As expected Yahoo (NSDQ: YHOO) has announced a non-exclusive ad pact with Google (NSDQ: GOOG). In an announcement, the company says it has agreed with its arch rival to run ads against some search queries as well as other of its web properties. From the announcement: “Under the terms of the agreement, Yahoo! will select the search term queries for which – and the pages on which – Yahoo! may offer Google paid search results.” Release.

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Key highlights:

—Length: It has a term of up to 10 years: an initial four-year term and two three-year renewals at Yahoo’s option.

—Limited geographic scope: The deal applies to Yahoo U.S. and Canada only. “At current monetization rates, this is an approximately $800 million annual revenue opportunity. In the first 12 months following implementation, Yahoo! expects the agreement to generate an estimated $250 million to $450 million in incremental operating cash flow.”

—Change in control: This deal would not preclude change of control through a sale or some other agreement. “The agreement allows either party to terminate the agreement in the event of a change in control of either party.” Yahoo would have to pay a termination fee of $250 million if the agreement is terminated as a result of a change in control that occurs within 24 months. The amount is subject to reduction by 50 percent of revenues earned by Google before the change.

—How it works: Yahoo can run ads supplied by Google’s AdSense for Search and AdSense for Content services next to its own internally generated paid search and algorithmic search results. Yahoo may also run Google-supplied ads on non-search Yahoo web properties, as well as on current members of its partner network. Yahoo and Google each will continue to be paid directly by advertisers with Yahoo getting revenue share from Google.

—Interoperability: The two also agreed to enable interoperability between their respective IM services.