Yahoo 2005 Annual Report Download - page 98

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directors and certain of its officers that will require the Company, among other things, to indemnify them
against certain liabilities that may arise by reason of their status or service as directors or officers. The
Company has also agreed to indemnify certain former officers and directors of acquired companies in
connection with the acquisition of such companies. The Company maintains director and officer insurance
which may cover certain liabilities arising from its obligation to indemnify its directors and officers and
former directors and officers of acquired companies, in certain circumstances.
It is not possible to determine the maximum potential amount 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 may not be subject to maximum loss
clauses. Historically, the Company has not incurred material costs as a result of obligations under these
agreements and it has not accrued any liabilities related to such indemnification obligations in its
consolidated financial statements.
On April 21, 2003, Overture completed its purchase of the Web Search unit of Fast Search and Transfer
ASA, a Norway based developer of search and real-time filtering technologies, for $70 million in cash, plus
a contingent earn-out payment of up to $30 million over three years based on specified operating criteria.
The earn-out payment is not included in the contractual obligations table.
Contractual Obligations. The following table presents certain payments due under contractual obligations
with minimum firm commitments as of December 31, 2005 (in millions):
Payments due by period
Total Due in 2006
Due in
2007-2008
Due in
2009-2010
Due in
2011
or after
Long-term debt (1) $ 750 $ — $ 750 $ — $ —
Operating lease obligations 832 71 177 171 413
Affiliate commitments (2) 211 199 12 — —
Total contractual obligations $ 1,793 $ 270 $ 939 $ 171 $ 413
(1) The long-term debt matures in April 2008, unless converted into Yahoo! common stock at a conversion price of $20.50 per
share, subject to adjustment upon the occurrence of certain events. Upon conversion, the Company has the right to deliver cash
in lieu of common stock. See Note 9 — “Long-Term Debt” for additional information related to the long-term debt.
(2) The Company is obligated to make payments under contracts to provide sponsored search services to its affiliates, which
represent traffic acquisition costs.
As of December 31, 2004 and 2005, the Company did not have any relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as structured finance or special purpose
entities, which would have been established for the purpose of facilitating off-balance sheet arrangements
or other contractually narrow or limited purposes. As such, the Company is not exposed to any financing,
liquidity, market, or credit risk that could arise if the Company had engaged in such relationships.
Contingencies. From time to time, third parties assert patent infringement claims against the Company.
Currently, the Company is engaged in several lawsuits regarding patent issues and has been notified of a
number of other potential patent disputes. In addition, from time to time the Company is subject to other
legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of
trademarks, copyrights and other intellectual property rights, and a variety of claims, including claims
alleging defamation or invasion of privacy, arising in connection with its e-mail, message boards, auction
sites, shopping services, and other communications and community features.
On May 24, 2001, Arista Records, Inc., Bad Boy Records, BMG Music d/b/a The RCA Records Label,
Capitol Records, Inc., Virgin Records America, Inc., Sony Music Entertainment, Inc., UMG
Recordings, Inc., Interscope Records, Motown Record Company, L.P., and Zomba Recording