Sohu.com (SOHU)

9. SUBSEQUENT EVENTS

As of June 30, 2007, the outstanding balance of our zero coupon convertible senior notes was $59.8 million. Under the terms governing the zero coupon convertible senior notes, each holder of the notes has the right, at the holder’s option, to require the Company to repurchase all or any portion of the principal amount of the holder’s notes on each of July 14, 2007, 2013 and 2018 at a price equal to 100% of the outstanding principal amount of such notes. As of the end of the notification period associated with the July 14, 2007 repurchase date, note holders had exercised their right to require the Company to repurchase principal on such notes in an aggregate amount of $58.5 million. The Company repurchased such notes on July 16, 2007. After the redemption, the outstanding balance of the Company’s zero coupon convertible senior notes was $1.3 million.

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As used in this report, references to “us,” “we,” “our,” “our company,” “Sohu” and “Sohu.com” are to Sohu.com Inc. and, except where the context requires otherwise, our subsidiaries, Sohu.com (Hong Kong) Limited (or Sohu Hong Kong), Sohu.com Limited, Kylie Enterprises Limited, All Honest International Limited, Marvel Hero Limited, Go2Map Inc., Sohu.com (Search) Limited, Sogou Inc., Sogou (BVI) Limited, 21 East Entertainment Limited (or 21 East HK), Sohu ITC Information Technology (Beijing) Co., Ltd. (or Beijing ITC), Beijing Sohu New Era Information Technology Co., Ltd. (or Sohu Era), Beijing Sohu Interactive Software Co., Ltd. (or Sohu Software), Go2Map Software (Beijing) Co., Ltd. (or Go2Map Software), Beijing Sogou Technology Development Co., Ltd. (or Sogou Technology) and Beijing Sohu New Media Information Technology Co., Ltd. (or Sohu Media), and our VIEs Beijing Century High Tech Investment Co., Ltd. (or High Century), Beijing Sohu Entertainment Culture Media Co., Ltd. (or Sohu Entertainment, formerly known as Beijing Hengda Yitong Internet Technology Development Co., Ltd. (or Hengda)), Beijing Sohu Internet Information Service Co., Ltd. (or Sohu Internet), Beijing Goodfeel Information Technology Co., Ltd. (or Goodfeel), Beijing Huohu Digital Technology Co., Ltd. (or Huohu), Beijing Tu Xing Tian Xia Information Consultancy Co., Ltd. (or Tu Xing Tian Xia), Beijing Feng Yang Tian Lang Advertising Co., Ltd (or Feng Yang Tian Lang), Beijing Sogou Information Services Co., Ltd. (or Sogou Information), Guangzhou Sohu Interactive Network Technology Co., Ltd. (or Guangzhou Interactive) and Beijing 21 East Culture Development Co., Ltd (or 21 East Beijing), and these references should be interpreted accordingly. Unless otherwise specified, references to “China” or “PRC” refer to the People’s Republic of China and do not include the Hong Kong Special Administrative Region, the Macau Special Administrative Region or Taiwan. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth below under the caption “Risk Factors.” Readers are cautioned not to place undue reliance on these forward-looking statements.

11. SUBSEQUENT EVENTS

In October 2005, the board of directors approved the Company’s repurchase of outstanding shares of its common stock from the open market, on an opportunistic basis, up to $15 million. As of August 1, 2006, the Company had repurchased a total of 690,581 shares, fully utilizing the $15 million available under this initial program. On July 25, 2006, the board of directors approved an additional $15 million stock repurchase program.

In July 2006, the Company granted approximately 420,000 restricted stock units to its employees and directors under the 2000 Stock Incentive Plan.

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9. SUBSEQUENT EVENTS

On July 29, 2005, Beijing Sohu received a formal notice from China Mobile Communications Corporation (or CMCC), which had suspended Beijing Sohu’s multi-media messaging services (or MMS) for a one-year period beginning September 1, 2004, stating that such MMS services on CMCC’s nationwide network would be resumed commencing on August 1, 2005.

8. SUBSEQUENT EVENTS

In April 2005, the Board of Directors adopted an amendment to Sohu’s 2000 Stock Incentive Plan to increase the number of shares of common stock covered by the 2000 Stock Inventive Plan from an aggregate of 8,000,000 to 9,500,000 shares and to provide for direct purchases of restricted common stock of the Company by directors, officers, employees, consultants and advisors under the Stock Incentive Plan. The amendment is subject to the approval of our shareholders at their annual general meeting.

On April 11, 2005, the Company entered into a definitive agreement to acquire Go2Map Inc. and Go2Map Inc.’s affiliate, Beijing Tu Xing Tian Xia Information Consultancy Co., Ltd., (or Go2Map), one of the leading online mapping service providers in China, for a consideration of $9.3 million in cash and an additional amount, not exceeding $2.5 million, which will be paid over 2 years after the closing of the acquisition, subject to the satisfaction and attainment of certain post closing operating and financial milestones of Go2Map. The acquisition will enable the Company to apply Go2Map’s rich technological expertise in professional location-based information to the Company’s search engine capabilities as well as online website content.