or, if earlier, the termination of this Agreement), Seller shall, as
promptly as reasonably practicable, and in any event within forty-eight (48) hours of receipt by Seller or any of its Representatives of any Competing Proposal, deliver to Purchaser a written notice setting forth: (i) the identity of the Third Party
making such Competing Proposal and (ii) the material terms and conditions of any such Competing Proposal (including an unredacted copy of any written materials). Seller shall keep Purchaser reasonably informed of the status of, and any material
developments regarding, any such Competing Proposal (including any material amendment or modification of any such Competing Proposal (including any change to the economic terms thereof), and including by providing to Purchaser copies of any written
materials) on a prompt basis, and in any event within forty-eight (48) hours thereafter. Seller shall not, and shall cause its Subsidiaries not to, enter into any agreement with any Person (relating to a Competing Proposal or otherwise) which
prohibits or otherwise would prevent the provision of any information to Purchaser in accordance with, or Seller from otherwise complying with, the terms and conditions of this Agreement or the consummation of the Transactions as contemplated
hereunder.
(e) Except as otherwise expressly provided in this Agreement, the board of directors of Seller (including any committee
thereof) shall not (i)(A) withdraw, modify or qualify (or propose publicly to withdraw,
Exhibit A-1-33
modify or qualify), in a manner adverse to Purchaser, the Seller Recommendation, (B) endorse, recommend, declare advisable or approve, or propose publicly to endorse, recommend, declare advisable
or approve, any Competing Proposal, (C) fail to include in the Proxy Statement the Seller Recommendation, or (D) fail to recommend against any Competing Proposal that is a tender or exchange offer subject to Regulation 14D under the Exchange
Act in a Solicitation/Recommendation Statement on Schedule 14D-9 within ten (10) Business Days after the commencement (within the meaning of Rule 14d-2 under the Exchange Act) of such tender or exchange offer (any action described in this clause (i)
being referred to as an
Adverse Recommendation Change
) or (ii) approve, cause or authorize or permit Seller or any of its Subsidiaries to enter into any Company Acquisition Agreement or resolve, agree or publicly propose to take
any such action.
(f) Notwithstanding anything in this Agreement to the contrary, at any time prior to the receipt of the Seller
Stockholder Approval, the board of directors of Seller may, subject to compliance with
Section 4.06(g)
, (x) make an Adverse Recommendation Change (A) in response to a Competing Proposal that the board of directors of Seller has
determined in good faith, after consultation with outside legal counsel and financial advisors, constitutes a Superior Proposal in circumstances not involving a material breach of this
Section 4.06
, (B) under clause (A) or (C) of the
definition of Adverse Recommendation Change in response to an Intervening Event and (y) if Seller has received a Competing Proposal in circumstances not involving a material breach of this
Section 4.06
that the board of directors of
Seller has determined in good faith, after consultation with outside legal counsel and financial advisors, constitutes a Superior Proposal, authorize, adopt or approve such Superior Proposal and cause or permit Seller to enter into a definitive
agreement with respect to such Superior Proposal concurrently with the termination of this Agreement in accordance with
Section 6.01(c)(ii)
, in each case if the board of directors of Seller determines in good faith (after consultation
with outside legal counsel) that the failure to take such action could reasonably be expected to be inconsistent with the directors fiduciary duties under applicable Law.
(g) Notwithstanding anything to the contrary in this Agreement, no Adverse Recommendation Change may be made and no termination of this
Agreement pursuant to
Section 4.06(f)
may be effected, in each case until after the fourth (4th) Business Day following Purchasers receipt of written notice from Seller advising Purchaser that the board of directors of Seller
intends to make an Adverse Recommendation Change pursuant to clause (x) of
Section 4.06(f)
(a
Notice of Adverse Recommendation Change
) or terminate this Agreement pursuant to clause (y) of
Section 4.06(f)
(a
Notice of Superior Proposal
);
provided
, that, (i) such notice shall specify, in reasonable detail, the reasons therefor, including, if the basis of the proposed action by Sellers
board of directors is (A) a Superior Proposal, the material terms and conditions of any such Superior Proposal, the identity of the Third Party making any such Superior Proposal and a copy of the Superior Proposal and any proposed agreements and
financing commitments relating thereto and (B) an Intervening Event, a reasonably detailed description of the Intervening Event, (ii) during such four (4) Business Day period (the
Notice Period
), if requested by Purchaser,
Seller shall, and shall make available and direct its necessary Representatives to, discuss and negotiate in good faith with Purchaser and Purchasers Representatives any proposed modifications to the terms and conditions of this Agreement; and
(iii) following such Notice Period, (x) in the case of an Intervening Event, Sellers board of directors, after taking into account any modifications to the terms of this Agreement and/or the Transactions to which Purchaser would agree,
determines in good faith, after consultation with outside legal counsel, that failure to effect such Adverse Recommendation Change could reasonably be expected to be inconsistent with its fiduciary duties under applicable Law or (y) in the case of a
Superior Proposal, Sellers board of directors, after taking into account any revisions to the terms of this Agreement and/or the Transactions to which Purchaser would agree, determines in good faith, after consultation with outside legal
counsel and financial advisors, that such Competing Proposal continues to constitute a Superior Proposal. Any such purported termination to enter into a definitive agreement for a Superior Proposal shall not be effective unless and until Seller pays
the Termination Fee in full. Any material change to (1) the facts or circumstances relating to such Intervening Event or (2) the terms (including any change to the financial terms) or any other material amendment of such Superior Proposal shall
require a new Notice of Adverse Recommendation Change or Notice of Superior Proposal, as applicable, and Seller shall be required to comply again with the requirements of this
Section 4.06(g)
, except that the Notice Period in such case
shall be two (2) Business Days.
Exhibit A-1-34
(h) Nothing contained in this Agreement shall prohibit the board of directors of Seller (or any
duly authorized committee thereof) from (i) taking and disclosing to Sellers stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or making a statement contemplated by Item 1012(a) of Regulation M-A or Rule
14d-9 promulgated under the Exchange Act or (ii) making any disclosure to Sellers stockholders if the board of directors of Seller determines in good faith, after consultation with Sellers outside counsel, that the failure to make such
disclosure would reasonably be likely to be inconsistent with applicable Law;
provided
,
however
, that nothing in this
Section 4.06(h)
shall be deemed to modify or supplement the definition of (or the requirements pursuant to
this
Section 4.06
with respect to an) Adverse Recommendation Change.
(i) For purposes of this Agreement:
(i)
Acceptable Confidentiality Agreement
means a confidentiality agreement containing confidentiality terms
that are not materially less favorable in the aggregate to Seller than those contained in the Confidentiality Agreement (it being understood and agreed that such confidentiality agreement need not restrict the making, confidentially, of Competing
Proposals (and related communications) to Seller or Sellers board of directors (or any duly authorized committee thereof)).
(ii)
Competing Proposal
means any bona fide proposal or offer made by any Third Party to purchase or
otherwise acquire, directly or indirectly, in one transaction or a series of transactions, pursuant to a merger, consolidation or other business combination, sale of shares of capital stock, sale of assets, tender offer, exchange offer or similar
transaction (i) beneficial ownership (as defined under Section 13(d) of the Exchange Act), including if such ownership would be through the equityholders of any such Third Party, of more than twenty-five percent (25%) of any class of
equity securities of Seller (unless such proposal or offer does not, and would not reasonably be expected to, conflict with, impede, delay or prohibit (including by imposing a Third Party consent right with respect to) the consummation of the Sale
and the Reorganization Transactions as contemplated hereunder and, as a condition to Sellers entry into a definitive agreement with respect to such proposal or offer, any such Third Party agrees to vote, or cause to be voted, all Seller equity
securities directly or indirectly beneficially owned by such Third Party and its controlled Affiliates in favor of the Sale and the Reorganization Transactions at the Stockholders Meeting or any adjournment or any postponement thereof (a
Permitted WholeCo Proposal
)) or (ii) any one or more assets or businesses of Seller and the Business Subsidiaries that constitute more than twenty-five percent (25%) of the consolidated assets of Seller (excluding in both the
numerator and the denominator for purposes of calculating such percentage any Excluded Assets), it being understood that any proposal or offer solely with respect to any or all of the Excluded Assets (for the avoidance of doubt excluding for this
purpose any capital stock of Seller held in treasury) and no Transferred Assets shall be deemed not to be a Competing Proposal (so long as such proposal or offer does not, and would not reasonably be expected to, conflict with, impede, delay or
prohibit (including by imposing a Third Party consent right with respect to) the consummation of the Sale and the Reorganization Transactions as contemplated hereunder).
(iii)
Superior Proposal
means a Competing Proposal (with all percentages in the definition of Competing
Proposal increased to sixty-five percent (65%)) made by a Third Party on terms that the board of directors of Seller determines in good faith, after consultation with Sellers financial and legal advisors, and considering such factors as the
board of directors of Seller considers to be appropriate, including the consideration, terms, conditions, timing, likelihood of consummation, financing terms and legal, financial, and regulatory aspects of such Competing Proposal, (A) are more
favorable from a financial point of view to Seller and its stockholders than the Transactions (including any revisions to the terms of this Agreement and/or the Transactions committed to by Purchaser to Seller in writing in response to such
Competing Proposal under the provisions of
Section 4.06(g)
) and (B) that the board of directors of Seller determines is reasonably likely to be completed on the terms proposed.
Exhibit A-1-35
4.07
Further Assurances; Post-Closing Cooperation
. Subject
to the terms and conditions of this Agreement, at any time or from time to time after the Closing, each of Seller and Purchaser shall execute and deliver such other documents and instruments, provide such materials and information and take such
other actions as may reasonably be necessary, proper or advisable, to the extent permitted by Law, to fulfill its obligations under this Agreement or to otherwise effect the Transactions.
4.08
Indemnification and Insurance
.
(a) Following the Closing, Purchaser shall cause the Business Subsidiaries not to make any changes to their respective organizational
documents that would adversely affect the rights of persons who are currently or who were officers or directors of, or in a comparable role with, any of the Business Subsidiaries (but not in the capacity of any roles of such persons with Seller) to
claim indemnification from such entity under the terms of their respective organizational documents as in effect on the date hereof unless such changes are required by Law and then only to the minimum extent required by Law. Prior to the Closing,
the Company shall or, if the Company is unable to, Purchaser shall cause the Company as of the Closing to, obtain and fully pay the premium for the non-cancellable extension of the directors and officers liability coverage of
Sellers existing directors and officers insurance policies and fiduciary liability insurance policies (collectively, the
D&O Insurance
), covering persons who are currently or who were officers or directors
of, or in a comparable role with, any of the Business Subsidiaries (but not in the capacity of any roles of such persons with Seller), for a claims reporting or discovery period of six years from and after the Closing with respect to any claim
related to any period of time at or prior to the Closing from an insurance carrier with the same or better credit rating as Sellers current insurance carrier with respect to D&O Insurance with terms, conditions, retentions and limits of
liability that are no less favorable than the coverage provided under Sellers existing policies;
provided
, that the premium for such tail insurance shall not exceed 300% of the annual premium currently paid by Seller.
(b) Following the Closing, Purchaser shall, and shall cause the Company to, as the primary source of indemnification, indemnify, defend and
hold harmless the current and former directors and officers of, or persons in a comparable role with, the Business Subsidiaries (but not in the capacity of any roles of such persons with Seller) for any damages, Taxes, Liabilities, costs and
expenses (including reasonable attorneys fees) in connection with any actual or threatened Action or investigation (whether civil, criminal, administrative or investigative) arising from any acts or omissions by such persons, in their
respective capacities as directors or officers of, or in a comparable role with, the Business Subsidiaries (but not Seller) prior to the Closing Date, other than acts or omissions arising out of the Excluded Assets or the Retained Liabilities.
(c) If Purchaser or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers all or substantially all of its properties and assets to any Person, then, in each case, Purchaser shall make proper provision so that the
successors and assigns of Purchaser shall assume all of the obligations of Purchaser set forth in this
Section 4.08
.
(d) The
provisions of this
Section
4.08
are intended for the benefit of the current and former officers and directors of, or persons in a comparable role with, the Business Subsidiaries (but not in the capacity of any roles of such
persons with Seller), and shall be enforceable by such individuals (in such capacities) and their heirs and representatives.
4.09
Employee Benefits
.
(a) With respect to the Employees as of the Closing, for a period of twelve (12) months after the
Closing, Purchaser agrees to provide or cause its Subsidiaries to provide each Employee with (i) a base salary or base wage rate (as applicable) that is no less favorable to each Employee than is in effect for such Employee immediately prior to
the Closing, (ii) annual cash bonus opportunities that are no less favorable to each Employee than are in effect for such Employee immediately prior to the Closing, (iii) equity incentive
Exhibit A-1-36
compensation opportunities that are no less favorable than the equity incentive compensation opportunities provided to similarly situated employees of AOL, Inc., and (iv) 401(k) benefits, medical
benefits and other welfare benefits that are no less favorable, in the aggregate, than those provided to similarly situated employees of AOL, Inc.
(b) As of the Closing, Purchaser shall honor or cause its Subsidiaries to honor all Benefit Plans and Non-U.S. Benefit Plans, in each case,
in accordance with their respective terms and subject to any rights to amend or terminate such plans.
(c) Without limiting anything in
this
Section 4.09
, as of the Closing and for a period of twelve (12) months thereafter, Purchaser agrees to provide or cause its Subsidiaries to provide to each Employee with severance payments and benefits that are no less favorable
than the severance payments and benefits for which such Employee would be eligible immediately following the Closing for a similar termination of employment under the applicable Benefit Plan or Non-U.S. Benefit Plan set forth in
Section 4.09(c)
of the Disclosure Schedules, taking into account any service with Purchaser and its Affiliates through such date of termination.
(d) With respect to each benefit plan, program, practice, policy or arrangement maintained by Purchaser or its Subsidiaries following the
Closing and in which any of the Employees participate (the
Purchaser Plans
), and except to the extent necessary to avoid duplication of benefits, for purposes of determining eligibility to participate and vesting, and for purposes
of vacation accrual and level of severance benefits, service with Seller and the Business Subsidiaries (or predecessor employers to the extent Seller or any of the Business Subsidiaries provides past service credit) shall be treated as service with
Purchaser and its Subsidiaries to the same extent such service has recognized for such Employees under the analogous Benefit Plan or Non-U.S. Benefit Plan, as applicable, as of the Closing. Purchaser shall use commercially reasonable efforts to
cause each of the applicable Purchaser Plans that provides medical, dental, pharmaceutical, vision and/or other health benefits to any Employee to (i) waive eligibility waiting periods, evidence of insurability requirements and pre-existing
condition limitations to the extent waived or not included under the corresponding Benefit Plan or Non-U.S. Benefit Plan, and (ii) provide Employees with credit under the applicable Purchaser Plans for amounts paid by such Employees prior to the
Closing during the plan year in which the Closing occurs under a corresponding Benefit Plan or Non-U.S. Benefit Plan for purposes of applying deductibles, co-payments and out-of-pocket maximums as though such amounts had been paid in accordance with
the terms and conditions of the Purchaser Plans.
(e) Purchaser agrees that it shall notify Seller in writing within ten (10) days
following the earlier to occur of (i) the termination of employment or (ii) the notice of termination of employment, in either case for any reason, of any of the individuals identified on
Section 4.09(e)(i)
of the Disclosure
Schedules in accordance with the terms of
Section 4.09(e)(ii)
of the Disclosure Schedules. Seller agrees that, on and following the Closing, it shall comply with terms of each of the applicable acquisition agreements related to the
Acquisition Holdback Stock (and any other amounts to be paid by Seller (or any of its Affiliates) under such agreements, excluding, for the avoidance of doubt, Acquisition Holdback Cash to the extent such Acquisition Holdback Cash is included in the
Transfers pursuant to Section 1.1(e) of the Reorganization Agreement) as though it was a direct party thereto with respect to matters to the extent relating to the Acquisition Holdback Stock (and any other related payments), including delivering the
shares of Acquisition Holdback Stock to the individuals entitled thereto in accordance with and at the times specified under the applicable acquisition agreements relating to such shares of Acquisition Holdback Stock;
provided
,
however
, that Seller may, in its discretion, accelerate the vesting and/or delivery of shares of Acquisition Holdback Stock under the acquisition agreement set forth in
Section 4.09(e)(iii)
of the Disclosure Schedules in their
entirety on or prior to the Closing.
(f) Purchaser acknowledges and agrees that the provisions of
Sections 4.09(a)
through
4.09(d)
are subject to any applicable Law that protects any Employees acquired rights or otherwise requires Purchaser or any of its Affiliates (including the Business Subsidiaries) to honor terms and conditions of employment,
compensation, benefits or continuity of service and are without limitation to Purchaser and its Affiliates ability to provide more generous terms and conditions, compensation or benefits to the Employees of the Business
Exhibit A-1-37
Subsidiaries following the Closing. Without limiting the foregoing, Purchaser and its Affiliates shall take the actions set forth in
Section
4.09(f)
of the Disclosure
Schedules.
(g) Seller shall, or shall cause its Business Subsidiaries to, use commercially reasonable efforts to take all actions
necessary in respect of consulting obligations and similar notice and bargaining obligations that arise on or before the Closing Date in connection with this Agreement or the Transactions.
(h) Purchaser shall, or shall cause its Subsidiaries to, employ the Employees who are foreign nationals working in the United States (the
Alien Employees
), under terms and conditions such that Purchaser or its Subsidiaries, as applicable, will be considered the successor-in-interest to the Business for U.S. immigration purposes. Accordingly, Purchaser shall, or
shall cause its Subsidiaries to, assume all immigration-related Liabilities that have arisen or will hereafter arise in connection with the submission of petitions to the United States Citizenship and Immigration Service requesting the grant of
employment-based non-immigrant and immigrant visa benefits on behalf of the Alien Employees.
(i) Upon the exercise or settlement of any
Seller Stock Options held by Employees or Former Business Employees, Seller shall be responsible for ensuring the satisfaction of all applicable Tax withholding, payroll Tax or other Tax obligations that arise in connection with any such exercise or
settlement. To the extent that (i) Seller is responsible under applicable Law for the remittance of any such Tax obligation to the applicable Governmental Authority, Seller shall promptly remit such Tax obligations to the applicable
Governmental Authority; and (ii) Purchaser or any of its Affiliates is responsible under applicable Law for the remittance of any such Tax obligation to the applicable Governmental Authority, (A) Seller shall promptly (and in any event within one
(1) Business Day) notify Purchaser of such exercise or settlement, (B) Purchaser and Seller shall cooperate to estimate the Tax obligation in advance of the option exercise settlement date, and (C) Seller shall (or shall cause its plan broker to)
promptly (and in any event within two (2) Business Days after the option exercise settlement date) pay to Purchaser in cash in a lump sum the actual amount withheld in U.S. Dollars (with Purchaser or its applicable Affiliate being responsible for
calculating the exact Tax obligation due based on its payroll records and remitting such Tax obligation to the applicable Governmental Authority in the required currency). To the extent there is any shortfall in the amount of such Tax obligation
withheld relative to the amount of such Tax obligation due, Seller shall promptly (and in any event within five (5) Business Days following notification thereof from Purchaser) reimburse Purchaser for the amount of any such shortfall required to be
remitted to the applicable Governmental Authority. To the extent there is any excess in the amount of such Tax obligation withheld relative to the amount of such Tax obligation due, Purchaser shall promptly (and in any event within five (5) Business
Days following its receipt of such excess, or if such excess is remitted to the applicable Governmental Authority prior to it being determined that an excess amount has been withheld, upon such excess being received by Purchaser from the applicable
Governmental Authority) pay such amount to Seller and Seller shall cause such funds to be restored to the optionees account at the plan broker.
(j) The parties hereto acknowledge and agree that all provisions contained in this
Section 4.09
with respect to Employees are
included for the sole and exclusive benefit of the respective parties hereto and shall not create any right (i) in any other person, including Employees, former employees, any participant or any beneficiary thereof in any Benefit Plan, Non-U.S.
Benefit Plan or Purchaser Plans or (ii) to continued employment with the Business Subsidiaries or Purchaser or any of its Subsidiaries. Notwithstanding anything in this
Section 4.09
to the contrary, nothing in this Agreement,
whether express or implied, shall be treated as an adoption, amendment or other modification of any Benefit Plan, Non-U.S. Benefit Plan or any other employee benefit plans of Seller or the Business Subsidiaries.
4.10
Books and Records; Post-Closing Access
.
(a) Except as provided in Section 5.5(g) of the Reorganization Agreement, for a period of seven (7) years after the Closing Date, each of
Seller and Purchaser shall preserve and retain, and Purchaser shall cause the Business Subsidiaries to preserve and retain, all corporate, accounting, Tax, legal, auditing or other Books
Exhibit A-1-38
and Records that are retained by Seller or are obtained by Purchaser or its Affiliates, as the case may be, (including any documents relating to any governmental or non-governmental Actions or
investigations) relating to the conduct of the Business prior to the Closing Date. Notwithstanding the foregoing, during such seven-year (7-year) period, Purchaser and the Business Subsidiaries may dispose of any such Books and Records if Purchaser
first offers the Books and Records to Seller in writing and Seller thereafter notifies Purchaser in writing that it wishes to reject such offer. Seller and Purchaser shall not, and Purchaser shall not permit the Business Subsidiaries to, dispose of
any such Books and Records at any time after such seven-year (7-year) period without first offering the Books and Records to the other party hereto in writing at least sixty (60) days prior to such disposal.
(b) After the Closing Date, for so long as such materials are retained in accordance with
Section 4.10(a)
, Seller and Purchaser
shall, and Purchaser shall cause the Business Subsidiaries to, and Seller shall cause its Subsidiaries to, permit the other party hereto and its authorized Representatives to have reasonable access to, and to inspect and copy, all materials referred
to in
Section 4.10(a)
and to meet, as reasonably necessary, a reasonable number of times with officers and employees of such party and its Subsidiaries on a mutually convenient basis in order to obtain explanations with respect to such
materials, in each case at the requesting partys sole expense, during normal business hours and upon reasonable prior notice, (x) in connection with (i) any Action relating to the Business or the Business Subsidiaries, (ii) any
governmental Consent, (iii) the prosecution or defense of any audit or Action that is then pending or threatened, (iv) adjustments to the Purchase Price pursuant to
Section 1.04
, or (v) the administration by Seller of the Excluded
Assets and the Retained Liabilities, including those described in Sections 1.4(a), 1.4(c), 1.4(e) and 1.4(g) of the Reorganization Agreement or (y) to the extent necessary to ensure compliance with this Agreement or applicable Law. Notwithstanding
the foregoing, neither Seller nor Purchaser (nor any of their Affiliates) shall be required to disclose any information under this
Section 4.10
(A) if such disclosure would be reasonably likely to: (1) contain information that in the
reasonable, good faith judgment of the disclosing party (after consultation with outside counsel) is competitively sensitive; (2) jeopardize any attorney-client or other legal privilege or the protections of the work product doctrine;
(3) contravene any applicable Laws, fiduciary duty or Contract to which the disclosing party or any of its Affiliates is a party; or (4) expose the disclosing party or any or its Affiliates to risk of liability for disclosure of sensitive or
personal information;
provided
that, in any such case, the disclosing party shall provide such information in redacted form as necessary to preserve such privilege or protections or comply with such Law or Contract or otherwise make
appropriate substitute disclosure arrangements, to the extent practicable or (B) in connection with any litigation or similar dispute between the parties hereto;
provided
,
further
, that the foregoing shall not limit any of the
parties rights of discovery. Any such access or furnishing of information shall be conducted under the supervision of the disclosing party or its Representatives and in such a manner as not to interfere unreasonably with the normal operations
of the business of the disclosing party and its Affiliates.
(c) Without limiting the generality of the foregoing, each of Seller and
Purchaser shall, and shall cause their respective Affiliates to, provide to the other party such cooperation, documentation and information as either of them reasonably may request in connection with (i) filing any Tax Return, amended Tax Return or
claim for refund, (ii) determining a liability for Taxes or a right to refund of Taxes (including pursuant to this Agreement) or (iii) preparing for or conducting any audit, examination, litigation or other Action with respect to Taxes. Such
cooperation and information shall include providing necessary powers of attorney, copies of all relevant portions of relevant Tax Returns, together with all relevant portions of relevant accompanying schedules, relevant work papers, relevant
documents relating to rulings or other determinations by Governmental Authorities and relevant records concerning the ownership and Tax basis of property and other relevant information, which any such party may possess. Each party shall make its
employees reasonably available on a mutually convenient basis at its cost to provide an explanation of any documents or information so provided.
4.11
Notification of Certain Matters
.
(a) Seller shall give prompt notice to Purchaser, and Purchaser shall give prompt notice to Seller, of (i) any notice or other communication
received by such party from any Governmental Authority in connection
Exhibit A-1-39
with the this Agreement or the Transactions, (ii) from any Person alleging that the Consent of such Person under a Material Contract or Lease is or may be required in connection with the
Transactions, and (iii) any Actions commenced against, relating to or involving or otherwise affecting such party or any of the Business Subsidiaries which relate to this Agreement or the Transactions. Seller shall promptly notify Purchaser of any
written notice from any party to any Material Contract to the effect that such party has terminated or intends to terminate (in each case other than the expiration of the term of such Material Contract in accordance with its terms, or with respect
to terminations that would not reasonably be expected to be material to the Business, taken as a whole).
(b) Seller shall promptly
advise Purchaser of any fact, change, event or circumstance that has had or would reasonably be expected to have a Business Material Adverse Effect, and each party shall promptly advise the other of any fact, change, event or circumstance that is
reasonably likely to cause the failure of any condition to Closing set forth in
Section 5.02
or
Section 5.03
, as applicable;
provided
, that any failure to give notice in accordance with the foregoing with respect to any breach
shall not in and of itself be deemed to constitute the failure of any condition set forth in
Section 5.02
or
Section 5.03
to be satisfied.
4.12
Guarantees
.
(a) Purchaser shall use reasonable best efforts to cause itself or one or more of its Affiliates to be substituted in all respects for
Seller, effective as of the Closing, in respect of all obligations of Seller under any guarantees, bonding arrangements, keepwell agreements, net working capital maintenance agreements, reimbursement obligations, letters of credit, letters of
comfort or any similar agreements, in each case to the extent relating to the Business (and not any Excluded Assets or Retained Liabilities), binding Seller for the benefit of the Business or the Business Subsidiaries, and Seller shall reasonably
cooperate in Purchasers efforts, in each case to the extent that the Company has not been so substituted for Seller pursuant to the Reorganization Agreement (the
Guarantees
). In no event shall Purchaser or any of its
Affiliates be obligated to pay any money to any Person to effect the substitutions described in this
Section 4.12
.
(b) With
respect to any Guarantees that remain outstanding after the Closing Date, (i) Seller and Purchaser shall continue to cooperate and use their respective reasonable best efforts to terminate, or, if the parties are unable to so terminate, cause
Purchaser or one of its Affiliates to be substituted in all respects for Seller in respect of, all obligations under the Guarantees, (ii) Purchaser shall indemnify and hold harmless Seller for any damages, Liabilities, costs and expenses
(including reasonable attorneys fees) arising from or relating to such Guarantees, and (iii) Purchaser shall not permit any of the Business Subsidiaries or Affiliates to (A) renew or extend the term of, (B) increase its obligations under, (C)
transfer to another Third Party or (D) amend in any manner, except as contemplated pursuant to clause (i) above, any loan, Contract or other obligation for which Seller is or would reasonably be expected to be liable under such Guarantee (including
after taking into account clause (ii) above). To the extent that Seller has performance obligations under any Guarantee that remains outstanding after the Closing Date, Purchaser will use reasonable best efforts to (x) perform such
obligations on behalf of Seller or (y) otherwise take such action as is reasonably requested by Seller so as to put Seller in the same position as if Purchaser, and not Seller, had performed or were performing such obligations.
4.13
Financing Cooperation
.
(a) Prior to the Closing, Seller shall provide, shall cause the Business Subsidiaries to provide, and shall use commercially reasonable
efforts to cause its and their respective Representatives to provide such cooperation as is reasonably required and customary in connection with the arrangement of the Financing. Notwithstanding anything in this Agreement to the contrary,
(A) none of Seller (at any time) or any of the Business Subsidiaries (prior to the Closing) shall be required to pay any commitment or other similar fee, incur or reimburse any costs or expenses (other than those fees, costs and expenses
promptly reimbursed by Purchaser) or incur any other liability or obligation of any kind in connection with the Financing, (B) none of Seller (at any time) or any of the Business Subsidiaries (prior to the Closing) shall be required to execute,
enter into or perform any binding agreement or commitment, or adopt any resolution or otherwise take any corporate or similar action
Exhibit A-1-40
or deliver any certificate, in connection with the Financing (other than delivery of customary authorization letters with respect to the Seller and customary representation letters with respect
to the Business Subsidiaries, in each case, in connection with any Financing consisting of a syndicated credit facility), (C) nothing shall obligate Seller or any Business Subsidiary to provide, or cause to be provided, any legal opinion or to
provide, or cause to be provided, any information or take, or cause to be taken, any action to the extent doing so could reasonably be expected to result in (x) a violation of applicable Law or Sellers or any Business Subsidiarys
organizational documents or any Contract binding on Seller or any of its Subsidiaries or any confidentiality obligations binding on Seller or any of its Subsidiaries or (y) the loss of any attorney-client privilege and (D) nothing shall obligate
Seller or any Business Subsidiary to provide carve-out financial statements or other carve-out financial information, in each case whether audited or unaudited, in respect of the Business or the Business Subsidiaries. The cooperation of Seller and
the Business Subsidiaries shall not unreasonably interfere with ongoing operations of Seller or any of its Subsidiaries or otherwise materially impair the ability of any Representative of Seller or any of the Business Subsidiaries to carry out its
duties to Seller or any of its Subsidiaries. Purchaser shall promptly, upon request by Seller, reimburse Seller for all reasonable out-of-pocket costs incurred by Seller or any of the Business Subsidiaries in connection with the cooperation of
Seller, the Business Subsidiaries and their respective Representatives contemplated by this
Section 4.13
and shall indemnify and hold harmless Seller, the Business Subsidiaries and their respective Representatives from and against any
and all losses, damages, claims, costs or expenses suffered or incurred by any of them in connection with (i) the Financing, (ii) any information used in connection with the Financing (except with respect to written information provided by Seller or
any of the Business Subsidiaries specifically for inclusion in offering materials relating to the Financing), and (iii) any action taken by any of them at the request of Purchaser pursuant to this
Section 4.13
, except, in the case
of clauses (i) and (iii), to the extent such losses, damages, claims, costs or expenses arose from the gross negligence or willful misconduct of Seller or any of the Business Subsidiaries, as determined in a final, non-appealable judgment of a court
of competent jurisdiction.
(b) All non-public or otherwise confidential information obtained by Purchaser, its Representatives or its
Financing Sources pursuant to this
Section 4.13
shall be kept confidential in accordance with the Confidentiality Agreement, except that Purchaser shall be permitted to disclose such information to the Financing Sources, rating agencies and
prospective lenders and investors during syndication of the Financing subject to the ratings agencies and prospective lenders and investors entering into customary confidentiality undertakings with respect to such information (including through a
notice and undertaking in a form customarily used in confidential information memoranda for senior credit facilities), and to potential investors in a customary offering memorandum and related materials used in connection with an offering of debt
securities used to finance the consummation of the Transactions.
4.14
Transaction Litigation
.
Seller shall control the defense of any Action brought by stockholders of Seller against Seller and/or its directors relating to the Transactions;
provided
,
however
, that Seller (i) shall promptly provide Purchaser with copies of
all proceedings and correspondence relating to such Action, (ii) shall give Purchaser the opportunity to consult with Seller regarding the defense or settlement of any such Action and (iii) shall not compromise, settle, come to an arrangement
regarding or agree to compromise, settle or come to an arrangement regarding any Action arising or resulting from the Transactions (other than any settlement that would not affect Purchaser or the Business in any material respect following the
Closing, including any settlement solely for monetary damages to be paid by Seller or entirely from proceeds of Sellers insurance, except for any applicable deductible which shall be paid by Seller) without the prior written consent of
Purchaser (which consent shall not be unreasonably withheld, conditioned or delayed).
4.15
Voting of
Shares
. Purchaser shall and shall cause its Affiliates to vote all shares of Seller Common Stock beneficially owned by it or any of its Affiliates in favor of authorizing the Sale and the Reorganization Transactions at the Stockholders
Meeting.
4.16
Tax Matters
.
(a)
Company Purchase Price Allocation
.
Exhibit A-1-41
(i) Purchaser and Seller agree to allocate, and, as applicable, to cause their
applicable Affiliates to allocate, the Company Purchase Price among the assets of the Section 338(h)(10) Subsidiaries and any other relevant assets acquired (or deemed acquired for U.S. federal income tax purposes in connection with the
acquisition of the Shares) in accordance with Sections 1060 and 338(h)(10) of the Code and the Treasury Regulations promulgated thereunder. Purchaser shall provide Seller with a proposed allocation of the Company Purchase Price (the
Purchasers Allocation
) no later than one hundred twenty (120) days after the Closing Date. If Seller disagrees with Purchasers Allocation, Seller may, within thirty (30) days after delivery of Purchasers
Allocation, deliver a notice (the
Sellers Allocation Notice
) to Purchaser to such effect, specifying those items as to which Seller disagrees and setting forth Sellers proposed allocation. If the Sellers
Allocation Notice is duly delivered, Seller and Purchaser shall, during the twenty (20) days following such delivery, use commercially reasonable efforts to reach agreement on the disputed items or amounts in order to determine the allocation of the
Company Purchase Price. If Seller and Purchaser are unable to reach such agreement, they shall promptly thereafter cause the Independent Accounting Firm to resolve any remaining disputes. Any allocation of the Company Purchase Price determined
pursuant to the decision of the Independent Accounting Firm shall incorporate, reflect and be consistent with the terms of this Agreement. Any costs and expenses of the Independent Accounting Firm shall be borne equally by the Seller, on the one
hand, and Purchaser, on the other hand. The allocation, as prepared by Purchaser if no Sellers Allocation Notice has been timely given, as adjusted pursuant to any agreement between Seller and Purchaser or as determined by the Independent
Accounting Firm (the
Company Purchase Price Allocation
), shall be conclusive and binding on Purchaser and Seller. The Company Purchase Price Allocation and the Foreign Sale Purchase Price shall be adjusted as necessary and
appropriate to reflect any payments treated as an adjustment to the purchase price for Tax purposes pursuant to
Section 4.16(c)
of this Agreement or Section 7.6 of the Reorganization Agreement or in the event the beneficial ownership of any
Non-Transferrable Asset is not transferred to the Company pursuant to Section 1.7 of the Reorganization Agreement.
(ii)
Each of Purchaser and Seller shall timely file IRS Form 8594 and all U.S. federal, state, local and foreign Tax Returns in accordance with the Company Purchase Price Allocation and the Foreign Sale Purchase Price. The Company Purchase Price
Allocation shall be used in preparing IRS Form 8883 (and any similar forms under applicable state and local Law) pursuant to
Section 4.16(b)(ii)
. Except to the extent otherwise required pursuant to a determination within the
meaning of Section 1313(a) of the Code (or any similar provision of state, local or foreign Law), Purchaser, Seller and their respective Affiliates shall not take any Tax position that is inconsistent with the Company Purchase Price Allocation or
the Foreign Sale Purchase Price on any Tax Return, in any Tax Proceeding or otherwise.
(b)
Section 338(h)(10) Elections
.
(i) At Purchasers request, Purchaser and Seller shall (or shall cause their relevant Affiliates to) make and timely
file joint elections under Section 338(h)(10) of the Code (and any corresponding elections under applicable state or local Law) with respect to any of the Business Subsidiaries set forth on
Schedule 4.16(b)(i)
(the Business Subsidiaries
with respect to which Purchaser requests such elections, the
Section 338(h)(10) Subsidiaries
, and such elections, the
Company Section 338(h)(10) Elections
).
(ii) Purchaser and Seller shall (and shall cause their relevant Affiliates to) cooperate in the preparation of all forms,
attachments and schedules necessary to effectuate the Company Section 338(h)(10) Elections and the Reorganization 338(h)(10) Elections (collectively, the
Section 338(h)(10) Elections
), including IRS Form 8023, IRS Form 8883
and any similar forms under applicable state and local Law (such forms with respect to the Company Section 338(h)(10) Elections, collectively, the
Company Section 338(h)(10) Forms
, and, collectively with the
Exhibit A-1-42
Reorganization 338(h)(10) Forms, the
Section 338(h)(10) Forms
), in a manner consistent with the Company Purchase Price Allocation and the Foreign Sale Purchase Price. Each
of Purchaser and Seller shall timely file (or cause to be timely filed) the Company Section 338(h)(10) Forms with the applicable Governmental Authorities.
(iii) Purchaser and Seller shall, and shall cause their respective Affiliates to, as promptly as practicable following the
Closing Date, cooperate with each other to take all actions necessary and appropriate (including filing such other forms, returns, elections, schedules and other documents as may be required) to effect, perfect and preserve the Company
Section 338(h)(10) Elections in accordance with the provisions of Section 338 of the Code and the Treasury Regulations promulgated thereunder (and any comparable provisions of applicable state or local Law). Purchaser and Seller shall, and
shall cause their respective Affiliates to, (A) report the transactions contemplated by this Agreement and the Reorganization Agreement in a manner consistent with the Section 338(h)(10) Elections for all Tax purposes and (B) except to the
extent otherwise required pursuant to a determination within the meaning of Section 1313(a) of the Code (or any similar provision of state or local Law), take no Tax position contrary to the Section 338(h)(10) Elections or the
Section 338(h)(10) Forms on any Tax Return, in any Tax Proceeding or otherwise.
(iv) Purchaser and Seller shall not,
and shall cause their respective Affiliates not to, take any action to (A) modify any of the forms or other documents (including any corrections, amendments or supplements thereto) that are required in connection with the
Section 338(h)(10) Elections or (B) modify or revoke any of the Section 338(h)(10) Elections after the filing of the Section 338(h)(10) Forms without the prior written consent of the other party.
(v) Purchaser may make and may cause its Affiliates (including the Company) to make (and nothing in this Agreement shall
prohibit the Purchaser from so making or causing to be made) an election under Section 338(g) of the Code with respect to the acquisition or deemed acquisition by Purchaser pursuant to this Agreement of any Business Subsidiary that is treated as a
foreign corporation for U.S. federal income tax purposes and that is not listed on
Section 4.16(b)(v)
of the Disclosure Schedules (an
Eligible Foreign Business Subsidiary
). Except for (x) the Company Section 338(h)(10)
Elections, (y) the Reorganization 338(h)(10) Elections and (z) the elections under Section 338(g) of the Code described in the immediately preceding sentence, Purchaser shall not, and shall cause its Affiliates not to, make any election under
Section 338 of the Code, or any comparable provision of state, local or foreign Law, with respect to any of the Business Subsidiaries without the prior written consent of Seller (which consent shall not be unreasonably withheld, conditioned or
delayed).
(c)
Adjustments for Tax Purposes
. Each of Purchaser and Seller agree to treat, and cause their respective Affiliates to
treat, for all Tax purposes, the receipt of any indemnification payment by Purchaser, the Company or Seller pursuant to this Agreement or the Reorganization Agreement as an adjustment to the purchase price, unless otherwise required by Law.
(d)
Prohibited Actions
. Except as otherwise required by applicable Law or as expressly required by this Agreement or the
Reorganization Agreement, Purchaser shall not, and shall cause its Affiliates not to, (A) amend any Tax Return related to the Business or any Business Subsidiary, make, change or revoke any Tax election related to the Business or any Business
Subsidiary or take any other similar action outside the ordinary course of business to the extent such amendment or action could materially increase Sellers (or any of its Affiliates) liability for Taxes for which Seller bears
responsibility pursuant to the Reorganization Agreement or (B) take, or cause to take, any action that could result in, or change the character of, any material amount of income or gain that must be reported on any Tax Return filed or to be filed by
Seller (or any of its Affiliates);
provided
,
however
, that nothing in this
Section 4.16(d)
shall be interpreted as affecting any rights or responsibilities of any party set forth in Section 5.5 of the Reorganization Agreement or
any other provision of
Exhibit A-1-43
this Section 4.16, and in the event of any conflict between any of the provisions contained in Section 5.5 of the Reorganization Agreement, Section 4.16(a)(c) or Section 4.16(e)(h),
on the one hand, with this Section 4.16(d), on the other hand, such provision(s) other than Section 4.16(d) shall control.
(e)
Tax
Deductions Related to Retained Employee Liabilities
. Each of Purchaser and Seller agree that, to the extent permitted by applicable Law, any income, franchise and similar Tax deductions with respect to any payment of Retained Employee
Liabilities, regardless of whether paid in cash or stock (any such deductions, the
Deductions
), shall be taken on the Tax Return of Seller or another Seller Entity. To the extent that Purchaser or any of its Affiliates Actually
Realizes a Tax Benefit as a result of any Deduction reflected on any Tax Return of Purchaser or any of its Affiliates for a taxable period beginning after the Closing Date, Purchaser shall pay the amount of such Tax Benefit to Seller within fifteen
(15) days of Actually Realizing such Tax Benefit. To the extent any Deduction giving rise to a Tax Benefit in respect of which Purchaser made a payment to Seller pursuant to this
Section 4.16(d)
is subsequently disallowed by the relevant
Governmental Authority, Seller shall repay the amount of such disallowed Tax Benefit received by Purchaser, together with any interest and penalties applicable with respect thereto and payable to the Governmental Authority, within fifteen (15) days
of Purchaser notifying Seller that such Tax Benefit has been disallowed.
(f)
Tax Sharing Agreements
. Notwithstanding
anything herein to the contrary, to the extent relating to the Business Subsidiaries, Seller shall terminate or cause to be terminated, on or before the Closing Date, all Tax sharing agreements or similar arrangements (which, for the avoidance of
doubt, shall not include this Agreement, the Reorganization Agreement or any other Transaction Document), if any, to which any of the Business Subsidiaries, on the one hand, and Seller or any of its Subsidiaries (other than the Business
Subsidiaries), on the other hand, are parties, and neither Seller nor any of its Subsidiaries (other than the Business Subsidiaries) nor any of the Business Subsidiaries shall have any rights or obligations thereunder after the Closing.
(g)
Foreign Business Subsidiary Transfers
. No later than twenty (20) Business Days before effectuating any Foreign Business Subsidiary
Transfer, Seller shall provide Purchaser with a draft of the relevant document(s) pursuant to which the Foreign Business Subsidiary Transfer(s) will be effected and shall make its employees reasonably available to explain to Purchaser the specific
steps contemplated to be taken to achieve any such Foreign Business Subsidiary Transfer. Seller shall thereafter consider in good faith any mutually beneficial alternative method for effectuating such Foreign Business Subsidiary Transfer(s)
suggested by Purchaser within ten (10) Business Days of Purchasers receipt of such document(s).
(h)
Certain Information
Deliveries.
No later than thirty (30) Business Days following the date of this Agreement, Seller shall produce and deliver to Purchaser a list setting forth (x) each Business Subsidiary, if any, that has undergone an ownership change
within the meaning of Section 382 of the Code (or any similar provision of state, local or foreign Law) (together with any calculations, workpapers and other documentations in existence with respect thereto) and (y) each gain recognition
agreement within the meaning of Section 367 of the Code and the Treasury Regulations promulgated thereunder, if any, to which any Business Subsidiary is a party (together with a copy of each such gain recognition agreement).
4.17
Change of Name
.
(a) Seller hereby acknowledges that, as of the Closing, all right, title and interest in and to the Marks and names set forth in
Section
2.16
(a)
of the Disclosure Schedules, together with all variations, acronyms or derivations thereof or any names, trademarks, service marks, logos or otherwise that are confusingly similar thereto (collectively, the
Names and
Marks
), will be owned exclusively by the Business Subsidiaries, and that, except as expressly provided below, any and all right of the Seller Entities to use the Names and Marks shall terminate as of the Closing, along with any and all
goodwill associated therewith. Notwithstanding the foregoing, Seller and its Affiliates may at all times after the Closing use such names and Marks (i) in internal Tax, legal, employment or similar records, (ii) as required by Law or the rules of
any applicable stock exchange and (iii) as part of any factual statement.
Exhibit A-1-44
(b) Seller shall as promptly as practicable after the Closing, file documents with the
appropriate Governmental Authorities changing its and any other Seller Entities corporate name (in such case, no more than five (5) Business Days after the Closing), doing business as name, trade name and any other similar
corporate identifier to (in the case of such corporate identifiers, no more than sixty (60) days after the Closing) a corporate name, doing business as name, trade name or any other similar corporate identifier that does not contain any
Names and Marks;
provided
, that Seller shall use reasonable best efforts to ensure that all Names and Marks be replaced, removed or covered-over on materials as soon as reasonably possible and will discontinue use, and will, as soon as
reasonably possible following discovery, destroy or deliver up all materials in the Seller Entities possession or control with Names and Marks affixed to them that have no valid continuing use by any Seller Entity, to the extent the use of
such items could reasonably be construed to create a legal obligation on behalf of Purchaser or its Affiliates (including the Business Subsidiaries). Such specific items to be destroyed, returned or altered, or for which such other steps must
be taken, include: order, purchase or material forms; requisitions; invoices; statements; labor reports; bill inserts; stationery; personalized note pads that are used for communications with the public; business cards; published organization
charts; bulletins/releases; sales/price literature; manuals distributed to the public; catalogs; websites; and publicly available media contact lists/cards.
4.18
Convertible Notes
.
(a) The parties hereto expressly acknowledge and agree that, except as may be required in accordance with
Section 4.18(b)
, the
Convertible Notes will not be assumed by the Company, Purchaser or any Affiliate thereof and will constitute Retained Liabilities. Seller may, in its reasonable discretion, take actions to amend the Indenture prior to the Closing to delete
Article 11 (and, in Sellers sole discretion, to delete or modify other provisions) of the Indenture, including conducting a tender offer and/or consent solicitation in accordance with applicable Law to acquire the Convertible Notes and/or
effect such amendments to the Indenture on such terms and conditions as Seller, in its reasonable discretion, determines (a
Debt Tender Offer
). Seller shall keep Purchaser reasonably informed with respect to the status of the
actions taken pursuant to the foregoing. For the avoidance of doubt, neither the commencement nor consummation of a Debt Tender Offer shall in any event constitute a condition to Closing under
Article V
.
(b) In the event that, at or after the Closing the Indenture has not been amended as permitted in
Section
4.18(a)
and a court of competent jurisdiction has determined in a final, non-appealable judgment or a judgment that Seller determines, in its reasonable discretion, not to appeal, that the Transactions constitute a sale, conveyance, transfer or lease of all
or substantially all of Sellers properties and assets to another Person (as defined in the Indenture) or otherwise issues a ruling with substantially the same effect:
(i) Seller and the Company will execute and deliver as promptly as practicable following such judgment a supplemental
indenture and such instruments, certificates, opinions, agreements and other documents as may be necessary to cause Seller and the Company to satisfy the requirements of the Indenture, including Article 11 thereof, including by causing the
Company to assume all of Sellers obligations under the Convertible Notes and the Indenture, effective upon consummation of the Transactions;
(ii) the Company shall (A) notify Seller in writing not later than 10:00 a.m. (New York City time) on the next Business
Day following the Companys receipt of a Notice of Conversion (as defined in the Indenture) in respect of the conversion of any Convertible Note by a holder thereof, and (B) elect to satisfy its Conversion Obligation (as defined in the
Indenture) with respect to such conversion by Cash Settlement (as defined in the Indenture), by Physical Settlement (as defined in the Indenture) or by Combination Settlement (as defined in the Indenture), in each case in accordance with the
Indenture and as directed in writing by Seller in its sole discretion;
provided
, that if Seller does not deliver written notice to the Company by 3:00 p.m. (New York City time) on the date it receives the Companys notice specifying the
Settlement Method (as defined in the Indenture) by which the Conversion Obligation should be satisfied, Seller will be deemed to have specified Cash Settlement; and,
provided
,
further
, that if Seller specifies Combination Settlement
Exhibit A-1-45
but does not indicate the Specified Dollar Amount (as defined in the Indenture) per $1,000 principal amount of Convertible Notes, the Specified Dollar Amount per $1,000 principal amount of
Convertible Notes shall be $1,000;
(iii) at Sellers election, either (A) the Purchase Price shall be reduced
by the principal amount ($1,000 per Convertible Note) of the Convertible Notes that remain outstanding immediately prior to the Closing (the
Principal Amount
), or (B) Seller shall pay to the Company at the Closing the
Principal Amount (in which case such payment shall have no impact on the amount of the Purchase Price);
provide
d
that, if the execution and delivery by the Company of the supplemental indenture described in
Section 4.18(b)(i)
occurs after the Closing, Seller shall pay to the Company promptly after such execution and delivery the Principal Amount (in which case such payment shall have no impact on the amount of the Purchase Price);
(iv) simultaneously with the execution and delivery by the Company of the supplemental indenture described in
Section
4.18(b)(i)
, Seller, the Company, Purchaser and a mutually agreed escrow agent will enter into an escrow agreement pursuant to which (A) Purchaser shall, or shall cause the Company to, deposit the Principal Amount into an escrow account (the
Escrow Account
); (B) all or a portion of the Principal Amount not to exceed $1,000 per Convertible Note shall be released from the Escrow Account and applied toward payments to holders of Convertible Notes of (x) the
principal due upon maturity of the Convertible Notes, (y) the Settlement Amount (as defined in the Indenture) due upon Cash Settlement, or (z) the Specified Dollar Amount due upon Combination Settlement; (C) all or a portion of the
Principal Amount not to exceed $1,000 per Convertible Note shall be released from the Escrow Account and paid to Seller (x) in respect of any Physical Settlement, in an amount equal to the principal amount of any Convertible Notes settled by
Physical Settlement or (y) in respect of any Combination Settlements, (I) the principal amount of any Convertible Notes settled by Combination Settlement less (II) the Specified Dollar Amount; and (D) any funds held in the Escrow
Account that are not paid to holders of Convertible Notes will, within five (5) Business Days following the later of (x) the earlier of (1) the Maturity Date (as defined in the Indenture), or (2) the date upon which all Convertible Notes
have been converted or repurchased and (y) the final satisfaction and settlement by Seller of any further excess obligations relating to or arising out of the Convertible Notes;
(v) in the case of any Cash Settlement or Combination Settlement, if application of the funds in the Escrow Account is not
sufficient to pay the Settlement Amount to the holders of Convertible Notes as required under the Indenture, then Seller will provide the amount of any cash shortfall by wire transfer of immediately available funds to the Company not less than one
(1) Business Day prior to the date such payments are required to be made to such holders;
(vi) in the case of any
Combination Settlement or Physical Settlement, Seller will provide the number of shares of Seller Common Stock (which shall be duly authorized and issued) to the Company required to satisfy the Conversion Obligation by no later than 10:00 a.m. (New
York City time) at least two (2) Business Days prior to the date such shares are required to be delivered to such holders;
(vii) until the later of (A) the earlier of (1) the Maturity Date (as defined in the Indenture), or (2) the date upon which
all Convertible Notes have been converted or repurchased and (B) the final satisfaction and settlement by Seller of any further excess obligations relating to or arising out of the Convertible Notes, Seller (x) shall at all times reserve and keep
available, out of its authorized but unissued Seller Common Stock, solely for the purpose of providing for its obligations under this
Section 4.18
and the Convertible Notes, the aggregate number of shares of Seller Common Stock issuable under
the Convertible Notes in accordance with the terms thereof, and (y) shall not adopt or enter into, or permit to be adopted or entered into, a plan of complete or partial liquidation or dissolution unless Seller has made provisions reasonably
acceptable to Purchaser for the final satisfaction and settlement of any further excess obligations relating to or arising out of the Convertible Notes;
Exhibit A-1-46
(viii) if Seller (i) consolidates with or merges into any other Person and shall
not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) enters into any agreement with a Third Party pursuant to which such Third Party acquires, directly or indirectly, in one transaction or a series of
transactions, pursuant to a merger, consolidation, business combination, sale of shares of capital stock, tender offer, exchange offer or similar transaction (x) beneficial ownership (as defined under Section 13(d) of the Exchange Act),
including if such ownership is through the equityholders of any such Third Party, of more than fifty percent (50%) of any class of equity securities of Seller or (y) any one or more assets or businesses of Seller and its Subsidiaries that
constitute more than fifty percent (50%) of the consolidated assets of Seller, then, in each case, Seller shall make proper provision so that the continuing or surviving entity or acquiror (or, if applicable, at Purchasers election, the
ultimate parent company of such continuing or surviving entity or acquiror), as the case may be, assumes in writing (in form and substance reasonably acceptable to Purchaser), on a joint and several basis, all of the obligations of Seller set forth
in this
Section 4.18
; and
(ix) except as set forth in this
Section
4.18(b)
, Seller will
not be required to pay any amount greater than the principal amount of any Convertible Note to purchase any Convertible Note prior to the Maturity Date unless Seller agrees to do so in its sole discretion (or unless the Company would be required to
do so under the terms of the Indenture).
The obligations under
Section
4.18(b)
shall terminate and shall become null and void,
and there shall be no liability on the part of any party hereto under
Section
4.18(b)
, and all rights and obligations of any party hereto under
Section
4.18(b)
shall cease, if prior to the Closing,
(i) pursuant to the Debt Tender Offer or otherwise, the Indenture is amended to permit the Transactions without assumption of the Convertible Notes by the Company, Purchaser or any Affiliate thereof or (ii) a court of competent
jurisdiction determines in a final, non-appealable judgment, that the Transactions do not constitute a sale, conveyance, transfer or lease of all or substantially all of Sellers properties and assets to another Person (as defined in the
Indenture) or otherwise issues a ruling with substantially the same effect. Notwithstanding the foregoing, any and all actions by the Company, Purchaser and their respective Affiliates under this
Section 4.18
shall be taken at Sellers
sole cost and expense, and Seller shall indemnify, defend and hold harmless Purchaser and its Affiliates (including, from and after the Closing, the Company) from and against any and all Losses (including for the avoidance of doubt any Losses
relating to any securities laws) relating to, arising out of or resulting from the Convertible Notes (including in connection with the Transactions or in connection with the conversion of any such Convertible Notes), but excluding any Losses to the
extent fully satisfied by recourse to funds in the Escrow Account in accordance with
Section 4.18(b)
, excluding any Losses to the extent directly resulting from any action or inaction by the Company in material breach (subject to applicable
cure rights and periods) of the Indenture or by Purchaser in material breach of the provisions of this
Section 4.18
, and excluding, for the avoidance of doubt, any premium that may be payable in connection with a tender offer that is
voluntarily commenced by Purchaser or any of its Affiliates following the Closing without Sellers prior written consent.
4.19
Yahoo Japan
.
(a) From and after the date of this Agreement, Seller and its Subsidiaries (for the avoidance of doubt
throughout this
Section 4.19
, not including the Company after the Closing) shall not, without the prior written consent of Purchaser, to the extent within its control, (i) amend or waive any provision of, or grant any Consent with respect to
any matter under, the Yahoo Japan License Agreement or any other agreement between Seller (or its Subsidiaries) and Yahoo Japan Corporation (or its Subsidiaries) that constitutes a Transferred Asset; provided, that this clause (i) shall not apply
following the Closing, (ii) amend or waive any provision of, or grant any Consent with respect to any matter under, the Yahoo Japan Joint Venture Agreement or any other agreement between Seller (or its Subsidiaries), on the one hand, and either
Yahoo Japan Corporation (or its Subsidiaries) or SoftBank Group Corp. (or its Subsidiaries), on the other hand, relating directly to Yahoo Japan Corporation that constitutes an Excluded Asset if such action would reasonably be expected to cause the
termination of, or permit
Exhibit A-1-47
Yahoo Japan Corporation to terminate, the Yahoo Japan License Agreement pursuant to clause (iii) or clause (iv) of Section 9.1 (Terms) thereof, or (iii) sell its shares in Yahoo Japan Corporation
or consent to an Acquisition (as such term is defined in the Yahoo Japan License Agreement) if such action would reasonably be expected to cause the termination of, or permit Yahoo Japan Corporation to terminate, the Yahoo Japan License Agreement
pursuant to clause (iii) or clause (iv) of Section 9.1 (Terms) thereof. Notwithstanding the foregoing, (x) neither Seller nor any director, officer or employee of Seller shall be obligated to take any action in its or their capacity as a shareholder
or director of Yahoo Japan Corporation that would violate applicable Law (including with respect to a directors fiduciary duties), and (y) Seller shall have no liability with respect to the restrictions set forth in clauses (ii) and (iii) of
the immediately preceding sentence if the applicable termination of the Yahoo License Agreement is pursuant to clause (iv) of Section 9.1 (Terms) thereof and would not have occurred but for the failure by the Company to have consented (following
reasonable notice and an opportunity to so consent) to the applicable Acquisition in accordance with the terms of such clause (iv) of Section 9.1 (Terms) thereof (it being understood that, notwithstanding anything to the contrary contained herein,
subject to this clause (y), Seller shall remain liable to Purchaser following the Closing with respect to any breaches by Seller of this
Section 4.19(a)
, whether such breaches occur prior to or following the Closing).
(b) Seller and its Subsidiaries will not implement or effect the Transfers under the Reorganization Agreement in a manner that constitutes a
breach or default under the terms of the Yahoo Japan License Agreement or that would cause the termination of, or permit Yahoo Japan Corporation to terminate, the Yahoo Japan License Agreement (it being understood that, notwithstanding anything to
the contrary contained herein, for twelve (12) months following the Closing, Seller shall remain liable to Purchaser with respect to a breach by Seller of this Section 4.19(b) prior to the Closing).
4.20
Designated Matters
. From and after the date hereof (and until the Closing), Seller shall, in
good faith, seek to address in a commercially reasonable manner as promptly as reasonably practicable the matters and issues described in
Section 4.20 of the Disclosure Schedules
(the
Designated Matters
). Without
limiting the generality of the foregoing, Seller shall keep Purchaser reasonably informed, to the extent practicable, on a reasonably current basis, of any material developments arising in connection with the Designated Matters (including by
providing copies of any material correspondence sent or received by Seller or its Representatives in connection with the Designated Matters), and otherwise consult with Purchaser in good faith on a reasonably current basis with respect to the
Designated Matters and the resolution thereof, including by providing Purchaser with the opportunity to attend any material teleconferences or in-person meetings with the applicable counterparties regarding the resolution of the Designated Matters.
In connection with such discussions and consultation, Seller shall consider in good faith Purchasers reasonable comments and suggestions with respect to the Designated Matters and the resolution thereof, including any good faith offers of
assistance by Purchaser in connection therewith. The cooperation and information sharing obligations of a party under this
Section 4.20
shall be limited to the extent any such cooperation or disclosure would jeopardize the
attorney-client privilege of such party or contravene any Laws or obligation of confidentiality to a third party;
provided
, that the parties shall endeavor in good faith to make appropriate substitute arrangements, if practicable, in a
manner that does not give rise to any of the foregoing consequences. Nothing in this
Section 4.20
shall be deemed to permit or require Seller to take any action that is prohibited pursuant to
Section 4.01
hereof without
Purchasers consent.
ARTICLE V
CONDITIONS
5.01
Conditions to the Obligations of Each Party
. The respective obligations of each party to consummate the Closing are subject to the fulfillment, at or before the Closing, of each of the following conditions:
(a)
Stockholder Approval
. The Seller Stockholder Approval shall have been obtained.
(b)
Antitrust Approvals
. All approvals or expirations or terminations of waiting periods (including any extensions thereof)
required to be obtained or to have occurred under the Antitrust Laws of the jurisdictions
Exhibit A-1-48
listed in
Section
5.01(b)
of the Disclosure Schedule prior to Closing shall have been obtained or shall have occurred without the imposition of any Burdensome Condition
(unless such Burdensome Condition was expressly agreed to in writing by Purchaser with the applicable Governmental Authority in connection with obtaining such approval, expiration or termination, it being understood that nothing in this Section
5.01(b) shall be deemed to alter or supplement the parties rights and obligations under
Section 4.05
).
(c)
No
Injunctions or Restraints
. No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is then in effect and has the effect of restraining, enjoining or
otherwise prohibiting the consummation of the Transactions.
(d)
Transaction Documents
. The closing of the Reorganization
Transactions under the Reorganization Agreement shall have occurred in accordance with the terms and conditions thereof in all respects (or, so long as not and not reasonably expected to be adverse (other than in a
de minimis
respect) to the
Business Subsidiaries, the Business, Purchaser or any of its Subsidiaries (in a manner related to the Transactions including from a Tax perspective or otherwise) or the Transactions, in all material respects), and the License Agreement shall remain
in full force and effect.
5.02
Conditions to the Obligations of Purchaser
. The obligations of
Purchaser hereunder to consummate the Closing and purchase the Shares are subject to the fulfillment, at or before the Closing, of each of the following additional conditions (all or any of which may be waived in writing in whole or in part by
Purchaser in its sole discretion):
(a)
Representations and Warranties
. (i) Each representation and warranty of Seller
contained in
Sections 2.01
,
2.02
,
2.03(c)
(with respect to Seller and the Business Subsidiaries (other than the Company and SaleCo2)),
2.03(e)
and
2.24
shall be true and correct in all material respects both at and
as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and
warranties shall be so true and correct in all material respects as of such specific date only), (ii) each representation and warranty of Seller contained in
Sections 2.03(a)
,
2.03(b)
,
2.03(c)
(with respect to the Company and
SaleCo2) and
2.03(d)
shall be true and correct in all but
de minimis
respects both at and as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date (except to the extent such
representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct in all but
de minimis
respects as of such specific date only), (iii) the
representation and warranty of Seller contained in the second sentence of
Section
2.18
shall be true and correct in all respects both at and as of the date of this Agreement and as of the Closing Date as if made on and as
of the Closing Date, and (iv) each other representation and warranty of Seller contained in this Agreement, without giving effect to any materiality, Business Material Adverse Effect or similar qualifications therein, shall be true
and correct both at and as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date (except to the extent such representations and warranties are expressly made as of a specific date, in which case such
representations and warranties shall be so true and correct as of such specific date only), except for such failures to be true and correct as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse
Effect.
(b)
Performance of Obligations of Seller
. The covenants and agreements contained in this Agreement to be complied
with by Seller on or before the Closing shall have been complied with in all material respects.
(c)
Officer
s
Certificate
. Purchaser shall have received a certificate signed on behalf of Seller by an officer of Seller, stating that the conditions specified in
Sections 5.02(a)
and
5.02(b)
have been satisfied.
Exhibit A-1-49
5.03
Conditions to the Obligations of Seller
. The
obligations of Seller hereunder to consummate the Closing are subject to the fulfillment, at or before the Closing, of each of the following additional conditions (all or any of which may be waived in writing in whole or in part by Seller in its
sole discretion):
(a)
Representations and Warranties
. (i) Each representation and warranty of Purchaser contained in
Section 3.01
,
Section
3.02
and
Section 3.08
shall be true and correct in all material respects both at and as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date (except to
the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct in all material respects as of such specific date only), and (ii) each other
representation and warranty of Purchaser contained in this Agreement, without giving effect to any materiality, material adverse effect or similar qualifications therein, shall be true and correct both at and as of the date of this Agreement and as
of the Closing Date as if made on and as of the Closing Date (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct as of
such specific date only), except for such failures to be true and correct as would not, individually or in the aggregate, reasonably be expected to materially and adversely affect the ability of Purchaser to carry out its obligations under, and to
consummate the transactions contemplated by, this Agreement.
(b)
Performance of Obligations of Purchaser
. The covenants and
agreements contained in this Agreement to be complied with by Purchaser on or before the Closing shall have been complied with in all material respects.
(c)
Officer
s Certificate
. Seller shall have received a certificate signed on behalf of Purchaser by an
officer of Purchaser, stating that the conditions specified in
Sections 5.03(a)
and
5.03(b)
have been satisfied.
ARTICLE VI
TERMINATION
6.01
Termination
. This Agreement may be terminated at any time prior to the Closing, whether before or after the Seller Stockholder Approval is obtained, as follows:
(a) by mutual written agreement of Seller and Purchaser.
(b) by either Seller or Purchaser, if:
(i) the Closing shall not have occurred by April 24, 2017 (the
Outside Date
);
provided
, that
(A) if the SEC shall not have cleared the Proxy Statement by March 10, 2017, then either party (
provided
that it has complied in all material respects with its obligations under
Section 4.02(a)
) may, by written notice
delivered to the other party, extend the Outside Date by three (3) months; and (B) if on the fifth (5th) Business Day prior to the Outside Date (including as extended one time pursuant to
Section 6.01(b)(i)(A)
or this
Section 6.01(b)(i)(B)
) the conditions set forth in
Section 5.01(b)
and
Section 5.01(c)
(solely on account of a temporary or preliminary Governmental Order) are not satisfied, but all other conditions set forth in
Article V
shall have been satisfied or waived (excluding conditions that, by their terms, cannot be satisfied until the Closing, which conditions would be capable of being satisfied at such time), then either Seller or Purchaser
(
provided
that it has complied in all material respects with its obligations under
Section 4.05
) may, by written notice delivered to the other party hereto, extend the Outside Date by three (3) months;
provided
,
further
, that the right to terminate this Agreement under this
Section 6.01(b)(i)
shall not be available to a party, if any failure by such party to fulfill its obligations under this Agreement shall have been the primary cause
of, or shall have resulted in, the failure of the Closing to occur on or prior to the Outside Date (as extended pursuant to clause (A) or clause (B) of this
Section 6.01(b)(i))
.
Exhibit A-1-50
(ii) any Governmental Authority of competent jurisdiction shall have issued or
entered any Governmental Order or taken any other action permanently restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the Sale and the Reorganization Transactions, and such Governmental Order or action
shall have become final and non-appealable;
provided
,
however
, that the party seeking to terminate this Agreement pursuant to this
Section 6.01(b)(ii)
shall have used its reasonable best efforts to remove such Governmental
Order or other action; and
provided
,
further
, that the right to terminate this Agreement under this
Section 6.01(b)(ii)
shall not be available to a party whose failure to fulfill its obligations under this Agreement shall
have been the primary cause of, or shall have resulted in, the issuance of such Governmental Order or taking of such action; or
(iii) the Seller Stockholder Approval shall not have been obtained upon a vote taken thereon at the Stockholders Meeting
duly convened therefor or at any adjournment or postponement thereof.
(c) by Seller:
(i) if Purchaser shall have breached or failed to perform any of its representations, warranties, covenants or other
agreements set forth in this Agreement, which breach or failure to perform (A) would result in the failure of a condition set forth in
Section 5.03
and (B) is not capable of being cured by Purchaser by the Outside Date or, if capable of
being cured, shall not have been cured by Purchaser on or before the earlier of (x) the Outside Date and (y) the date that is thirty (30) calendar days following Sellers delivery of written notice to Purchaser of such breach or failure to
perform;
provided
,
however
, that Seller shall not have the right to terminate this Agreement pursuant to this
Section 6.01(c)(i)
if Seller is then in material breach of any of its representations, warranties, covenants,
agreements or other obligations under this Agreement; or
(ii) at any time prior to receipt of the Seller Stockholder
Approval, in order to enter into a definitive agreement with respect to a Superior Proposal, subject to the applicable terms and conditions of
Section 4.06
;
provided
, that Seller shall have paid the Termination Fee to Purchaser in
accordance with
Section 6.03
simultaneously with or prior to such termination.
(d) by Purchaser, if:
(i) Seller shall have breached or failed to perform any of its representations, warranties, covenants or other agreements set
forth in this Agreement, which breach or failure to perform (A) would result in the failure of a condition set forth in
Section 5.02
and (B) is not capable of being cured by Seller by the Outside Date or, if capable of being cured, shall
not have been cured by Seller on or before the earlier of (x) the Outside Date and (y) the date that is thirty (30) calendar days following Purchasers delivery of written notice to Seller of such breach or failure to perform;
provided
,
however
, that Purchaser shall not have the right to terminate this Agreement pursuant to this
Section 6.01(d)(i)
if Purchaser is then in material breach of any of its representations, warranties, covenants,
agreements or other obligations under this Agreement; or
(ii) at any time prior to the receipt of the Seller Stockholder
Approval, an Adverse Recommendation Change shall have occurred.
6.02
Effect of Termination
. Any
termination of this Agreement pursuant to
Section 6.01
shall be effective immediately upon delivery of written notice thereof by the terminating party to the other party, specifying the provisions hereof pursuant to which such
termination is made (other than
Section 6.01(a)
, which termination shall be effective upon the effectiveness of such mutual written agreement), and this Agreement shall become null and void and there shall be no liability on the part of
any party hereto, and all rights and obligations of any party hereto shall cease;
provided
,
however
, that, except as otherwise provided in
Section 6.03
or in any other provision of this Agreement, no such termination shall
relieve any party hereto of any liability or damages
Exhibit A-1-51
resulting from fraud or any willful and material breach of this Agreement prior to such termination, in which case, except as otherwise provided in
Section
6.03
or in
any other provision of this Agreement, the aggrieved party shall be entitled to all remedies available at Law or in equity; and
provided
,
further
, that the Confidentiality Agreement, Purchasers expense reimbursement and
indemnification obligations contained in
Section 4.13
, Sellers expense reimbursement and indemnification obligations contained in
Section 4.18
,
Section 4.03(b)
, this
Section 6.02
,
Section 6.03
and
Article VIII
shall survive any termination of this Agreement pursuant to
Section 6.01
. For purposes of this Agreement,
willful and material breach
means a breach that is material,
and that is caused by an action or omission that the breaching party knew was, or would reasonably be expected to result in, a material breach.
6.03
Termination Fee
.
(a) If, but only if, the Agreement is terminated by:
(i) (A) Purchaser pursuant to
Section 6.01(d)(i)
, or (B) either Purchaser or Seller pursuant to
Section 6.01(b)(i)
or
Section 6.01(b)(iii)
, and in the case of either clause (A) or clause (B) (x) a Competing Proposal shall have been publicly disclosed or shall have become publicly known (or, in the case of a termination
pursuant to
Section 6.01(d)(i)
, shall have become known to the board of directors of Seller) after the execution of this Agreement and, in the case of termination pursuant to
Section 6.01(b)(iii)
, such Competing Proposal shall not
have been publicly withdrawn at least five (5) Business Days prior to the date of the Stockholders Meeting, and (y) within twelve (12) months after such termination, Seller consummates or enters into a definitive agreement for any
Competing Proposal (
provided
,
however
, that for purposes of this
Section 6.03(a)(i)
, the references to twenty-five percent (25%) in the definition of Competing Proposal shall be deemed to be references to
fifty percent (50%));
(ii) Seller pursuant to
Section 6.01(c)(ii)
; or
(iii) Purchaser pursuant to
Section 6.01(d)(ii)
;
then, in any such case, Seller shall pay, or cause to be paid, to Purchaser $144,774,000 (the
Termination Fee
). Any payment
required to be made under this
Section 6.03(a)
shall be made by wire transfer of immediately available funds to the account or accounts designated by Purchaser, (x) in the case of clause (i) above, on the same day as the earlier of the
entry into a definitive agreement and consummation of the transaction contemplated therein, (y) in the case of clause (ii) above, simultaneously with or prior to such termination and (z) in the case of clause (iii) above, promptly, but in no
event later than three (3) Business Days after the date of such termination.
(b) Notwithstanding anything to the contrary set forth in
this Agreement, the parties agree that in no event shall Seller be required to pay the Termination Fee on more than one occasion.
(c)
Notwithstanding anything to the contrary set forth in this Agreement, but subject to
Section
8.10
and except in the case of fraud or any willful and material breach of this Agreement, Purchasers right to receive
payment from Seller of the Termination Fee pursuant to
Section 6.03(a)
shall, in circumstances in which the Termination Fee is owed, constitute the sole and exclusive monetary remedy of Purchaser against Seller and any of its respective
former, current or future general or limited partners, stockholders, members, managers, Representatives or assignees (collectively, the
Seller Related Parties
) for all losses and damages suffered as a result of the failure of the
Transactions to be consummated or for a breach or failure to perform hereunder or otherwise, and upon payment of such amount, none of the Seller Related Parties shall have any further liability or obligation related to or arising out of this
Agreement or the Transactions (except that Seller shall also be obligated with respect to
Section
6.03(e)
).
(d) If this Agreement is terminated by Purchaser pursuant to
Section
6.01(d)(i)
, then Seller shall pay, or cause to
be paid, to Purchaser the reasonable and documented out-of-pocket fees and expenses (including
Exhibit A-1-52
fees and expenses of financial advisors and legal counsel) incurred by Purchaser in connection with this Agreement and the transactions contemplated hereby, excluding any discretionary fees paid
to financial advisors, in an amount not to exceed $15,000,000 in the aggregate (the
Purchaser Expenses
), such payment to be made as promptly as possible (but in any event within three (3) Business Days) following such termination;
provided
that any payment of the Purchaser Expenses shall reduce, on a dollar-for-dollar basis, any Termination Fee that becomes due and payable under
Section
6.03(a)
.
(e) Each of the parties hereto acknowledges that (i) the agreements contained in this
Section
6.03
are an
integral part of the transactions contemplated by this Agreement, (ii) the Termination Fee is not a penalty, but is liquidated damages, in a reasonable amount that will compensate Purchaser in the circumstances in which such fee is payable and
which do not involve fraud or willful and material breach of this Agreement for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the
consummation of the transactions contemplated hereby, which amount would otherwise be impossible to calculate with precision, and (iii) without these agreements, Purchaser would not enter into this Agreement; accordingly, if Seller fails to
timely pay any amount due pursuant to this
Section
6.03
Seller shall pay Purchaser its reasonable and documented out-of-pocket fees and expenses (including fees and expenses of counsel) in connection with the collection of
such overdue amount, including any Actions in connection therewith, together with interest on such amount at the prime rate as published in
The Wall Street Journal
in effect on the date such payment was required to be made through the date
such payment was actually received, or such lesser rate as is the maximum permitted by applicable Law.
ARTICLE VII
DEFINITIONS
7.01
Definitions
. As used in this Agreement, the following defined terms have the meanings indicated below:
Acceptable
Confidentiality Agreement
has the meaning ascribed to such term in
Section
4.06(i)(i)
.
Acquisition Holdback Cash
has the meaning ascribed to such term in the Reorganization Agreement.
Acquisition Holdback Stock
has the meaning ascribed to such term in the Reorganization Agreement.
Actions
means any action, claim, suit, proceeding, arbitration, subpoena, civil investigative demand or Governmental
Authority investigation.
Actually Realize
means, for purposes of determining the timing of the incurrence of any Tax
liability or the receipt or realization of a Refund or a Tax Benefit (or any related Tax Item) by a Person in respect of any payment, transaction, occurrence or event, the time at which the amount of Taxes paid (or Refund or Tax Benefit received or
realized) by such Person is increased above (or reduced below) the amount of Taxes that such Person would have been required to pay (or Refund or Tax Benefit that such Person would have received or realized) but for such payment, transaction,
occurrence or event.
Adjusted Cash
means (a) the amount of Cash of the Business Subsidiaries minus (b) the excess, if
any, of the amount of Foreign Cash over $250,000,000.
Adverse Recommendation Change
has the meaning ascribed to such
term in
Section
4.06(e)
.
Affiliate
means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with, such Person.
Exhibit A-1-53
Agreement
means this Stock Purchase Agreement, the Disclosure Schedules and
the Exhibits hereto.
Alien Employees
has the meaning ascribed to such term in
Section
4.09(h)
.
Antitrust Laws
means any applicable Law or other legal restraint designed
to govern competition, trade regulation or foreign investment matters or to prohibit, restrict or regulate actions with the purpose or effect of monopolization or restraint of trade.
Assumed Liabilities
has the meaning ascribed to such term in the Reorganization Agreement.
Base Purchase Price
has the meaning ascribed to such term in
Section
1.01
.
Benefit Plan
means any benefit plan, program, arrangement, policy or agreement, whether written or unwritten, including any
such plan, program, arrangement, policy or agreement that is an employee welfare benefit plan within the meaning of Section 3(1) of ERISA, whether or not such employee welfare benefit plan is subject to ERISA, an employee pension benefit plan
within the meaning of Section 3(2) of ERISA, whether or not such pension plan is subject to ERISA, or health, medical, dental, disability, accident or life insurance or a bonus, incentive, deferred compensation, vacation, stock purchase, stock
option, restricted stock or other equity-based award, severance, termination, retention, retirement, savings, employment, change of control, vacation or fringe benefit plan, program, arrangement or agreement, which benefits the current or former
employees, independent contractors, consultants or directors of Seller or any of the Business Subsidiaries, or which Seller (to the extent related to the Business) or any of its ERISA Affiliates sponsors, maintains or contributes to or in respect of
which has any liability, whether contingent or otherwise;
provided
that the term Benefit Plan shall not include any arrangement or portion thereof that (a) is applicable solely to (i) current or former non-employee
directors of Seller or (ii) Seller Retained Employees or (b) is a Non-U.S. Benefit Plan.
Books and Records
means all files, documents, instruments, correspondence, data, papers and other books and records of Seller and the Business Subsidiaries to the extent relating to the Business, including financial statements, Tax Returns and related work papers and
letters from accountants, budgets, pricing guidelines, drawings, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, customer lists, computer files and programs, retrieval programs, operating
data and plans and environmental studies and plans, in all cases whether in paper, data, electronic, microfilm, microfiche, computer tape or disc, magnetic tape or any other form.
Burdensome Condition
has the meaning ascribed to such term in
Section 4.05(c)
.
Business
means all of the business, operations, properties, assets and liabilities of Seller and the Business Subsidiaries,
other than the Excluded Assets and the Retained Liabilities.
Business Day
means any day that is not a Saturday, a
Sunday or other day on which banks are required or authorized by Law to be closed in New York, New York or Sunnyvale, California.
Business Information
has the meaning ascribed to such term in
Section 4.03(c)
.
Business Intellectual Property
means Intellectual Property Rights used or held for use by Seller or any of the Business
Subsidiaries in the conduct of the Business, excluding, for the avoidance of doubt, the Excluded IP Assets.
Business Material
Adverse Effect
means any circumstance, event, development, effect, change or occurrence that, individually or in the aggregate, (a) would, or would reasonably be expected to, prevent, materially delay or materially impede the ability of
Seller to consummate the Transactions or (b) has had, or would or would reasonably be expected to have, a material adverse effect on the business, assets, properties,
Exhibit A-1-54
results of operation or financial condition of the Business, taken as a whole;
provided
,
however
, that none of the following shall constitute or be taken into account in determining
whether a Business Material Adverse Effect has occurred or would reasonably be expected to occur for the purposes of this clause (b): (i) changes in general economic, financial market, or United States or global political conditions; (ii) general
changes or developments in any of the industries or markets in which Seller (to the extent related to the Business) and the Business Subsidiaries operate; (iii) changes in any applicable Laws or applicable accounting regulations or principles,
including GAAP, or official or judicial interpretations thereof or changes in the accounting rules or regulations of the SEC, or official or judicial interpretations thereof; (iv) any change in the price or trading volume of Sellers
securities, in and of itself; (v) any failure by Seller to meet published analyst estimates or expectations of Sellers revenues, earnings or other financial performance or results of operations for any period, in and of itself; (vi) any
failure by Seller to meet its internal or published projections, budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations, in and of itself; (vii) any outbreak or escalation of hostilities or war
or any act of terrorism, or any acts of God or natural disasters or other
force majeure
events; (viii) (A) the announcement, consummation or existence of this Agreement and the Transactions, including the threat of or the initiation of any
Action by any stockholder with respect to this Agreement, or any termination of, reduction in or similar negative impact on relationships, contractual or otherwise, with any customers, suppliers, distributors, partners or employees of Seller (to the
extent related to the Business) and the Business Subsidiaries, in each case due to the announcement and performance of this Agreement or the identity of the parties to this Agreement or (B) the IP Monetization (it being understood that this clause
(viii) shall not apply with respect to a representation or warranty contained in this Agreement to the extent that the purpose of such representation or warranty is to address the consequences resulting from the execution and delivery of this
Agreement or the consummation of the Transactions or the performance of obligations under this Agreement or the IP Monetization); (ix) any specific action taken by Seller, or which Seller causes to be taken by any of the Business Subsidiaries, in
each case which is expressly required by this Agreement; and (x) any specific actions taken (or omitted to be taken) at the written request of, or expressly consented to in writing by, Purchaser;
provided
,
however
, that the facts,
circumstances, events, developments, changes, occurrences or effects set forth in clauses (i) through (iii) and (vii) above shall be taken into account in determining whether a Business Material Adverse Effect has occurred to the extent (but only to
such extent) such circumstances, events, developments, changes or occurrences have a disproportionate adverse impact on the Business, relative to the other participants in the industries or markets in which the Business operates;
provided
,
further
, that the exceptions in clauses (iv) through (vi) above shall not prevent or otherwise affect a determination that the underlying cause of any failure or change referred to therein has had or contributed to a Business Material Adverse
Effect.
Business Subsidiaries
means the Subsidiaries of Seller, other than (i) Aabaco Holdings Hong Kong Limited, (ii)
Excalibur IP, LLC and (iii) the Minority Investments. For the avoidance of doubt, the term Business Subsidiaries includes the Company and, if applicable, SaleCo2.
Capitalization Date
has the meaning ascribed to such term in
Section
2.03(b)
.
Cash
means cash, cash equivalents and marketable securities with remaining maturities of less than 12 months of the
Business Subsidiaries, each as defined in accordance with GAAP applied on a basis that is consistent with past practices and prior periods, excluding, for the avoidance of doubt, the capital stock of Alibaba Group Holding Limited and Yahoo Japan
Corporation and the Minority Investments, and excluding all Acquisition Holdback Cash.
Closing
has the meaning
ascribed to such term in
Section
1.02(a)
.
Closing Cash
has the meaning ascribed to such term
in
Section
1.04(c)
.
Closing Date
has the meaning ascribed to such term in
Section
1.02(a)
.
Closing Debt
has the meaning ascribed to such term in
Section
1.04(c)
.
Exhibit A-1-55
Closing Net Working Capital
has the meaning ascribed to such term in
Section
1.04(c)
.
Closing Transaction Expenses
has the meaning ascribed to such term in
Section
1.04(c)
.
Code
means the U.S. Internal Revenue Code of 1986, as amended.
Company
has the meaning ascribed to such term in the recitals of this Agreement.
Company Acquisition Agreement
has the meaning ascribed to such term in
Section 4.06(b)
.
Company Purchase Price
means the Purchase Price (as finally determined pursuant to
Section 1.04)
, and together with
all other amounts relevant to the Company Purchase Price Allocation, including any Assumed Liabilities (and any other liabilities deemed assumed by the Company) that are treated as assumed by the Company at the Closing for U.S. federal income Tax
purposes (but not including, for the avoidance of doubt, the portion of the Purchase Price allocated to the acquisition of equity interests in SaleCo2 by the Purchaser Designee pursuant to
Section 1.06
).
Company Purchase Price Allocation
has the meaning ascribed to such term in
Section 4.16(a)(i)
.
Company Section
338(h)(10) Elections
has the meaning ascribed to such term in
Section 4.16(b)(i)
.
Company Section 338(h)(10) Forms
has the meaning ascribed to such term in
Section 4.16(b)(ii)
.
Competing Proposal
has the meaning ascribed to such term in
Section
4.06(i)(ii)
.
Confidentiality Agreement
has the meaning ascribed to such term in
Section
4.03(b)
.
Consent
means any consent, approval, authorization, clearance, waiver, Permit, grant, agreement, certificate, exemption,
order, registration, declaration, filing, notice of, with or to any Person or under any Law, or the expiration or termination of a waiting period under Antitrust Laws of applicable jurisdictions, in each case required to permit the consummation of
the Transactions.
Contract
means any written contract, agreement, lease, license, indenture, note, bond, undertaking,
obligation, commitment or instrument.
Controlled Group Liability
means any and all liabilities (a) under
Title IV of ERISA, (b) under Section 302 of ERISA, (c) under Sections 412, 430 or 4971 of the Code, or (d) as a result of failure to comply with the continuation coverage requirements of Section 601
et seq
.
of ERISA and Section 4980B of the Code.
Convertible Notes
means Sellers 0.00% Convertible Senior Notes due
2018.
Copyleft License
means any license of Software meeting the Open Source Definition (as promulgated by the Open
Source Initiative) or the Free Software Definition (as promulgated by the Free Software Foundation) that requires, as a condition to the use, modification, or distribution of such Software, that such Software be licensed, distributed or otherwise
made available: (a) in source code form; or (b) under terms that permit redistribution, reverse engineering, modification or the creation of derivative works or other modifications of such Software.
Copyrights
has the meaning ascribed to such term in the definition of
Intellectual Property Rights
.
Counsel
has the meaning ascribed to such term in
Section
8.15
.
Exhibit A-1-56
Current Assets
means the amount of all current assets of the Business
Subsidiaries, without duplication, as determined in accordance with GAAP applied on a basis that is consistent with past practices and prior periods and the accounting principles, practices, procedures, policies and methods set forth on
Exhibit
C
, consistent with the illustrative example set forth on
Exhibit
C
;
provided
, that in the event of any conflict between GAAP and the sample calculation set forth on
Exhibit
C
,
Exhibit
C
shall govern. Notwithstanding the foregoing and for the avoidance of doubt, Current Assets excludes Cash, Acquisition Holdback Cash, other Excluded Assets, any Taxes and
amounts due from related parties (other than Intercompany Agreements or Intercompany Accounts, if any, to the extent contemplated to survive the Closing pursuant to the Reorganization Agreement).
Current Liabilities
means the amount of all current liabilities of the Business Subsidiaries, without duplication, as
determined in accordance with GAAP applied on a basis that is consistent with past practices and prior periods and the accounting principles, practices, procedures, policies and methods set forth on
Exhibit
C
, consistent
with the illustrative example set forth on
Exhibit
C
;
provided
, that in the event of any conflict between GAAP and the sample calculation set forth on
Exhibit
C
,
Exhibit
C
shall govern. Notwithstanding the foregoing and for the avoidance of doubt, Current Liabilities excludes Debt, Transaction Expenses, other Retained Liabilities, any Taxes and amounts due to related parties
(other than Intercompany Agreements or Intercompany Accounts, if any, to the extent contemplated to survive the Closing pursuant to the Reorganization Agreement).
D&O Insurance
has the meaning ascribed to such term in
Section
4.08(a)
.
Debt
means, with respect to the Business Subsidiaries, (a) indebtedness for borrowed money, including all accrued and
unpaid interest, all fees, premiums, prepayment penalties, breakage costs or similar charges or expenses or other obligations owed as a result of the early repayment or redemption thereof, (b) the deferred purchase price of property or services
(other than trade payables or accruals incurred in the ordinary course of business), (c) all obligations evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations in respect of, any bankers acceptance or
letter of credit, in each case only to the extent drawn or otherwise not contingent, including the principal, interest and fees owing thereon, (e) any capitalized lease obligations, (f) obligations in respect of any interest rate,
currency, swap or other hedging agreements, (g) payment obligations secured by any lien on the assets or properties of any Business Subsidiary, whether or not the obligations secured thereby have been assumed by any Business Subsidiary, and (h)
all obligations of others of the nature referred to in clauses (a) through (g) above guaranteed or counter-indemnified directly or indirectly in any manner by a Business Subsidiary or for which such Business Subsidiary is otherwise
liable. Notwithstanding the foregoing and for the avoidance of doubt, Debt shall exclude (i) all obligations in respect of the Convertible Notes (which are the subject of
Section
4.18
) and (ii) any Taxes.
Debt Tender Offer
has the meaning ascribed to such term in
Section
4.18(a)
.
Deductions
has the meaning ascribed to such term in
Section
4.16(e)
.
Defend Trade Secrets Act of 2016
has the meaning ascribed to such term in the definition of
Intellectual Property
Rights
.
Designated Matters
has the meaning ascribed to such term in
Section 4.20
.
Designated Persons
has the meaning ascribed to such term in
Section 8.15
.
Disclosure Schedules
means the disclosure schedules delivered by Seller to Purchaser in connection with, and upon execution
of, this Agreement.
Dispute Notice
has the meaning ascribed to such term in
Section
1.04(d)
.
Eligible Foreign Business Subsidiary
has the meaning ascribed to such term in
Section 4.16(b)(v)
.
Exhibit A-1-57
Employees
means all employees of Seller or any of the Business Subsidiaries
other than the Seller Retained Employees. For the avoidance of doubt, with respect to the period commencing on the Closing Date, Employees shall not include any individuals who are not Transferred Employees.
Encumbrance
means any encumbrance, restriction, lien, charge, pledge, mortgage, deed of trust, title retention agreement,
security interest of any nature, adverse claim, exception, reservation, easement, encroachment, right of occupation, any matter capable of registration against title, option, right of pre-emption or privilege or any agreement or other commitment,
whether written or oral, to create any of the foregoing (excluding restrictions on transfer arising under securities Laws) or title defect of any nature;
provided
, that Encumbrance does not include non-exclusive licenses or
covenants not to sue or assert with respect to Intellectual Property Rights.
Enforceability Limitations
has the
meaning ascribed to such term in
Section
2.02(b)
.
Environmental Claim
means any letter,
citation, report, investigation, pleading or other Action or written demand alleging actual or potential liability (including actual or potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources
damages, property damages, personal injuries, attorneys fees or penalties) based on or resulting from (a) the presence, or release into the environment, of any Hazardous Materials at any property currently or formerly owned or operated by
Seller (to the extent related to the Business) or any of the Business Subsidiaries or currently or formerly used by them for storage, treatment or disposal of Hazardous Materials or (b) any violation, or alleged violation, of any Environmental
Law.
Environmental Law
means any Law or Governmental Order relating to: (1) pollution or protection of human health or
safety (as such matters relate to exposure to Hazardous Materials) or the environment (including air, water vapor, surface water, groundwater, drinking water, supply, surface or subsurface land or strata and natural resources), including Laws
relating to Releases or threatened Releases of Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Materials; (2) the protection of wildlife and
other natural resources such as endangered species, wetlands, and coastal areas; (3) conservation and the control of greenhouse gases; and (4) recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials or
Permits in respect of any of the foregoing.
Equity Award Adjustment Amount
has the meaning ascribed to such term in
Section 1.04(a)
.
ERISA
means the Employee Retirement Income Security Act of 1974, as amended.
ERISA Affiliate
means any trade or business, whether or not incorporated, that together with Seller or any of the Business
Subsidiaries would be deemed to be a single employer for purposes of Section 4001 of ERISA or Sections 414(b), (c), (m), (n) or (o) of the Code.
Escrow Account
has the meaning ascribed to such term in
Section
4.18(b)(iv)
.
Estimated Cash
has the meaning ascribed to such term in
Section
1.04(b)
.
Estimated Closing Adjustment Amount
has the meaning ascribed to such term in
Section
1.04(b)
.
Estimated Closing Statement
has the meaning ascribed to such term in
Section 1.04(b)
.
Estimated Debt
has the meaning ascribed to such term in
Section
1.04(b)
.
Estimated Net Working Capital
has the meaning ascribed to such term in
Section
1.04(b)
.
Estimated Purchase Price
has the meaning ascribed to such term in
Section
1.01
.
Exhibit A-1-58
Estimated Transaction Expenses
has the meaning ascribed to such term in
Section
1.04(b)
.
Excalibur
has the meaning ascribed to such term in the Recitals.
Exchange Act
means the Securities Exchange Act of 1934, and the rules and regulations thereunder.
Excluded Assets
has the meaning ascribed to such term in the Reorganization Agreement.
Excluded IP Assets
means all of the equity interests in Excalibur IP, LLC and/or the assets and liabilities of Excalibur
IP, LLC.
Final Closing Adjustment Amount
has the meaning ascribed to such term in
Section
1.04(g)
.
Final Post-Closing Statement
has the meaning ascribed to such term in
Section
1.04(g)
.
Financing
means third-party debt financing to be obtained by or on behalf
of Purchaser for purposes of financing all or a portion of its obligations under this Agreement, including the Purchase Price and the payment of all related fees and expenses and any other amounts required to be paid by Purchaser in connection with
the consummation of the Transactions.
Financing Sources
means the nationally recognized financial institutions that at
any time have committed to provide or arrange or otherwise have entered into agreements in connection with all or any part of the Financing, including the parties to any joinder agreements to commitment letters or other documentation related to the
Financing or credit agreements related to the Financing, together with their respective Affiliates, and the former or current partners, members, stockholders, officers, directors, employees, agents and representatives and their respective successors
and assigns of such financial institutions and their respective Affiliates.
Foreign Business Subsidiary Transfers
has
the meaning ascribed to such term in the Reorganization Agreement.
Foreign Cash
means the aggregate amount of Cash
held in an account in, or held by any Business Subsidiary organized in, any country other than the United States.
Foreign
Sale
has the meaning ascribed to such term in
Section 1.06
.
Foreign Sale Closing
has the meaning
ascribed to such term in
Section 1.06
.
Foreign Sale Purchase Price
has the meaning ascribed to such term in
Section 1.06
.
Foreign Sale Notice
has the meaning ascribed to such term in the Reorganization Agreement.
Former Business Employee
has the meaning ascribed to such term in the Reorganization Agreement.
GAAP
means generally accepted accounting principles in the United States.
Governmental Authority
means any United States federal, state or local or any non-United States governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.
Governmental
Order
means any order, writ, judgment, injunction, decree, stipulation, determination or award entered or issued by or with any Governmental Authority.
Exhibit A-1-59
Guarantees
has the meaning ascribed to such term in
Section
4.12(a)
.
Hazardous Materials
means all substances defined as Hazardous Substances,
Oils, Pollutants or Contaminants (including any separately regulated constituent, raw material, product or by-products thereof) in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. §300.5 or defined as such by, or
regulated as such under, any Environmental Law, including petroleum and petroleum products, asbestos or asbestos-containing material, urea formaldehyde or polychlorinated biphenyls, lead paint or materials, toxic or hazardous mold, greenhouse gases,
any hazardous solid waste, and any toxic, radioactive, infectious or hazardous substance or material.
HSR Act
means
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
Indenture
means that certain Indenture (including form of Notes) with respect to the Convertible Notes, dated as of
November 26, 2013, between Seller and The Bank of New York Mellon Trust Company, N.A., as trustee.
Independent Accounting
Firm
has the meaning ascribed to such term in
Section
1.04(e)
.
Intellectual Property
Rights
means any and all intellectual property rights, whether arising under the Laws of the United States or any foreign jurisdiction, including all of the following: (A) patents and patent applications (including utility, utility
model, design patents and certificates of invention), including all reissues, reexaminations, divisionals, extensions, provisionals, continuations and continuations-in-part thereof (
Patents
); (B) trademarks, service marks,
trade dress rights, trade names, logos, slogans, fictitious and other business names, brand names and other indicia of origin (whether registered or unregistered or common law), including all applications and registrations for the foregoing and all
goodwill associated with the foregoing (
Marks
); (C) works of authorship, copyrights (whether registered or unregistered), and rights in copyrightable subject matter in published and unpublished works of authorship, including
copyrights in Software and all applications and registrations for all of the foregoing (
Copyrights
); (D) (i) trade secret rights in confidential and proprietary information (including trade secret rights in confidential and
proprietary inventions, processes, designs, formulae, models, tools, algorithms, Software architectures, know-how, ideas, research and development) and (ii) any other materials falling within the definition of trade secrets as set forth
in 18 U.S. Code Section 1890 (
Defend Trade Secrets Act of 2016
) (
Trade Secrets
); (E) Internet domain names; (F) rights with respect to databases and other compilations and collections of data or
information; (G) any rights equivalent or similar to any of the foregoing; and (H) registrations, applications, extensions, reversions and renewals for any of the foregoing.
Intercompany Account
has the meaning ascribed to such term under the Reorganization Agreement.
Intercompany Agreement
has the meaning ascribed to such term under the Reorganization Agreement.
Intervening Event
means any material circumstance, event, change or occurrence (other than a Competing Proposal) that (x)
was not known or reasonably foreseeable to the board of directors of Seller on the date of this Agreement, which material circumstance, event, change or occurrence becomes known to the board of directors of Seller prior to the receipt of the Seller
Stockholder Approval, and (y) does not relate to a Competing Proposal or to the identity of Purchaser and its Affiliates, including, subject to the foregoing clauses (x) and (y), changes in any applicable Tax Laws, or official or judicial
interpretations thereof, that would have a material adverse effect on the advisability of the Transactions.
Investment Company
Act
means the Investment Company Act of 1940.
IP Monetization
means the proposed divestiture by Seller of
the Excluded IP Assets.
Exhibit A-1-60
IRS
means the U.S. Internal Revenue Service.
Knowledge of Seller
means the actual knowledge of the officers and employees of Seller listed in
Section 7.01(b)
of
the Disclosure Schedules.
Law
means any federal, national, state or local, whether foreign, multi-national, or
domestic, law (including common law), statute, treaty, regulation, ordinance, rule, judgment, Governmental Order, decree, approval, Permit, requirement or other governmental restriction, in each case having the force and effect of law, or any
similar form of decision or approval of, or determination by, or any binding interpretation or administration of any of the foregoing by, any Governmental Authority that is issued, enacted, adopted, promulgated, implemented or otherwise put in
effect by or under the authority of, any Governmental Authority.
Lease
has the meaning ascribed to such term in
Section
2.15(a)
.
Leased Real Property
has the meaning ascribed to such term in
Section
2.15(a)
.
Liabilities
means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, known or unknown, matured or unmatured, determined or determinable, secured or unsecured, disputed or undisputed, or subordinated or unsubordinated, including those arising under any Law, Action or
Governmental Order and those arising under any Contract, arrangement or undertaking.
License Agreement
has the meaning
ascribed to such term in the Recitals.
Losses
means any damages, losses, deficiencies, Liabilities, obligations,
penalties, judgments, settlements, claims, payments, interest costs, fines and expenses (including the costs and expenses of any Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys,
accountants, consultants and other professionals fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder), of any kind or nature, whether or not the same would properly be reflected
on any financial statements or the footnotes thereto.
Marks
has the meaning ascribed to such term in the definition of
Intellectual Property Rights
.
Material Contracts
has the meaning ascribed to such term in
Section
2.19
.
Minority Investments
means all capital stock of, or securities convertible
into, or exchangeable or exercisable for, or other equity interests in, each of the Persons set forth on
Section 7.01(a)
of the Disclosure Schedules.
Names and Marks
has the meaning ascribed to such term in
Section 4.17(a)
.
Nasdaq
means the Nasdaq Global Select Market.
Net Working Capital
means Current Assets minus Current Liabilities.
Non-Reorganization 338(h)(10) Subsidiaries
has the meaning ascribed to such term in the Reorganization Agreement.
Non-Transferrable Asset
has the meaning ascribed to such term in Section 1.7(a) of the Reorganization Agreement.
Non-U.S. Benefit Plan
means any plan, program, agreement or other arrangement that provides compensation or other benefits
similar to those provided under any Benefit Plan maintained pursuant to the Laws of a country other than the United States.
Exhibit A-1-61
Notice of Adverse Recommendation Change
has the meaning ascribed to such term
in
Section
4.06(g)
.
Notice of Superior Proposal
has the meaning ascribed to such term in
Section
4.06(g)
.
Notice Period
has the meaning ascribed to such term in
Section
4.06(g)
.
Offered Employee
has the meaning ascribed to such term in the
Reorganization Agreement.
Open Source Software
means, any Software that is licensed, distributed or conveyed as
open source software, free software, copyleft, or under a similar licensing or distribution model or under a contract that (i) has been approved as an open source license by the Open Source Initiative (including
Software licensed under any license listed at www.opensource.org) or Free Software Definition (as promulgated by the Free Software Foundation), or that contains or is derived from any such Software, or (ii) provides as a condition or covenant of
use, modification or distribution of the licensed Software, that such Software, or other Software derived from, or linked to, such Software or into or with which such Software is incorporated, combined or distributed (A) be redistributable at no
charge, (B) be licensable and/or redistributed to third parties for the purpose of making derivative works or under all or some of the terms of such contract, or (C) be distributed or otherwise disclosed or made available in source code form.
Outside Date
has the meaning ascribed to such term in
Section
6.01(b)(i)
.
Owned Business Intellectual Property
means Business Intellectual Property that is owned or purported to be owned by Seller
or any of the Business Subsidiaries.
Owned Business Software
means all Software that is (a) owned or purported to be
owned by, and proprietary to, Seller (to the extent related to the Business, the Transferred Assets or the Assumed Liabilities) or any of its Business Subsidiaries and (b) material to the Business, the Transferred Assets or the Assumed Liabilities.
Patents
has the meaning ascribed to such term in the definition of
Intellectual Property Rights
.
Permit
means any permit, license, variance, franchise or authorization of any Governmental Authority.
Permitted Encumbrances
means (a) Encumbrances imposed by Law such as carriers, warehousemens,
mechanics, materialmens, landlords, laborers, suppliers, and vendors liens and other statutory liens securing obligations which are not yet delinquent or the validity of which are being contested in good faith by
appropriate actions; (b) Encumbrances for Taxes, assessments and other governmental charges not yet delinquent, the validity of which is being contested in good faith by appropriate actions; (c) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business consistent with past practice; (d) all matters of record, reciprocal easement
agreements and other encumbrances on title to real property that do not, and would not be reasonably expected to, materially detract from the use or operation of the property subject thereto as currently used or operated by Seller or any of the
Business Subsidiaries; (e) all applicable zoning, entitlement, conservation restrictions, land use restrictions and other governmental rules and regulations; (f) matters that would be disclosed by a current survey of the property that would not
materially and adversely affect the use, value or operation of the property; (g) with respect to real property, easements or claims of easements, boundary line disputes, overlaps, encroachments, supplemental Taxes and assessments, rights of parties
in possession and title to any portion of the premises lying within the right of way or boundary of any public road or private road, in each case that do not materially interfere with the Business as presently conducted; and (h) Encumbrances
identified in
Section 7.01(c)
of the Disclosure Schedules.
Exhibit A-1-62
Permitted WholeCo Proposal
has the meaning ascribed to such term in
Section
4.06(i)(ii)
.
Person
means any individual, corporation, partnership, limited
partnership, joint venture, limited liability company, trust, unincorporated organization, Governmental Authority or any other entity.
Personal Data
means any data or information in any media that is linked to the identity of a particular individual,
browser, or device and any other data or information that constitutes personal data or personal information under any applicable Law or Sellers or Business Subsidiaries privacy policies, and includes an individuals combined first
and last name, home address, telephone number, fax number, email address, Social Security number or other Government Authority-issued identifier (including state identification number, drivers license number, or passport number), precise
geolocation information of an individual or device, biometric data, medical or health information, credit card or other financial information (including bank account information), cookie identifiers associated with registration information, or any
other browser- or device-specific number or identifier not controllable by the end user, and web or mobile browsing or usage information that is linked to the foregoing.
Post-Closing Statement
has the meaning ascribed to such term in
Section
1.04(c)
.
Principal Amount
has the meaning ascribed to such term in
Section
4.18(b)(iii)
.
Processed
means the receipt, access, acquisition, collection, compilation, use, storage, processing, safeguarding,
security, disposal, destruction, disclosure, or transfer of Personal Data.
Proxy Statement
means a proxy statement
relating to the Stockholders Meeting, as amended or supplemented from time to time.
Purchase Price
has the
meaning ascribed to such term in
Section
1.01
.
Purchase Price Adjustment
has the meaning
ascribed to such term in
Section
1.04(g)
.
Purchaser
has the meaning ascribed to such term in
the preamble to this Agreement.
Purchaser Common Stock
means the common stock, par value $0.10 per share, of
Purchaser.
Purchaser Designee
has the meaning ascribed to such term in
Section
1.06
.
Purchaser Expenses
has the meaning ascribed to such term in
Section
6.03(d)
.
Purchaser Plans
has the meaning ascribed to such term in
Section
4.09(d)
.
Purchaser Post-Closing Stock Price
means the volume weighted average price of a share of Purchaser Common Stock trading on
the New York Stock Exchange over the first three trading days following the Closing Date.
Purchaser Ratio
means a
fraction, the numerator of which is the Seller Pre-Closing Stock Price and the denominator of which is the Purchaser Post-Closing Stock Price.
Purchaser RSU Award
has the meaning ascribed to such term in
Section
1.03(b)
.
Purchasers Allocation
has the meaning ascribed to such term in
Section 4.16(a)(i)
.
Real Property
means the Leased Real Property and the Owned Real Property.
Exhibit A-1-63
Refund
has the meaning ascribed to such term in the Reorganization Agreement.
Registered Owned Business IP
has the meaning ascribed to such term in
Section
2.16(a)
.
Release
means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching
or migration into the indoor or outdoor environment (including ambient air, surface water, groundwater and surface or subsurface strata) or into or out of any property, including the movement of Hazardous Materials through or in the air, soil,
surface water, groundwater or property.
Reorganization 338(h)(10) Elections
has the meaning ascribed to such term in
the Reorganization Agreement.
Reorganization Agreement
has the meaning ascribed to such term in the recitals to this
Agreement.
Reorganization Transactions
means the transactions contemplated by the Reorganization Agreement, including
Sellers transfer of the Business, the Transferred Assets and the Assumed Liabilities to the Company, and, if applicable, the Foreign Business Subsidiary Transfers and the SaleCo2 Contribution.
Representatives
means, with respect to any Person, the directors, officers, employees, agents or advisors (including
attorneys, accountants, consultants, bankers and financial advisors) of such Person and its Affiliates.
Retained
Liabilities
has the meaning ascribed to such term in the Reorganization Agreement.
Retained Employee
Liabilities
has the meaning ascribed to such term in the Reorganization Agreement.
Sale
has the meaning
ascribed to such term in the recitals of this Agreement.
SaleCo2
has the meaning ascribed to such term in the
Reorganization Agreement.
SaleCo2 Contribution
has the meaning ascribed to such term in the Reorganization Agreement.
Sarbanes-Oxley Act
means the Sarbanes-Oxley Act of 2002.
SEC
means the United States Securities and Exchange Commission.
SEC Documents
has the meaning ascribed to such term in
Section
2.07(a)
.
Section
338(h)(10) Elections
has the meaning ascribed to such term in
Section
4.16(b)(ii)
.
Section
338(h)(10) Forms
has the meaning ascribed to
such term in
Section
4.16(b)(ii)
.
Section
338(h)(10) Subsidiaries
has the
meaning ascribed to such term in
Section
4.16(b)(i)
.
Securities Act
means the Securities Act
of 1933, and the rules and regulations thereunder.
Security Breach
means any actual (i) loss or misuse (by any means)
of Personal Data; (ii) unauthorized or unlawful Processing, sale, or rental of Personal Data; or (iii) other act or omission that compromises the security or confidentiality of Personal Data.
Seller
has the meaning ascribed to such term in the preamble to this Agreement.
Exhibit A-1-64
Seller Closing Equity Award Value
means the product of (a) the Seller
Pre-Closing Stock Price multiplied by (b) the aggregate number of shares of Seller Common Stock subject to Seller RSU Awards that are held by Employees and are outstanding and unvested as of 11:59 p.m., Pacific Time, on the Business Day
immediately preceding the Closing Date (with respect to any Seller RSU Award that is subject to attainment of performance targets, with respect to any performance year that includes the Closing Date and any subsequent performance year, the number of
shares of Seller Common Stock subject to such Seller RSU Award shall be deemed to be the target number of shares of Seller Common Stock issuable under such Seller RSU Award).
Seller Common Stock
means the common stock, par value $0.001 per share, of Seller.
Seller Entities
means Seller and its Subsidiaries which are not Business Subsidiaries.
Seller Equity Award
has the meaning ascribed to such term in
Section
2.03(b)
.
Seller Equity Plans
means the Yahoo! Inc. Stock Plan, as amended and restated on April 8, 2014 (and effective June 25,
2014), the Yahoo! Inc. Directors Stock Plan, as amended and restated on October 16, 2014, and any other equity plans under which awards were assumed by Seller in connection with prior acquisitions.
Seller Licensed Software
means all Software licensed to the Seller (to the extent related to the Business) or any of the
Business Subsidiaries.
Seller Pre-Closing Stock Price
means the volume weighted average price of a share of Seller
Common Stock trading on Nasdaq over the three (3) trading days immediately preceding the date immediately preceding the Closing Date.
Seller Pre-Signing Equity Award Value
means the product of (a) the Seller Pre-Signing Stock Price multiplied by
(b) the aggregate number of shares of Seller Common Stock subject to Seller RSU Awards that are held by Employees and are outstanding and unvested as of 11:59 p.m., Pacific Time, on the Business Day immediately preceding the date hereof (with
respect to any Seller RSU Award that is subject to attainment of performance targets, with respect to any performance year that includes the date hereof and any subsequent performance year, the number of shares of Seller Common Stock subject to such
Seller RSU Award shall be deemed to be the target number of shares of Seller Common Stock issuable under such Seller RSU Award).
Seller Pre-Signing Stock Price
means the volume weighted average price of a share of Seller Common Stock trading on Nasdaq
over the three (3) trading days immediately preceding the date of this Agreement.
Seller Recommendation
has the
meaning ascribed to such term in
Section
2.02(d)
.
Seller Related Parties
has the meaning
ascribed to such term in
Section 6.03(c)
.
Seller Retained Employees
means those employees of Seller identified
by Seller as Seller Retained Employees between the date hereof and the Closing Date whose employment is reasonably necessary to facilitate Sellers post-Closing operations and not primarily related to the operations of the Business;
provided
that the aggregate number of Seller Retained Employees shall not exceed twenty-five (25) employees of Seller;
provided
,
further
, that Seller Retained Employees does not include any employees of Seller
who remain at Seller on a temporary basis, pending approval of a visa covering employment with the Company, and whose services are provided to the Company pursuant to a mutually agreed services agreement.
Seller RSU
means a restricted stock unit granted pursuant to the one of the Seller Equity Plans, whether settled in cash or
Seller Common Stock and whether subject to time-based or performance-based vesting, or a combination thereof.
Exhibit A-1-65
Seller RSU Award
means an award of Seller RSUs.
Seller Stock Options
means an option to purchase shares of Seller Common Stock granted pursuant to one of the Seller Equity
Plans.
Seller Stockholder Approval
means the adoption of a resolution authorizing the Sale and the Reorganization
Transactions by the holders of a majority of the outstanding shares of Seller Common Stock entitled to vote thereon at the Stockholders Meeting.
Sellers Allocation Notice
has the meaning ascribed to such term in
Section 4.16(a)(i)
.
Shares
means all of the issued and outstanding shares of common stock, par value $0.00001, of the Company, including any
such shares issued between the date hereof and the Closing.
Software
means (i) computer programs, including
application software, system software, firmware, middleware, mobile digital applications, assemblers, applets, compilers and binary libraries, together with any error corrections, updates, modifications, or enhancements thereto, in both
machine-readable form and human-readable form; (ii) computer databases, including all data and information included in such databases; (iii) screens, user interfaces, command structures, report formats, templates, menus, buttons and icons;
(iv) descriptions, flow-charts, architectures, development tools and other materials used to design, plan, organize and develop any of the foregoing; and (v) all documentation, including development, diagnostic, support, user and training
documentation, related to any of the foregoing.
Specified Transaction-Related Employee Liabilities
means the
Liabilities set forth in
Section
7.01(d)
of the Disclosure Schedules.
Stockholders
Meeting
has the meaning ascribed to such term in
Section
4.02(c)
.
Subsidiary
means, with respect to any Person, any other Person of which (i) voting power to elect a majority of the board of directors (or equivalent governing body) with respect to such other Person is held by the first mentioned Person and/or by any one
or more of its other Subsidiaries or (ii) more than 50% of the equity interests of such other Person is, directly or indirectly, owned or controlled by such first mentioned Person and/or by any one or more of its other Subsidiaries.
Superior Proposal
has the meaning ascribed to such term in
Section
4.06(i)(iii)
.
Target Working Capital
means negative $56,000,000.
Tax Benefit
has the meaning ascribed to such term in the Reorganization Agreement.
Tax Item
has the meaning ascribed to such term in the Reorganization Agreement.
Tax Proceeding
has the meaning ascribed to such term in the Reorganization Agreement.
Tax Return
means any return, declaration, report, claim for refund or information return, certificate, bill, statement or
other written information filed or required to be filed with any Governmental Authority relating to Taxes, including any supplement, schedule or attachment thereto, and including any amendment thereof (and including any Financial Crimes Enforcement
Network (FinCEN) Report of Foreign Bank and Financial Accounts (FBAR)).
Taxes
means (i) any taxes of any kind
whatsoever, including any federal, state, local or foreign income, estimated, sales, use,
ad valorem
, receipts, value added, goods and services, profits, license, withholding,
Exhibit A-1-66
payroll, employment, unemployment, excise, premium, property, net worth, escheat, capital gains, transfer, stamp, documentary, social security, environmental, alternative or add-on minimum and
occupation taxes, imposts, duties, withholdings, charges, fees, levies or other assessments, in each case in the nature of a tax, imposed by any Governmental Authority, whether domestic or foreign, together with all interest, fines, penalties and
additions attributable to or imposed with respect to such amounts and (ii) any liability for payment of amounts described in clause (i) of this definition as a result of transferee or successor liability, a Contract or being a member of an
affiliated, consolidated, combined, aggregate or unitary group for any period, or otherwise through operation of Law.
Termination Fee
has the meaning ascribed to such term in
Section
6.03(a)
.
Third Party
means any Person or group other than Purchaser and its Affiliates or Seller and its Affiliates.
Trade Secrets
has the meaning ascribed to such term in the definition of
Intellectual Property Rights
.
Transaction Documents
has the meaning ascribed to such term in the Reorganization Agreement.
Transaction Expenses
means, to the extent unpaid at the Closing, all costs, fees and expenses incurred in connection with
the negotiation, execution, performance and delivery of this Agreement or the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby (including any sales process or other strategic review process by and
with respect to Seller) to the extent such costs, fees and expenses are payable or reimbursable by any of the Business Subsidiaries, including (a) all brokerage fees, commissions, finders fees or financial advisory fees, (b) the fees
and expenses of all legal counsel, accountants, consultants, data room providers and other experts and advisors so incurred, and (c) all severance or termination Liabilities related to any Offered Employee that does not become a Transferred
Employee pursuant to Section 5.3(a) of the Reorganization Agreement and all severance or termination Liabilities triggered automatically upon or prior to the Closing as a result of the Transactions (excluding, for the avoidance of doubt, any
Specified Transaction-Related Employee Liabilities and any such Liabilities triggered in respect of (i) any Person who is a Level I Employee under the Amended and Restated Change in Control Employee Severance Plan for
Level I and Level II Employees or (ii) any other relevant Person as a result of a resignation for good reason upon or following the Closing). Notwithstanding the foregoing and for the avoidance of doubt, Transaction
Expenses shall exclude all Retained Liabilities and any Taxes.
Transactions
means, collectively, the
Reorganization Transactions and the Sale and the other transactions contemplated by the Transaction Documents.
Transferred
Assets
has the meaning ascribed to such term in the Reorganization Agreement.
Transferred Employee
has the
meaning ascribed to such term in the Reorganization Agreement.
Transfer Taxes
means any and all transfer Taxes
(excluding Taxes measured in whole or in part by net income), including sales, use, excise, value-added, goods and services, stock, conveyance, gross receipts, registration, business and occupation, securities transactions, real estate transfer,
stamp, documentary, notarial, filing, recording, permit, license, authorization and similar Taxes.
Treasury
Regulations
means the U.S. Treasury Department regulations promulgated under the Code.
Yahoo Japan Joint Venture
Agreement
means that certain Joint Venture Agreement, dated as of April 1, 1996, by and between Seller and Softbank Corporation, as amended through the date hereof.
Exhibit A-1-67
Yahoo Japan License Agreement
means that certain License Agreement, dated as
of April 1, 1996, by and between Seller and Yahoo Japan Corporation, as amended through the date of hereof.
ARTICLE VIII
MISCELLANEOUS
8.01
Non-Survival of Representations, Warranties and Agreements
. The representations, warranties, covenants and agreements in this Agreement and any certificate delivered pursuant hereto by any person shall terminate at the Closing or,
except as provided in
Section
6.02
, upon the termination of this Agreement pursuant to
Section
6.01
, as the case may be, except that this
Section
8.01
shall not limit any
covenant or agreement of the parties hereto which by its terms contemplates performance after the Closing or after termination of this Agreement.
8.02
Assignment
. This Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise, by Seller or Purchaser without the prior
written consent of the other party hereto;
provided
,
however
, that Purchaser may assign, at any time prior to the Closing, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to any wholly
owned U.S. Subsidiary of Purchaser (or a Purchaser Designee in order to implement the Foreign Sale as contemplated hereby); and
provided
,
further
, that any such assignment shall not relieve Purchaser of its obligations
hereunder. Any purported assignment in contravention of this
Section
8.02
shall be null and void.
8.03
Amendment; Waiver
. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of Seller and Purchaser. At any time prior to the Closing, subject to applicable Law, any party hereto may (a) extend the time for the performance of any obligation or other act of the
other party hereto, (b) waive any inaccuracy in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto and (c) waive compliance with any agreement or condition contained
herein. Any such extension or waiver shall only be valid if set forth in an instrument in writing signed by the party to be bound thereby. Notwithstanding the foregoing, no failure or delay by Seller or Purchaser in exercising any right
hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder.
8.04
Public Announcements
. The initial press release with respect to the execution of this Agreement
shall be a joint press release to be reasonably agreed upon by Seller and Purchaser. Thereafter, except as otherwise contemplated by
Section
4.06
(and, for the avoidance of doubt, nothing herein shall limit the rights
of Seller or its board of directors (or any duly authorized committee thereof) under
Section
4.06
) and except to the extent disclosed in or consistent with the Proxy Statement, no party hereto shall issue or cause the
publication of any press release or other public announcement or disclosure regarding this Agreement or its subject matter without the other partys prior written consent (which consent shall not be unreasonably withheld or delayed), except for
any such disclosure that is required by applicable Law or the rules of any applicable stock exchange or for press releases or other public statements that are substantially consistent with prior press releases or other public statements made by the
parties in compliance with this
Section
8.04
.
8.05
Expenses
. Whether or
not the Transactions are consummated, and except as otherwise specified herein, each party shall bear its own expenses with respect to the Sale and the other Transactions;
provided
,
however
, that Seller shall be responsible for the
timely payment of all Transfer Taxes arising out of or incurred in connection with the Sale. The party responsible under applicable Law for filing the Tax Returns with respect to such Transfer Taxes shall prepare and timely file such Tax
Returns and promptly provide a copy of such Tax Return to the other party. Seller and Purchaser shall, and shall cause their respective Affiliates to, cooperate to timely prepare and file any Tax Returns or other filings relating to such Transfer
Taxes. For the avoidance of doubt, the allocation of responsibility for Transfer Taxes arising out of or incurred in connection with the Reorganization Transactions are governed by the Reorganization Agreement.
Exhibit A-1-68
8.06
Severability
. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future Laws effective during the term hereof, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in its terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and
enforceable.
8.07
No Third Party Beneficiaries
. Except as set forth in
Section
4.08
and
Section
8.15
, this Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein, express or implied, shall give or be construed to give to
any Person, other than the parties hereto and such permitted assigns, any legal or equitable rights hereunder.
8.08
Governing Law and Jurisdiction
. This Agreement shall be governed by, and construed and enforced in accordance with, the Laws of the State of Delaware, without regard to any choice or conflict of Law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware. In addition, each of the parties (a) submits to the exclusive personal jurisdiction of the Delaware
Court of Chancery, any other court of the State of Delaware or any federal court sitting in the State of Delaware in the event that any dispute (whether in contract, tort or otherwise) arises out of this Agreement or the Sale or the other
Transactions; (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court; (c) agrees that it will not bring any Action relating to this Agreement or the Sale or
the other Transactions in any court other than the Delaware Court of Chancery, any other court of the State of Delaware or any federal court sitting in the State of Delaware; and (d) agrees that it will not seek to assert by way of motion, as a
defense or otherwise, (i) that any such Action is brought in an inconvenient forum, (ii) that any such Action should be transferred or removed to any court other than one of the above-named courts, (iii) that any such Action should be
stayed by reason of the pendency of some other Action in any court other than one of the above-named courts, or (iv) that this Agreement or the subject matter hereof may not be enforced in or by the above-named courts. Each party hereto agrees
that service of process upon such party in any such Action shall be effective if notice is given in accordance with
Section
8.13
. Notwithstanding the foregoing in this
Section
8.08
, a party may
commence any Action in any court other than the above-named courts solely for the purpose of enforcing an order or judgment issued by one of the above-named courts relating to any dispute (whether in contract, tort or otherwise) arising out of this
Agreement or the Transactions.
8.09
Waiver of Jury Trial
. EACH OF PURCHASER AND SELLER HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS.
8.10
Specific Performance
. The parties agree that irreparable harm for which monetary damages, even if
available, would not be an adequate remedy would occur in the event that the parties hereto do not perform the provisions of this Agreement (including failing to take such actions as are required of such party hereunder to consummate this Agreement)
in accordance with its specified terms or otherwise breach such provisions. Accordingly, the parties hereto acknowledge and agree that the parties hereto shall be entitled to an injunction, specific performance and other equitable relief to prevent
breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at Law or in equity. Each of the parties agrees that it will not oppose the granting of an
injunction, specific performance or other equitable relief on the basis that any other party has an adequate remedy at Law or that any award of specific performance is not an appropriate remedy for any reason at Law or in equity. Any party
seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or
injunction.
Exhibit A-1-69
8.11
Headings
. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part hereof.
8.12
Counterparts
. The parties hereto may execute this Agreement in one or more counterparts, and each fully executed counterpart shall be deemed an original but all of which taken together shall constitute one and the same agreement.
8.13
Notices
. All notices required to be given hereunder shall be in writing and be given in
person or by means of electronic mail, facsimile or other means of wire transmission (with request for assurance of receipt in a manner typical with respect to communications of that type), by overnight courier or by mail, and shall become
effective: (a) on delivery if given in person; (b) on the date of transmission if sent by electronic mail, facsimile or other means of wire transmission; (c) one (1) Business Day after delivery to the overnight service; or
(d) three (3) Business Days after being mailed, with proper postage and documentation, for first-class registered or certified mail, prepaid. Notices shall be addressed as follows:
If to Purchaser, to:
Verizon
Communications Inc.
One Verizon Way, VC44E239
Basking Ridge, NJ 07920
Facsimile: 908-766-3818
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Attn:
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William L. Horton, Jr., Senior Vice President, Deputy General Counsel and Corporate Secretary
|
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Michael Rosenblat, Vice President, Associate General Counsel
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Email:
|
|
william.horton@verizon.com
|
|
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michael.rosenblat@verizon.com
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with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY
10019
Facsimile: (212) 403-2000
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Attn:
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Daniel A. Neff
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|
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Steven A. Rosenblum
|
|
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David E. Shapiro
|
|
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Edward J. Lee
|
Email:
|
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DANeff@wlrk.com
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SARosenblum@wlrk.com
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DEShapiro@wlrk.com
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EJLee@wlrk.com
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If to Seller, to:
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Facsimile: (408) 349-3510
Attn: General Counsel and Secretary
Email: rbell@yahoo-inc.com
with
a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY
10036
Facsimile: (212) 735-2000
Exhibit A-1-70
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Attn:
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Marc R. Packer
|
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Michael J. Mies
|
Email:
|
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Marc.Packer@skadden.com
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Michael.Mies@skadden.com
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Cravath, Swaine & Moore LLP
Worldwide Plaza
825 8th Ave
New York, NY 10019
Facsimile:
(212) 474-3700
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Attn:
|
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Faiza Saeed
|
|
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Eric L. Schiele
|
Email:
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FSaeed@cravath.com
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ESchiele@cravath.com
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Wilson Sonsini Goodrich & Rosati, Professional Corporation
650 Page Mill Road
Palo Alto, CA
94304
Facsimile: (650) 493-6811
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Attn:
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Larry Sonsini
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Email:
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LSonsini@wsgr.com
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provided
,
however
, that if any party shall have designated a different address by notice to the other,
then notices shall be addressed to the last address so designated.
8.14
Construction
. The language
in all parts of this Agreement shall be construed, in all cases, according to its fair meaning. The parties hereto acknowledge that each party and its counsel have reviewed and revised this Agreement and that any rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. Words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be
deemed to include the other gender as the context requires. The terms hereof, herein, and herewith and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole
(including all of the Disclosure Schedules and Exhibits hereto) and not to any particular provision of this Agreement. Article, Section and Schedule references are to the Articles, Sections, and Disclosure Schedules to this Agreement unless
otherwise specified. Unless otherwise stated, all references to any Contract shall be deemed to include the schedules to such Contract. The word including and words of similar import when used in this Agreement mean including,
without limitation, unless the context otherwise requires or unless otherwise specified. The word or shall not be exclusive. Unless otherwise specified in a particular case, the word days refers to calendar days.
References herein to any Law shall be deemed to refer to such Law as it may be amended, modified or supplemented from time to time, unless otherwise specified. All references to dollars or $ shall be deemed references to the
lawful money of the United States of America.
8.15
Privilege; Counsel
. Skadden, Arps, Slate,
Meagher & Flom LLP, Cravath, Swaine & Moore LLP, Wilson Sonsini Goodrich & Rosati, Professional Corporation and Weil, Gotshal & Manges LLP (collectively and individually,
Counsel
) have been engaged by Seller and/or
its directors to represent them and the Business Subsidiaries, including the Company, in connection with the transactions contemplated hereby. Purchaser (on its behalf and on behalf of its Affiliates) hereby (a) agrees that, in the event
that a dispute arises after the Closing between Purchaser and/or any of its Affiliates, on the one hand, and Seller and/or any of its Affiliates, on the other hand, Counsel may represent Seller and/or any of its Affiliates in such dispute even
though the interests of Seller and/or any of its Affiliates may be directly adverse to Purchaser, the Business Subsidiaries or any of their Affiliates and even though Counsel may have represented the Business Subsidiaries (prior to Closing) in a
matter substantially related to such dispute, or may be handling ongoing matters for Purchaser or the Business Subsidiaries and (b) waives any conflict in connection therewith. Purchaser (on its behalf and on behalf of its
Exhibit A-1-71
Affiliates) further agrees that, notwithstanding anything in this Agreement to the contrary, as to all communications among Counsel, Seller and the Business Subsidiaries (including any of their
respective directors, officers, employees or other Representatives) (the
Designated Persons
) to the extent relating to this Agreement or the transactions contemplated hereby are subject to the attorney-client privilege, and the
expectation of client confidence belongs to Seller and shall be controlled by Seller and shall not pass to or be claimed by Purchaser, the Business Subsidiaries or any of their Affiliates;
provided
, that the foregoing shall not extend to any
communication not involving this Agreement or the transactions contemplated hereby, or to communications with any Person other than the Designated Persons and their advisors. Notwithstanding the foregoing, in the event that a dispute arises
between Purchaser, the Business Subsidiaries or any of their respective Affiliates and a third party other than a party to this Agreement after the Closing, Purchaser may assert (or cause to be asserted) the attorney-client privilege to prevent
disclosure of confidential communications by Counsel to such third party;
provided
,
however
, that to the extent such dispute relates to this Agreement or the transactions contemplated hereby, Purchaser may not waive (or permit the
waiver of) such privilege without the prior written consent of Seller (not to be unreasonably withheld, conditioned or delayed).
8.16
Disclosure Schedules
. The Disclosure Schedules shall be deemed to be a part of this Agreement and are fully incorporated into this Agreement by reference. Any capitalized terms used in any Disclosure Schedule but not otherwise
defined therein shall have the meanings ascribed to such terms in this Agreement. The inclusion of any item referenced in one section or subsection of the Disclosure Schedules shall be deemed to refer to (a) the corresponding section of
this Agreement and (b) any other section or subsection of the Disclosure Schedules (and accordingly to the applicable sections or subsections of this Agreement), whether or not an explicit cross-reference appears, if the applicability of such
item to the other section or subsection is reasonably apparent on the face of such disclosure. The inclusion of any information in the Disclosure Schedules shall not be deemed to be an admission or evidence of the materiality of such item, nor
shall it establish a standard of materiality for any purpose whatsoever.
8.17
Entire Agreement
.
This Agreement (including the Disclosure Schedules), the other Transaction Documents and the Confidentiality Agreement constitute the entire agreement between the parties and supersedes any prior understanding, agreements or representations by or
between the parties, written or oral, to the extent they relate in any way to the subject matter hereof.
[SIGNATURE PAGES FOLLOW]
Exhibit A-1-72
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered by their duly authorized representatives as of the date first written above.
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YAHOO! INC.
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By:
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/s/ Marissa A. Mayer
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Name:
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Marissa A. Mayer
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Title:
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CEO & President
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[Stock Purchase Agreement]
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VERIZON COMMUNICATIONS INC.
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By:
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/s/ John N. Doherty
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Name:
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John N. Doherty
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Title:
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Senior Vice President, Corporate Development and Ventures
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[Stock Purchase Agreement]
Exhibit A-1-73
Exhibit A-2
EXECUTION VERSION
AMENDMENT TO STOCK PURCHASE AGREEMENT
This AMENDMENT, dated as of February 20, 2017 (this
Amendment
), to the Stock Purchase Agreement, dated as of
July 23, 2016, by and between Yahoo! Inc., a Delaware corporation (
Seller
), and Verizon Communications Inc., a Delaware corporation (
Purchaser
and, together with Seller, the
Parties
) (the
Agreement
), is made by and between Seller and Purchaser.
WITNESSETH:
WHEREAS, subject to the terms and conditions set forth in this Amendment, and pursuant to Section 8.03 of the Agreement, the Parties
desire to amend certain terms of the Agreement by entering into, and as set forth in, this Amendment.
NOW THEREFORE, for and in
consideration of the aforesaid premises and of the mutual representations, warranties and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be
legally bound, the Parties hereby agree as set forth below:
1.
Modification; Full Force and Effect
. Except as expressly modified
and superseded by this Amendment, the terms and provisions of the Agreement are and shall continue to be in full force and effect.
2.
Definitions
. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Agreement unless otherwise indicated.
3.
Amendment
.
Effective
immediately, Article I of the Agreement is hereby amended by deleting the second sentence of Section 1.01 in its entirety and replacing it with the following:
At the Closing, in consideration for the purchase of the Shares, Purchaser shall pay in cash to Seller or its designee (a) $4,475,800,000
(the
Base Purchase Price
), plus or minus (b) the Equity Award Adjustment Amount, plus or minus (c) the Estimated Closing Adjustment Amount, minus (d) solely to the extent required pursuant to Section 4.18(b)(iii),
the Principal Amount (the
Estimated Purchase Price
).
Effective immediately, Article IV of the Agreement is hereby
amended as follows:
(a) A new Section 4.21 is added to the end thereof, as follows:
4.21
User
Security
Matters
.
(a) The parties acknowledge and agree that with respect to (i) the conditions set forth in Sections 5.02(a)(iii),
5.02(a)(iv) (other than to the extent resulting from a breach of Section 4.21(d)) and 5.02(b) to the obligations of Purchaser hereunder to consummate the Closing and purchase the Shares and (ii) the right of Purchaser to terminate this
Agreement pursuant to Section 6.01(d)(i) (other than to the extent resulting from a breach of Section 4.21(d)), (x) the existence and/or continuation of, and the knowledge of Seller or any of its Subsidiaries or any director, officer or
employee of Seller or any of its Subsidiaries of, any User Security Matters, and (y) any Losses arising out of or resulting from any User Security Matters, shall be disregarded ((x) and (y), collectively, the
Excluded
Matters
). For the avoidance of doubt, any
Exhibit A-2-1
material inaccuracies in the consolidated financial statements of Seller included in the SEC Documents that are the result of Sellers accounting systems or corporate enterprise
infrastructure being manipulated, damaged or otherwise compromised and thereby reporting inaccurate information shall not be disregarded nor considered Excluded Matters. Purchaser hereby expressly, unconditionally and irrevocably waives and
relinquishes any and all rights and bases not to consummate the Closing pursuant to Sections 5.02(a)(iii), 5.02(a)(iv) (other than to the extent resulting from a breach of Section 4.21(d)) and 5.02(b) or to terminate this Agreement pursuant to
Section 6.01(d)(i) (other than to the extent resulting from a breach of Section 4.21(d)) or to exercise any other right or seek any other remedy under this Agreement, in each case on the basis of the Excluded Matters. Nothing in this
Section 4.21 is intended to or shall be deemed to constitute an admission that, absent the foregoing, any of the Excluded Matters would give rise to any breach or failure to perform by Seller of any of its representations, warranties or
covenants, or any right or remedy of Purchaser, under this Agreement.
(b) Seller agrees that, prior to the five
(5) year anniversary of the Closing, (i) Seller shall not adopt or enter into, or permit to be adopted or entered into, a plan of liquidation or dissolution under applicable corporate law, or otherwise distribute or otherwise dispose of
all or substantially all its assets (other than a sale of all or substantially all of its assets for substantially equivalent value that is not part of a plan of liquidation or dissolution under applicable corporate law), unless Seller has made
provisions reasonably acceptable to Purchaser for the satisfaction of Sellers obligations with respect to the User Security Liabilities pursuant to the Reorganization Agreement and (ii) if Seller consolidates with or merges into any other
Person and Seller shall not be the continuing or surviving corporation or entity of such consolidation or merger, then Seller shall make proper provisions reasonably acceptable to Purchaser for the continuing or surviving corporation or entity (or
if such continuing or surviving corporation or entity in not a U.S. domestic entity, a U.S. domestic entity with adequate resources) to be responsible for the satisfaction of Sellers obligations with respect to all User Security Liabilities
pursuant to the Reorganization Agreement (it being understood that this clause (ii) shall be deemed satisfied, and no provision or other action shall be required under this clause (ii), in connection with a merger of Seller with and into a U.S.
domestic entity pursuant to which such U.S. domestic entity is the surviving entity in the merger and succeeds to the obligations of Seller under the Reorganization Agreement by operation of law).
(c) From and after the date hereof (and until the Closing), Seller shall in good faith take commercially
reasonable steps to seek to address the User Security Matters in substantially the same manner as Seller would have addressed such matters in the absence of the transactions contemplated by this Agreement and the Reorganization Agreement; it being
understood that, without limiting any other covenant or agreement contained herein, (i) the foregoing shall not require Seller to accelerate any such steps or accelerate the incurrence or resolution of any User Security Liabilities relative to
what Seller would have done in the absence of the transactions contemplated by this Agreement and the Reorganization Agreement and (ii) failure to comply with the foregoing shall not in and of itself be deemed to constitute the failure of any
condition set forth in
Section
5.02
to be satisfied (it being understood that, notwithstanding anything to the contrary contained herein (including Section 8.01), this Section 4.21(c) shall survive for six
(6) months following the Closing (and any claim delivered in writing prior to the expiration of such six (6) month period shall survive until the resolution thereof)).
(d) Seller represents and warrants to Purchaser that the information set forth in Exhibit F hereto (the
User
Engagement
Data
) was designed in good faith to demonstrate the impact of the press release, issued by Seller on December 14, 2016, entitled Important Security Information for Yahoo Users, and the User
Engagement Data has been prepared in all material respects in accordance with the data methodology as set forth in Section 4.21(d) of the Disclosure Schedules, consistently applied throughout the periods indicated therein. Notwithstanding anything
to the contrary, Purchasers sole and exclusive remedy for any breach of this Section 4.21(d) shall be pursuant to and in accordance with Section 5.02(a)(iv) or Section 6.01(d)(i).
Exhibit A-2-2
(b) Section 4.02(c) of the Agreement is amended by adding the following sentence at the end
thereof:
For the avoidance of doubt, and without limiting the foregoing obligations of Seller to hold the
Stockholders Meeting as promptly as practicable in accordance with this
Section
4.02(c)
, the Stockholders Meeting may also be an annual meeting of Sellers stockholders, at which Seller may elect directors and
seek stockholder approval of other matters typically presented at Sellers annual meeting. Notwithstanding the foregoing or anything herein to the contrary, except with Purchasers prior written consent, Seller will hold the
Stockholders Meeting no earlier than the time Sellers Annual Report on Form
10-K
for the fiscal year ended December 31, 2016 has been filed with the SEC.
(c) Section 4.03(a) of the Agreement is amended by adding the following sentence at the end thereof:
Without limiting the foregoing, prior to the Closing (or until the earlier termination of this Agreement in accordance
with
Section
6.01
), upon reasonable notice, Seller shall promptly arrange for and permit Purchaser and its Representatives to access all personnel, properties and Books and Records of the Business as Purchaser
reasonably determines is necessary or appropriate in order to investigate and verify the accuracy of the representations of Seller set forth in Section 4.21(d);
provided
,
however
, that any such access shall be conducted during normal
business hours and in such a manner as not to interfere unreasonably with the normal operations of the business of Seller or the Business Subsidiaries;
provided
,
further
, that neither Seller nor any of the Business Subsidiaries shall
be required to disclose any information to Purchaser if such disclosure would reasonably be expected to jeopardize any attorney-client privilege or the protections of the work product doctrine or contravene any applicable Laws (provided that, in any
such case, Seller shall provide such information pursuant to alternative arrangements reasonably acceptable to Purchaser as necessary to preserve such privilege or protections or comply with such Law).
(d) Section 4.08(a) of the Agreement is amended by deleting the second sentence of Section 4.08(a) and replacing it as follows:
(a) Prior to the Closing, Seller shall (on its behalf and on behalf of the Business Subsidiaries) obtain a
non-cancellable
extension of the directors and officers liability coverage of Sellers existing directors and officers insurance policies and fiduciary liability insurance policies
(collectively, the
D&O
Insurance
), covering persons who are currently or who were officers or directors of, or in a comparable role with, Seller and/or any of the Business Subsidiaries, for a claims reporting or
discovery period of six years from and after the Closing with respect to any claim related to any period of time at or prior to the Closing from an insurance carrier with the same or better credit rating as Sellers current insurance carrier
with respect to D&O Insurance with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under Sellers existing policies (for the avoidance of doubt, with the Business Subsidiaries as
additional named insureds and/or successor companies as applicable, to ensure their (and their applicable indemnitees) benefit under such extension policies));
provided
, that Purchaser shall pay 50% of the
premium for such tail insurance, but in no event greater than $5,000,000.
Effective immediately, Section 6.01(b) of the
Agreement is hereby amended by deleting clause (i) thereof and replacing it with the following:
(i) the Closing shall not have
occurred by July 24, 2017 (the
Outside
Date
);
provided
, that the right to terminate this Agreement under this Section 6.01(b)(i) shall not be available to a party, if any failure by such party to fulfill its
obligations under this Agreement shall have been the primary cause of, or shall have resulted in, the failure of the Closing to occur on or prior to the Outside Date;
Effective immediately, Section 6.03 of the Agreement is hereby amended by replacing $144,774,000 in the definition of
Termination Fee with $134,274,000.
Exhibit A-2-3
Effective immediately, Article VII of the Agreement is hereby amended as follows:
(a) The following defined terms are added to Section 7.01 of the Agreement in appropriate alphabetical order:
Excluded
Matters
has the meaning ascribed to such term in
Section
4.21
.
User
Security
Liabilities
has the meaning ascribed to such term in the Reorganization
Agreement.
User Security Matters
has the meaning ascribed to such term in the Reorganization Agreement.
(b) The definition of Business Material Adverse Effect in Section 7.01 of the Agreement is amended to remove and immediately
before clause (x) in the first proviso thereof and to add the following new clause (xi) immediately following such clause (x):
and (xi) any of the Excluded Matters (other than, for the avoidance of doubt, a breach of Section 4.21(d))
Effective immediately, (i) the Agreement is hereby amended by adding a new Exhibit F thereto as set forth on
Appendix A
to this
Amendment and (ii) the Disclosure Schedules are hereby amended by adding a new Section 4.21(d) thereto as set forth on
Appendix B
to this Amendment.
4.
Reorganization Agreement Reference
. The Parties acknowledge and agree that any reference in the Reorganization Agreement or any
other Transaction Document (or in any other document or instrument referred to in any of the foregoing) to the Agreement shall mean the Agreement as amended by this Amendment.
5.
Miscellaneous
. The provisions of Article VIII of the Agreement shall apply
mutatis
mutandis
to this Amendment.
[
signature
page
follows
]
Exhibit A-2-4
IN WITNESS WHEREOF, the Parties have each caused this Amendment to be signed as of the date first
written above.
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YAHOO! INC.
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By:
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/s/ Marissa A. Mayer
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Name:
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Marissa A. Mayer
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Title:
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CEO & President
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[Signature Page to Amendment to Stock Purchase Agreement]
Exhibit A-2-5
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VERIZON COMMUNICATIONS INC.
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By:
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/s/ Craig Silliman
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Name:
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Craig Silliman
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Title:
|
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Executive Vice President Public Policy and General Counsel
|
[Signature Page to Amendment to Stock Purchase Agreement]
Exhibit A-2-6
Appendix A
Exhibit F
Exhibit A-2-7
Exhibit B-1
EXECUTION VERSION
REORGANIZATION AGREEMENT
by and between
YAHOO!
INC.
and
YAHOO HOLDINGS, INC.
Dated as of July 23, 2016
TABLE OF CONTENTS
Exhibit B-1-i
TABLE OF ANNEXES
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Annex A
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Certain Definitions
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TABLE OF EXHIBITS
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Exhibit A
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Bill of Sale
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Exhibit B
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Assignment and Assumption Agreement
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Exhibit C
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IP Assignment Agreement
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Exhibit D
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Non-Foreign Status Affidavit
|
TABLE OF SCHEDULES
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Schedule 1.1(e)
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Holdback Acquisitions
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Schedule 1.2(h)
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Agreements with respect to Minority Investments
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Schedule 1.2(n)
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Terminated Intercompany Agreements
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Schedule 1.2(p)
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Other Excluded Assets
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Schedule 1.4(g)
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Public Company Matters
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Schedule 5.5(j)
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Non-Reorganization 338(h)(10) Subsidiaries
|
Exhibit B-1-ii
REORGANIZATION AGREEMENT
THIS REORGANIZATION AGREEMENT, dated as of July 23, 2016 (this
Agreement
), is entered into by and between Yahoo Holdings,
Inc., a Delaware corporation (the
Company
), and Yahoo! Inc., a Delaware corporation (
Seller
). The Company and Seller are sometimes referred to herein individually as a
Party
, and
collectively as the
Parties
. Capitalized terms used but not otherwise defined herein have the meanings set forth in
Annex A
to this Agreement.
RECITALS
WHEREAS, concurrently
with the execution and delivery of this Agreement, Seller and Verizon Communications Inc., a Delaware corporation (
Purchaser
), are entering into a Stock Purchase Agreement (the
Purchase Agreement
), pursuant to
which, upon the terms and subject to the conditions set forth in the Purchase Agreement, Seller will sell to Purchaser, and Purchaser will purchase from Seller (the
Sale
), all of the issued and outstanding shares of common stock
of the Company;
WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, Seller desires to contribute,
transfer, assign, convey and deliver to the Company the Transferred Assets (as defined below), and the Company desires to assume and to agree to satisfy, pay, perform and discharge when due the Assumed Liabilities (as defined below) (the
Transfers
); and
WHEREAS, the respective boards of directors of Seller and the Company have approved this Agreement and
the Reorganization Transactions.
NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
THE
TRANSFERS
Section 1.1
Transferred Assets
. Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, Seller shall contribute, transfer, assign, convey and deliver to the Company, and the Company shall acquire and accept from Seller all of Sellers right, title and interest in and to all of the Assets of Seller as
they exist on the Closing Date other than the Excluded Assets (collectively, the
Transferred Assets
). Without limiting the foregoing, Transferred Assets includes:
(a) all capital stock of, or other equity interests in, any Person (including the Business Subsidiaries) owned directly by Seller (other than
such capital stock or other equity interests that are Excluded Assets);
(b) all Assets with respect to all Benefit Plans and all Non-U.S.
Benefit Plans;
(c) all rights, defenses, claims, demands, actions or causes of action to the extent resulting from, related to or arising
out of the Transferred Assets;
(d) the License Agreement and all Intercompany Agreements, other than those set forth on
Schedule
1.2(n)
; and
(e) all rights of Seller with respect to cash and cash equivalents held in escrow or
similar arrangements in connection with the acquisitions set forth on
Schedule
1.1(e)
(the
Acquisition Holdback Cash
).
Exhibit B-1-1
Notwithstanding the foregoing, (i) Seller may contribute, transfer, assign, convey and deliver to one or more
Business Subsidiaries other than the Company all or a portion of the Transferred Assets, and the Company shall cause such other Business Subsidiary or Business Subsidiaries to acquire and accept from Seller such Transferred Assets;
provided
,
that any such contribution, transfer, assignment, conveyance or delivery may not be effected without Purchasers prior written consent if it is or could reasonably be expected to be adverse (as compared to a contribution, transfer, assignment,
conveyance or delivery to the Company) to the Business Subsidiaries, the Business, Purchaser or any of its Subsidiaries (including from a Tax perspective or otherwise) or the Transactions;
provided
,
further
, that if the adverse impact
is reasonably expected to be only
de minimis
in nature, then Purchasers prior written consent shall not be required so long as Seller shall have consulted in good faith with Purchaser in advance and (ii) Transferred Assets
shall not include Assets relating to Taxes, which shall be governed exclusively by
Section
5.5
.
Section 1.2
Excluded Assets
. Notwithstanding anything to the contrary contained
in
Section
1.1
or any other provisions in this Agreement, Sellers right, title and interest in and to the following Assets of Seller (collectively, the
Excluded Assets
) are excluded from the
Transferred Assets and will remain the property of Seller after the Closing (except Excluded Assets shall not include Assets relating to Taxes, which shall be governed exclusively by
Section
5.5
):
(a) other than any Acquisition Holdback Cash, all cash, cash equivalents, short-term marketable securities and long-term marketable securities
of Seller (and not of the Business Subsidiaries), each as defined in accordance with GAAP applied on a basis that is consistent with past practices and prior periods;
(b) all capital stock of, or other equity interests in, each of Alibaba Group Holding Limited, Aabaco Holdings Hong Kong Limited and Yahoo
Japan Corporation held directly by Seller;
(c) the Minority Investments;
(d) all capital stock of Seller held in treasury and all capital stock of the Company;
(e) that certain Amended and Restated Registration Rights Agreement, dated September 18, 2012, by and among Alibaba Group Holding Limited and
the persons whose names are set out in Schedule 1 thereto;
(f) that certain Joint Venture Agreement, dated April 1, 1996, by and between
Seller and SOFTBANK Corporation;
(g) that certain Consulting Agreement, dated as of December 20, 2013, by and between Yahoo Japan
Corporation and Seller;
(h) the agreements set forth on
Schedule
1.2(h)
with respect to the Minority
Investments;
(i) the membership interests in Excalibur IP, LLC and the Excluded IP Assets;
(j) all rights, defenses, claims, demands, actions, deposits or causes of action to the extent resulting from, related to or arising out of
any Excluded Asset;
(k) the Indenture;
(l) Books and Records, to the extent exclusively related to the Excluded Assets and the Retained Liabilities (and copies of Books and Records
to the extent otherwise relating to the Excluded Assets or Retained Liabilities);
(m) to the extent not used, held for use, intended to
be used in or otherwise necessary to operate the Business, all other Assets used exclusively in connection with Sellers organization, maintenance and existence
Exhibit B-1-2
as a corporation, and not Sellers operational functions, including arrangements with registered agents relating to foreign qualifications of Seller, taxpayer and other identification
numbers of Seller, seals of Seller and stock records of Seller;
(n) the Intercompany Agreements (i) set forth on
Schedule
1.2(n)
or (ii) described in
Section
1.8(b)
;
(o) all rights of Seller
with respect to any capital stock of Seller held in escrow or similar arrangements or otherwise issuable in connection with the acquisitions set forth on
Schedule
1.1(e)
(the
Acquisition Holdback Stock
);
or
(p) all Assets of Seller set forth on
Schedule
1.2(p)
.
Section 1.3
Assumed Liabilities
. At the Closing, on the terms and subject to the conditions set
forth in this Agreement, the Company shall, effective as of the Closing, assume and shall agree to satisfy, pay, perform and discharge when due all of the Liabilities of Seller other than the Retained Liabilities (collectively, the
Assumed
Liabilities
). Without limiting the foregoing,
Assumed Liabilities
includes:
(a) all Liabilities to the
extent resulting from, related to, arising out of, imposed under or pursuant to the conduct of the Business or the Transferred Assets, whether arising from or related to any period prior to, on, or after the Closing, including Liabilities for
infringement claims, service obligations and obligations under warranty and other claims to the extent relating to, arising from or incurred in connection with the conduct of the Business or the Transferred Assets;
(b) all Liabilities to the extent arising in connection with Actions to the extent resulting from, related to or arising out of the
Transferred Assets or any other Assumed Liability, expressly excluding any Actions brought by any securityholder(s) of Seller against Seller and/or its directors or officers (including on a derivative basis) relating to the Transactions or
otherwise;
(c) all Assumed Employee Liabilities; and
(d) all Liabilities with respect to all Benefit Plans and all Non-U.S. Benefit Plans, in each case, other than Retained Employee Liabilities.
Notwithstanding the foregoing, (i) Seller may determine that one or more Business Subsidiaries other than the Company shall assume and agree to satisfy,
pay, perform and discharge when due all or a portion of the Assumed Liabilities, and the Company shall cause such other Business Subsidiary or Business Subsidiaries to assume and agree to satisfy, pay, perform and discharge when due all or a portion
of the Assumed Liabilities; provided, that any such change may not, without Purchasers prior written consent, be effected if it is or could reasonably be expected to be adverse (as compared to an assumption, agreement to satisfy, payment,
performance or discharge by the Company) to the Business Subsidiaries, the Business, Purchaser or any of its Subsidiaries (including from a Tax perspective or otherwise) or the Transactions;
provided
,
further
, that if the adverse
impact is reasonably expected to be only
de minimis
in nature, then Purchasers prior written consent shall not be required so long as Seller shall have consulted in good faith with Purchaser in advance and (ii) Assumed
Liabilities shall not include Liabilities relating to Taxes, which shall be governed exclusively by
Section
5.5
.
Section 1.4
Retained Liabilities
. Notwithstanding anything to the contrary contained in
Section
1.3
or any other provisions in this Agreement, the following Liabilities of Seller (collectively, the
Retained Liabilities
) are excluded from the Assumed Liabilities and will remain Liabilities of
Seller after the Closing (except Retained Liabilities shall not include Liabilities relating to Taxes, which shall be governed exclusively by
Section
5.5
):
(a) all Liabilities to the extent resulting from, related to, arising out of, imposed under or pursuant to the Excluded Assets;
Exhibit B-1-3
(b) subject to Section 4.18 of the Purchase Agreement, all Liabilities under the Indenture and
related hedge and warrant transactions in respect thereof;
(c) any Actions brought by any securityholder(s) of Seller against Seller
and/or its directors or officers (including on a derivative basis) relating to the Transactions or otherwise;
(d) all Retained Employee
Liabilities;
(e) all Liabilities of Seller to indemnify (including expenses or the advancement thereof), defend or hold harmless (x) any
of the current and former directors and officers of, or persons in a comparable role with, Seller or the Business Subsidiaries, or any other Person, resulting from, related to or arising out of the Excluded Assets or the other Retained Liabilities
or (y) any of the current and former directors, officers or employees of, or persons in a comparable role with, Seller, in their respective capacities with Seller;
(f) all Liabilities of Seller under the Purchase Agreement or any other Transaction Document; and
(g) any Actions or Liabilities relating to or arising out of Sellers SEC or Nasdaq reporting, accounting or compliance obligations as a
public company, including the matters referenced on
Schedule 1.4(g)
.
Section 1.5
Schedules
. Following the date hereof and prior to the Closing, Seller may, with Purchasers prior written consent (which consent shall not be unreasonably withheld conditioned or delayed), update any of the Schedules to this
Agreement;
provided
that Seller may update
Schedule 1.2(p)
without Purchasers prior written consent to reflect the addition of Assets acquired after the date hereof that (x) are not used, held for use, intended to be used in or
otherwise necessary to operate or related to the Business and (y) are reasonably necessary to facilitate Sellers post-Closing operations.
Section 1.6
Consideration
. In consideration for the contribution, transfer, assignment,
conveyance and delivery of the Transferred Assets, the Company shall, effective as of the Closing, assume and shall agree to satisfy, pay, perform and discharge when due the Assumed Liabilities. Notwithstanding the foregoing, if desirable under
local Law, any instruments and agreements which effect the contribution, transfer, assignment, conveyance and delivery of the Transferred Assets may instead effect such action as a contribution to the capital of the Company;
provided
, that
effecting such action as a contribution to the capital of the Company is not and would not reasonably be expected to be adverse to the Business Subsidiaries, the Business, Purchaser or any of its Subsidiaries (including from a Tax perspective or
otherwise), or the Transactions.
Section 1.7
Non-Transferable Assets
.
(a) Notwithstanding anything to the contrary in this Agreement, if any Transferred Asset is not assignable or transferable without a Consent
(each, a
Non-Transferable Asset
), then to the extent that such Consent is not obtained, submitted or filed on or prior to the Closing Date, this Agreement and the related instruments of transfer will not constitute an assignment
or transfer of such Non-Transferable Asset. Upon the terms and subject to the conditions set forth herein and in the Purchase Agreement, each of Seller and the Company will cooperate with each other and use their respective reasonable best efforts
during the period beginning on the date hereof until six-year anniversary of the Closing Date to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with each other in doing, all things necessary,
proper or advisable to obtain or deliver all Consents of all Governmental Authorities and Third Parties that may be or become necessary, proper or advisable for the contribution, transfer, assignment, conveyance and delivery of the Non-Transferable
Assets. Notwithstanding anything to the contrary herein, neither Seller nor the Company shall be required to pay any consent or other similar fee, profit sharing or other similar payment or other consideration, or the provision of
additional security (including a guaranty) to obtain the Consent of any Person under any Contract. For the avoidance of doubt, obtaining the Consents described in the second sentence of this
Section
1.7(a)
is not a
condition to the consummation of the Closing by virtue of this
Section
1.7(a)
.
Exhibit B-1-4
(b) The obligation to contribute, transfer, assign, convey and deliver any Non-Transferable Asset
will continue following the Closing for six years, and the Parties will accomplish such contribution, transfer, assignment, conveyance and delivery as soon as reasonably practicable following the Closing for no additional consideration. Subject
to applicable Law, Seller and the Company shall use their respective reasonable best efforts to establish arrangements which, from and after the Closing, result in the Company receiving all the benefits (including all economic claims, rights and
benefits, and dominion and control) and bearing all the costs, Liabilities and burdens with respect to the Non-Transferable Assets, including reasonable, out-of-pocket and documented expenses incurred by Seller in performing its obligations under
this
Section
1.7(b)
. In furtherance and not limitation of the foregoing, subject to reimbursement from the Company of all reasonable out-of-pocket and documented costs and expenses incurred in connection with such
actions, prior to such contribution, transfer, assignment, conveyance and delivery of such Non-Transferable Asset, Seller will (i) use reasonable best efforts to provide to the Company all the rights and benefits under or with respect to such
Non-Transferable Asset (including all economic claims, rights and benefits, and dominion and control), (ii) enforce its rights under or with respect to such Non-Transferable Asset for the benefit of the Company, and (iii) pay or discharge all
obligations under or with respect to such Non-Transferable Asset, in the case of each of clauses (i), (ii) and (iii) to the extent that such action does not cause a breach or default under or with respect to such Non-Transferable
Asset. Notwithstanding the foregoing, funds received by a Business Subsidiary or a Seller Entity (such recipient, a
Recipient
) upon the payment of accounts receivable that belong, consistent with the terms and conditions of
this Agreement and the other Transaction Document, to a Seller Entity or a Business Subsidiary (such Person, a
Transferee
), respectively, whether before or after the six year anniversary of the Closing Date will be transferred to
such Transferee by wire transfer as promptly as practicable after the Recipient becomes aware of having received such funds. For all Tax purposes, and to the extent permitted by applicable Law, the Parties shall treat the Recipient of any such
funds as receiving such amounts as an agent or nominee for the Transferee. For six years following the Closing, in the event that a Seller Entity or a Business Subsidiary possesses any Transferred Asset or Excluded Assets, respectively, the
parties hereto shall cause the prompt transfer of such Transferred Asset or Excluded Assets to a Business Subsidiary or Seller Entity, respectively, in each case, without further consideration.
(c) From and after the Closing and to the extent permitted by applicable Tax Laws, the Parties agree to treat, and cause their Affiliates to
treat, for all Tax purposes, the Non-Transferable Assets as having been contributed, transferred, assigned, conveyed and/or delivered to the Company at the Closing as contemplated by this Agreement. Each of Seller and the Company agrees to
notify the other Party promptly in writing if it determines that such treatment is not permitted under applicable Tax Laws. All Taxes imposed on any Seller Tax Indemnified Party with respect to any such Non-Transferable Asset for any taxable
period (or portion thereof) beginning after the Closing Date shall be calculated on a with and without basis, and the Company shall indemnify each Seller Tax Indemnified Party for any such Taxes in accordance with
Section
5.5(a)(ii)
. For the avoidance of doubt, Seller shall repay any amounts paid by the Company to Seller pursuant to this
Section 1.7(c)
and
Section 5.5(a)(ii)
relating to any Taxes imposed with
respect to a Non-Transferrable Asset to the extent the beneficial ownership of such Non-Transferrable Asset cannot be transferred to the Company (and the provisions of this
Section 1.7(c)
shall not otherwise apply with respect to any
Non-Transferrable Asset to the extent the beneficial ownership of such Non-Transferrable Asset cannot be transferred to the Company).
Section 1.8
Termination of Intercompany Agreements
.
(a) Seller, on behalf of itself and each of the other Seller
Entities, and the Company, on behalf of itself and each of the other Business Subsidiaries, hereby terminates, effective as of immediately before the Closing, all Intercompany Agreements set forth on
Schedule 1.2(n)
;
provided
, that for
purposes of any calculation of any purchase price adjustment under Section 1.04 of the Purchase Agreement, all such terminations shall be deemed to have occurred immediately prior to the open of business on the Closing Date. No such terminated
Intercompany Agreement will be of any further force or effect from and after the Closing, and all parties thereto will be released from all Liabilities thereunder other than the Liability to settle any Intercompany Accounts as provided in
Section
1.9
. For the avoidance of doubt, all Cash, Debt, Net Working Capital and Transaction
Exhibit B-1-5
Expenses with respect to any Intercompany Agreement that is not so terminated shall be taken into account for the determination of any purchase price adjustment under Section 1.04 of the Purchase
Agreement. Each Party will take, or cause to be taken, all actions as may be reasonably necessary to effect the foregoing.
(b) The
provisions of
Section
1.8(a)
will not apply to any of the following Contracts (which Contracts will continue to be outstanding after the Closing and thereafter will be deemed to be, for the relevant Seller Entity or
Business Subsidiary, as the case may be, an obligation to a third party and will no longer be an Intercompany Agreement):
(i) this Agreement and the License Agreement; and
(ii) to the extent required pursuant to the Purchase Agreement, any agreement by Seller to pay, reimburse or indemnify the
Company pursuant to the terms and conditions of the Purchase Agreement.
Section 1.9
Settlement of
Intercompany Accounts
. Intercompany Accounts outstanding as of immediately prior to the Closing, if any, will be settled, capitalized, cancelled, assigned or assumed by the relevant Seller Entities and Business Subsidiaries immediately
prior to the Closing (
provided
, that for purposes of any purchase price adjustment under Section 1.04 of the Purchase Agreement, all such settlements, capitalizations, cancellations, assignments or assumptions shall be deemed to have occurred
immediately prior to the open of business on the Closing Date), in each case, in the manner agreed to by the Parties, and from and after the Closing, all parties thereto will be released from all Liabilities thereunder. With respect to any
outstanding checks issued by Seller Entities or Business Subsidiaries prior to the Closing, such outstanding checks will be honored following the Closing by the entity owning the account on which the check is drawn. As between the Seller
Entities and the Business Subsidiaries, all payments and reimbursements received after the Closing by either Party (or any of its Subsidiaries) in respect or in satisfaction of an Asset or Liability of the other Party (or any of its Subsidiaries),
will be held by such Party (or its applicable Subsidiary) in trust for the use and benefit of the Party entitled thereto (or its applicable Subsidiary) and, as promptly as practicable or as otherwise agreed between the Parties, upon receipt by such
Party (or its applicable Subsidiary) of any such payment or reimbursement, such Party will pay over, or will cause its applicable Subsidiary to pay over, to the other Party (or its applicable Subsidiary) the amount of such payment or reimbursement.
Section 1.10
Bulk Sales Laws
. Each Party hereto hereby waives compliance with the
requirements and provisions of the bulk-sale or bulk-transfer Laws of any jurisdiction that may otherwise be applicable with respect to any of the transactions contemplated in this Agreement or any other Transaction Document.
Section 1.11
AS IS,
WHERE
IS
TRANSFER
. EACH PARTY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY OTHER TRANSACTION DOCUMENT, NO PARTY HAS MADE OR HEREBY MAKES ANY EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF ANY
NATURE, INCLUDING ANY REPRESENTATIONS OR WARRANTIES AS TO THE TRANSFERRED ASSETS OR THE ASSUMED LIABILITIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN ANY OTHER TRANSACTION DOCUMENT, ALL ASSETS CONTRIBUTED, TRANSFERRED, ASSIGNED,
CONVEYED OR DELIVERED PURSUANT TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT ARE BEING CONTRIBUTED, TRANSFERRED, ASSIGNED, CONVEYED OR DELIVERED ON AN AS IS, WHERE IS BASIS.
Section 1.12
Foreign Transfer
. At Purchasers request received by Seller in writing no later
than forty-five (45) Business Days prior to the Closing Date (
Foreign Sale Notice
), Seller shall (i) prior to the Closing, cause the Company to form a direct wholly-owned Subsidiary of the Company (
SaleCo2
)
organized in the form and jurisdiction specified by Purchaser in such Foreign Sale Notice (
provided
, that such jurisdiction must be Luxembourg, the Netherlands or the United Kingdom and such Subsidiary must be a foreign eligible
entity as defined in Treasury Regulations Section 301.7701-3(b)), (ii) prior to the Closing, make or cause to be made an election under Treasury Regulations Section 301.7701-3(c) for SaleCo2 to be treated as an entity that is disregarded as
separate from its owner for U.S. federal income tax purposes, effective as of the formation of
Exhibit B-1-6
SaleCo2, (iii) prior to the Closing, cause all right, title and interest in and to the equity interests (the
Foreign Equity Interests
) in such Business Subsidiaries specified
by Purchaser in the Foreign Sale Notice to be distributed, sold, conveyed, assigned or otherwise transferred to Seller (to the extent not already held directly by Seller as of the date hereof) (the transfers contemplated pursuant to this clause
(iii), collectively, the
Foreign Business Subsidiary Transfers
), (iv) at the Closing, pursuant to the Transfers, contribute, sell, convey, assign or otherwise transfer all of Sellers right, title and interest in and to such
Foreign Equity Interests to the Company, and (v) immediately after the Closing and prior to the Foreign Sale Closing, cause the Company to contribute, sell, convey or otherwise transfer all of the Companys right, title and interest in and to
such Foreign Equity Interests to SaleCo2 (the
SaleCo2 Contribution
);
provided
, that Purchaser may not specify any Business Subsidiary in the Foreign Sale Notice other than a Business Subsidiary that (A) is organized under
the laws of a jurisdiction other than the United States or any political subdivision thereof and (B) is not a direct or indirect Subsidiary of a Non-Reorganization 338(h)(10) Subsidiary;
provided
further
, that Seller shall not be
required to take any of the foregoing actions if taking such action would reasonably be expected to result in a breach of applicable Law or materially impede or delay the consummation of the Sale;
provided
further
, that in the event
the immediately preceding proviso applies, Seller and Purchaser shall cooperate in good faith to determine an alternative manner or structure to effect the Foreign Business Subsidiary Transfers, the SaleCo2 Contribution and the Foreign Sale.
ARTICLE II
CLOSING
Section 2.1
Closing
. Upon the terms and subject to the satisfaction or waiver of each of the conditions set forth in this Agreement, the closing of the Transfers (the
Closing
) shall take place at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York 10036 or at such other place as Seller and the Company mutually agree, commencing at 10:00 a.m., local time, immediately prior to the closing of the Sale pursuant to
the Purchase Agreement (the
Closing Date
). Notwithstanding anything to the contrary in this Agreement, the Parties may agree to effect any Transfer at any time prior to the Closing;
provided
, that no such Transfer prior to
the Closing that could reasonably be expected to adversely affect (as compared to such Transfer occurring upon the Closing) the Business Subsidiaries, the Business, Purchaser or any of its Subsidiaries (including from a Tax perspective or
otherwise), or the Transactions, shall be made without the prior written consent of Purchaser;
provided
,
further
, that if such adverse impact is reasonably expected to be only
de
minimis
in nature, then Purchasers
prior written consent shall not be required so long as Seller shall have consulted in good faith with Purchaser in advance.
Section 2.2
Deliveries at Closing
.
(a) At the Closing (or prior to the Closing where indicated), Seller shall take all
steps necessary in accordance with the terms of this Agreement to place the Company in possession or control of the Business and the Transferred Assets and execute (where applicable) and deliver the following, each of which is subject to the
delivery of each other of the following deliveries:
(i) an executed copy of a bill of sale in substantially the form
appended hereto as
Exhibit A
(the
Bill of Sale
);
(ii) an executed copy of a general
assignment and assumption of Liabilities in substantially the form appended hereto as
Exhibit B
(the
Assignment and Assumption Agreement
);
(iii) an executed copy of an intellectual property assignment agreement in substantially the form appended hereto as
Exhibit
C
(the
IP Assignment
Agreement
);
(iv) executed copies of such other instruments and
agreements as may be required to effect the contribution, transfer, assignment, conveyance and delivery of the Transferred Assets, and the assumption of the Assumed Liabilities; and
Exhibit B-1-7
(v) a duly executed certificate of non-foreign status of Seller in accordance
with Section 1445 of the Code and the Treasury Regulations promulgated thereunder substantially in the form attached hereto as
Exhibit D
.
(b) At the Closing, the Company shall execute (where applicable) and deliver:
(i) an executed copy of the Bill of Sale;
(ii) an executed copy of the Assignment and Assumption Agreement;
(iii) an executed copy of the IP Assignment Agreement;
(iv) executed copies of such other instruments and agreements as may be required to effect the contribution, transfer,
assignment, conveyance and delivery of the Transferred Assets, and the assumption of the Assumed Liabilities; and
(v)
solely to the extent required by applicable Law, to Seller, a document executed by the Company and each Business Employee who is an Offered Employee, pursuant to which such Business Employee agrees (a) to be employed by the Company or an Affiliate
thereof and (b) to the transfer of such Transferred Employees Assumed Employee Liabilities to the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except (i) as otherwise set forth in the Disclosure Schedules (as defined in the Purchase Agreement) or (ii) as set forth in the SEC Documents
(as defined in the Purchase Agreement) filed or furnished and publicly available prior to the date of this Agreement (excluding any disclosures set forth under the heading Risk Factors and any disclosures included in any
forward-looking statements section or that are similarly cautionary, predictive or forward-looking in nature), Seller hereby represents and warrants to the Company as follows:
Section 3.1
Organization
. Seller is a corporation, duly incorporated, validly existing and in
good standing under the Laws of the State of Delaware.
Section 3.2
Authority
and
Enforceability
. Seller has all necessary corporate power and authority to enter into, execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement by Seller have been duly
authorized by all requisite action on the part of Seller. This Agreement has been duly executed and delivered by Seller and, assuming due authorization, execution and delivery of this Agreement by the Company, this Agreement is a legal, valid
and binding obligation of Seller, enforceable against it in accordance with its terms, except as such enforceability may be limited by the Enforceability Limitations.
Section 3.3
Rights and Obligations
. Assuming receipt of any Consent that is required in
connection with the consummation of the Reorganization Transactions, the Business Subsidiaries (after giving effect to the Reorganization Transactions (including the transactions contemplated by
Section
1.7
)) will have
substantially the same rights and obligations (excluding the Excluded Assets and the Retained Liabilities) with respect to the Business immediately following the Closing as Seller and the Business Subsidiaries had immediately prior to the
consummation of the Reorganization Transactions.
Exhibit B-1-8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF
THE COMPANY
The Company hereby represents and warrants to Seller as follows:
Section 4.1
Organization
. The Company is a corporation, duly incorporated, validly existing
and in good standing under the Laws of the State of Delaware.
Section 4.2
Authority and
Enforceability
. The Company has all necessary corporate power and authority to enter into, execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement by the Company have
been duly authorized by all requisite action on the part of the Company. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery of this Agreement by Seller, this Agreement is a
legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except as such enforceability may be limited by the Enforceability Limitations.
ARTICLE V
COVENANTS
Section 5.1
Reasonable Best Efforts
. Subject to the terms and conditions set forth herein (including
Section
1.7
) and in the Purchase Agreement, each of Seller and the Company will cooperate with each other
and use their respective reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with each other in doing, all things necessary, proper or advisable to consummate and make
effective the Reorganization Transactions as soon as practicable and cause the conditions to the consummation of the Closing set forth in
Article VI
to be satisfied. Without limiting any other provision of this Agreement or the Purchase
Agreement, each of Seller and the Company will cooperate with each other and use their respective reasonable best efforts, prior to the Closing Date, to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with each other in doing, all things necessary, proper or advisable to obtain or deliver all Consents of all Governmental Authorities and Third Parties that may be or become necessary, proper or advisable for the contribution, transfer,
assignment, conveyance and delivery of the Transferred Assets;
provided
, that neither Seller nor the Company shall be required to pay any consent or other similar fee to obtain the Consent of any Person under any Contract.
Section 5.2
Further Actions; Post-Closing Cooperation; Transition Services
.
(a) Subject to the terms and conditions of this Agreement, at any time or from time to time after the Closing, each of Seller and the Company
shall execute and deliver such other documents and instruments, provide such materials and information and take such other actions as may reasonably be necessary, proper or advisable, to the extent permitted by Law, to fulfill its obligations under
this Agreement or to otherwise effect the Reorganization Transactions.
(b) Following the Closing, each Party will, and will cause its
Subsidiaries to, use reasonable best efforts (subject to, and in accordance with applicable Law) to deliver to the other Party copies of any mail, packages or other communications relating to the businesses of the other Party received by it or any
of its Subsidiaries. Without limiting the generality of the foregoing, where the cooperation of Third Parties would be necessary in order for a Party to completely fulfill its obligations under this Agreement, such Party will use reasonable best
efforts to cause such Third Parties to provide such cooperation.
Exhibit B-1-9
(c) If Seller or the Company or any of its respective successors or assigns (i) consolidates with
or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, (ii) transfers all or a substantial portion of its properties and assets to any Person, or (iii) is dissolved, then,
in each case, Seller or the Company, as applicable, shall make proper provision, as a condition precedent to any such transaction, so that its successors and assigns or transferees, as applicable, shall expressly assume all of its obligations under
this Agreement.
(d) In the event that either Seller or Purchaser identifies any services provided by Seller to the Business in the six
(6) months prior to the Closing Date, or provided by the Business to Seller in the six (6) months prior to the Closing Date, in each case that are necessary for the operation of the business of Seller or the Business, as applicable, following the
Closing Date in substantially the same manner as such business was conducted during the six (6) months prior to the Closing Date (any such service, a
Transition Service
and collectively, the
Transition
Services
), upon the request of Seller or Purchaser, Seller and Purchaser shall use commercially reasonable efforts to negotiate and agree on the terms of a customary transition services agreement to be effective upon the Closing pursuant
to which such Transition Services will be provided.
Section 5.3
Employees
.
(a) Seller and the Company shall take all steps necessary to cause the Business Employees to become employed by the Company or one of its
Affiliates effective immediately upon the Closing, without any action required by any such Business Employee. To the extent an offer of employment is required to be made to a Business Employee (each, an
Offered Employee
)
under applicable Law or as a result of any Business Employee having an existing employment agreement with Seller pursuant to the immediately preceding sentence or
Section
1.1
for the transfer of employment of such Business
Employee to be effective upon the Closing, not less than ten (10) days prior to the Closing, the Company (or another Business Subsidiary) shall make an offer of employment to each such Business Employee for such transfer of employment to be
effective upon the Closing (each (i) Offered Employee who accepts the Companys offer of employment and commences employment with the Company or another Business Subsidiary upon the Closing and (ii) other Business Employee whose
employment is transferred to the Company upon the Closing, a
Transferred Employee
).
(b) Subject and in addition to the
requirements of any applicable Law relating to employees acquired rights, the Companys offer of employment to each Offered Employee shall be for, and the Company shall or shall cause its Affiliates to provide to each of the Transferred
Employees upon the Closing, the same (i) position, title, duties and other terms and conditions of employment in effect for such Transferred Employee immediately prior to the Closing; (ii) base salary or base wage rate in effect for such
Transferred Employee immediately prior to the Closing; and (iii) employee benefits in effect for such Transferred Employee immediately prior to the Closing.
(c) If any Offered Employee does not accept the offer of employment from the Company or one of its Affiliates and does not resign his or her
employment with Seller, such Offered Employee, to the extent permissible under applicable Law, shall be deemed to have resigned his or her employment with Seller effective as of the Closing or such earliest date thereafter as may be required or
allowed by Law, and Seller shall terminate or cause to be terminated the employment of such Offered Employee so as to take effect upon the Closing, in accordance with all applicable Laws, or in such cases that Seller is prohibited by applicable Law
to terminate or cause to be terminated any such Offered Employees employment as of the Closing, Seller shall terminate or cause to be terminated any such Offered Employees employment so as to take effect as of the first possible date
following the Closing, in accordance with the requirements of applicable Law. Seller shall cooperate with, and use reasonable best efforts to assist, the Company in its efforts to secure employment arrangements satisfactory to the Company with the
Offered Employees. As applied to the Transferred Employees employment with any Business Subsidiary following the Closing, Seller shall not enforce against any Transferred Employee (or any Business Subsidiary) any confidentiality (but only to
the extent an alleged breach of confidentiality is related to the Business) or any customer or client non-solicitation or non-compete obligations to the extent related to the
Exhibit B-1-10
Business;
provided
,
however
, that any employee non-solicitation covenant applicable to any Transferred Employees that prohibits such Transferred Employee from soliciting employees
of Seller or its Affiliates who are not Business Employees shall remain in place pursuant to its terms.
(d) The Company shall adopt the
alternate procedure for preparing and filing IRS Forms W-2 (Wage and Tax Statements), W-4 (Employees Withholding Allowance Certificate) and W-5 (Earned Income Credit Advance Payment Certificate) as described in Revenue Procedure
2004-53 (or any similar procedure under applicable state, local or foreign Law) with respect to the Transferred Employees for the calendar year in which the Closing occurs.
(e) Seller shall, at its own expense, give all notices and other information required to be given by Seller to the Transferred Employees, any
Employee Representative, and any applicable Governmental Authority and comply with any obligation to consult with any Business Employees or Employee Representative under the WARN Act, the National Labor Relations Act, the Code, COBRA and other
applicable Laws in connection with the execution of this Agreement or any other Transaction Document or the consummation of the Transfers and their impact on any Business Employee.
Section 5.4
Immigration Matters
. The Company will, or will cause one or more of its Subsidiaries
to, serve as a sponsoring employer for U.S. immigration purposes with respect to the Transferred Employees, and the Company will, or will cause one or more of its Subsidiaries to, assume all immigration-related Liabilities that have arisen or will
hereafter arise in connection with the submission of petitions to the United States Citizenship and Immigration Service requesting the grant of employment-based non-immigrant and immigrant visa benefits on behalf of Transferred Employees. The
Company will, or will cause one or more of its Subsidiaries to, apply for such visas as soon as practicable following the Closing Date if required. The Parties intend that the Company and its Subsidiaries (by agreeing to hire the Transferred
Employees, and/or agreeing, as a sponsoring employer, to assume the immigration-related Liabilities described in this
Section
5.4
) will be considered the successor-in-interest to the Business for U.S. immigration purposes.
A correct and complete list of each Transferred Employee whose transfer of employment to the Company may require submission of a petition pursuant to this
Section
5.4
as of the date hereof has been provided to Purchaser.
Section 5.5
Tax Matters
.
(a)
Tax Indemnification
.
(i) Effective as of and after the Closing Date, Seller shall pay or cause to be paid, and shall indemnify, defend and hold
harmless the Company and each of its Affiliates (collectively, the
Company Tax Indemnified Parties
) from and against, without duplication, (i) any Excluded Tax Liability; (ii) any Taxes for which Seller is responsible pursuant to
Section
5.5(b)
or Section 4.09(i) of the Purchase Agreement; (iii) any Taxes arising out of or resulting from any breach by Seller, or by the Company prior to the closing of the Sale, of any provision of this Agreement or
any provision of
Section
4.16
of the Purchase Agreement (Tax Matters); and (iv) any costs and expenses, including reasonable legal fees and expenses, attributable to any item described in the foregoing clauses (i) through
(iii).
(ii) Effective as of and after the Closing Date, the Company shall pay or cause to be paid, and shall indemnify,
defend and hold harmless Seller and each of its Affiliates (collectively, the
Seller Tax Indemnified Parties
) from and against, without duplication, (i) any Assumed Tax Liability; (ii) any Taxes for which the Company is
responsible pursuant to
Section
1.7(c)
or
Section 5.5(b)(ii)
; (iii) any Taxes arising out of or resulting from any breach by Purchaser, or the Company following the closing of the Sale, of any provision of this
Agreement or any provision of Section 4.16 of the Purchase Agreement (Tax Matters); and (iv) any costs and expenses, including reasonable legal fees and expenses, attributable to any item described in the foregoing clauses (i) through (iii).
(b)
Transfer Taxes; Foreign Sale Restructuring Taxes
. Notwithstanding anything herein to the contrary,
Exhibit B-1-11
(i) Seller shall be responsible for, and shall timely pay or cause to be timely
paid, all Transfer Taxes arising out of or incurred in connection with the Reorganization Transactions (other than any such Transfer Taxes that are Foreign Sale Restructuring Taxes, which shall be governed by
Section
5.5(b)(ii)
) and shall prepare and timely file, or cause to be prepared and timely filed, all necessary documentation and Tax Returns required to be filed with respect to such Transfer Taxes.
(ii) Seller and the Company shall each be responsible for fifty percent (50%) of all Foreign Sale Restructuring Taxes. With
respect to any Foreign Sale Restructuring Taxes that are Transfer Taxes, Seller and the Company shall cooperate to (x) timely pay or cause to be timely paid such Transfer Taxes and (y) prepare and timely file, or cause to be prepared and timely
filed, all necessary documentation and Tax Returns required to be filed with respect to such Transfer Taxes.
(c)
[Intentionally
Omitted
].
(d)
Tax Returns
.
(i) Following the Closing Date, the Company shall prepare or shall cause to be prepared (A) any combined, consolidated or
unitary Tax Return that includes Seller or any of its Affiliates (other than the Business Subsidiaries), on the one hand, and any of the Business Subsidiaries (or any former Subsidiaries of Seller), on the other hand (a
Combined Tax
Return
), and (B) any Tax Return (other than any Combined Tax Return) that is required to be filed by or with respect to any of the Business Subsidiaries for any taxable period (a
Company Separate Tax Return
). All
Combined Tax Returns and all Company Separate Tax Returns, in each case, to the extent relating to the Seller Entities, the Excluded Assets, the Retained Liabilities, the Retained Business and/or the Excluded Tax Liabilities shall be prepared in a
manner consistent with past practices of Seller or its relevant Subsidiary, as and where applicable, except to the extent otherwise required by applicable Law. The Company shall deliver to Seller a draft copy of each Company Separate Tax Return that
reflects any Taxes for which Seller is responsible under this Agreement (a
Mixed Company Separate Tax Return
) and each Combined Tax Return at least thirty (30) days prior to the due date therefor (taking into account any
extensions). The Company shall (and shall cause its Affiliates to) revise each such Combined Tax Return and Mixed Company Separate Tax Return to reflect any reasonable comments requested by Seller, provided such comments relate to Taxes for which
Seller is responsible under this Agreement and are received from Seller not later than fifteen (15) days before the due date for such Tax Return (taking into account any extensions for filing such Tax Return);
provided
,
however
, that
the Company shall not be required to (or to cause its Affiliates to) revise any such Tax Return if such revision would or would reasonably be expected to, (x) result in an increase in the amount of Taxes for which the Company is responsible pursuant
to this Agreement or the Tax Liability of Purchaser or any of its Affiliates or (y) reflect a position for which there is not substantial authority within the meaning of Treasury Regulations Section 1.6662-4(d) (or any similar provision
or standard under any applicable state, local or foreign Tax Law).
(1) The Company shall deliver, or cause to be
delivered, to Seller a finalized version of each Combined Tax Return and each Company Separate Tax Return that is required by applicable Law to be filed by Seller or any of its Affiliates at least five (5) Business Days prior to the due date for
filing such Tax Return (taking into account extensions), together with payment for any Taxes shown to be due on such Tax Return that are the responsibility of the Company under this Agreement, and Seller shall timely file or cause to be timely filed
each such Tax Return and timely pay or cause to be paid all Taxes shown as due on such Tax Return.
(2) The Company shall
timely file or cause to be timely filed any Combined Tax Return and any Mixed Company Separate Tax Return that is required by applicable Law to be filed by the Company or any of its Affiliates (taking into account extensions), and shall provide
Seller with a finalized copy thereof promptly after such Combined Tax Return or Mixed Company Separate Tax Return is filed. At least five (5) Business Days prior to the due date for filing any such Tax Return (taking into account extensions), Seller
shall pay to the Company the amount of any Taxes
Exhibit B-1-12
shown to be due on such Tax Return that are the responsibility of Seller under this Agreement, and the Company shall timely pay or cause to be paid all Taxes shown as due on such Tax Return.
(3) Seller shall not, and shall not permit any of its Affiliates to, amend or revoke any Combined Tax Return or any Company
Separate Tax Return (or any notification or election relating thereto) without the prior written consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed), except to the extent such amendments or revocations
relate exclusively to Taxes for which Seller is responsible under this Agreement. At the Companys request, Seller shall (or shall cause its Affiliates to) amend or revoke any Combined Tax Return or any Company Separate Tax Return (or any
notification or election relating thereto) as directed by the Company, but only if such Tax Return is permitted to be amended or revoked by Seller or its Affiliates under applicable Law;
provided
, that, except to the extent such amendments or
revocations relate exclusively to Taxes for which the Company is responsible under this Agreement, Seller consents to such amendment or revocation (which consent shall not be unreasonably withheld, conditioned or delayed). The Company shall
not, and shall not permit any of its Affiliates to, amend or revoke any Combined Tax Return or any Mixed Company Separate Tax Return (or any notification or election relating thereto) without the prior written consent of Seller (which consent shall
not be unreasonably withheld, conditioned or delayed), except to the extent such amendments or revocations relate exclusively to Taxes for which the Company is responsible under this Agreement.
(ii) Except for any Tax Return required to be prepared (or caused to be prepared) by the Company pursuant to
Section
5.5(d)(
i
)
, Seller shall prepare or shall cause to be prepared all Tax Returns required to be filed by any of the Seller Entities (a
Seller Separate Tax Return
). All Seller Separate
Tax Returns, to the extent relating to the Business Subsidiaries, the Transferred Assets, the Assumed Liabilities, the Business and/or the Assumed Tax Liabilities shall be prepared in a manner consistent with past practices of Seller or its relevant
Subsidiary, as and where applicable, except to the extent otherwise required by applicable Law. Seller shall deliver to the Company a draft copy of each Seller Separate Tax Return that reflects any Taxes for which the Company is responsible under
this Agreement (a
Mixed Seller Separate Tax Return
) at least thirty (30) days prior to the due date therefor (taking into account any extensions for filing such Tax Return). Seller shall (and shall cause its Affiliates to)
revise each such Mixed Seller Separate Tax Return to reflect any reasonable comments requested by the Company, provided such comments relate to Taxes for which the Company is responsible under this Agreement and are received from the Company not
later than fifteen (15) days before the due date for such Tax Return (taking into account any extensions for filing such Tax Return);
provided
,
however
, that Seller shall not be required to (or to cause its Affiliates to) revise any
such Tax Return if such revision would or would reasonably be expected to, (x) result in an increase in the amount of Taxes for which Seller is responsible pursuant to this Agreement or (y) reflect a position for which there is not substantial
authority within the meaning of Treasury Regulations Section 1.6662-4(d) (or any similar provision or standard under any applicable state, local or foreign Tax Law).
(1) Seller shall timely file or cause to be timely filed any Mixed Seller Separate Tax Return (taking into account
extensions), and shall provide the Company with a finalized copy thereof promptly after such Mixed Seller Separate Tax Return is filed. At least five (5) Business Days prior to the due date for filing any such Tax Return (taking into account
extensions), the Company shall pay to Seller the amount of any Taxes shown to be due on such Tax Return that are the responsibility of the Company under this Agreement and Seller shall timely pay or cause to be paid all Taxes shown as due on such
Tax Return.
(2) Seller shall not, and shall not permit any of its Affiliates to, amend or revoke any Mixed Seller
Separate Tax Return (or any notification or election relating thereto) without the prior written consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed), except to the extent such amendments or revocations
relate exclusively to Taxes for which Seller is responsible under this Agreement. At the Companys request, Seller shall (or shall
Exhibit B-1-13
cause its Affiliates to) amend or revoke any Mixed Seller Separate Tax Return (or any notification or election relating thereto) as directed by the Company, but only if such Tax Return is
permitted to be amended or revoked by Seller or its Affiliates under applicable Law;
provided
, that, except to the extent such amendments or revocations relate exclusively to Taxes for which the Company is responsible under this Agreement,
Seller consents to such amendment or revocation (which consent shall not be unreasonably withheld, conditioned or delayed).
(e)
Tax
Refunds, Tax Benefits and Tax Assets
.
(i) Except as otherwise provided in this
Section 5.5(e)
, (x) Seller shall
be entitled to any Refund of Taxes for which Seller is responsible pursuant to this Agreement and (y) the Company shall be entitled to any Refund of Taxes for which the Company is responsible pursuant to this Agreement. A Party receiving a Refund to
which the other Party is entitled pursuant to this Agreement shall pay the amount of the Refund to which such other Party is entitled within fifteen (15) days after the receipt of the Refund. To the extent that a Party realizes a Refund by
applying or causing to be applied an overpayment of Taxes as a credit toward or a reduction in Taxes otherwise payable (or a Governmental Authority requires such application in lieu of a refund) and such overpayment of Taxes, if received as a
Refund, would have been payable by such Party to the other Party pursuant to this
Section
5.5(e)(
i
)
, such Party shall pay such amount to the other Party within fifteen (15) days of filing the Tax Return for
which such overpayment is applied to reduce Taxes otherwise payable.
(ii) In the event that, as a result of any audit
adjustment (or adjustment in any other Tax Proceeding) made with respect to a Tax Item attributable to Taxes for which one Party is responsible under this Agreement, the other Party (the
Benefited Party
) or any of its Affiliates
Actually Realizes a Tax Benefit with respect to Taxes for which such Benefited Party is responsible under this Agreement, then the Benefited Party shall pay to the other Party the amount of such Tax Benefit within fifteen (15) days after such Tax
Benefit is Actually Realized. To the extent that any such Tax Benefit is reflected on a Tax Return for which the Benefited Party has filing responsibility pursuant to
Section
5.5(d)
, the Benefited Party shall, or shall
cause its relevant Affiliate to, claim any Tax Benefit to which it may be entitled as a result of any such audit adjustment (or adjustment in any other Tax Proceeding).
(iii) To the extent that any Seller Tax Asset is utilized to reduce Taxes for which the Company is responsible pursuant to this
Agreement or as a result of which the Company or any of its Affiliates otherwise Actually Realizes a Tax Benefit, the Company shall pay to Seller the amount of such reduction in Taxes or Tax Benefit within fifteen (15) days after such Tax Benefit is
Actually Realized;
provided
, that the Company shall not be required to make any payments to the Seller in respect of any such utilization of any such Seller Tax Asset to the extent that the amount of such utilized Seller Tax Asset, together
with the aggregate amount of all Seller Tax Assets previously utilized by the Company to reduce Taxes for which the Company is responsible pursuant to this Agreement, is less than or equal to the aggregate amount of all Company Tax Assets utilized
to offset any income or gain required to be recognized by any of the Seller Entities as a result of the Sale, the Foreign Sale, the Transfers, the Foreign Business Subsidiary Transfers or the SaleCo2 Contribution. To the extent that any Company
Tax Asset is utilized to reduce Taxes for which Seller is responsible pursuant to this Agreement or as a result of which Seller or any of its Affiliates otherwise Actually Realizes a Tax Benefit, Seller shall pay to the Company the amount of such
reduction in Taxes or other Tax Benefit within fifteen (15) days after such Tax Benefit is Actually Realized;
provided
, that, notwithstanding anything to the contrary in this
Section 5.5
, any Tax Asset of any Seller Entity or of any
Business Subsidiary existing as of immediately prior to the closing of the Sale shall first be utilized to offset any income or gain required to be recognized by any of the Seller Entities as a result of the Sale, the Foreign Sale, the Transfers,
the Foreign Business Subsidiary Transfers or the SaleCo2 Contribution, and Seller shall not be required pursuant to this
Section 5.5(e)
to make any payments to the Company in respect of any such utilization of any such Tax Assets.
Exhibit B-1-14
(iv) If any Refund, Tax Benefit or Tax Asset in respect of which a Party made a
payment to the other Party pursuant to this
Section 5.5(e)
is subsequently disallowed or reduced, such other Party shall promptly repay the amount of such Refund, Tax Benefit or Tax Asset received, to the extent disallowed or reduced, to the
Party that made such payment, together with any interest, penalties or other charges imposed thereon by the applicable Governmental Authority.
(f)
Timing of Payments
. Except to the extent otherwise provided in this
Section 5.5
, any indemnity payment required to be made
pursuant to this
Section
5.5
shall be made within thirty (30) days after the indemnified Person gives notice to the indemnifying Party in accordance with the procedures set forth in
Section
7.4(a)
.
(g)
Cooperation in Tax Matters
.
(i) In connection with the preparation of any Tax Return pursuant to
Section
5.5(d)(i)
, Seller shall
assist and cooperate with the Company by preparing and providing to the Company pro forma Tax Returns for the Seller Entities in respect of the Excluded Assets, Retained Liabilities and/or the Retained Business, as appropriate, and any related
supporting documentation, statements and workpapers. Any such pro forma Tax Returns shall be prepared in accordance with past practices, accounting methods, elections and conventions of Seller or its applicable Subsidiary, unless otherwise required
by Law. At its option, the Company may engage an accounting firm of its choice to review any such pro forma Tax Return and any supporting documentation, statements and workpapers submitted to the Company.
(ii) The Parties agree to furnish or cause to be furnished to one another, as promptly as practicable, information in the
possession of such Party or its Affiliates that is reasonably requested by such other Party in order to (A) prepare and file Tax Returns, (B) determine liabilities for Taxes or any indemnification obligation under this
Section
5.5
or any right to a Refund or other Tax Benefits, (C) make any Tax election or (D) prepare for and respond to any Tax Proceeding. Such cooperation and information shall include providing reasonably requested
powers of attorney, copies of all relevant portions of relevant Tax Returns, together with all relevant portions of relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by
Governmental Authorities and relevant records concerning ownership and Tax basis of property and other information, which any such party may possess. Each Party shall make its employees reasonably available on a mutually convenient basis at its
cost to provide an explanation of any documents or information so provided. Each Party shall, and shall cause its Affiliates to, retain all Tax Returns, schedules and work papers and all material records and other documents that could reasonably be
expected to be requested pursuant to this
Section 5.5(g)
until the later of (x) the expiration of the applicable statute of limitations (taking into account any extensions) under applicable Law for the Tax periods to which the Tax Returns or
other documents relate or (y) eight (8) years following the due date for such Tax Returns.
(h)
Tax Proceedings
.
(i) In the event that any Party (the
Informed
Party
) or any of its Affiliates receives notice of any
Tax Proceeding that could give rise to an indemnification obligation of the other Party under this
Section
5.5
or could otherwise result in Tax liability for such other Party or its Affiliates, the Informed Party shall
provide prompt written notice to the other Party of such Tax Proceeding (but in all events no later than ten (10) days following receipt of such notice);
provided
, that failure by the Informed Party to so promptly notify the other Party shall
not reduce such other Partys indemnification obligation hereunder, except to the extent such other Partys ability to defend against such Tax Proceeding is actually and materially prejudiced by such failure. Such notice shall include a
copy of the relevant portion of any correspondence received from the Governmental Authority or other party instituting such Tax Proceeding and shall specify in reasonable detail the basis for such Tax Proceeding if not readily apparent from such
correspondence.
Exhibit B-1-15
(ii) In the case of any Tax Proceeding with respect to any Combined Tax Return,
any Company Separate Tax Return or any Seller Separate Tax Return, the Controlling Party shall have the exclusive right to conduct such Tax Proceeding;
provided
,
however
, that to the extent such Tax Proceeding could reasonably be
expected to materially affect the amount of Taxes for which the Non-Controlling Party is responsible under this Agreement, the Controlling Party shall, and shall cause its Affiliates to, (A) provide the Non-Controlling Party with a timely and
reasonably detailed account of each stage of such Tax Proceeding, (B) consult with the Non-Controlling Party before taking any significant action in connection with such Tax Proceeding, (C) consult with the Non-Controlling Party with respect to any
written materials prepared or furnished in connection with such Tax Proceeding and, in the case of clauses (B) and (C), (1) offer the Non-Controlling Party an opportunity to comment before taking such action or submitting such materials and (2) take
into account any such comments in good faith in taking such action or in preparing and furnishing such materials, (D) defend such Tax Proceeding diligently and in good faith as if it were the only party in interest in connection with such Tax
Proceeding, and (E) not settle, compromise or abandon any portion of such Tax Proceeding exclusively relating to Taxes for which the Non-Controlling Party may be responsible without obtaining the prior written consent of the Non-Controlling Party
(which consent shall not be unreasonably withheld, conditioned or delayed). For purposes of this Agreement,
Controlling Party
shall mean Seller if the Seller Tax Indemnified Parties are reasonably expected to bear the greater
Tax liability in connection with such Tax Proceeding, or the Company if the Company Tax Indemnified Parties are reasonably expected to bear the greater Tax liability in connection with such Tax Proceeding (in each case taking into account the
indemnification obligations arising under this Section 5.5); and
Non-Controlling Party
means whichever of Seller or the Company is not the Controlling Party with respect to such Tax Proceeding, as the case may be. Notwithstanding
anything to the contrary in this
Section
5.5(h)(ii)
, if in the case of any Combined Tax Return, Mixed Company Separate Tax Return or Mixed Seller Separate Tax Return, there would be different Controlling Parties with
respect to two or more issues in such Tax Proceeding if such issues were treated as separate Tax Proceedings for purposes of this
Section
5.5(h)(ii)
, each such issue shall be treated as a separate Tax Proceeding for
purposes of this
Section
5.5(h)(ii)
to the extent permitted by Law;
provided
,
however
, that if such treatment is not permitted by Law or is otherwise impracticable, the Controlling Party shall mean
the Company if such Tax Proceeding relates to a Combined Tax Return or a Company Separate Tax Return, and Seller if such Tax Proceeding relates to a Seller Separate Tax Return.
(i)
Company Purchase Price Allocation
.
(i) The Parties agree to allocate, and, as applicable, to cause their applicable Affiliates to allocate, (x) the Foreign Sale
Purchase Price (as determined under Section 1.06 of the Purchase Agreement) to the Foreign Equity Interests and (y) the Company Purchase Price, among the assets of the Section 338(h)(10) Subsidiaries (other than the Company) and any other
relevant assets acquired (or deemed acquired by the Company for U.S. federal income tax purposes pursuant to this Agreement) (other than the Foreign Equity Interests) in accordance with the Company Purchase Price Allocation, as determined under
Section 4.16(a) of the Purchase Agreement, in each case, which shall be conclusive and binding on the parties. It is agreed and understood that the Parties shall adjust the Company Purchase Price Allocation in accordance with any adjustment to
the same made pursuant to Section 4.16(a) of the Purchase Agreement.
(ii) Each of the Company and Seller shall timely file
IRS Form 8594 and all U.S. federal, state, local and foreign Tax Returns in accordance with the Company Purchase Price Allocation. The Company Purchase Price Allocation, as determined under Section 4.16(a) of the Purchase Agreement, shall be
used in preparing IRS Form 8883 (and any similar forms under applicable state and local Law). Except to the extent otherwise required pursuant to a determination within the meaning of Section 1313(a) of the Code (or any similar provision
of state, local or foreign Law), the Company, Seller and their respective Affiliates shall not take any Tax position that is inconsistent with the
Exhibit B-1-16
Company Purchase Price Allocation on any Tax Return (including any of the Reorganization 338(h)(10) Forms), in any Tax Proceeding or otherwise.
(j)
Reorganization 338(h)(10) Elections
. At Purchasers request, the Company and Seller shall (or shall cause their relevant
Affiliates to) make and timely file joint elections under Section 338(h)(10) of the Code (and any corresponding elections under applicable state or local Law) with respect to the Section 338(h)(10) Subsidiaries (other than the Company) (the
Reorganization 338(h)(10) Elections
and all forms, attachments and schedules necessary to effectuate the Reorganization 338(h)(10) Elections, including IRS Form 8023, IRS Form 8883 and any similar forms under applicable state and
local Law, collectively, the
Reorganization 338(h)(10) Forms
). For the avoidance of doubt, the Reorganization 338(h)(10) Elections shall be made with respect to the same Section 338(h)(10) Subsidiaries (other than the Company)
with respect to which the Company Section 338(h)(10) Elections are made pursuant to the Purchase Agreement. All Reorganization 338(h)(10) Elections, Reorganization 338(h)(10) Forms and any related forms, Tax Returns, elections, schedules and
other documents shall be consistent with the Company Section 338(h)(10) Elections, the Company Section 338(h)(10) Forms, the Company Purchase Price Allocation as determined under Section 4.16(a) of the Purchase Agreement and any other forms, Tax
Returns, elections, schedules and other documents prepared pursuant to Section 4.16(b) of the Purchase Agreement. The rights and obligations of Seller and Purchaser set forth in Section 4.16(b) of the Purchase Agreement with respect to the
Company Section 338(h)(10) Elections shall apply
mutatis mutandis
to Seller and the Company, respectively, with respect to the Reorganization 338(h)(10) Elections.
(k)
Other Elections
. At Purchasers election, the Company shall make or cause its Affiliates to make (and nothing in this
Agreement shall prohibit the Company from so making or causing to be made) an election under Section 338(g) of the Code with respect to the acquisition or deemed acquisition by the Company pursuant to this Agreement of any Eligible Foreign Business
Subsidiary. Except for (x) the Reorganization 338(h)(10) Elections, (y) the Company Section 338(h)(10) Elections and (z) the elections under Section 338(g) of the Code described in the immediately preceding sentence, the Company shall not, and shall
cause its Affiliates not to, make any election under Section 338 of the Code, or any comparable provision of state, local or foreign Law, with respect to any of the Business Subsidiaries without the prior written consent of Seller (which
consent shall not be unreasonably withheld, conditioned or delayed).
(l)
Tax Matters Coordination and
Survival
. Notwithstanding anything to the contrary in this Agreement, indemnification and other payments in respect of Taxes and the procedures relating thereto shall be governed exclusively by this
Section
5.5
and
the provisions of
Article VII
(other than
Section
7.4(a)
,
Section
7.4(g)
and
Section
7.6
) shall not apply. The indemnification and other payment obligations
contained in this
Section
5.5
shall survive the Closing Date until sixty (60) days following the expiration of the applicable statute of limitations;
provided
that if written notice of a claim has been given to the
indemnifying Party in good faith prior to the end of this period, then the indemnification obligations with respect to such claim shall survive until such claim is finally resolved. If the Foreign Sale occurs, SaleCo2 shall be responsible for any
indemnification or other payment obligation of the Company pursuant to this
Section 5.5
or
Article VII
to the extent relating to any of the Business Subsidiaries transferred to SaleCo2 pursuant to the SaleCo2 Contribution (for the
avoidance of doubt, nothing in this sentence shall relieve the Company of any of its obligations under this Agreement).
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1
Conditions to Closing
. The respective obligations of each Party to consummate the
Closing are subject to the prior or substantially concurrent satisfaction or waiver of each of the conditions to the closing of the Sale set forth in Article V of the Purchase Agreement (other than the condition set forth in Section 5.01(d) of the
Purchase Agreement and conditions that, by their terms, cannot be satisfied until the closing of the Sale, which conditions the Parties are reasonably satisfied will be satisfied or waived at the closing of the Sale).
Exhibit B-1-17
ARTICLE VII
MUTUAL RELEASES; INDEMNIFICATION
Section 7.1
Release of Pre-Distribution Claims
.
(a) Except as provided in
Section
7.1(c)
,
Section
7.1(e)
and
Section
7.1(g)
, or with respect to claims arising from fraud, effective as of the Closing, the Company does hereby, on behalf of itself and each Business Subsidiary, release and forever discharge each Seller Indemnitee,
from all Liabilities whatsoever to any Business Subsidiary, whether at law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, existing or arising from any acts or events
occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed at or before the Closing, including in connection with the Transactions.
(b) Except as provided in
Section
7.1(c)
,
Section
7.1(e)
and
Section
7.1(g)
, effective as of the Closing, Seller does hereby, for itself and each other Seller Entity, release and forever discharge each Company Indemnitee from all Liabilities whatsoever to any Seller Entity, whether
at law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed
to occur or any conditions existing or alleged to have existed at or before the Closing, including in connection with the Transactions.
(c) Nothing contained in
Section
7.1(a)
or
Section
7.1(b)
will impair any right of any
Person to enforce this Agreement or any Contracts that are specified in, or contemplated to continue pursuant to this Agreement. Without limiting the foregoing, nothing contained in
Section
7.1(a)
or
Section
7.1(b)
will release any Person from:
(i) any Liability assumed by such Person in
accordance with, or any other Liability of such Person under, this Agreement or any other Transaction Document;
(ii) any
Liability that such Person may have with respect to indemnification or contribution pursuant to this Agreement for claims brought by third Persons, which Liability will be governed by the provisions of this
Article VII
;
(iii) any right or obligation that such Person may have pursuant to
Section
5.5
;
(iv) any unpaid accounts payable or receivable (to the extent not settled pursuant to the terms of this Agreement) arising from
or relating to the sale, provision, or receipt of goods, payment for goods, property or services purchased, obtained or used in the ordinary course of business by any Seller Entity from any Business Subsidiary, or by any Business Subsidiary from any
Seller Entity, to the extent that such unpaid accounts payable or receivable are taken into account in the determination of Net Working Capital; or
(v) any Liability, the release of which would result in the release of any Person other than an Indemnitee;
provided
,
that the Parties agree not to bring suit, or permit any of their Subsidiaries to bring suit, against any Indemnitee with respect to such Liability.
(d) The Company will not make, and will not permit any other Business Subsidiary to make, any claim or demand, or commence any Action
asserting any claim or demand, including any claim of contribution or indemnification, against any Seller Indemnitee with respect to any Liabilities released pursuant to
Section
7.1(a)
. Seller will not make, and will not
permit any Seller Entity to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against any Company Indemnitee with respect to any Liabilities released pursuant
to
Section
7.1(b)
.
Exhibit B-1-18
(e) Nothing contained in
Section
7.1(a)
or
Section
7.1(b)
will release or discharge the Seller Entities from any Liability arising out of any Action brought by securityholders of Seller against Seller and/or its officers and/or directors (including on a derivative
basis) relating to the Transactions or otherwise.
(f) The Parties intend
Section
7.1(a)
and
Section
7.1(b)
to establish mutual and general releases, subject to the terms hereof. The releases thereunder include, to the maximum extent permitted by Law, and subject to the terms hereof, unknown claims and Liabilities.
Each Party hereto hereby acknowledges that it has read and is familiar with California Civil Code Section 1542, which states as follows:
A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
Subject to the terms of
Section
7.1(a)
and
Section
7.1(b)
, each of the Parties does hereby expressly
waive and relinquish all rights and benefits which it has or may have under California Civil Code Section 1542 (or any similar Law of any other country, state, territory or jurisdiction) to the fullest extent that it may lawfully waive such rights
and benefits. In connection with the waiver and relinquishment set forth in this
Section
7.1(f)
, each of the Parties acknowledges that it may hereafter discover facts in addition to and/or different from those now
known or believed to be true, but that notwithstanding that fact, it is their respective intention hereby to fully, finally and forever release all of the claims and Liabilities released herein, known or unknown, suspected or unsuspected, which now
exist, may in the future exist or heretofore have existed between each respective Party, on the one hand, and those Parties and Persons granted releases by it, on the other hand, and that in furtherance of such intention, the releases given herein
will be and remain in effect as full and complete releases, notwithstanding the discovery or existence of any such additional or different facts.
(g) Nothing contained in
Section
7.1(a)
or
Section
7.1(b)
will release any Seller Entity
from honoring its obligations to indemnify, whether pursuant to a Seller Entitys certificate of incorporation, bylaws, similar organization document or any indemnification agreement, each person who is or was a director, officer or employee of
any Business Subsidiary prior to the Closing with respect to matters arising prior to the Closing; it being understood that (other than with respect to indemnification obligations to any such person in their capacity as a director, officer or
employee of Seller, which are expressly agreed to be Retained Liabilities) such Seller Entitys indemnification obligations will be secondary to Purchasers and the Companys obligations as and to the extent provided pursuant to
Section 4.08 of the Purchase Agreement, other than with respect to acts or omissions arising out of the Excluded Assets or the Retained Liabilities. To the extent the underlying Liability giving rise to such indemnification obligation is not an
Excluded Asset or a Retained Liability, the Company shall indemnify Seller for such Liability (including Sellers costs to indemnify the director, officer or employee) in accordance with the provisions set forth in this
Article
VII
. To the extent the underlying Liability giving rise to such indemnification obligation is an Excluded Asset or a Retained Liability (or is an indemnification obligation to any such person in their capacity as a director, officer or
employee of Seller), Seller shall indemnify the Company for such Liability (including their costs to indemnify the director, officer or employee) in accordance with the provisions set forth in this
Article VII
.
Section 7.2
Indemnification by
the Company
. The Company will indemnify, defend and
hold harmless, the Seller Indemnitees from and against all Losses of the Seller Indemnitees to the extent relating to, arising out of or resulting from any of the following (without duplication):
(a) any Transferred Asset or Assumed Liability, including the failure of the Company or any other Business Subsidiary to satisfy, pay, perform
and discharge when due any Assumed Liabilities in accordance with their respective terms, whether prior to, at or after the Closing; and
(b) any breach by the Company following the Closing of any provision of this Agreement,
Exhibit B-1-19
in each case, regardless of when or where the loss, claim, accident, occurrence, event or happening giving rise
to the Loss took place, or whether any such loss, claim, accident, occurrence, event or happening is known or unknown, or reported or unreported and regardless of whether such loss, claim, accident, occurrence, event or happening giving rise to the
Loss existed prior to, on or after the Closing Date or relates to, arises out of or results from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to, on or after the Closing Date.
Section 7.3
Indemnification by
Seller
. Seller will indemnify, defend and hold harmless
the Company Indemnitees from and against all Losses of the Company Indemnitees to the extent relating to, arising out of or resulting from any of the following (without duplication):
(a) any Excluded Asset or Retained Liability, including the failure of Seller or any other Person to satisfy, pay, perform and discharge when
due any Retained Liabilities in accordance with their respective terms, whether prior to, at or after the Closing; and
(b) any breach by
Seller of any provision of this Agreement, or any breach by the Company prior to the Closing of any provision of this Agreement,
in each case, regardless
of when or where the loss, claim, accident, occurrence, event or happening giving rise to the Loss took place, or whether any such loss, claim, accident, occurrence, event or happening is known or unknown, or reported or unreported and regardless of
whether such loss, claim, accident, occurrence, event or happening giving rise to the Loss existed prior to, on or after the Closing Date or relates to, arises out of or results from actions, inactions, events, omissions, conditions, facts or
circumstances occurring or existing prior to, on or after the Closing Date.
Section 7.4
Procedures for Indemnification
.
(a) An Indemnitee shall give notice of any matter that such Indemnitee has determined has given,
or would reasonably be expected to give, rise to a right of indemnification under this Agreement (other than a Third-Party Claim which is governed by
Section
7.4(b)
) to the Party that is or may be required pursuant to this
Agreement to make such indemnification (the
Indemnifying Party
) promptly (and in any event within thirty (30) days) after making such a determination. Such notice will state the amount of the Loss claimed, if known, and method of
computation thereof, and contain a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed by such Indemnitee;
provided
, that the failure to provide such notice will not release the
Indemnifying Party from any of its obligations except and solely to the extent the Indemnifying Party will have been prejudiced as a result of such failure.
(b) If a claim or demand is made against an Indemnitee by any Third Party (a
Third-Party Claim
) as to which such Indemnitee
is, or reasonably expects to be, entitled to indemnification pursuant to this Agreement, such Indemnitee will notify the Indemnifying Party in writing, and in reasonable detail, of the Third-Party Claim promptly (and in any event within thirty (30)
days) after receipt by such Indemnitee of notice of the Third-Party Claim;
provided
, that the failure to provide notice of any such Third-Party Claim will not release the Indemnifying Party from any of its obligations except and solely to the
extent the Indemnifying Party will have been prejudiced as a result of such failure.
(c) An Indemnifying Party will be entitled (but will
not be required) to control the defense, compromise and settlement of any Third-Party Claim, at such Indemnifying Partys own cost and expense and by such Indemnifying Partys own counsel, which counsel must be reasonably acceptable to the
Indemnitee, if it gives written notice of its intention to do so (including a statement that the Indemnitee is entitled to indemnification under this
Article VII
) to the applicable Indemnitee within thirty (30) days after the receipt of
notice from such Indemnitee of the Third-Party Claim (failure of the Indemnifying Party to respond within such thirty (30) day period will be deemed to be an election by the Indemnifying Party not to control the defense,
Exhibit B-1-20
compromise and settlement of such Third-Party Claim). After a notice from an Indemnifying Party to an Indemnitee of its election to control the defense, compromise and settlement of a
Third-Party Claim, such Indemnitee will have the right to employ separate counsel and to participate in (but not control) the defense, compromise and settlement thereof, at its own expense and, in any event, will reasonably cooperate with the
Indemnifying Party in such defense, compromise and settlement and use its reasonable best efforts to make available to the Indemnifying Party all witnesses and information in such Indemnitees possession or under such Indemnitees control
relating thereto as are reasonably required by the Indemnifying Party;
provided
, that the Indemnitee shall not be required to disclose any information if such disclosure would be reasonably likely to: (w) contain information that in the
reasonable, good faith judgment of the Indemnitee is competitively sensitive; (x) jeopardize any attorney-client or other legal privilege or the protections of the work product doctrine; (y) contravene any applicable Laws, fiduciary duty or Contract
to which any Indemnitee is a party; or (z) expose the Indemnitee to risk of liability for disclosure of sensitive or personal information;
provided
, that, in any such case, the Indemnitee shall provide such information in redacted form as
necessary to preserve such privilege or protections or comply with such Law or Contract or otherwise make appropriate substitute disclosure arrangements, to the extent practicable.
(d) Notwithstanding anything to the contrary in this
Section
7.4
, in the event that (i) an Indemnifying Party elects
not to control the defense, compromise and settlement of a Third-Party Claim, (ii) there exists a conflict of interest or potential conflict of interest between the Indemnifying Party and the Indemnitee, (iii) any Third-Party Claim seeks a
Governmental Order, injunction or other equitable relief or relief for other than money damages against the Indemnitee, (iv) the Indemnitees exposure to Liability in connection with such Third-Party Claim is reasonably expected to exceed the
Indemnifying Partys exposure in respect of such Third-Party Claim taking into account the indemnification obligations hereunder, or (v) the Person making such Third-Party Claim is a Governmental Authority with regulatory authority over the
Indemnitee or any of its material Assets, such Indemnitee will be entitled to control the defense, compromise and settlement of such Third-Party Claim, at the Indemnifying Partys expense, with one (1) counsel (and any applicable local counsel)
of such Indemnitees choosing (such counsel to be reasonably acceptable to the Indemnifying Party). If the Indemnitee is conducting the defense against any such Third-Party Claim, the Indemnifying Party will reasonably cooperate with the
Indemnitee in such defense and use its reasonable best efforts to make available to the Indemnitee all witnesses and information in such Indemnifying Partys possession or under such Indemnifying Partys control relating thereto as are
reasonably required by the Indemnitee;
provided
, that the Indemnifying Party shall not be required to disclose any information if such disclosure would be reasonably likely to: (w) contain information that in the reasonable, good faith
judgment of the Indemnifying Party is competitively sensitive; (x) jeopardize any attorney-client or other legal privilege or the protections of the work product doctrine; (y) contravene any applicable Laws, fiduciary duty or Contract to which the
Indemnifying Party is a party; or (z) expose the Indemnifying Party to risk of liability for disclosure of sensitive or personal information;
provided
, that, in any such case, the Indemnifying Party shall provide such information in redacted
form as necessary to preserve such privilege or protections or comply with such Law or Contract or otherwise make appropriate substitute disclosure arrangements, to the extent practicable.
(e) Unless the Indemnifying Party has failed to control the defense, compromise and settlement of the Third-Party Claim in accordance with the
terms of this Agreement and subject to
Section
7.4(f)
, no Indemnitee may settle or compromise any Third-Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld, conditioned
or delayed). If an Indemnifying Party has failed to control the defense, compromise and settlement of the Third-Party Claim, the Indemnitee shall have the right to contest, settle or otherwise dispose of any such Third Party Claim, but will
afford the Indemnifying Party an opportunity to participate in such defense, at its cost and expense, and will consult with the Indemnifying Party prior to settling or otherwise disposing of any of the same.
(f) In the case of a Third-Party Claim, no Indemnifying Party will consent to entry of any judgment or enter into any compromise or settlement
of the Third-Party Claim without the consent of the Indemnitee if the effect thereof is to permit any injunction, declaratory judgment, other adverse Governmental Order or non-
Exhibit B-1-21
monetary relief, or monetary relief for which the Indemnitee is not fully indemnified by the Indemnifying Party, to be entered, directly or indirectly, against any Indemnitee, does not
unconditionally release the Indemnitee from all Liabilities with respect to such Third-Party Claim or includes an admission of guilt, wrongdoing or misconduct on behalf of the Indemnitee.
(g) Absent fraud by an Indemnifying Party, and other than as provided in
Section 10.8
, the indemnification provisions of
Section
5.5
and this
Article VII
will be the sole and exclusive remedy of an Indemnitee for any monetary or compensatory damages or Losses resulting from any breach of this Agreement, and each Indemnitee expressly
waives and relinquishes all rights, claims or remedies such Person may have with respect to the foregoing other than under
Section
5.5
and this
Article VII
against any Indemnifying Party.
Section 7.5
Indemnification Obligations Net of Insurance Proceeds
. The Parties intend that
any Loss subject to indemnification or reimbursement pursuant to this
Article VII
(an
Indemnifiable Loss
) will be net of Insurance Proceeds that actually reduce the amount of the Loss. Accordingly, the amount which an
Indemnifying Party is required to pay to any Indemnitee will be reduced by any Insurance Proceeds actually recovered by or on behalf of the Indemnitee in reduction of the related Loss. If an Indemnitee receives a payment (an
Indemnity
Payment
) required by this Agreement from an Indemnifying Party in respect of any Loss and subsequently receives Insurance Proceeds, the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payments
received over the amount of the Indemnity Payments that would have been due if the Insurance Proceeds recovery had been received, realized or recovered before the Indemnity Payments were made.
Section 7.6
Adjustments for Tax Purposes
. Each of Seller and the Company agree to treat, and
cause their respective Affiliates to treat, for all applicable Tax purposes, the receipt of any indemnification payment from the other Party made pursuant to this Agreement as an adjustment to the purchase price, unless otherwise required by Law.
Section 7.7
No Right to Set-Off
. No Party hereto shall have any right to set off any
Losses under this
Article VII
against any payments to be made by such Party pursuant to this Agreement or any other agreement between the Parties hereto.
Section 7.8
Survival of Indemnities
. The rights and obligations of each of the Parties and
their respective Indemnitees under this
Article VII
will survive the Closing indefinitely, unless a specific survival or other applicable period is expressly set forth herein, and will survive the sale or other transfer by any Party or any of
its Subsidiaries of any Assets or businesses or the assignment by it of any Liabilities.
Section 7.9
LIMITATION OF LIABILITY
. IN NO EVENT WILL EITHER PARTY BE LIABLE TO ANY INDEMNITEE FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES (OTHER THAN, IN EACH CASE, IF SUCH DAMAGES ARE AWARDED TO
THIRD PARTIES IN CONNECTION WITH A THIRD-PARTY CLAIM), WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
ARTICLE VIII
[RESERVED]
Section 8.1
[Reserved]
.
Exhibit B-1-22
ARTICLE IX
TERMINATION
Section 9.1
Termination
. This Agreement (a) shall immediately terminate without further action upon termination of the Purchase Agreement and (b) may be terminated at any time prior to the Closing by mutual written agreement of
Seller and the Company; provided, that this Agreement may not be terminated pursuant to clause (b) of this
Section
9.1
without Purchasers prior written consent.
Section 9.2
Effect of Termination
. Any termination of this Agreement pursuant to
Section
9.1
shall be effective, in the case of clause (a) thereof, immediately upon termination of the Purchase Agreement and, in the case of clause (b) thereof, upon the effectiveness of such mutual written agreement, and
this Agreement shall forthwith become null and void and there shall be no liability on the part of any Party, and all rights and obligations of any Party shall cease.
ARTICLE X
MISCELLANEOUS
Section 10.1
Assignment
. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned, in whole or in part, by operation of Law or otherwise, by Seller or the Company without the prior written consent of the other Party. Any purported assignment in contravention of this
Section
10.1
shall be null and void.
Section 10.2
Amendment;
Waive
r
. This Agreement may not be amended except by an instrument in writing signed on behalf of each of Seller and the Company;
provided
, that this Agreement may not be amended in a manner that is or could reasonably be
expected to be adverse to the Business Subsidiaries, the Business, Purchaser or any of its Subsidiaries (including from a Tax perspective or otherwise), or the Transactions without Purchasers prior written consent;
provided
,
further
that if the adverse impact of the amendment is reasonably expected to be only
de minimis
in nature, then Purchasers prior written consent shall not be required so long as Seller shall have consulted in good faith with
Purchaser in advance. At any time prior to the Closing, subject to applicable Law, any Party may (a) extend the time for the performance of any obligation or other act of the other Party, (b) waive any inaccuracy in the representations and
warranties of the other Party contained herein or in any document delivered pursuant hereto, and (c) waive compliance with any agreement or condition contained herein;
provided
, that no such extension or waiver may be effected in a manner
that is or could reasonably be expected to be adverse to the Business Subsidiaries, the Business, Purchaser or any of its Subsidiaries (including from a Tax perspective or otherwise), or the Transactions without Purchasers prior written
consent;
provided
,
further
that if the adverse impact of the extension or waiver is reasonably expected to be only
de minimis
in nature, then Purchasers prior written consent shall not be required so long as Seller shall
have consulted in good faith with Purchaser in advance. Any such extension or waiver shall only be valid if set forth in an instrument in writing signed by the Party to be bound thereby and in accordance with this
Section
10.2
. Notwithstanding the foregoing, no failure or delay by Seller or the Company in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of
any other right hereunder.
Section 10.3
Expenses
. Whether or not the Reorganization
Transactions are consummated, and except as otherwise specified herein, each Party shall bear its own expenses with respect to the Transfers and the other Reorganization Transactions.
Section 10.4
Severability
. If any provision of this Agreement is held to be illegal, invalid
or unenforceable under present or future Laws effective during the term hereof, such provision shall be fully
Exhibit B-1-23
severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision never comprised a part hereof, and the remaining provisions hereof shall remain
in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as
part of this Agreement a provision as similar in its terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.
Section 10.5
No Third Party Beneficiaries
. This Agreement is for the sole benefit of the
parties hereto and their permitted assigns and nothing herein, express or implied, shall give or be construed to give to any Person, other than the parties hereto and such permitted assigns, any legal or equitable rights hereunder;
provided
,
however
, that (x) Purchaser (and, if applicable, SaleCo2 and the Purchaser Designee) shall be a third-party beneficiary of this Agreement and shall have the right to enforce the terms and provisions hereof and (y) the applicable indemnitees
shall be third-party beneficiaries of
Section
5.5
and
Article VII
.
Section 10.6
Governing Law and Jurisdiction
. This Agreement shall be governed by, and
construed and enforced in accordance with, the Laws of the State of Delaware, without regard to any choice or conflict of Law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws
of any jurisdiction other than the State of Delaware. In addition, each of the parties (a) submits to the exclusive personal jurisdiction of the Delaware Court of Chancery, any other court of the State of Delaware or any federal court sitting
in the State of Delaware in the event that any dispute (whether in contract, tort or otherwise) arises out of this Agreement or the Reorganization Transactions or the other Transactions; (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court; (c) agrees that it will not bring any Action relating to this Agreement or the Reorganization Transactions or the other Transactions in any court other than the Delaware
Court of Chancery, any other court of the State of Delaware or any federal court sitting in the State of Delaware; and (d) agrees that it will not seek to assert by way of motion, as a defense or otherwise, (i) that any such Action is brought in an
inconvenient forum, (ii) that any such Action should be transferred or removed to any court other than one of the above-named courts, (iii) that any such Action should be stayed by reason of the pendency of some other Action in any court other than
one of the above-named courts, or (iv) that this Agreement or the subject matter hereof may not be enforced in or by the above-named courts. Each party hereto agrees that service of process upon such party in any such Action shall be effective if
notice is given in accordance with
Section
10.11
. Notwithstanding the foregoing in this
Section
10.6
, a party may commence any Action in any court other than the above-named courts solely for the
purpose of enforcing an order or judgment issued by one of the above-named courts relating to any dispute (whether in contract, tort or otherwise) arising out of this Agreement or the Transactions.
Section 10.7
Waiver of Jury Trial
. EACH OF THE COMPANY AND SELLER HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE REORGANIZATION TRANSACTIONS.
Section 10.8
Specific Performance
. The Parties agree that irreparable harm for which monetary
damages, even if available, would not be an adequate remedy would occur in the event that the Parties do not perform the provisions of this Agreement (including failing to take such actions as are required of such party hereunder to consummate this
Agreement) in accordance with its specified terms or otherwise breach such provisions. Accordingly, the Parties acknowledge and agree that the Parties shall be entitled to an injunction, specific performance and other equitable relief to
prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at Law or in equity. Each of the Parties agrees that it will not oppose the granting of
an injunction, specific performance or other equitable relief on the basis that any other Party has an adequate remedy at Law or that any award of specific performance is not an appropriate remedy for any reason at Law or in equity. Any Party
seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or
injunction.
Exhibit B-1-24
Section 10.9
Headings
. The headings of the
sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part hereof.
Section 10.10
Counterparts
. The parties hereto may execute this Agreement in one or more counterparts, and each fully executed counterpart shall be deemed an original but all of which taken together shall constitute one and the
same agreement.
Section 10.11
Notices
. All notices required to be given hereunder shall
be in writing and be given in person or by means of electronic mail, facsimile or other means of wire transmission (with request for assurance of receipt in a manner typical with respect to communications of that type), by overnight courier or by
mail, and shall become effective: (a) on delivery if given in person; (b) on the date of transmission if sent by electronic mail, facsimile or other means of wire transmission; (c) one (1) Business Day after delivery to the overnight service; or (d)
three (3) Business Days after being mailed, with proper postage and documentation, for first-class registered or certified mail, prepaid. Notices shall be addressed as follows:
(a) If to the Company, to:
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|
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Yahoo Holdings, Inc.
c/o Yahoo!
Inc.
701 First Avenue
Sunnyvale, CA 94089
Facsimile: (408) 349-3510
Attn: Vice President and
Secretary
Email: rbell@yahoo-inc.com
|
|
with a copy to (which copy shall not constitute notice):
|
|
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Facsimile: (212) 735-2000
|
Attn:
|
|
Marc R. Packer
|
|
|
Michael J. Mies
|
Email:
|
|
Marc.Packer@skadden.com
|
|
|
Michael.Mies@skadden.com
|
|
with a further copy to (which copy shall not constitute notice):
|
|
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 8th Ave
New York, NY 10019
Facsimile: (212) 474-3700
|
Attn:
|
|
Faiza Saeed
|
|
|
Eric L. Schiele
|
Email:
|
|
FSaeed@cravath.com
|
|
|
ESchiele@cravath.com
|
|
with a further copy to (which copy shall not constitute notice):
|
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Wilson Sonsini Goodrich & Rosati, Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
Facsimile: (650) 493-6811
|
Attn:
|
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Larry Sonsini
|
Email:
|
|
LSonsini@wsgr.com
|
Exhibit B-1-25
|
|
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with a further copy to (which copy shall not constitute notice):
|
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Verizon Communications Inc.
One
Verizon Way, VC44E239
Basking Ridge, NJ 07920
Facsimile: 908-766-3818
|
Attn:
|
|
William L. Horton, Jr., Senior Vice President, Deputy General Counsel and Corporate Secretary
|
|
|
Michael Rosenblat, Vice President, Associate General Counsel
|
Email:
|
|
william.horton@verizon.com
michael.rosenblat@verizon.com
|
|
with a further copy to (which copy shall not constitute notice):
|
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Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Facsimile: (212) 403-2000
|
Attn:
|
|
Daniel A. Neff
Steven A. Rosenblum
David E. Shapiro
Edward J. Lee
|
Email:
|
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DANeff@wlrk.com
SARosenblum@wlrk.com
DEShapiro@wlrk.com
EJLee@wlrk.com
|
(b) If to Seller, to:
|
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Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Facsimile: (408) 349-3510
Attn: General Counsel and Secretary
Email: rbell@yahoo-inc.com
|
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with a copy to (which copy shall not constitute notice):
|
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Skadden, Arps, Slate, Meagher & Flom LLP
|
Four Times Square
New York, NY
10036
Facsimile: (212) 735-2000
|
Attn:
|
|
Marc R. Packer
Michael J. Mies
|
Email:
|
|
Marc.Packer@skadden.com
Michael.Mies@skadden.com
|
|
with a further copy to (which copy shall not constitute notice):
|
|
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 8th Ave
New York, NY 10019
Facsimile: (212) 474-3700
|
Attn:
|
|
Faiza Saeed
Eric L. Schiele
|
Email:
|
|
FSaeed@cravath.com
ESchiele@cravath.com
|
Exhibit B-1-26
|
|
|
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with a further copy to (which copy shall not constitute notice):
|
|
Wilson Sonsini Goodrich & Rosati, Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
Facsimile: (650) 493-6811
|
Attn:
|
|
Larry Sonsini
|
Email:
|
|
LSonsini@wsgr.com
|
provided
,
however
, that if any Party shall have designated a different address by notice to the other,
then notices shall be addressed to the last address so designated.
Section 10.12
Construction
. The language in all parts of this Agreement shall be construed, in all cases, according to its fair meaning. The Parties hereto acknowledge that each Party and its counsel have reviewed and revised this Agreement and
that any rule of construction to the effect that any ambiguities are to be resolved against the drafting Party shall not be employed in the interpretation of this Agreement. Words in the singular shall be deemed to include the plural and vice versa
and words of one gender shall be deemed to include the other gender as the context requires. The terms hereof, herein, and herewith and words of similar import shall, unless otherwise stated, be construed to refer
to this Agreement as a whole (including all of the Schedules and Exhibits hereto) and not to any particular provision of this Agreement. Article, Section and Schedule references are to the Articles, Sections, and Schedules to this Agreement unless
otherwise specified. Unless otherwise stated, all references to any Contract shall be deemed to include the schedules to such Contract. The word including and words of similar import when used in this Agreement mean including,
without limitation, unless the context otherwise requires or unless otherwise specified. The word or shall not be exclusive. Unless otherwise specified in a particular case, the word days refers to calendar days.
References herein to any Law shall be deemed to refer to such Law as it may be amended, modified or supplemented from time to time, unless otherwise specified. All references to dollars or $ shall be deemed references to the
lawful money of the United States of America.
Section 10.13
Schedules
. The Schedules
shall be deemed to be a part of this Agreement and are fully incorporated into this Agreement by reference. Any capitalized terms used in any Schedule but not otherwise defined therein shall have the meanings ascribed to such terms in this
Agreement.
Section 10.14
Entire Agreement
. This Agreement (including the Schedules) and
the Purchase Agreement and the other Transaction Documents constitute the entire agreement between the Parties and supersedes any prior understanding, agreements or representations by or between the Parties, written or oral, to the extent they
relate in any way to the subject matter hereof.
[SIGNATURE PAGES FOLLOW]
Exhibit B-1-27
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed and delivered by
their duly authorized representatives as of the date first written above.
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YAHOO! INC.
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By:
|
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/s/ Marissa A. Mayer
|
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Name:
|
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Marissa A. Mayer
|
|
|
Title:
|
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CEO & President
|
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YAHOO HOLDINGS, INC.
|
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By:
|
|
/s/ Ronald S. Bell
|
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Name:
|
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Ronald S. Bell
|
|
|
Title:
|
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Vice President and Secretary
|
[Reorganization Agreement]
Exhibit B-1-28
ANNEX A
CERTAIN DEFINITIONS
As
used in this Agreement, the following defined terms have the meanings indicated below:
Acquisition Holdback Cash
has
the meaning ascribed to such term in
Section 1.1(e)
.
Acquisition Holdback Stock
has the meaning ascribed
to such term in
Section 1.2(o)
.
Action
has the meaning ascribed to such term in the Purchase Agreement.
Actually Realize
has the meaning ascribed to such term in the Purchase Agreement.
Affiliate
has the meaning ascribed to such term in the Purchase Agreement.
Agreement
has the meaning ascribed to such term in the Preamble.
Assets
means all rights, properties or other assets, whether real, personal or mixed, tangible or intangible, of any kind,
nature and description, whether accrued, contingent or otherwise, and wheresoever situated and whether or not carried or reflected, or required to be carried or reflected, on the books of any Person.
Assignment and Assumption Agreement
has the meaning ascribed to such term in
Section 2.2(a)(ii)
.
Assumed Employee Liabilities
means all Liabilities of Seller or its Affiliates related to the Business Employees and all
former employees of Seller or its Affiliates (the
Former Business Employees
), whether arising or accruing prior to, on, or after the Closing, which Liabilities shall include the Liabilities of Seller or its Affiliates related to
the Business Employees and Former Business Employees, including: (a) claims or Actions related to employment or employment conditions, regardless of when such claim arose or was incurred, (b) severance and other termination costs and
Liabilities for all Business Employees and Former Business Employees, regardless of when arising, (c) all accrued, unused vacation, sick leave, recuperation pay and paid time off accrued by Business Employees prior to the Closing, which shall
be assumed and honored by the Company or one of its Affiliates following the Closing to the extent permitted by applicable Law, (d) any obligations to pay any portion of the Acquisition Holdback Cash to the extent such Acquisition Holdback Cash
is included in the Transfers pursuant to
Section 1.1
, and (e) any Specified Transaction-Related Employee Liabilities, but excluding, in each case, any Retained Employee Liabilities.
Assumed Liabilities
has the meaning ascribed to such term in
Section
1.3
.
Assumed Tax Liabilities
means (a) any Taxes (or any reduction of a Refund to which Seller is entitled under
Section 5.5(e)(i)
) resulting from, related to, arising out of, attributable to or imposed on the Business, the Business Subsidiaries, the Transferred Assets and/or the Assumed Liabilities and (b) any Taxes (or any reduction of a Refund
to which Seller is entitled under
Section 5.5(e)(i)
) attributable to former (as of the Closing) divisions, assets, activities or operations of Seller and its Affiliates, in the case of each of clauses (a) and (b), other than Excluded Tax
Liabilities.
Benefit Plan
has the meaning ascribed to such term in the Purchase Agreement.
Benefited Party
has the meaning ascribed to such term in
Section 5.5(e)(ii)
.
Bill of Sale
has the meaning ascribed to such term in
Section 2.2(a)(i)
.
Books and Records
has the meaning ascribed to such term in the Purchase Agreement.
Exhibit B-1-29
Business
has the meaning ascribed to such term in the Purchase Agreement.
Business Day
has the meaning ascribed to such term in the Purchase Agreement.
Business Employees
means all employees of Seller and its Affiliates other than the Seller Retained Employees.
Business Subsidiaries
has the meaning ascribed to such term in the Purchase Agreement.
Cash
has the meaning ascribed to such term in the Purchase Agreement.
Closing
has the meaning ascribed to such term in
Section 2.1
.
Closing Date
has the meaning ascribed to such term in
Section 2.1
.
COBRA
means the Consolidated Omnibus Budget Reconciliation Act.
Code
has the meaning ascribed to such term in the Purchase Agreement.
Combined Tax Return
has the meaning ascribed to such term in
Section 5.5(d)(i)
.
Company
has the meaning ascribed to such term in the Preamble.
Company Indemnitees
means each Business Subsidiary, its respective Affiliates, and each of their respective current or
former directors, officers, managers, agents and employees (in each case, in such Persons respective capacity as such), and their respective heirs, executors, administrators, successors and assigns.
Company Tax Asset
means (i) any Tax Asset resulting from, related to, arising out of or attributable to the Business
Subsidiaries, the Business, the Transferred Assets and/or the Assumed Liabilities (for the avoidance of doubt, determined on a pro forma basis (x) without taking into account any Tax Items attributable to the Seller Entities, the Retained Business,
the Excluded Assets and/or the Retained Liabilities (including the Deductions), and (y) taking into account any deductions in respect of the Assumed Employee Liabilities), and (ii) any Tax Asset allocated to a Business Subsidiary in connection with
the Transfers or the Sale under applicable Law and any other Tax Asset of a Business Subsidiary after the closing of the Sale (in each case, without taking into account any Tax Items attributable to the Retained Business, the Excluded Assets and/or
the Retained Liabilities (including the Deductions)).
Company Purchase Price
has the meaning ascribed to such term in
the Purchase Agreement.
Company Purchase Price Allocation
has the meaning ascribed to such term in the Purchase
Agreement.
Company Section 338(h)(10) Elections
has the meaning ascribed to such term in the Purchase Agreement.
Company Section 338(h)(10) Forms
has the meaning ascribed to such term in the Purchase Agreement.
Company Tax Indemnified Parties
has the meaning ascribed to such term in
Section 5.5(a)
.
Consent
has the meaning ascribed to such term in the Purchase Agreement.
Contract
has the meaning ascribed to such term in the Purchase Agreement.
Controlling Party
has the meaning ascribed to such term in
Section
5.5(h)(ii)
.
Exhibit B-1-30
Convertible Notes
means Sellers 0.00% Convertible Senior Notes due 2018.
Deduction
has the meaning ascribed to such term in the Purchase Agreement.
Eligible Foreign Business Subsidiary
has the meaning ascribed to such term in the Purchase Agreement.
Employee Representative
means any labor or trade union, works council, employee forum or other employee representative body
recognized by Seller or its Affiliates for collective consultation purposes in relation to the Business Employees.
Enforceability Limitations
has the meaning ascribed to such term in the Purchase Agreement.
Excluded Assets
has the meaning ascribed to such term in
Section 1.2
.
Excluded IP Assets
has the meaning ascribed to such term in the Purchase Agreement.
Excluded Tax Liabilities
means (a) any Taxes (or any reduction of a Refund to which the Company is entitled under
Section
5.5(e)(i)
) resulting from, related to, arising out of, attributable to the Retained Business, the Excluded Assets and/or the Retained Liabilities (for the avoidance of doubt, excluding any Taxes resulting from,
related to, arising out of or attributable to the Assumed Employee Liabilities and including any Taxes set forth on
Schedule 5.5(a)
), (b) any Taxes (or any reduction of a Refund) resulting from, related to, arising out of, attributable
to or imposed on the IP Monetization or the Real Estate Monetization, and (c) any Taxes (other than any Foreign Sale Restructuring Taxes for which the Company is responsible hereunder and any Transfer Taxes for which Purchaser is responsible under
the Purchase Agreement) (or any reduction of a Refund to which the Company is entitled under
Section 5.5(e)(i)
) resulting from, related to, arising out of, attributable to or imposed on the Sale, the Foreign Sale, the Transfers, the
Foreign Business Subsidiary Transfers, any of the Reorganization Transactions (including as a result of the Reorganization 338(h)(10) Elections or the Section 338(h)(10) Elections) or any other transaction outside of the ordinary course of business
entered into in anticipation of the transactions contemplated by this Agreement (including any transaction or action pursuant to
Section 1.8
or
Section 1.9
) or the Purchase Agreement, including any actual or deemed
distribution of cash or property by any Subsidiary of Seller.
Foreign Business Subsidiary Transfers
has the meaning
ascribed to such term in
Section 1.12
.
Foreign Equity Interests
has the meaning ascribed to such
term in
Section 1.12
.
Foreign Sale
has the meaning ascribed to such term in the Purchase Agreement.
Foreign Sale Closing
has the meaning ascribed to such term in the Purchase Agreement.
Foreign Sale Notice
has the meaning ascribed to such term in
Section 1.12
.
Foreign Sale Purchase Price
has the meaning ascribed to such term in the Purchase Agreement.
Foreign Sale Restructuring Taxes
means any Taxes imposed on or borne by any of the Seller Entities or any of the Business
Subsidiaries to the extent such Taxes result solely from, and would not have been imposed but for, any of the Foreign Business Subsidiary Transfers or the SaleCo2 Contribution.
Former Business Employees
has the meaning ascribed to such term in the definition of Assumed Employee
Liabilities.
Governmental Authority
has the meaning ascribed to such term in the Purchase Agreement.
Exhibit B-1-31
Governmental Order
has the meaning ascribed to such term in the Purchase
Agreement.
Indemnifiable Loss
has the meaning ascribed to such term in
Section 7.5
.
Indemnifying Party
has the meaning ascribed to such term in
Section 7.4(a)
.
Indemnitee
means any Seller Indemnitee or any Company Indemnitee.
Indemnity Payment
has the meaning ascribed to such term in
Section 7.5
.
Independent Accounting Firm
has the meaning ascribed to such term in the Purchase Agreement.
Indenture
has the meaning ascribed to such term in the Purchase Agreement.
Informed Party
has the meaning ascribed to such term in
Section 5.5(h)(i).
Insurance Proceeds
means those monies (a) received by an insured from an insurance carrier, (b) paid by an insurance
carrier on behalf of the insured or (c) received (including by way of set off) from any Third Party in the nature of insurance, contribution or indemnification in respect of any Liability; in any such case net of any applicable premium adjustments
(including reserves and retrospectively rated premium adjustments), net of any costs or expenses incurred in the collection thereof, and excluding any deductible and retention amounts.
Intercompany Account
means any receivable, payable or loan between any Seller Entity, on the one hand, and any Business
Subsidiary, on the other hand, that exists prior to the Closing, except for any such receivable, payable or loan that arises pursuant to this Agreement or any other Transaction Document.
Intercompany Agreement
means a Contract between or among any Seller Entity, on the one hand, and any Business Subsidiary,
on the other hand, entered into prior to the Closing, but excluding any Transaction Document and excluding any Contract to which a Person other than any of the Seller Entities or any of the Business Subsidiaries is also a Party.
IP Assignment Agreement
has the meaning ascribed to such term in
Section 2.2(a)(iii)
.
IP Monetization
has the meaning ascribed to such term in the Purchase Agreement.
IRS
has the meaning ascribed to such term in the Purchase Agreement.
Law
has the meaning ascribed to such term in the Purchase Agreement.
Liabilities
has the meaning ascribed to such term in the Purchase Agreement.
License Agreement
has the meaning ascribed to such term in Purchase Agreement.
Losses
means any damages, losses, deficiencies, Liabilities, obligations, penalties, judgments, settlements, claims,
payments, interest costs, fines and expenses (including the costs and expenses of any Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys, accountants, consultants and other
professionals fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder), of any kind or nature, whether or not the same would properly be reflected on any financial statements or the footnotes
thereto.
Minority Investments
has the meaning ascribed to such term in the Purchase Agreement.
Mixed Company Separate Tax Return
has the meaning ascribed to such term in
Section 5.5(d)(i
).
Exhibit B-1-32
Mixed Seller Separate Tax Return
has the meaning ascribed to such term in
Section 5.5(d)(ii
).
Nasdaq
has the meaning ascribed to such term in the Purchase Agreement.
Net Working Capital
has the meaning ascribed to such term in the Purchase Agreement.
Non-Controlling Party
has the meaning ascribed to such term in
Section 5.5(h)(ii)
.
Non-Reorganization 338(h)(10) Subsidiaries
means the Business Subsidiaries set forth on
Schedule 5.5(j)
.
Non-Transferable Asset
has the meaning ascribed to such term in
Section 1.7(a)
.
Non-U.S. Benefit Plan
has the meaning ascribed to such term in the Purchase Agreement.
Offered Employee
has the meaning ascribed to such term in
Section 5.3(a)
.
Party
or
Parties
has the meaning ascribed to such term in the Preamble.
Person
has the meaning ascribed to such term in the Purchase Agreement.
Purchase Agreement
has the meaning ascribed to such term in the recitals to this Agreement.
Purchase Price
has the meaning ascribed to such term in the Purchase Agreement.
Purchaser
has the meaning ascribed to such term in the recitals to this Agreement.
Real Estate Monetization
means the disposition by Seller and any of its Subsidiaries of any real estate (x) outside of the
ordinary course and (y) after May 2016 and prior to the Closing.
Recipient
has the meaning ascribed to such term in
Section 1.7(b)
.
Refund
means any refund (or credit in lieu thereof) of Taxes (including any overpayment of
Taxes that can be refunded or, alternatively, applied to other Taxes payable), including any interest paid on or with respect to such refund of Taxes;
provided
,
however
, that for purposes of this Agreement, the amount of any Refund
required to be paid by one Party to another Party shall be the amount actually received or realized by such first Party, net of any Taxes imposed on, related to, or attributable to, the receipt or accrual of such refund or credit and any reasonable
costs incurred in connection with obtaining such refund or credit.
Reorganization 338(h)(10) Elections
has the meaning
ascribed to such term in
Section 5.5(j)
.
Reorganization 338(h)(10) Forms
has the meaning ascribed to such
term in Section 5.5(j).
Reorganization Transactions
has the meaning ascribed to such term in the Purchase Agreement.
Retained Business
means all of the business, operations, properties, assets and liabilities of Seller and its
Subsidiaries immediately prior to the Closing relating to, involving or attributable to the Excluded Assets and the Retained Liabilities.
Retained Employee Liabilities
means (a) any obligations of Seller or its Affiliates to deliver shares of Seller Common
Stock to holders of Seller Stock Options and to deliver shares of Seller Common Stock to holders of Seller RSU Awards that vest upon or prior to the Closing, other than in respect of any Specified Transaction-Related Employee Liabilities;
(b) any obligations to deliver shares of Acquisition Holdback Stock; and (c) all Liabilities related to the Seller Retained Employees, whether arising or accruing prior to, on or after the Closing.
Exhibit B-1-33
Retained Liabilities
has the meaning ascribed to such term in
Section 1.4
.
Sale
has the meaning ascribed to such term in the recitals to this Agreement.
SaleCo2
has the meaning ascribed to such term in
Section 1.12
.
SaleCo2 Contribution
has the meaning ascribed to such term in
Section 1.12
.
Sale Closing Date
means the date on which the closing of the Sale occurs pursuant to the Purchase Agreement.
SEC
has the meaning ascribed to such term in the Purchase Agreement.
Section 338(h)(10) Elections
has the meaning ascribed to such term in the Purchase Agreement.
Section 338(h)(10) Subsidiaries
has the meaning ascribed to such term in the Purchase Agreement.
Seller
has the meaning ascribed to such term in the Preamble.
Seller Common Stock
has the meaning ascribed to such term in the Purchase Agreement.
Seller Entities
means Seller and its Subsidiaries which are not Business Subsidiaries.
Seller Indemnitees
means each Seller Entity and its Affiliates and each of their respective current or former directors,
officers, managers, agents and employees (in each case, in such Persons respective capacity as such) and their respective heirs, executors, administrators, successors and assigns.
Seller Retained Employees
has the meaning ascribed to such term in the Purchase Agreement.
Seller Separate Tax Return
has the meaning ascribed to such term in
Section 5.5(d)(ii)
.
Seller Tax Asset
means any Tax Asset resulting from, related to, arising out of or attributable to the Retained Business,
the Excluded Assets and/or the Retained Liabilities (for the avoidance of doubt, determined on a pro forma basis (x) without taking into account any Tax Items attributable to the Business Subsidiaries, the Business, the Transferred Assets and/or the
Assumed Liabilities, and (y) taking into account any Deductions), other than any Company Tax Asset.
Seller Stock
Option
has the meaning ascribed to such term in the Purchase Agreement.
Seller Tax Indemnified Parties
has
the meaning ascribed to such term in
Section 5.5(a)(ii)
.
Specified Transaction-Related Employee
Liabilities
has the meaning ascribed to such term in the Purchase Agreement.
Subsidiary
has the meaning
ascribed to such term in the Purchase Agreement.
Tax Asset
means any Tax Item that could reduce a Tax, including a net
operating loss, net capital loss, overall foreign losses, previously taxed income, general business credit, foreign tax credit, charitable deduction or credit related to alternative minimum tax or other Tax credit.
Tax Benefit
shall mean the Tax effect of any Tax Item that decreases Taxes paid or payable, including any interest with
respect thereto or interest that would have been payable but for such Tax Item. For purposes of
Exhibit B-1-34
determining the amount and timing of any Tax Benefit, the recipient of the Tax Benefit shall be deemed to pay tax at the highest marginal rates in effect in the year such Tax Benefit is Actually
Realized, shall be deemed to realize or utilize any Tax Benefit in the year in which such Tax Benefit is Actually Realized and shall be deemed to have no Tax Assets other than those giving rise to such Tax Benefit.
Tax Item
shall mean any item of income, gain, loss, deduction, credit, recapture of credit or any other item that increases
or decreases Taxes paid or payable, including for the sake of clarity an adjustment under Section 481 of the Code (or any similar provision of state, local or foreign Law) resulting from a change in accounting method.
Tax Proceeding
means any audit, examination, contest, administrative proceeding, litigation or other Action relating to
Taxes.
Tax Return
has the meaning ascribed to such term in the Purchase Agreement.
Taxes
has the meaning ascribed to such term in the Purchase Agreement.
Third Party
has the meaning ascribed to such term in the Purchase Agreement.
Third-Party Claim
has the meaning ascribed to such term in
Section 7.4(b)
.
Transaction Documents
shall mean this Agreement, the Purchase Agreement and the License Agreement.
Transactions
has the meaning ascribed to such term in the Purchase Agreement.
Transfer Taxes
has the meaning ascribed to such term in the Purchase Agreement.
Transferee
has the meaning ascribed to such term in
Section 1.7(b)
.
Transferred Assets
has the meaning ascribed to such term in
Section 1.1
.
Transferred Employee
has the meaning ascribed to such term in
Section 5.3(a)
.
Transfers
has the meaning ascribed to such term in the recitals to this Agreement.
Transition Services
has the meaning ascribed to such term in
Section 5.2(d)
.
WARN Act
means the Worker Adjustment and Retraining Notification Act.
Exhibit B-1-35
Exhibit B-2
EXECUTION VERSION
AMENDMENT TO REORGANIZATION AGREEMENT
This AMENDMENT, dated as of February 20, 2017 (this
Amendment
), to the Reorganization Agreement, dated as of
July 23, 2016, by and between Yahoo! Inc., a Delaware corporation (
Seller
), and Yahoo Holdings, Inc., a Delaware corporation (the
Company
) (the
Agreement
), is made by and among
(x) Seller, (y) the Company and (z) Verizon Communications Inc., a Delaware corporation (
Purchaser
and, together with Seller and the Company, the
Parties
).
WITNESSETH:
WHEREAS, subject to
the terms and conditions set forth in this Amendment, and pursuant to Section 10.2 of the Agreement and Sections 4.04 and 8.03 of the Purchase Agreement, the Parties desire to amend certain terms of the Agreement by entering into, and as set
forth in, this Amendment.
NOW THEREFORE, for and in consideration of the aforesaid premises and of the mutual representations, warranties
and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound, the Parties hereby agree as set forth below:
1.
Modification; Full Force and Effect
. Except as expressly modified and superseded by this Amendment, the terms and provisions of the
Agreement are and shall continue to be in full force and effect.
2.
Definitions
. Capitalized terms used herein without definition
shall have the meanings ascribed to such terms in the Agreement unless otherwise indicated.
3.
Amendment
.
(a) Effective immediately, Section 1.4 of the Agreement is hereby amended by adding the following paragraphs to the end thereof:
Without limiting the foregoing, Retained Liabilities shall also include the following Liabilities (
User
Security
Liabilities
), which shall in all cases be excluded from Assumed Liabilities and remain Liabilities of Seller (subject to the provisions of Sections 7.2 and 7.3 hereof): (i) any damages, fines, penalties,
judgments, settlements or other similar amounts payable in cash to the extent resulting from, arising out of or imposed under or pursuant to any Third Party Actions in connection with any User Security Matters or any other Data Breaches and
(ii) any damages, fines, judgments, settlements, penalties or other similar amounts payable in cash imposed by (including under or pursuant to any agreement or settlement with) any Governmental Authority, including U.S. state attorneys general
and international data protection authorities, to the extent resulting from, arising out of or relating to any User Security Matters or any other Data Breaches, in the case of each of clause (i) and clause (ii), including attorneys,
consultants and other professionals fees and expenses incurred in the investigation, defense or resolution of any such matters or liabilities; provided that User Security Liabilities shall not include any such damages, fines, penalties,
judgments, settlements or other similar amounts (or the fees and expenses associated therewith) to the extent attributable to the failure by any Company Indemnitee to comply after the Closing with any agreement assumed by it or Governmental Order
applicable to it or to the Business. For the avoidance of doubt, in no event shall User Security Liabilities include, or the Parties obligations in respect thereof cover, the Business loss of users or partners, any diminution in the
value of or lost revenues or profit of the Business or any other adverse business impact on the Business (other than the payments expressly set forth
Exhibit B-2-1
in the immediately preceding sentence) resulting from, arising out of or relating to any (x) User Security Matters or any such other Data Breaches or (y) any consent decree or other
non-monetary
remedy (or the cost of compliance therewith) imposed on or with respect to the Business resulting from, arising out of or relating to any User Security Matters or any such other Data Breaches.
User
Security
Matters
shall mean any of the matters, facts, events, disclosures, developments and occurrences described in or underlying (i) the press release, issued by Seller on September 22,
2016, entitled An Important Message About Yahoo User Security, (ii) the section of Sellers Quarterly Report on Form
10-Q
for the fiscal quarter ended September 30, 2016 entitled
Security Incident appearing under the heading Recent Developments in Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operation, (iii) the press release, issued by Seller on December 14, 2016,
entitled Important Security Information for Yahoo Users, (iv) the matter set forth in
Schedule
1.4
or (v) any matters disclosed by Seller to Purchaser during the meetings of representatives of Seller and
Purchaser held on January 23, 2017 and January 24, 2017, in each case including any related matters, facts, events, disclosures, developments and occurrences that may arise from the ongoing investigations described therein and any use or transfer of
data that may have been or may be obtained as a result of any of the foregoing matters, facts, events, developments and occurrences.
Data
Breaches
shall mean (i) the User Security Matters and (ii) any other
security breaches, known or unknown to Seller and disclosed or undisclosed to Purchaser as of February 20, 2017, sustained by or perpetrated against Seller or any of its Subsidiaries through February 20, 2017 that, in the case of this clause (ii),
were or are initiated by or at the direction of, conducted on behalf of, sponsored by or otherwise involve (x) the state believed by Seller to have sponsored some or all of the User Security Matters (the identity of which has been communicated
by Seller to Purchaser prior to the date of the Amendment) or any Governmental Authority or other instrumentality of such state or (y) any other actor that sponsored or perpetrated any User Security Matter, including in each case, for the
avoidance of doubt, any use or transfer of data obtained as a result of any such matters or security breaches.
User Security
Liabilities shall not in any event include any Actions or Liabilities to the extent otherwise covered under Sections 1.4(a) through (g) above (
provided
that the Liabilities covered under Section 1.4(e)(x) shall not include (and User
Security Liabilities shall include) any Liabilities to indemnify, defend or hold harmless any Third Party (for the avoidance of doubt, which term does not include any current or former directors or officers of, or persons in a comparable role with,
Seller or the Business Subsidiaries) that would otherwise constitute User Security Liabilities hereunder). For the avoidance of doubt and notwithstanding anything herein to the contrary, it is the intention of the Parties that, as contemplated by
Sections 7.2 and 7.3, the Company will be responsible for 50% of any User Security Liabilities other than
Pre-Closing
User Security Liabilities (as defined below), but that Seller will be responsible for (x)
100% of any Actions or Liabilities covered under Sections 1.4(a) through (g) above regardless of when incurred and (y) 100% of any User Security Liabilities the amount of which has been finally determined and that have been entered or
stipulated against Seller or any of its Subsidiaries and not subject to appeal, as applicable, prior to the Sale Closing Date (or, with respect to attorneys, consultants and other professionals fees and expenses, that relate to
services rendered to Seller or any of its Subsidiaries prior to the Sale Closing Date) (the
Pre-Closing
User
Security
Liabilities
).
(b) Effective immediately, Section 5.2(c) of the Agreement is hereby amended by adding the following parenthetical at the end thereof:
(other than, in the case of Seller, its obligations in respect of any User Security Liabilities, which shall be governed by and subject to
Section 4.21(b) of the Purchase Agreement)
(c) Effective immediately, Section 5.5(d) of the Agreement is hereby amended by adding a
new clause (iii) at the end thereof, as follows:
(iii) Notwithstanding anything to the contrary in this Section 5.5, Seller
may (in its sole discretion and to the extent permitted by applicable Tax Law) apply to change its taxable year for income and franchise tax purposes to provide for a short taxable year that ends on or after the Closing Date. In the
event any such
Exhibit B-2-2
change is approved by the relevant taxing authority, (A) Seller shall notify the Company in writing of such change promptly after such approval is received and (B) the Company and
Seller shall apply the procedures set forth in Section 5.5(d)(i) (it being understood, for the avoidance of doubt, that the preparation and filing of any Tax Returns in accordance with such changed taxable year shall not be deemed inconsistent with
past practices within the meaning of Section 5.5(d)(i)),
provided
,
however
, that if the application of such procedures is not reasonably practicable, the Company and Seller shall cooperate in good faith and modify such procedures as
appropriate to ensure that the Company has a reasonable opportunity to prepare and timely file all relevant Tax Returns (including any Tax Returns with due dates accelerated as a result of the change described this Section 5.5(d)(iii)) and that each
Party has a reasonable opportunity to review and comment upon any Tax Return that reflects any Taxes for which such Party is responsible under this Agreement.
(d) Effective immediately, Section 7.2 of the Agreement is hereby amended by deleting the word and at the end of
clause (a) thereof, replacing the period at the end of clause (b) thereof with ; and, and adding the following paragraph as a new clause (c) thereof:
(c) fifty percent (50%) of any User Security Liabilities other than
Pre-Closing
User Security
Liabilities (for the avoidance of doubt, which fifty percent (50%) portion shall, subject to the terms of Section 7.4(h), be treated for all purposes hereunder (including all Tax related matters) as an Assumed Liability and not a Retained
Liability),
(e) Effective immediately, Section 7.3 of the Agreement is hereby amended by:
(i) replacing clause (a) thereof with the following:
(a) any Excluded Asset or Retained Liability, including the failure of Seller or any other Person to satisfy, pay, perform and discharge
when due any Retained Liabilities in accordance with their respective terms, whether prior to, at or after the Closing;
provided
, that, notwithstanding the foregoing, with respect to any User Security Liabilities other than
Pre-Closing
User Security Liabilities, Sellers obligations pursuant to this Section 7.3(a) will be limited to an amount equal to fifty percent (50%) of such User Security Liabilities; and
(ii) adding the following parenthetical
(but
subject
to
the
proviso
at
the
end
of
clause
(a)
above)
immediately following the phrase in each case appearing immediately following clause (b) of Section 7.3 of the Agreement.
(f) Effective immediately, Section 7.4 of the Agreement is hereby amended by adding a new clause (h) at the end thereof, as follows:
(h) Notwithstanding anything to the contrary in this Agreement, any Third-Party Claim in respect of User Security Liabilities shall be
controlled by the Company Indemnitees, but Seller shall be entitled to participate therein either (i) with counsel (selected by the Company Indemnitees and of recognized standing and competence) that shall serve as joint counsel for Seller and
the Company Indemnitees or (ii) with separate counsel selected by Seller, and, in either case, the fees and expenses of such counsel shall be included in the User Security Liabilities for purposes of this Agreement,
provided
that, in the
case of clause (ii), (A) unless such separate counsel is retained by Seller as a result of (1) an actual or potential conflict of interest resulting from such joint representation or the Company Indemnitees control or (2) the counsel
selected by the Company Indemnitees otherwise refusing to jointly represent Seller, the fees and expenses of such separate counsel for Seller shall not be included in User Security Liabilities and shall instead be at Sellers sole expense and
(B) in the event such separate counsel is retained by Seller as a result of clause (A)(1) or (2) above, the fees and expenses of any such separate counsel for Seller beyond a single firm (plus applicable local counsel) shall not be
included in User Security Liabilities and shall instead be at Sellers sole expense. The Company Indemnitees shall not settle or compromise such Third-Party Claim without the prior written consent of Seller (not to be unreasonably withheld,
conditioned or delayed).
Exhibit B-2-3
(g) Effective immediately, the Agreement is hereby amended by adding a new Schedule 1.4 thereto
as set forth on Appendix A to this Amendment.
4.
Purchase Agreement Reference
. The Parties acknowledge and agree that any
reference in the Purchase Agreement or any other Transaction Document (or in any other document or instrument referred to in any of the foregoing) to the Agreement shall mean the Agreement as amended by this Amendment.
5.
Miscellaneous
. The provisions of Article X of the Agreement shall apply
mutatis
mutandis
to this Amendment. Purchaser
hereby consents to this Amendment for purposes of Section 10.2 of the Agreement and Section 4.04 of the Purchase Agreement.
[
signature
page
follows
]
Exhibit B-2-4
IN WITNESS WHEREOF, the Parties have each caused this Amendment to be signed as of the date first
written above.
|
|
|
YAHOO! INC.
|
|
|
By:
|
|
/s/ Marissa A. Mayer
|
Name:
|
|
Marissa A. Mayer
|
Title:
|
|
CEO & President
|
|
YAHOO HOLDINGS, INC.
|
|
|
By:
|
|
/s/ Kenneth A. Goldman
|
Name:
|
|
Kenneth A. Goldman
|
Title:
|
|
President, Chief Financial Officer & Treasurer
|
[
Signature
Page
to Amendment to Reorganization Agreement
]
Exhibit B-2-5
Acknowledged and agreed:
|
|
|
VERIZON COMMUNICATIONS INC.
|
|
|
By:
|
|
/s/ Craig Silliman
|
Name:
|
|
Craig Silliman
|
Title:
|
|
Executive Vice President Public Policy and General Counsel
|
[
Signature
Page
to Amendment to Reorganization Agreement
]
Exhibit B-2-6
Exhibit C
EXECUTION VERSION
SETTLEMENT AND RELEASE AGREEMENT
THIS SETTLEMENT AND RELEASE AGREEMENT (this
Agreement
), dated as of February 20, 2017 (
Effective
Date
), is made and entered into by and among Yahoo! Inc., a Delaware corporation (
Seller
), Yahoo Holdings Inc., a Delaware corporation (the
Company
), and Verizon Communications Inc., a Delaware
corporation (
Purchaser
). Capitalized terms used but not otherwise defined herein have the meanings set forth in Section 1 below.
RECITALS
WHEREAS, Seller and
Purchaser are parties to that certain Stock Purchase Agreement, dated as of July 23, 2016, by and between Seller and Purchaser (the
Purchase Agreement
);
WHEREAS, Seller and the Company are parties to that certain Reorganization Agreement, dated as of July 23, 2016, by and between Seller
and the Company (the
Reorganization Agreement
);
WHEREAS, Seller and Purchaser are, contemporaneously with the
execution of this Agreement, entering into an Amendment to Stock Purchase Agreement, dated as of the date hereof (the
Amendment to Purchase Agreement
);
WHEREAS, Seller, Purchaser and the Company are, contemporaneously with the execution of this Agreement, entering into an Amendment to
Reorganization Agreement, dated as of the date hereof (the
Amendment to Reorganization Agreement
); and
WHEREAS,
subject to the terms of this Agreement, the parties wish to settle all potential disputes relating to, arising out of or in connection with the Data Breaches, and therefore it is their intent to avoid the risk and expense of litigation, and
permanently to settle and resolve all disputes, matters, claims, controversies, issues, assertions and causes of action among them, whether known or unknown, which could have been alleged or asserted, by and between the parties, without any
admission of fault, liability or wrongdoing on the part of any party, or any admission on the part of any party;
NOW, THEREFORE, in
consideration of the mutual representations, warranties, covenants and agreements set forth in this Agreement, the Amendment to Purchase Agreement and the Amendment to Reorganization Agreement, all of which are being executed contemporaneously, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1.
Definitions
. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings assigned to them in
the Purchase Agreement, as amended by the Amendment to Purchase Agreement, or the Reorganization Agreement, as amended by the Amendment to Reorganization Agreement, as applicable.
SECTION 2.
Settlement and Release of Claims
. (a) In consideration of the mutual representations, warranties, covenants, rights and
agreements set forth in this Agreement, as well as the consideration set forth in the Amendment to Purchase Agreement and the Amendment to Reorganization Agreement, and for other good and valuable consideration, the receipt and sufficiency of which
all parties hereby acknowledge, effective as of the Effective Date and to the fullest extent permitted by applicable Law, except as set forth in Section 2(d) or (e) of this Agreement, Purchaser, on its own behalf and on behalf of its
Subsidiaries and other Affiliates
Exhibit C-1
(including, from and after the Closing, the Company and its Subsidiaries), and its and their respective Representatives and the respective heirs, executors, administrators, successors and assigns
of each of the foregoing (collectively, the
Releasing Parties
), hereby releases and discharges any and all past, present or future claims, rights, orders, causes of action, suits, liabilities, debts, dues, sums of money, accounts,
actions, reckonings, bonds, bills, specialties, covenants, contracts, controversies, counterclaims, cross-claims, defenses, obligations, promises, costs, damages, judgments, extents, executions, losses and demands of any kind, nature or description
in any forum whatsoever, whether presently known or unknown, accrued or not accrued, foreseen or unforeseen, matured or not matured, patent or latent, suspected or claimed (
Claims
), which Purchaser or any of the Releasing Parties
ever had, now has or hereafter can, shall or may have against Seller or any of its Subsidiaries and other Affiliates, and its and their respective stockholders and Representatives and the respective heirs, executors, administrators, successors and
assigns of each of the foregoing (collectively, the
Released Parties
), for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world, whether in contract, tort, law, equity or otherwise, arising
out of, relating to, in connection with or based in any way on the Data Breaches (collectively, the
Released Claims
), including, for the avoidance of doubt, tort claims (including fraudulent inducement, fraudulent concealment and
negligent misrepresentation), contract claims, warranty claims, statutory claims, declaratory judgment actions, counterclaims, cross-claims and third-party claims.
(b) In furtherance of the foregoing, and without limiting the generality thereof, except as set forth in Section 2(d) or (e) of this
Agreement, Purchaser, on behalf of itself and the other Releasing Parties, hereby releases Seller and the other Released Parties from any and all Claims, whether in contract, tort, law, equity or otherwise, that any of the Data Breaches, or any
matter arising out of, relating to, in connection with or based in any way on any of the Data Breaches, constitutes a breach of Contract, fraud or negligent misrepresentation warranting the failure, breach or rescission of the Purchase Agreement or
any other monetary damages or remedies.
(c) In connection with the waiver and release set forth in this Section 2, Purchaser hereby
expressly acknowledges present uncertainty about the facts concerning the Knowledge of Seller and the knowledge of any of Sellers directors, officers, employees or independent contractors, or any recklessness or negligence by Seller or any of
its directors, officers, employees or independent contractors with respect to the existence of Data Breaches at the time of the signing of the Purchase Agreement, and that Purchaser may hereafter discover facts in addition to and/or different from
those now known or believed to be true with respect to such knowledge, recklessness or negligence. Purchaser also expressly acknowledges present uncertainty as to the number, nature and extent of Data Breaches, and that Purchaser may hereafter
discover facts in addition to and/or different from those now known or believed to be true regarding any Data Breaches. Purchaser expressly acknowledges these uncertainties and nonetheless fully, finally and forever releases, on behalf of itself and
the other Releasing Parties, all Released Parties from any and all Released Claims as set forth in this Section 2, except as expressly set forth in Section 2(d) or (e). No such present or future development, discovery or disclosure of facts
related to any Data Breaches, including any purported knowledge, recklessness or negligence by Seller, its directors, officers, employees or its independent contractors, shall provide grounds for rescission of this Agreement.
(d) Notwithstanding anything to the contrary,
Released Claims
shall not include or limit in any manner whatsoever
(i) any obligations under this Agreement, under Section 4.21 of the Purchase Agreement (for the avoidance of doubt, including any remedies for any breaches of representations contained herein or in Section 4.21(d) of the Purchase
Agreement), as amended by the Amendment to Purchase Agreement, or under the last sentence of Section 4.03(a) of the Purchase Agreement, as amended by the Amendment to Purchase Agreement, or (ii) any indemnification or other obligations with
respect to the User Security Liabilities under the Reorganization Agreement, as amended by the Amendment to Reorganization Agreement, or any Claim to interpret, for breach of or to enforce any such obligations referred to in clauses (i) and
(ii).
(e) Notwithstanding anything to the contrary, the releases set forth in this Section 2, and the definition of
Released Claims
, shall not include or limit in any manner whatsoever any Claims that any Data Breaches,
Exhibit C-2
other than the Excluded Matters, individually or in the aggregate, constitute or would reasonably be expected to constitute, or have contributed to or would reasonably be expected to contribute
to, a Business Material Adverse Effect, which Purchaser reserves the right to assert, and, for the avoidance of doubt, Data Breaches other than the Excluded Matters shall not be disregarded for purposes of (i) the conditions set forth in
Sections 5.02(a)(iii), 5.02(a)(iv) and 5.02(b) of the Purchase Agreement, as amended by the Amendment to Purchase Agreement, to the obligations of Purchaser thereunder to consummate the Closing and purchase the Shares or (ii) the right of
Purchaser to terminate the Purchase Agreement, as amended by the Amendment to Purchase Agreement, pursuant to Section 6.01(d)(i) thereof.
(f) The parties intend Sections 2(a), (b) and (c) to establish a general release covering the subject matter hereof, and subject to the
terms hereof (including Sections 2(d) and (e)). Except as expressly set forth in Section 2(d) or (e), those releases include, to the maximum extent permitted by Law, and subject to the terms hereof, unknown claims and Liabilities. Each party
hereto hereby acknowledges that it has read and is familiar with California Civil Code Section 1542, which states as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. Subject to the terms of this Section 2, Purchaser, on behalf of itself and the other Releasing
Parties, does hereby knowingly and expressly waive and relinquish all rights and benefits which it or any other Releasing Party has or may have under California Civil Code Section 1542 (or any similar Law of any other country, state, territory
or jurisdiction) to the fullest extent that it may lawfully waive such rights and benefits. Subject to the terms of this Section 2, in connection with the waiver and relinquishment set forth in this Section 2, Purchaser, on behalf of
itself and the other Releasing Parties, acknowledges that it or any other Releasing Party may hereafter discover facts in addition to and/or different from those now known or believed to be true, but that notwithstanding that fact, it is
Purchasers intention, on behalf of itself and the other Releasing Parties, hereby to fully, finally and forever release all of the Released Claims, known or unknown, suspected or unsuspected, which now exist, may in the future exist or
heretofore have existed between Purchaser and any Releasing Party, on the one hand, and Seller and any other Released Party, on the other hand, and that in furtherance of such intention, the releases given herein will be and remain in effect as full
and complete releases, notwithstanding the discovery or existence of any such additional or different facts.
SECTION 3.
Covenant Not
to Sue
. (a) Purchaser, on behalf of itself and the other Releasing Parties, covenants not to bring or join any Released Claim against any Released Party before any Governmental Authority in any jurisdiction, whether as a cause of action,
counterclaim, Action, defense or otherwise; provided, that this Section 3(a) shall not apply to the defense of any Action if such Action has been initiated by any Released Party against a Releasing Party. Seller and each other Released Party may
plead this Agreement as a complete bar to any claim or defense brought in derogation of this covenant not to sue.
(b) Nothing in this
Section 3 shall preclude any party from initiating any proceeding to interpret, for breach of or to enforce the terms of this Agreement.
SECTION 4.
Representations and Warranties
. (a) Each of Seller and the Company hereby represents and warrants to Purchaser as
follows:
(i) It is a corporation duly organized, validly existing, and in good standing and has corporate power and
authority to enter into, execute and deliver this Agreement, and to perform its obligations hereunder.
(ii) The execution,
delivery and performance of this Agreement has been duly authorized by all necessary corporate proceedings on its part, and the actions contemplated by this Agreement are authorized and permitted to be undertaken pursuant to its organizational and
operational documents.
(iii) The person signing this Agreement on its behalf has the authority to execute this Agreement
and thereby bind it to the terms of this Agreement.
Exhibit C-3
(iv) This Agreement has been duly and validly executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, general
equity principles, other similar Laws of general application affecting enforcement of creditors rights generally and rules of Law governing specific performance, injunctive relief and other equitable remedies.
(v) Seller has relied solely upon the advice and analysis of its own independent counsel in order for Seller to enter this
Agreement, and Seller, on its own behalf and on behalf of the Released Parties, acknowledges that, except for the representations and warranties of Purchaser expressly set forth in Section 4(b), none of Purchaser, its Subsidiaries, Affiliates or any
of their Representatives or the Releasing Parties makes or has made, and Seller and the Released Parties have not relied on, any representation or warranty, either express or implied, by any such Person in connection with Sellers entering into
this Agreement. Any other purported representation or warranty in connection with Sellers entering into this Agreement, whether written or oral, is hereby expressly disclaimed.
(b) Purchaser hereby represents and warrants to Seller as follows:
(i) Purchaser is a corporation duly organized, validly existing, and in good standing and has corporate power and authority to
enter into, execute and deliver this Agreement, and to perform its obligations hereunder, including releasing Released Claims as set forth in Section 2.
(ii) The execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate proceedings
on Purchasers part, and the actions contemplated by this Agreement are authorized and permitted to be undertaken pursuant to Purchasers organizational and operational documents.
(iii) The person signing this Agreement on behalf of Purchaser has the authority to execute this Agreement and thereby bind
Purchaser to the terms of this Agreement.
(iv) This Agreement has been duly and validly executed and delivered by
Purchaser and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, general equity principles, other similar Laws of general application affecting enforcement of creditors rights generally and rules of Law governing specific performance, injunctive relief and other equitable remedies.
(v) Purchaser has no claims of any type pending against Seller or any Person, collectively or individually, directly or
derivatively, in judicial, governmental or other regulatory bodies, relating to any of the Data Breaches, the Purchase Agreement or the Reorganization Agreement.
(vi) Purchaser is the sole and absolute owner of each and every of the Released Claims that it has released herein, and it has
not sold, assigned, transferred, conveyed or otherwise assigned or disposed of any portion of the Released Claims, or any of its interests therein, to any Person.
(vii) Purchaser acknowledges and agrees that, to the extent permitted by applicable Law, Purchasers intention, by
entering into this Agreement, is to release any and all Released Claims on behalf of all Releasing Parties as provided in this Agreement and to agree to any and all provisions applicable to the Releasing Parties as set forth in this Agreement, and
that, upon execution by Purchaser, to the extent permitted by applicable Law, this Agreement shall be binding upon all Releasing Parties, without the need for accession or ratification hereof by any Releasing Party or any other Person. Purchaser
agrees that it shall cause each of the Releasing Parties to comply with and be bound by the terms of the Agreement to the fullest extent permitted by Law.
(viii) Purchaser has relied solely upon the advice and analysis of its own independent counsel in order for Purchaser to enter
this Agreement, and Purchaser, on its own behalf and on behalf of the Releasing
Exhibit C-4
Parties, acknowledges that, except for the representations and warranties of Seller expressly set forth in Section 4(a), none of Seller, its Subsidiaries, Affiliates or any of their
Representatives makes or has made, and Purchaser and the Releasing Parties have not relied on, any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information provided or made available to
Purchaser or any of the other Releasing Parties in connection with Purchasers entering into this Agreement and agreeing to the settlement and releases set forth herein. Without limiting the generality of the foregoing, except for the
representations and warranties made by Seller in Section 4(a), none of Seller nor any of the other Released Parties makes or has made, and Purchaser and the Releasing Parties have not relied on, any representation or warranty in connection with
Purchasers entering into this Agreement and agreeing to the settlement and releases set forth herein with respect to (A) this Agreement, (B) the facts of any of the Data Breaches, (C) potential legal or monetary liabilities
arising out of any of the Data Breaches, (D) the contemporaneous knowledge of any Released Party concerning any of the Data Breaches or (E) the accuracy or completeness of any material, document or information made available or
communicated to Purchaser or any other Releasing Party relating to any of the Data Breaches. Any other purported representation or warranty in connection with Purchasers entering into this Agreement and agreeing to the settlement and releases
set forth herein, whether written or oral, is hereby expressly disclaimed.
SECTION 5.
No Admission of Liability
. (a) Neither
the negotiation, execution nor performance of this Agreement, nor any provision hereof nor acts undertaken pursuant to it, shall be construed as an admission or evidence of liability, wrongdoing or fault whatsoever on the part of any party or
Person. Each party expressly denies and specifically disclaims any liability, wrongdoing or fault on the part of itself and its present and former directors, officers, employees and agents in connection with the subject matter of this Agreement.
(b) Each party acknowledges that the policies concerning settlement agreements contained in Federal Rule of Evidence 408, Delaware
Uniform Rule of Evidence 408 and any other state, regulatory or foreign equivalent of Federal Rule of Evidence 408 limit the admissibility of this Agreement. Neither this Agreement, nor the fact of its execution, nor any of its provisions, shall be
offered or received into evidence in any action or proceeding of any nature or otherwise referred to or used in any manner in any court or tribunal, except in a proceeding to interpret, for breach of or to enforce the terms of this Agreement or any
of the Transaction Documents.
SECTION 6.
Unknown Facts; Mistakes of Fact or Law
. (a) Each party acknowledges that it may
hereafter discover facts different from, or in addition to, those that it now knows or believes to be true with respect to the Released Claims, and agrees that this Agreement and the releases contained herein shall be and remain effective in all
respects, notwithstanding such different or additional facts and subsequent discovery thereof.
(b) With the exception of the warranties
and representations made in Section 4, in entering into this Agreement and the settlement contemplated herein, each party assumes the risk of any misrepresentations, concealment or mistake. If any party should subsequently discover that any
fact relied upon it by it entering into this Agreement was untrue, or that any fact was concealed from it, or that its understanding of the facts or of the law was incorrect, with the exception of the warranties and representations made in
Section 4, such party shall not be entitled to any relief in connection therewith, including any alleged right or claim to set aside or rescind this Agreement. This Agreement is intended to be and is final and binding between the parties
hereto, regardless, to the fullest extent permitted by Law, of any claims of fraud (including fraudulent inducement and fraudulent concealment), misrepresentations, promise made, lack of intention to perform, concealment of facts, or mistakes of
fact or law.
SECTION 7.
Miscellaneous
. (a)
Survival
. The rights and obligations of each of the parties under this
Agreement will survive the Closing indefinitely.
(b)
Assignment
. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder
Exhibit C-5
shall be assigned, in whole or in part, by operation of Law or otherwise, by any party without the prior written consent of the other parties. Any purported assignment in contravention of this
Section 7(b) shall be null and void.
(c)
Amendment
. This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
(d)
Severability
. If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future Laws effective during the term hereof, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision never comprised a part
hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in its terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.
(e)
No Third-Party Beneficiaries
. This Agreement is for the sole benefit of the parties hereto and their permitted assigns and (subject
to Section 10.5 of the Reorganization Agreement, as amended by the Amendment to Reorganization Agreement) nothing herein, express or implied, shall give or be construed to give to any Person, other than the parties hereto and such permitted
assigns, any legal or equitable rights hereunder;
provided
,
however
, that the Released Parties shall be third-party beneficiaries of this Agreement and shall have the right to enforce the terms and provisions hereof.
(f)
Governing Law and Jurisdiction
. This Agreement shall be governed by, and construed and enforced in accordance with, the Laws of the
State of Delaware, without regard to any choice or conflict of Law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware. In
addition, each of the parties (i) submits to the exclusive personal jurisdiction of the Delaware Court of Chancery, any other court of the State of Delaware or any federal court sitting in the State of Delaware in the event that any dispute
(whether in contract, tort or otherwise) arises out of this Agreement; (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court; (iii) agrees that it will
not bring any Action relating to this Agreement in any court other than the Delaware Court of Chancery, any other court of the State of Delaware or any federal court sitting in the State of Delaware; and (iv) agrees that it will not seek to
assert by way of motion, as a defense or otherwise, (A) that any such Action is brought in an inconvenient forum, (B) that any such Action should be transferred or removed to any court other than one of the above-named courts,
(C) that any such Action should be stayed by reason of the pendency of some other Action in any court other than one of the above-named courts or (D) that this Agreement or the subject matter hereof may not be enforced in or by the
above-named courts. Each party hereto agrees that service of process upon such party in any such Action shall be effective if notice is given in accordance with Section 7(k). Notwithstanding the foregoing in this Section 7(f), a party may commence
any Action in any court other than the above-named courts solely for the purpose of enforcing an order or judgment issued by one of the above-named courts relating to any dispute (whether in contract, tort or otherwise) arising out of this
Agreement.
(g)
Waiver of Jury Trial
. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(h)
Specific
Performance
. The parties agree that irreparable harm for which monetary damages, even if available, would not be an adequate remedy would occur in the event that the parties do not perform the provisions of this Agreement (including failing to
take such actions as are required of such party hereunder to consummate this Agreement) in accordance with its specified terms or otherwise breach such provisions. Accordingly, the parties acknowledge and agree that the parties shall be entitled to
an injunction, specific
Exhibit C-6
performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are
entitled at law or in equity. Each of the parties agrees that it will not oppose the granting of an injunction, specific performance or other equitable relief on the basis that any other party has an adequate remedy at law or that any award of
specific performance is not an appropriate remedy for any reason at law or in equity. Any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall
not be required to provide any bond or other security in connection with any such order or injunction.
(i)
Headings
. The headings
of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part hereof.
(j)
Counterparts
. The parties hereto may execute this Agreement in one or more counterparts, and each fully executed counterpart shall
be deemed an original but all of which taken together shall constitute one and the same agreement.
(k)
Notices
. Should any notice
be required with respect to this Agreement, such notice shall be in writing and be given in person or by means of electronic mail, facsimile or other means of wire transmission (with request for assurance of receipt in a manner typical with respect
to communications of that type), by overnight courier or by mail, and shall become effective: (i) on delivery if given in person; (ii) on the date of transmission if sent by electronic mail, facsimile or other means of wire transmission;
(iii) one (1) Business Day after delivery to the overnight service; or (iv) three (3) Business Days after being mailed, with proper postage and documentation, for first-class registered or certified mail, prepaid. Notices shall be
addressed as follows:
|
(i)
|
If to Seller or, prior to the Closing, the Company, to:
|
|
|
|
Yahoo! Inc.
|
701 First Avenue
|
Sunnyvale, CA 94089
|
Facsimile: (408)
349-3510
|
Attn: General Counsel and Secretary
|
Email:
rbell@yahoo-inc.com
|
|
with a copy to (which copy shall not constitute notice):
|
|
Skadden, Arps, Slate, Meagher & Flom LLP
|
Four Times Square
|
New York, NY 10036
|
Facsimile: (212)
735-2000
|
Attn:
|
|
Marc R. Packer
|
|
|
Michael J. Mies
|
Email:
|
|
Marc.Packer@skadden.com
|
|
|
Michael.Mies@skadden.com
|
|
with a further copy to (which copy shall not constitute notice):
|
|
Cravath, Swaine & Moore LLP
|
Worldwide Plaza
|
825 8th Ave
|
New York, NY 10019
|
Facsimile: (212)
474-3700
|
Attn:
|
|
Faiza J. Saeed
|
|
|
Eric L. Schiele
|
Email:
|
|
FSaeed@cravath.com
|
|
|
ESchiele@cravath.com
|
Exhibit C-7
|
|
|
|
with a further copy to (which copy shall not constitute notice):
|
|
Wilson Sonsini Goodrich & Rosati, Professional Corporation
650 Page Mill Road
|
Palo Alto, CA 94304
Facsimile:
(650)
493-6811
|
Attn:
|
|
Larry Sonsini
|
Email:
|
|
LSonsini@wsgr.com
|
|
(ii)
|
If to Purchaser or, after the Closing, the Company, to:
|
|
|
|
Verizon Communications Inc.
One
Verizon Way, VC44E239
Basking Ridge, NJ 07920
Facsimile:
908-766-3818
|
Attn:
|
|
William L. Horton, Jr., Senior Vice President, Deputy General
|
|
|
Counsel and Corporate Secretary
|
|
|
Michael Rosenblat, Vice President, Associate General Counsel
|
Email:
|
|
william.horton@verizon.com
michael.rosenblat@verizon.com
|
|
with a copy to (which copy shall not constitute notice):
|
|
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Facsimile: (212)
403-2000
|
Attn:
|
|
Daniel A. Neff
|
|
|
Steven A. Rosenblum
|
|
|
David E. Shapiro
|
|
|
Edward J. Lee
|
Email:
|
|
DANeff@wlrk.com
|
|
|
SARosenblum@wlrk.com
|
|
|
DEShapiro@wlrk.com
|
|
|
EJLee@wlrk.com
|
provided
,
however
, that if any party shall have designated a different address by notice to the other,
then notices shall be addressed to the last address so designated.
(l)
Construction
. The language in all parts of this Agreement
shall be construed, in all cases, according to its fair meaning. The parties hereto acknowledge that each party and its counsel have reviewed and revised this Agreement and that any rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation of this Agreement. Words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other gender as the
context requires. The terms hereof, herein, and herewith and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this
Agreement. Section references are to the Sections to this Agreement unless otherwise specified. Unless otherwise stated, all references to any Contract shall be deemed to include the schedules to such Contract. The word including and
words of similar import when used in this Agreement mean including, without limitation, unless the context otherwise requires or unless otherwise specified. The word or shall not be exclusive. Unless otherwise specified in a
particular case, the word days refers to calendar days. References herein to any Law shall be deemed to refer to such Law as it may be amended, modified or supplemented from time to time, unless otherwise specified. All references to
dollars or $ shall be deemed references to the lawful money of the United States of America.
Exhibit C-8
(m)
Entire Agreement
. This Agreement, along with the Purchase Agreement, as amended by the
Amendment to Purchase Agreement, the Reorganization Agreement, as amended by the Amendment to Reorganization Agreement, the other Transaction Documents and the Confidentiality Agreement, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes any prior understanding, agreements or representations by or between the parties, written or oral, to the extent they relate in any way to the subject matter hereof.
(n)
Counsel
. Each party acknowledges and represents that it has been represented by counsel of its own choice throughout the
arms-length
negotiations that preceded the execution of this Agreement and in connection with the preparation and execution of this Agreement. Each party further acknowledges and represents that it has
reviewed this Agreement with its counsel and that each party understands the terms of this Agreement.
[SIGNATURE PAGES FOLLOW]
Exhibit C-9
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by
their duly authorized representatives as of the date first written above.
|
|
|
|
|
|
|
YAHOO! INC.
|
|
|
|
|
|
by
|
|
/s/ Marissa A. Mayer
|
|
|
|
|
Name:
|
|
Marissa A. Mayer
|
|
|
|
|
Title:
|
|
CEO & President
|
|
YAHOO HOLDINGS, INC.
|
|
|
|
|
|
by
|
|
/s/ Kenneth A. Goldman
|
|
|
|
|
Name:
|
|
Kenneth A. Goldman
|
|
|
|
|
Title:
|
|
President, Chief Financial Officer & Treasurer
|
[
Signature Page to Settlement and Release Agreement]
Exhibit C-10
|
|
|
|
|
|
|
VERIZON COMMUNICATIONS INC.
|
|
|
|
|
|
by
|
|
/s/ Craig Silliman
|
|
|
|
|
Name:
|
|
Craig Silliman
|
|
|
|
|
Title:
|
|
Executive Vice President Public
Policy and General Counsel
|
[
Signature Page to Settlement and Release Agreement]
Exhibit C-11
Exhibit D
RESTATED CERTIFICATE OF INCORPORATION
OF
ALTABA INC.
The undersigned, Arthur Chong, hereby certifies that:
1. He is the duly elected and acting Secretary of Altaba Inc., a Delaware corporation.
2. The Certificate of Incorporation of this corporation was originally filed with the Secretary of State of Delaware on March 24, 1999
under the name Yahoo! Inc.
3. This Restated Certificate of Incorporation only restates and integrates and does not further amend the
provisions of the Certificate of Incorporation of this corporation as heretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation.
4. The text of the Certificate of Incorporation of this corporation as heretofore amended or supplemented, including the Certificate of
Designation, Preferences and Rights of Series A Junior Participating Preferred Stock attached hereto as
Exhibit A
, is hereby restated without further amendments or changes to read in full as follows:
ARTICLE I
The name of
this corporation is Altaba Inc. (the
Corporation
).
ARTICLE II
The address of the Corporations registered office in the State of Delaware is 1209 Orange Street in the City of Wilmington, County of
New Castle, 19801. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV
(A)
Classes of Stock
. The Corporation is authorized to issue two classes of stock to be designated, respectively,
Common Stock
and
Preferred Stock
. The total number of shares which the Corporation is authorized to issue is Five Billion Ten Million (5,010,000,000) shares, each with a par value of $0.001 per share. Five
Billion (5,000,000,000) shares shall be Common Stock and Ten Million (10,000,000) shares shall be Preferred Stock.
(B) The
Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized, within the limitations and restrictions stated in this Certificate of Incorporation, to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and the number of shares constituting any such series and the designation thereof, or any of them; and to increase or decrease the number of shares
of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.
Exhibit D-1
ARTICLE V
The number of directors of the Corporation shall be fixed from time to time by a bylaw or amendment thereof duly adopted by the Board of
Directors.
ARTICLE VI
In the election of directors, each holder of shares of any class or series of capital stock of the Corporation shall be entitled to one vote
for each share held. No stockholder will be permitted to cumulate votes at any election of directors.
ARTICLE VII
No action shall be taken by the stockholders of the Corporation other than at an annual or special meeting of the stockholders, upon due
notice and in accordance with the provisions of the Corporations Bylaws.
ARTICLE VIII
The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
ARTICLE IX
The Board of
Directors of the Corporation is expressly authorized to make, alter or repeal the Bylaws of the Corporation.
ARTICLE X
Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be
kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
ARTICLE XI
(A) To the
fullest extent permitted by applicable law, as the same may be amended from time to time, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a
director. If any applicable law is hereafter amended to authorize, with the approval of the Corporations stockholders, further reductions in the liability of the Corporations directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent permitted by applicable law, as amended.
(B) To the extent the
limitations on liability delineated in paragraph (A) of this Article XI are limited by the Investment Company Act of 1940 (the
Investment Company Act
), the limitations under the Investment Company Act shall govern only those
actions taken by directors of the Corporation while the Corporation is registered as an investment company under the Investment Company Act and do not apply to any actions taken by directors of the Corporation when the Corporation is not registered
as an investment company under the Investment Company Act.
Exhibit D-2
(C) Any repeal or modification of the foregoing provisions of this Article XI shall not adversely
affect any right or protection of a director of the Corporation with respect to any acts or omissions of such director occurring prior to such repeal or modification.
ARTICLE XII
(A) To the
fullest extent permitted by applicable law, as the same may be amended from time to time, the Corporation is also authorized to provide indemnification of (and advancement of expenses to) agents (and any other persons to which applicable law permits
the Corporation to provide indemnification) through bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by
Section 145 of the Delaware General Corporation Law or other applicable law, subject only to limits created by applicable Delaware law (statutory or non-statutory) and the Investment Company Act with respect to actions for breach of duty to a
corporation, its stockholders, and others.
(B) To the extent the rights to indemnification delineated in paragraph (A) of this
Article XII are limited by the Investment Company Act, such limitations shall govern only those actions taken by an indemnified person while the Corporation is registered as an investment company under the Investment Company Act and do not apply to
any actions taken by an indemnified person when the Corporation is not registered as an investment company under the Investment Company Act.
(C) Any repeal or modification of any of the foregoing provisions of this Article XII shall not adversely affect any right or protection of a
director, officer, agent or other person existing at the time of, or increase the liability of any such person with respect to, any acts or omissions of such person occurring prior to such repeal or modification.
* * *
This Restated Certificate of Incorporation, including the Certificate of Designation, Preferences and Rights of Series A Junior Participating
Preferred Stock attached hereto as
Exhibit A
, has been duly adopted by the Corporations Board of Directors in accordance with the applicable provisions of Section 245 of the General Corporation Law of the State of Delaware.
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Executed on [●], 2017.
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Arthur Chong
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Secretary
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Exhibit D-3
Exhibit A
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
ALTABA INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Section
1.
Designation and Amount
. The shares of such series shall be designated as Series A Junior Participating Preferred Stock and the number of shares constituting such series shall be two million (2,000,000).
Section 2.
Dividends and Distributions
.
(A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on March 31, June 30, September 30 and December 31 of each year (each such date being referred to herein as a
Quarterly Dividend Payment
Date
), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $.01 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $.001 per share, of the
Corporation (the
Common Stock
) since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series
A Junior Participating Preferred Stock. In the event the Corporation shall at any time after March 1, 2001 (the
Rights Declaration Date
) (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(B) The
Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in Paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior
Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior
Exhibit D-4
Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among
all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.
Section 3.
Voting
Rights
. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights:
(A) Subject to
the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to one thousand (1,000) votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating
Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six
(6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a default period) which shall extend until such time when all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all
holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the
right to elect two (2) directors.
(ii) During any default period, such voting right of the holders of Series A Junior
Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided
that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase, in certain cases, the authorized number of directors shall be exercised unless the holders of ten percent (10%) in number
of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the
holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect directors to fill such vacancies, if any, in the Board of Directors as may then exist up
to two (2) directors or, if such right is exercised at an annual meeting, to elect two (2) directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock
shall have the right to make such increase in the number of directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect directors in any
default period and during the continuance of such period, the number of directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking
senior to or
pari
passu
with the Series A Junior Participating Preferred Stock.
(iii) Unless the holders of
Preferred Stock shall, during an existing default period, have previously exercised their right to elect directors, the Board of Directors may order, or any stockholder or
Exhibit D-5
stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a
special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock
are entitled to vote pursuant to this Paragraph (C)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall
be called for a time not earlier than 20 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this Paragraph (C)(iii), no such special meeting shall be called
during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall
continue to be entitled to elect the whole number of directors until the holders of Preferred Stock shall have exercised their right to elect two (2) directors voting as a class, after the exercise of which right (x) the directors so
elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as
provided in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the remaining directors theretofore elected by the holders of the class of stock which elected the director whose office shall have become vacant. References in
this Paragraph (C) to directors elected by the holders of a particular class of stock shall include directors elected by such directors to fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to
elect directors shall cease, (y) the term of any directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of directors shall be such number as may be provided for in the Amended and Restated
Certificate of Incorporation or Bylaws irrespective of any increase made pursuant to the provisions of Paragraph (C)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the
certificate of incorporation or by-laws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining directors.
(D) Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
Section 4.
Certain Restrictions
.
(A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation
shall not
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
Exhibit D-6
(iii) redeem or purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of
any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares
of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms
as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire
for consideration any shares of stock of the Corporation unless the Corporation could, under Paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5.
Reacquired Shares
. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.
Section 6.
Liquidation, Dissolution or Winding Up
.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders
of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred
Stock shall have received an amount equal to $100 per share of Series A Participating Preferred Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the
Series A Liquidation Preference
). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the
Common Adjustment
) equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by
(ii) 1,000 (as appropriately adjusted as set forth in subparagraph (C) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the
Adjustment Number
). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock,
respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not
sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Junior Participating Preferred
Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event
the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
Exhibit D-7
or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
Section 7.
Consolidation, Merger, etc
. In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior
Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 8.
No Redemption
. The shares of Series A Junior Participating Preferred Stock shall not be redeemable.
Section 9.
Ranking
. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Corporations
Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.
Section 10.
Amendment
. At any time when any shares of Series A Junior Participating Preferred Stock are outstanding, neither the
Amended and Restated Certificate of Incorporation of the Corporation nor this Certificate of Designation shall be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11.
Fractional Shares
. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle
the holder, in proportion to such holders fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock.
Exhibit D-8
Exhibit E
PERSONAL AND CONFIDENTIAL
February 20, 2017
The Strategic Review Committee of the
Board of Directors
The Board of Directors
Yahoo! Inc.
701 First Ave.
Sunnyvale, California 94089
Ladies and Gentlemen:
You have requested our opinion as to the
fairness from a financial point of view to Yahoo! Inc. (the Company) of the $4.4758 billion in cash (as adjusted pursuant to Sections 1.01 and 1.04 of the Agreement (as defined below), the Cash Consideration) to be paid
to the Company, together with the substitution by the Purchaser of such restricted stock unit awards of the Company as are specified in Section 1.03(b) of the Agreement for restricted stock unit awards with respect to shares of the Purchasers
common stock as specified in the Agreement, thereby relieving the Company of its obligations with respect to such substituted restricted stock unit awards (the RSU Substitution and, together with the Cash Consideration, collectively, the
Consideration), pursuant to the Stock Purchase Agreement, dated as of July 23, 2016 (the
Pre-Amendment
Agreement), by and between the Company and Verizon Communications Inc. (the
Purchaser), as amended by the Amendment to the
Pre-Amendment
Agreement, dated as of February 20, 2017 (the Amendment and together with the
Pre-Amendment
Agreement, the Agreement), in connection with the purchase from the Company of all of the then issued and outstanding shares of common stock (the Shares) of Yahoo!
Holdings, Inc., a wholly owned subsidiary of the Company (SaleCo). Concurrently with the execution of the Amendment, the Company, SaleCo and the Purchaser entered into (a) an amendment, dated as of February 20, 2017 (the
Reorganization Amendment), to the Reorganization Agreement, dated as of July 23, 2016 (the
Pre-Amendment
Reorganization Agreement and as amended, the Reorganization
Agreement), and (b) a Settlement and Release Agreement, dated as of February 20, 2017 (the Settlement Agreement). Pursuant to the Agreement, the following will occur:
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pursuant to the Reorganization Agreement the Company will transfer to SaleCo the Business (as defined in the Agreement), and the Company and SaleCo will complete the other Reorganization Transactions (as such term is
defined in the Agreement) at or prior to the closing of the Transaction;
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the Company will sell to the Purchaser the Shares, and the Purchaser will effect the RSU Substitution and pay to the Company the Cash Consideration.
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Goldman, Sachs & Co. and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research,
investment management and other financial and
non-financial
activities and services for various persons and entities. Goldman, Sachs & Co. and its affiliates and employees, and funds or other entities
they manage or in which they invest or have other economic interests or with which they
co-invest,
may at any time purchase, sell, hold or vote long or short positions and investments in securities,
derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of the Company, the Purchaser, any of their respective affiliates and third parties or any currency or commodity that may be involved in the
Exhibit E-1
The Strategic Review Committee of the Board of Directors
The Board of Directors
Yahoo! Inc.
February 20, 2017
Page
2
transaction contemplated by the Agreement (the Transaction). We have acted as financial advisor to the Strategic Review Committee of the Companys Board of Directors (the
Strategic Review Committee) in connection with, and have participated in certain of the negotiations leading to, the Transaction. We expect to receive fees for our services in connection with the Transaction, the principal portion of
which is payable upon consummation of the Transaction, and the Company has agreed to reimburse certain of our expenses arising, and indemnify us against certain liabilities that may arise, out of our engagement. We have provided certain financial
advisory and/or underwriting services to the Company and/or its affiliates from time to time for which our Investment Banking Division has received, and may receive, compensation. We also have provided certain financial advisory and/or underwriting
services to the Purchaser and/or its affiliates from time to time for which our Investment Banking Division has received, and may receive, compensation, including having acted as joint bookrunner with respect to a public offering by the Purchaser of
$400,000,000 of Floating Rate notes due 2019, $1,000,000,000 of 1.375% Notes due 2019, $1,000,000,000 of 1.750% Notes due 2021, $2,250,000,000 of 2.625% Notes due 2026, and $1,500,000,000 of 4.125% Notes due 2046 in July 2016; financial advisor to
AOL Inc., a subsidiary of the Purchaser, in connection with its acquisition of Millennial Media in October 2015; as a lead dealer manager with respect to seven private offers to exchange specified series of debt securities of the Purchaser and one
of its subsidiaries for new debt securities of the Purchaser and cash in March 2015; as a
co-lead
underwriter with respect to a public offering by the Purchaser of 2.625% Notes due 2031 (aggregate principal
amount of 1,000,000,000) in December 2014; as a
co-lead
underwriter with respect to a public offering by the Purchaser of 1.625% Notes due 2024 (aggregate principal amount of 1,400,000,000) in
December 2014; as a lead dealer manager and a lead solicitation agent with respect to three cash tender offers on behalf of the Purchaser and certain of its subsidiaries in April 2016; and as a dealer in respect of the Purchasers commercial
paper program commencing in 2006. We may also in the future provide financial advisory and/or underwriting services to the Company, the Purchaser, SaleCo and their respective affiliates for which our Investment Banking Division may receive
compensation. In addition, Goldman, Sachs & Co., acting as principal, is a counterparty to the Company with respect to convertible note hedge transactions entered into in connection with the Companys sale of 0.00% Convertible Senior
Notes due 2018 (the Convertible Notes) and with respect to issuer written warrant transactions entered into contemporaneously with those note transactions (the Hedge and Warrant Transactions). Pursuant to the terms of
the Hedge and Warrant Transactions specified in the confirmations thereof, upon a change of control, fundamental change, sale of assets or certain other events involving the Company (including the Transaction), there could be an adjustment,
cancellation or termination of the Hedge and Warrant Transactions in whole or in part. In that case, the terms of such confirmations could require the Company to make a termination or cancellation payment to us. In connection with the
Hedge and Warrant Transactions, we have engaged, and expect to continue to engage, in hedging transactions intended to reduce the risk of being party to these transactions.
In connection with this opinion, we have reviewed, among other things, the
Pre-Amendment
Agreement, the Amendment, the
Pre-Amendment
Reorganization Agreement, the Reorganization Amendment and the Settlement Agreement; the preliminary proxy statement of the Company with respect to the Transaction contemplated by the
Pre-Amendment
Agreement filed on Schedule 14A with the Securities and Exchange Commission on September 9, 2016; annual reports to stockholders and Annual Reports on
Form 10-K
of the Company for the five fiscal years ended December 31, 2015; certain interim reports to stockholders and Quarterly Reports on
Form 10-Q
of
the Company; and certain other communications from the Company to its stockholders; certain publicly available research analyst reports for the Company; certain historical financial information relating to the Business prepared by the management of
the Company; certain internal financial analyses and forecasts for the Business as of July 22, 2016 prepared by the management of the Company; and
Exhibit E-2
The Strategic Review Committee of the Board of Directors
The Board of Directors
Yahoo! Inc.
February 20, 2017
Page
3
certain updated internal financial analyses and forecasts for the Business prepared by the management of the Company, as approved for our use by the Company (the Updated Forecasts).
We have also held discussions with members of the senior management of the Company regarding their assessment of the past and current business operations, financial condition and future prospects of the Business, including regarding their assessment
of the potential financial impact of the User Security Matters and Data Breaches (in each case, as defined in the Reorganization Agreement); compared certain financial information for the Business and certain financial and stock market information
for the Company with similar financial and stock market information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the digital media industry; and
performed such other studies and analyses, and considered such other factors, as we deemed appropriate.
For purposes of rendering this opinion, we have,
with your consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, us, without assuming any responsibility for
independent verification thereof. In that regard, we have assumed with your consent that the Updated Forecasts have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company
and the Strategic Review Committee. We have not made an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other
off-balance-sheet
assets and
liabilities) of the Company or any of its subsidiaries, including SaleCo, or the Business and, except for being furnished with appraisals of certain real estate assets of the Company, we have not been furnished with any such evaluation or
appraisal. We have assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or on the expected benefits of the
Transaction in any way meaningful to our analysis. We have assumed that the Transaction will be consummated on the terms set forth in the Agreement, without the waiver or modification of any term or condition the effect of which would be in any way
meaningful to our analysis.
Our opinion does not address the underlying business decision of the Company to engage in the Transaction, including its
decision to enter into the Amendment, the Reorganization Amendment or the Settlement Agreement, or the relative merits of the Transaction as compared to any other strategic alternatives that may be available to the Company; nor does it address any
legal, regulatory, tax or accounting matters. This opinion addresses only the fairness from a financial point of view to the Company, as of the date hereof, of the Cash Consideration to be paid to the Company for the Shares, together with the RSU
Substitution, pursuant to the Agreement. We do not express any view on, and our opinion does not address, any other term or aspect of the Agreement, the Reorganization Agreement, the Settlement Agreement or the Transaction or any term or aspect of
any other agreement or instrument contemplated by the Agreement, the Reorganization Agreement or the Settlement Agreement or entered into or amended in connection with the Transaction, including the Reorganization Transactions, the Indenture (as
defined in the Agreement), any indemnification or other ongoing obligations of the Company, including in respect of the User Security Matters and Data Breaches or any expenses related thereto, any allocation of the Consideration (including between
the Cash Consideration and the RSU Substitution), the fairness of the Transaction to, or any consideration received in connection therewith by, the holders of any class of securities, creditors, or other constituencies of the Company; nor as to the
fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company or SaleCo, or any class of such persons, in connection with the Transaction, whether relative to the Cash
Consideration to be paid to the Company for all of the Shares, together with the RSU Substitution, pursuant to the Agreement or otherwise. We are not expressing any opinion as to the prices at which the shares of the
Exhibit E-3
The Strategic Review Committee of the Board of Directors
The Board of Directors
Yahoo! Inc.
February 20, 2017
Page
4
Companys common stock will trade at any time or as to the impact of the Transaction on the solvency or viability of the Company, SaleCo or the Purchaser or the ability of the Company SaleCo
or the Purchaser to pay their respective obligations when they come due. Our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof and we
assume no responsibility for updating, revising or reaffirming this opinion based on circumstances, developments or events occurring after the date hereof. Our advisory services and the opinion expressed herein are provided for the information and
assistance of the Strategic Review Committee and the Board of Directors of the Company in connection with their consideration of the Transaction and such opinion does not constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote with respect to the Transaction or any other matter. This opinion has been approved by a fairness committee of Goldman, Sachs & Co.
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Cash Consideration to be paid to the Company for the Shares,
together with the RSU Substitution, pursuant to the Agreement, is fair from a financial point of view to the Company.
Very truly yours,
/s/ Goldman, Sachs &
Co.
(GOLDMAN, SACHS & CO.)
Exhibit E-4
Exhibit F
February 20, 2017
The
Strategic Review Committee of the Board of Directors
The Board of Directors
Yahoo! Inc.
701 First Ave. Sunnyvale, California 94089
Members of the Strategic Review Committee of the Board of Directors and the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, to Yahoo! Inc. (the Seller) of the consideration to be paid to
the Seller in the Transaction (as defined below) with Verizon Communications Inc. (the Acquiror) relating to the Sellers wholly owned subsidiary, Yahoo! Holdings, Inc., a Delaware corporation (the Company). The Seller
entered into a Stock Purchase Agreement, dated as of July 23, 2016 (the Pre-Amendment Agreement), with the Acquiror and we understand that the Seller proposes to enter into an Amendment to the Pre-Amendment Agreement (the
Amendment and together with the Pre-Amendment Agreement, the Agreement). Concurrently with the execution of the Amendment, the Seller, the Company and the Acquiror will enter into (i) an amendment (the
Reorganization Amendment) to the Reorganization Agreement (the Pre-Amendment Reorganization Agreement as amended, the Reorganization Agreement) as defined in the Agreement and (ii) a Settlement and Release
Agreement (the Settlement Agreement). Pursuant to the Agreement, the following will occur (collectively, the Transaction):
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pursuant to the Reorganization Agreement, the Seller will transfer to the Company the Business as defined in the Agreement (the Business), and the Seller and the Company will complete the Reorganization
Transactions (as defined in the Agreement) at or prior to the closing of the Transaction;
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the Seller will sell to the Acquiror all of the then issued and outstanding shares of common stock of the Company (the Shares); and
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the Acquiror will pay to the Seller cash consideration in the aggregate amount of $4.4758 billion (the Cash Consideration) and substitute such restricted stock unit awards of the Seller as are specified in
Section 1.03(b) of the Agreement for restricted stock unit awards with respect to shares of the Acquirors common stock as described in the Agreement, thereby relieving the Seller of its obligations with respect to such substituted
restricted stock unit awards (the RSU Substitution and, together with the Cash Consideration, collectively, the Consideration).
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We also understand that the Consideration will be subject to adjustment as provided in the Agreement based on the value of the Sellers unvested
restricted stock units outstanding on the business day immediately preceding the closing of the Transaction and the amounts of the Companys working capital, cash, indebtedness and transaction expenses as set forth in the Agreement (the
Purchase Price Adjustments).
In connection with preparing our opinion, we have (i) reviewed the Pre-Amendment Agreement, a draft, dated
February 18, 2017, of the Amendment, the Pre-Amendment Reorganization Agreement, a draft, dated February 18, 2017, of the Reorganization Amendment, and a draft, dated February 18, 2017, of the Settlement Agreement; (ii) reviewed
certain publicly available business and financial information concerning the Business and the industries in which it operates; (iii) compared the proposed financial terms of the Transaction with the publicly available financial terms of certain
transactions involving companies we deemed relevant and the consideration paid for such companies; (iv) compared the financial and operating performance of the Business with publicly available information concerning certain other companies we
deemed relevant, and reviewed the current and historical market prices of the Sellers common stock and certain publicly traded securities of such other companies; (v) reviewed certain internal financial analyses and forecasts prepared by
the management of the Seller relating to the Business as of July 22, 2016, (vi) reviewed certain internal financial analyses and
Exhibit F-1
updated forecasts prepared by the management of the Seller relating to the Business; and (vii) performed such other financial studies and analyses and considered such other information as we
deemed appropriate for the purposes of this opinion.
In addition, we have held discussions with certain members of the management of the Seller with
respect to certain aspects of the Transaction, and the past and current business operations of the Business, the financial condition and future prospects and operations of the Business, including making inquiries of certain members of the management
of the Seller regarding their assessment of the potential financial impact of the User Security Matters and Data Breaches (in each case, as defined in the Reorganization Agreement), and certain other matters we believed necessary or appropriate to
our inquiry.
In giving our opinion, we have relied upon and assumed the accuracy and completeness of all information that was publicly available or was
furnished to or discussed with us by the Seller or otherwise reviewed by or for us. We have not independently verified any such information or its accuracy or completeness and, pursuant to our engagement letter with the Seller, we did not assume any
obligation to undertake any such independent verification. We have not conducted or, with the exception of being provided with appraisals of certain real estate assets (which we did not use in giving our opinion), been provided with, any valuation
or appraisal of any assets or liabilities, nor have we evaluated the solvency of the Seller, the Company or the Acquiror under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and
updated forecasts provided to us or derived therefrom, we have assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of
operations and financial condition of the Business to which such analyses or updated forecasts relate. We express no view as to such analyses or updated forecasts or the assumptions on which they were based. We have also assumed that the Transaction
and the other transactions contemplated by the Agreement and the Reorganization Agreement will have the tax consequences described in discussions with, and materials furnished to us by, representatives of the Seller and will be consummated as
described in the Agreement and the Reorganization Agreement and that the Amendment, Reorganization Amendment and Settlement Agreement will not differ in any material respect from the drafts thereof furnished to us. We have also assumed that the
representations and warranties made by the Seller and the Acquiror in the Agreement and the Reorganization Agreement are and will be true and correct in all respects material to our analysis, that the Seller will have no exposure under any
indemnification obligations contained within the Agreement or the Reorganization Agreement, including in respect of the User Security Matters and Data Breaches, in any amount material to our analysis, and that the Purchase Price Adjustments will not
result in any adjustment to the Consideration that is material to our analysis. We are not legal, regulatory or tax experts and have relied on the assessments made by advisors to the Seller with respect to such issues. We have further assumed that
all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Seller, the Company or the Business or on the contemplated benefits of the
Transaction.
Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of,
the date hereof. It should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of view,
of the Cash Consideration to be paid to the Seller in the Transaction, together with the RSU Substitution, and we express no opinion as to the fairness of any consideration paid in connection with the Transaction to the holders of any class of
securities, creditors or other constituencies of the Seller or the Company or as to the underlying decision by the Seller to engage in the Transaction. We express no opinion as whether the Transaction constitutes a sale, conveyance, transfer or
lease of all or substantially all of the Sellers properties and assets to another person for purposes of the Sellers 0.00% Convertible Senior Notes due 2018 (the Convertible Notes). Furthermore, we express no opinion with
respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons relative to the Cash Consideration to be paid to the Seller in the Transaction, together with
the RSU Substitution, or with respect to the fairness of any such compensation.
Exhibit F-2
We have acted as financial advisor to the Strategic Review Committee of the Sellers Board of Directors with
respect to the proposed Transaction and will receive a fee from the Seller for our services, a portion of which was paid upon the delivery of our opinion, dated July 22, 2016, and a substantial portion of which will become payable only if the
proposed Transaction is consummated. In addition, the Seller has agreed to indemnify us for certain liabilities arising out of our engagement. During the two years preceding the date of this letter, we and our affiliates have had commercial or
investment banking relationships with the Seller and the Acquiror, for which we and such affiliates have received customary compensation. Such services during such period have included acting as financial advisor to the Seller in connection with its
strategic planning in 2015, acting as financial advisor to the Acquiror in connection with its sale of a portfolio of cellphone towers to American Tower in February, 2015 and acting as joint bookrunner on the Acquirors bond offering in
October, 2016. In addition, as we have previously advised the Strategic Review Committee and the Seller, one of our affiliates (x) sold to the Seller convertible note hedge options relating to the Sellers common stock in connection with
the Sellers sale of the Convertible Notes (the Note Hedge Options) and (y) purchased from the Seller warrants relating to the Sellers common stock contemporaneously with such sale of the Note Hedge Options (the
Warrants, and, together with the Note Hedge Options, the Call Spread). Such affiliate entered into the Call Spread, and is acting thereunder, as principal for its own account and not as an advisor to the Seller. Pursuant to
the terms of each of the Note Hedge Options and the Warrants, upon the occurrence of a make-whole fundamental change under the Convertible Notes, a fundamental change under the Convertible Notes and/or certain transactions or events involving the
Seller, the terms of the Note Hedge Options and/or Warrants may be adjusted and/or one or both of the Note Hedge Options and the Warrants may be terminated, in whole or in part. Upon any termination of the Warrants, the Seller will be required to
make a payment or delivery to such affiliate. In addition, our commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of the Acquiror, for which it receives customary compensation or other financial benefits.
In addition, we and our affiliates hold, on a proprietary basis, less than 1% of the outstanding common stock of each of the Seller and the Acquiror. In the ordinary course of our businesses, we and our affiliates may actively trade the debt and
equity securities or financial instruments (including derivatives, bank loans or other obligations) of the Seller or the Acquiror for our own account or for the accounts of customers and, accordingly, we may at any time hold long or short positions
in such securities or other financial instruments.
On the basis of and subject to the foregoing, it is our opinion as of the date hereof that the Cash
Consideration to be paid to the Seller in the Transaction, together with the RSU Substitution, is fair, from a financial point of view, to the Seller.
The issuance of this opinion has been approved by a fairness opinion committee of J.P. Morgan Securities LLC. This letter is provided to the Strategic Review
Committee of the Board of Directors of the Seller and the Board of Directors of Seller (in their capacities as such) in connection with and for the purposes of their evaluation of the Transaction. This opinion does not constitute a recommendation to
any stockholder of the Seller as to how such stockholder should vote with respect to the Transaction or any other matter. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose
whatsoever except with our prior written approval. This opinion may be reproduced in full in any proxy or information statement mailed to stockholders of the Seller but may not otherwise be disclosed publicly in any manner without our prior written
approval.
Very truly yours,
J.P. Morgan Securities LLC
/s/ J.P. Morgan Securities LLC
U147031
Exhibit F-3
Exhibit G
Confidential
February 20, 2017
The Strategic Review Committee of the
Board of Directors
The Board of Directors
Yahoo! Inc.
701 First Ave.
Sunnyvale, California 94089
Members of the Strategic Review Committee of the Board and of the Board:
We understand that Yahoo! Inc. (the Seller) has entered into a Stock Purchase Agreement, dated as of July 23, 2016 (the Pre-Amendment
Agreement), with Verizon Communications Inc., (the Purchaser) and proposes to enter into an Amendment to the Pre-Amendment Agreement (the Amendment and together with the Pre-Amendment Agreement, the
Agreement), pursuant to which the Purchaser will purchase from the Seller all of the then issued and outstanding shares of common stock (the Shares) of Yahoo! Holdings, Inc., a Delaware corporation (the Company),
in exchange for $4.4758 billion in cash (the Cash Consideration) and the substitution by the Purchaser of such restricted stock unit awards of the Seller as are specified in Section 1.03(b) of the Agreement for restricted stock unit
awards with respect to shares of the Purchasers common stock as specified in the Agreement, thereby relieving the Seller of its obligations with respect to such substituted restricted stock unit awards (the RSU Substitution and,
together with the Cash Consideration, collectively, the Consideration). Concurrently with the execution of the Amendment, the Seller, the Company and Purchaser will enter into (i) an amendment (the Reorganization
Amendment) to the Reorganization Agreement (the Pre-Amendment Reorganization Agreement) as defined in the Agreement (as amended, the Reorganization Agreement) and (ii) a Settlement and Release Agreement (the
Settlement Agreement). Pursuant to the Agreement, the following will occur (collectively, the Transaction):
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pursuant to the Reorganization Agreement, the Seller will transfer to the Company the Business as defined in the Agreement (the Business), and the Seller and the Company will complete the Reorganization
Transactions (as defined in the Agreement) at or prior to the closing of the Transaction; and
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the Seller will sell to the Purchaser the Shares, and the Purchaser will effect the RSU Substitution and pay to the Seller the Cash Consideration.
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We also understand that the Consideration will be subject to adjustment as provided in the Agreement based on the value of the Sellers unvested
restricted stock units outstanding on the business day immediately preceding the closing of the Transaction and the amounts of the Companys working capital, cash, indebtedness and transaction expenses as set forth in the Agreement (the
Purchase Price Adjustments).
The terms and conditions of the Transaction are fully set forth in the Agreement and the Reorganization
Agreement.
280 Park Avenue | New York, NY
10017 | t. +1.212.364.7800 | pjtpartners.com
Exhibit G-1
You have asked us whether, in our opinion, as of the date hereof, the Consideration to be received in the
Transaction by the Seller is fair to the Seller from a financial point of view. In arriving at the opinion set forth below, we have, among other things:
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(i)
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reviewed certain publicly available information concerning the business and financial condition of the Business and the industries in which it operates;
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(ii)
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reviewed certain internal information concerning the business and financial condition of the Business prepared and furnished to us by the management of the Seller;
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(iii)
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reviewed certain internal financial analyses, estimates and forecasts relating to the Business prepared by the management of the Seller;
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(iv)
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held discussions with the management of the Seller concerning, among other things, the Business, the operating and regulatory environment of the Business and the financial condition, prospects and strategic objectives
of the Business, including making inquiries of certain members of the management of the Seller regarding their assessment of the potential financial impact of the User Security Matters and Data Breaches (in each case, as defined in the
Reorganization Agreement);
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(v)
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compared the financial and operating performance of the Business with publicly available similar information for certain other public companies that we deemed to be relevant, and reviewed the stock market information
for certain other public companies that we deemed to be relevant;
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(vi)
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reviewed the publicly available financial terms of certain other business combination transactions that we deemed to be relevant;
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(vii)
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reviewed the Pre-Amendment Agreement, a draft, dated February 18, 2017, of the Amendment, the Pre-Amendment Reorganization Agreement, a draft, dated February 18, 2017, of the Reorganization Amendment, and a
draft, dated February 18, 2017, of the Settlement Agreement; and
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(viii)
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performed such other financial studies, analyses and investigations, and considered such other matters, as we deemed necessary or appropriate for purposes of rendering this opinion.
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In preparing this opinion, with your consent, we have relied upon and assumed the accuracy and completeness of the foregoing information and all other
information discussed with or reviewed by us, without independent verification thereof. For purposes of the opinion delivered by us on July 22, 2016, in connection with the Pre-Amendment Agreement, we were provided by the management of the
Seller with forecasts and certain terminal year assumptions relating to the Business as of July 22, 2016, which we were directed to use by the Strategic Review Committee. In connection with preparing this opinion, we were provided by the
management of the Seller with updated forecasts and certain terminal year assumptions relating to the Business (collectively, the Updated Projections), which we were directed to use by the Board of Directors. We have assumed with your
consent that the Updated Projections and the assumptions underlying the Updated Projections, and all other financial analyses, estimates and forecasts provided to us by the management of the Seller, have been reasonably prepared in accordance with
industry practice and represent managements best currently available estimates and judgments as to the business and operations and future financial performance of the Business. We assume no responsibility for and express no opinion as to the
Updated Projections, the assumptions upon which they are based or any other financial analyses, estimates and forecasts provided to us by the management of the Seller. We have also assumed that there have been no material changes in the assets,
financial condition, results of operations, business or prospects of the Business since the respective dates of the last financial statements made available to us. We have relied on representations and/or projections provided by the management of
the Seller regarding taxable income, standalone net operating loss utilization and other tax attributes of the Business. We have further relied with your consent upon the assurances of the management of the Seller that they are not aware of any
facts that would make the information and projections provided by them inaccurate, incomplete or misleading.
We have not been asked to undertake, and
have not undertaken, an independent verification of any information provided to or reviewed by us, nor have we been furnished with any such verification and we do not assume any
Exhibit G-2
responsibility or liability for the accuracy or completeness thereof. We did not conduct a physical inspection of any of the properties or assets of the Seller or the Company. We did not make an
independent evaluation or appraisal of the assets or the liabilities (including any contingent, derivative or off-balance sheet assets and liabilities) of the Seller, nor, with the exception of being furnished with appraisals of certain real estate
assets (which we did not use in preparing this opinion), have we been furnished with any such evaluations or appraisals, nor have we evaluated the solvency of the Seller, the Company or the Purchaser under any applicable laws.
We also have assumed with your consent that the final executed forms of the Amendment, the Reorganization Amendment and the Settlement Agreement will not
differ in any material respects from drafts reviewed by us and the consummation of the Transaction will be effected in accordance with the terms and conditions of the Agreement and the Reorganization Agreement, without waiver, modification or
amendment of any material term, condition or agreement, and that, in the course of obtaining the necessary regulatory or third party consents and approvals (contractual or otherwise) for the Transaction, no delay, limitation, restriction or
condition will be imposed that would have an adverse effect on the Seller, the Company or the Business or the contemplated benefits of the Transaction. We have also assumed that the Seller will have no exposure under any indemnification obligations
contained in the Agreement or the Reorganization Agreement, including in respect of the User Security Matters and Data Breaches, in any amount material to our analysis, and that the Purchase Price Adjustments will not result in any adjustment to the
Consideration that is material to our analysis. We do not express any opinion as to any tax or other consequences that might result from the Transaction, nor does our opinion address any legal, tax, regulatory or accounting matters, as to which we
understand that the Seller obtained such advice as it deemed necessary from qualified professionals. We are not legal, tax or regulatory advisors and have relied upon without independent verification the assessment of the Seller and its legal, tax
and regulatory advisors with respect to such matters.
In arriving at our opinion, we have not considered the relative merits of the Transaction as
compared to any other business plan or opportunity that might be available to the Seller, or the effect of any other arrangement in which the Seller might engage, and our opinion does not address the underlying decision by the Seller to engage in
the Transaction, including its decision to enter into the Amendment, the Reorganization Amendment or the Settlement Agreement. Our opinion is limited to the fairness as of the date hereof, from a financial point of view, to the Seller of the
Consideration to be received by the Seller in the Transaction, and our opinion does not address any other aspect or implication of the Transaction, the Agreement, the Reorganization Agreement, the Settlement Agreement or any other agreement or
understanding entered into in connection with the Transaction or otherwise. We further express no opinion or view as to the fairness of the Transaction to the holders of any class of securities, creditors or other constituencies of the Seller or as
to the underlying decision by the Seller to engage in the Transaction. We also express no opinion as to the fairness of the amount or nature of the compensation to any of the Sellers or the Companys officers, directors or employees, or
any class of such persons, relative to the Consideration or otherwise. Our opinion is necessarily based upon economic, market, monetary, regulatory and other conditions as they exist and can be evaluated, and the information made available to us, as
of the date hereof. We express no opinion as to whether the Transaction constitutes a sale, conveyance, transfer or lease of all or substantially all of the Sellers properties and assets to another person for purposes of the Sellers
0.00% Convertible Senior Notes due 2018. We express no opinion as to the prices or trading ranges at which the shares of the Sellers common stock will trade at any time.
This opinion does not constitute a recommendation to any stockholder of the Seller as to how any such stockholder should vote or act with respect to the
Transaction or any other matter. We assume no responsibility for updating or revising our opinion based on circumstances or events occurring after the date hereof. This opinion has been approved by a fairness committee of PJT Partners in accordance
with established procedures.
This opinion is provided to the Strategic Review Committee of the Board of Directors of the Seller and the Sellers
Board of Directors, in their capacities as such, in connection with and for the purposes of their evaluation of the Transaction only and is not a recommendation as to any action the Strategic Review Committee of the Board of Directors or the Board
of Directors should take with respect to the Transaction or any aspect thereof.
Exhibit G-3
This opinion is not to be quoted, summarized, paraphrased or excerpted, in whole or in part, in any registration statement, prospectus or proxy or information statement, or in any other report,
document, release or other written or oral communication prepared, issued or transmitted by the Strategic Review Committee of the Board of Directors or any other committee of the Board of Directors, or the Seller, without our prior consent. However,
a copy of this opinion may be included, in its entirety, as an exhibit to any disclosure document the Seller is required to file with the Securities and Exchange Commission in connection with the Transaction. Any summary of or reference to this
opinion or the analysis performed by us in connection with the rendering of this opinion in such documents shall require our prior written approval.
We
are acting as financial advisor to the Strategic Review Committee of the Sellers Board of Directors with respect to the Transaction and will receive a fee from the Seller for our services, a portion of which was payable upon the rendering of
our opinion, dated July 22, 2016, and a significant portion of which is contingent upon the consummation of the Transaction. We will not receive a fee from the Seller in connection with the delivery of this opinion. In addition, the Seller has
agreed to reimburse us for out-of-pocket expenses and to indemnify us for certain liabilities arising out of the performance of such services (including the rendering of this opinion).
In the ordinary course of our and our affiliates businesses, we and our affiliates may provide investment banking and other financial services to the
Seller or the Purchaser and may receive compensation for the rendering of these services. During the two years preceding the date of this opinion, we have acted as financial advisor to the Purchaser on three separate transactions, for which we
received customary compensation. We may also in the future provide investment banking and other financial services to the Seller, the Company, the Purchaser and their respective affiliates for which we may receive compensation.
* * *
Exhibit G-4
Based on and subject to the foregoing, we are of the opinion, as investment bankers, that, as of the date hereof,
the Consideration to be received by the Seller in the Transaction is fair to the Seller from a financial point of view.
Very truly yours,
/s/ PJT Partners LP
PJT Partners LP
Exhibit G-5
C123456789
IMPORTANT SPECIAL MEETING INFORMATION 000004
000000000.000000 ext 000000000.000000 ext
ENDORSEMENT LINE SACKPACK 000000000.000000 ext 000000000.000000 ext
000000000.000000 ext 000000000.000000 ext
MR A SAMPLE Electronic Voting
Instructions
DESIGNATION (IF ANY) Available 24 hours a day, 7 days a week!
ADD 1
ADD 2 Instead of mailing your proxy, you may choose one of the voting
ADD 3 methods outlined below to vote your proxy.
ADD 4 VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
NNNNNNNNN ADD 5 Proxies submitted by the Internet or telephone must be received by ADD 6 2:00 a.m. Eastern Time on June 8, 2017.
Vote by Internet
Go to www.investorvote.com/YHOO
Or scan the QR code with your smartphone
Follow the steps outlined on the secure website
Vote by telephone
Call toll free 1-800-652-VOTE (8683) within the USA, US
territories & Canada on a touch tone telephone
Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as
shown in X this example. Please do not write outside the designated areas.
Special Meeting Proxy Card 1234 5678 9012 345
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
A Proposals Yahoo! Inc.s (Yahoo or the Company) Board of Directors (the Board) recommends a vote FOR each of
Proposals 1, 2 and 3: For Against Abstain
1. (a) Authorization of the sale to
Verizon Communications Inc. (Verizon), pursuant to the terms and subject to the + conditions set forth in the Stock Purchase Agreement, dated as of July 23, 2016, as amended as of February 20, 2017, between Yahoo and Verizon, of all of
the outstanding shares of Yahoo Holdings, Inc. (Yahoo Holdings), a Delaware corporation and a wholly-owned subsidiary of Yahoo, and prior to the sale of Yahoo Holdings, the sale (the Foreign Sale Transaction) by Yahoo
Holdings to a foreign subsidiary of Verizon of all of the equity interests in a foreign subsidiary of Yahoo Holdings that will hold certain foreign subsidiaries relating to Yahoos operating business, following the transfer to Yahoo Holdings of
all of the assets and liabilities relating to the Yahoos operating business, other than specified excluded assets and retained liabilities, as set forth in the Reorganization Agreement, dated as of July 23, 2016, as amended as of February 20,
2017, between Yahoo and Yahoo Holdings (the transfers pursuant to the Reorganization Agreement, together with the sale of all of the outstanding shares of Yahoo Holdings to Verizon and the Foreign Sale Transaction, the Sale Transaction)
and (b) adoption of an amendment to the Companys certificate of incorporation following completion of the Sale Transaction to provide that the exculpation and indemnification provisions of Articles XI and XII of the certificate of
incorporation are subject to the limitations of the Investment Company Act of 1940 with respect to actions taken while the Company is registered as an investment company under the Investment Company Act of 1940.
2. Approval, on a non-binding, advisory basis, of the compensation that may be paid or become payable to Yahoos named executive officers in connection with the completion of
the Sale Transaction.
3. Authorization for the Board to postpone or adjourn the special meeting (i) for up to 10 business days to solicit additional proxies for
the purpose of obtaining stockholder approval, if the Board determines in good faith such postponement or adjournment is necessary or advisable to obtain stockholder approval, or (ii) to allow reasonable additional time for the filing and/or mailing
of any supplemental or amended disclosure which the Board has determined, after consultation with outside legal counsel, is necessary under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by the
stockholders prior to the special meeting.
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the special
meeting and any adjournment or postponement thereof.
IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A, B AND C ON BOTH SIDES OF THIS CARD.
C 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
1UP X 2 9 4 9 7 5 1 MR A SAMPLE AND MR A
SAMPLE AND MR A SAMPLE AND +
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