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David Karp's pay package at Yahoo: Stick around 4 years, collect $110M

Tumblr founder will walk away a very rich man should he remain a Yahoo employee.

Tumblr CEO David Karp speaks at TechCrunch Disrupt in New York.
Shara Tibken/CNET

For the young and entrepreneurially minded David Karp, it's time to get comfortable and settle into a long-term gig with his new employer. The Tumblr founder and CEO, who sold his company to Yahoo for $1.1 billion, won't be leaving the media giant anytime soon should he wish to collect $110 million in cash and stock.

Yahoo said in a filing with the Securities and Exchange Commission on Thursday that it will dole out $70 million in stock and $40 million in cash to Karp over a four-year period, provided he remains an employee of the company.

The filing's excerpt on Karp's earn-out package reads:

In connection with the acquisition, the Company is recognizing stock-based compensation expense of $70 million over a period of up to 4 years. This amount is comprised of the assumed unvested stock options and restricted stock units, valued at $29 million, and the Yahoo! common stock, valued at $41 million, issued to Tumblr's founder but subject to holdback and release over four years provided he remains an employee of the Company. In addition, the transaction resulted in contingent cash consideration of $40 million to be paid to Tumblr's founder over 4 years provided that Tumblr's founder remains an employee of the Company. Such cash payments will be recognized as compensation expense over the 4-year service period.

Yahoo announced its plans to purchase Tumblr in May. The Sunnyvale senior, which now owns Tumblr's traffic and young users, completed the deal in late June.

For Karp and company, Yahoo provided the assurance that Tumblr could continue to keep the lights on for its 130 million blogs. The filing reveals that Tumblr had just $16.6 million in cash on hand at the time Yahoo came a-calling, meaning that the bank accounts for the 175-person company were drying up quickly.

No matter now. Yahoo CEO Marissa Mayer swooped in and financially secured the future of Tumblr and its chief, simultaneously ensuring that her stodgy enterprise will benefit from the with-it-and-hip perspective of Karp for at least four years.