Yahoo 2003 Annual Report Download - page 78

allege, among other things, violations of the Securities Act Sale of Investment in Privately-Held Company. In January 2004,
of 1933 and the Securities Exchange Act of 1934 involv- the Company exercised its put option to sell back all of
ing undisclosed compensation to the underwriters, and its shares of Zed to Sonera. There was no material impact
improper practices by the underwriters, and seek unspeci- to the Company’s balance sheet, statement of operations
fied damages. Similar complaints were filed in the same or cash flows as a result of this transaction. As a result of
court against numerous public companies that conducted the exercise of the put option, Yahoo! no longer has an
initial public offerings of their common stock since the investment in Zed and the Zed investment agreement has
mid-1990s. All of these lawsuits were consolidated for pre- been terminated. See Note 14 – ‘‘Commitments and
trial purposes before Judge Shira Scheindlin. On April 19, Contingencies.’’
2002, plaintiffs filed an amended complaint, alleging
Legal Proceedings. On or about February 4, 2004, a share-
Rule 10b-5 claims of fraud. On July 15, 2002, the issuers
holder derivative action was filed in the Court of Chan-
filed a motion to dismiss for failure to comply with appli-
cery of the State of Delaware in and for New Castle
cable pleading standards. On October 8, 2002, the Court
County, against the Company (as nominal defendant) and
entered an Order of Dismissal as to all of the individual
certain of its current and former officers and directors (the
defendants in the Overture IPO litigation, without
‘‘Derivative Defendants’’). Two similar shareholder deriva-
prejudice. On February 19, 2003, the Court denied the
tive actions were filed in the California Superior Court for
motion to dismiss the Rule 10b-5 claims against certain
the County of San Mateo on February 13, 2004. The
defendants, including Overture. Settlement discussions
complaints generally allege breaches of fiduciary duties by
relating to this case on behalf of the named defendants
the Derivative Defendants related to the alleged purchase
have occurred over the last several months, resulting in a
of shares in initial public offerings or the alleged acquies-
final settlement memorandum of understanding with the
cence in such conduct. The complaints seek unspecified
plaintiffs in the case and Overture’s insurance carriers. A
monetary damages and other relief purportedly on behalf
proposal has been made for the settlement and release of
of the Company from the Derivative Defendants. The
claims against the issuer defendants, including Overture.
Company understands the Derivative Defendants deny
The settlement is subject to a number of conditions,
any impropriety and intend to defend the lawsuits vigor-
including approval of the proposed settling parties and the
ously. The Company does not believe that the ultimate
court. If the settlement does not occur, and litigation
costs to resolve these matters will have a material adverse
against Overture continues, the Company and Overture
effect on its financial condition, results of operations or
believe that Overture has meritorious defenses to liability
cash flows. In addition, the Company believes there are
and damages and intend to defend the case vigorously.
procedural defects to permitting these complaints to pro-
Note 15 SUBSEQUENT EVENTS ceed on its behalf.
3721 Network Software Company Limited. On January 2, 2004,
the Company completed the acquisition of 3721 Network
Software Company Limited, a China-based software devel-
opment company. Under the terms of the acquisition, the
Company has agreed to pay a total of approximately
$120 million in cash over two years, subject to certain
performance conditions. In January 2004, approximately
$50 million of the total commitment was paid. The
remaining $70 million is a contingent earn-out payment
over the two-year period ending December 31, 2005.
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