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Commitments and Contingencies
3 Months Ended
Mar. 31, 2014
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Leases
We entered into various capital lease arrangements to obtain property and equipment for our operations. Additionally, on occasion we have purchased property and equipment for which we have subsequently obtained capital financing under sale-leaseback transactions. These agreements are typically for three years, except for a building lease which is for 15 years, with interest rates ranging from 1% to 13%. The leases are secured by the underlying leased buildings, leasehold improvements, and equipment. We have also entered into various non-cancelable operating lease agreements for certain of our offices, equipment, land and data centers with original lease periods expiring between 2014 and 2029. We are committed to pay a portion of the related actual operating expenses under certain of these lease agreements. Certain of these arrangements have free rent periods or escalating rent payment provisions, and we recognize rent expense under such arrangements on a straight-line basis.
Operating lease expense was $29 million and $41 million for the three months ended March 31, 2014 and 2013, respectively.
Other Agreements
In February 2014, we entered into an agreement to acquire WhatsApp Inc. (WhatsApp), a privately-held cross-platform mobile messaging company, for 183,865,778 shares of our Class A common stock and approximately $4 billion in cash, subject to certain adjustments such that the cash paid will comprise at least 25% of the aggregate transaction consideration. Upon closing, we will also grant 45,966,445 RSUs to WhatsApp employees. The value of the equity component of the final purchase price and RSUs granted will be determined for accounting purposes based on the fair value of our common stock on the closing date. This acquisition is subject to customary closing conditions, including certain regulatory approvals, and is expected to close later in 2014. We have agreed to pay a termination fee to WhatsApp of $1 billion in cash and issue a number of shares of our Class A common stock equal to $1 billion, based on the average closing price of the ten trading days preceding such termination, if the closing of this acquisition has not occurred by August 19, 2014 (or August 19, 2015, if as of August 19, 2014, all closing conditions have been completed except for the receipt of certain regulatory approvals).
In March 2014, we entered into an agreement to acquire Oculus VR, Inc. (Oculus), a privately-held company developing virtual reality technology, for 23,071,377 shares of our Class B common stock and approximately $400 million in cash. The value of the equity component of the final purchase price will be determined for accounting purposes based on the fair value of our common stock on the closing date. Further, up to an additional 3,460,706 shares of our Class B common stock and $60 million in cash would be payable upon the completion of certain milestones. The earn-out portion that would be payable to employee stockholders is also subject to continuous employment through the applicable payment dates. This acquisition is subject to customary closing conditions, including certain regulatory approvals, and is expected to close in the second quarter of 2014.
Contingencies
Beginning on May 22, 2012, multiple putative class actions, derivative actions, and individual actions were filed in state and federal courts in the United States and in other jurisdictions against us, our directors, and/or certain of our officers alleging violation of securities laws or breach of fiduciary duties in connection with our initial public offering (IPO) and seeking unspecified damages. We believe these lawsuits are without merit, and we intend to continue to vigorously defend them. On October 4, 2012, on our motion, the vast majority of the cases in the United States, along with multiple cases filed against The NASDAQ OMX Group, Inc. and The Nasdaq Stock Market LLC (collectively referred to herein as NASDAQ) alleging technical and other trading-related errors by NASDAQ in connection with our IPO, were ordered centralized for coordinated or consolidated pre-trial proceedings in the U.S. District Court for the Southern District of New York. On February 13, 2013, the court granted our motion to dismiss four derivative actions against our directors and certain of our officers with leave to amend. On December 18, 2013, the court denied our motion to dismiss the consolidated securities class action. On December 23, 2013, the court granted our motion to dismiss, and denied the plaintiffs’ motion to remand to state court, another derivative action against our directors and certain of our officers; on February 28, 2014, the plaintiffs in this action filed a notice of appeal. In addition, the events surrounding our IPO have been the subject of various government inquiries, and we are cooperating with those inquiries.
We are also party to various legal proceedings and claims that arise in the ordinary course of business. Among these pending legal matters, one case is currently scheduled for trial in the near future. Rembrandt Social Media, LP v. Facebook, Inc., et al., was scheduled to begin trial December 2013 in the U.S. District Court for the Eastern District of Virginia. In the Rembrandt case, the plaintiff alleges that we infringe certain patents held by the plaintiff. The plaintiff is seeking significant monetary damages and equitable relief. The trial date was vacated in December 2013 pending appeal, which the court of appeals declined to hear on April 7, 2014. Accordingly, this case is in the process of being rescheduled for trial, which will likely take place between May and July of 2014. We believe the claims made by the plaintiff in the Rembrandt case are without merit, and we intend to defend ourselves vigorously.

With respect to our outstanding legal matters, we believe that the amount or estimable range of reasonably possible loss will not, either individually or in the aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of litigation is inherently uncertain. Therefore, if one or more of these legal matters were resolved against us for amounts in excess of management's expectations, our results of operations and financial condition, including in a particular reporting period, could be materially adversely affected.