YAHOO INC
DEF 14A, 1998-03-12
COMPUTER INTEGRATED SYSTEMS DESIGN
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<PAGE>
                           DEFINITIVE PROXY MATERIALS
                            SCHEDULE 14A INFORMATION
                  PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
 
    Filed by the Registrant /X/
    Filed by a Party other than the Registrant / /
 
    Check the appropriate box:
    / /  Preliminary Proxy Statement
    / /  Confidential, for Use of the Commission Only (as permitted by Rule
         14a-6(e)(2))
    /X/  Definitive Proxy Statement
    / /  Definitive Additional Materials
    / /  Soliciting Material Pursuant to Section 240.14a-11(c) or Section
         240.14a-12
 
                                              YAHOO! INC.
- --------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)
 
                                              YAHOO! INC.
- --------------------------------------------------------------------------------
                   (Name of Person(s) Filing Proxy Statement)
 
Payment of Filing Fee (Check the appropriate box):
 
/X/  No Fee required.
/ /  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
     1)  Title of each class of securities to which transaction applies:
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     2)  Aggregate number of securities to which transaction applies:
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         was determined.
/ /  Fee paid with preliminary material:
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     0-11(a)(2) and identify the filing for which the offsetting fee was paid
     previously. Identify the previous filing by registration statement number,
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<PAGE>
                                  [YAHOO LOGO]
 
                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                           TO BE HELD APRIL 17, 1998
 
                            ------------------------
 
    The Annual Meeting of Shareholders (the "Annual Meeting") of Yahoo! Inc., a
California corporation (the "Company"), will be held at the Company's corporate
headquarters, located at 3420 Central Expressway, Santa Clara, California, on
Friday, April 17, 1998, at 10:00 a.m., local time, for the following purposes:
 
        1.  To elect five (5) directors of the Company to serve until the 1999
    Annual Meeting of Shareholders or until their respective successors are
    elected and qualified;
 
        2.  To approve the amendment to the 1995 Stock Plan to increase the
    number of shares of Common Stock reserved for issuance thereunder by
    2,000,000 shares;
 
        3.  To ratify the appointment of Price Waterhouse LLP as the independent
    accountants for the Company for the year ending December 31, 1998; and
 
        4.  To transact such other business as may properly come before the
    Annual Meeting and any adjournment or postponement thereof.
 
    The foregoing items of business, including the nominees for directors, are
more fully described in the Proxy Statement which is attached and made a part of
this Notice.
 
    The Board of Directors has fixed the close of business on February 27, 1998
as the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
 
    All shareholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you plan to attend the Annual Meeting in person,
you are urged to mark, date, sign and return the enclosed proxy card as promptly
as possible in the postage-prepaid envelope provided to ensure your
representation and the presence of a quorum at the Annual Meeting. If you send
in your proxy card and then decide to attend the Annual Meeting to vote your
shares in person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
 
                                          By Order of the Board of Directors,
 
                                          /s/ John Place
                                          -------------------------
                                          JOHN PLACE
                                          GENERAL COUNSEL AND SECRETARY
 
Santa Clara, California
March 12, 1998
<PAGE>
                                  [YAHOO LOGO]
 
                            3420 CENTRAL EXPRESSWAY
                             SANTA CLARA, CA 95051
 
                            ------------------------
 
                                PROXY STATEMENT
                             ---------------------
 
GENERAL
 
    This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Yahoo! Inc., a California corporation (the
"Company" or "Yahoo!"), of proxies in the enclosed form for use in voting at the
Annual Meeting of Shareholders (the "Annual Meeting") to be held at the
Company's corporate headquarters, located at 3420 Central Expressway, Santa
Clara, California, on Friday, April 17, 1998, at 10:00 a.m., local time, and any
adjournment or postponement thereof.
 
    This Proxy Statement, the enclosed proxy card and the Company's Annual
Report to Shareholders are being mailed to shareholders on or about March 12,
1998.
 
REVOCABILITY OF PROXIES
 
    Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
John Place, Secretary) a written notice of revocation or a duly executed proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
 
RECORD DATE; VOTING SECURITIES
 
    The close of business on February 27, 1998 has been fixed as the record date
(the "Record Date") for determining the holders of shares of Common Stock of the
Company entitled to notice of and to vote at the Annual Meeting. At the close of
business on the Record Date, the Company had approximately 45,829,896 shares of
Common Stock outstanding and held of record by approximately 900 shareholders.
Unless otherwise indicated, all information in this Proxy Statement has been
adjusted to reflect the Company's three-for-two stock split which took effect on
August 11, 1997.
 
VOTING AND SOLICITATION
 
    Each outstanding share of Common Stock on the Record Date is entitled to one
vote on all matters, subject to the conditions described below.
 
    Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Company's transfer agent, which will act as Inspector of Elections. The
Inspector of Elections will also determine whether or not a quorum is present.
Except with respect to the election of directors and except in certain other
specific circumstances, the affirmative vote of a majority of shares represented
and voting at a duly held meeting at which a quorum is present (which shares
voting affirmatively also constitute at least a majority of the required quorum)
is required under California law for approval of proposals presented to
shareholders. In general, California law also provides that a quorum consists of
a majority of the shares entitled to vote, represented either in person or by
proxy. The Inspector of Elections will treat abstentions as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum but as not voting for purposes of determining the approval of any matter
submitted to the shareholders for a vote.
 
    The shares represented by the proxies received, properly marked, dated,
signed and not revoked will be voted at the Annual Meeting. Where such proxies
specify a choice with respect to any matter to be acted upon, the shares will be
voted in accordance with the specifications made. Any proxy in the enclosed form
which is returned but is not marked will be voted FOR the election of each of
the five nominees named below, FOR amendment of the Company's 1995 Stock Plan,
FOR ratification of the appointment of the designated independent accountants
and as the proxy holders deem advisable on other matters that may come before
the meeting. If a broker indicates on the enclosed proxy or its substitute that
it does not
<PAGE>
have discretionary authority as to certain shares to vote on a particular matter
("broker non-votes"), those shares will not be considered as voting with respect
to that matter. While there is no definitive specific statutory or case law
authority in California concerning the proper treatment of abstentions and
broker non-votes, the Company believes that the tabulation procedures to be
followed by the Inspector of Elections are consistent with the general statutory
requirements in California concerning voting of shares and determination of a
quorum.
 
    The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing and
mailing proxy solicitation materials for the Annual Meeting and reimbursements
paid to brokerage firms and others for their expenses incurred in forwarding
solicitation materials regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation personally,
telephonically or by facsimile through its officers, directors and employees,
none of whom will receive additional compensation for assisting with the
solicitation.
 
                                 PROPOSAL NO. 1
                             ELECTION OF DIRECTORS
 
NOMINEES
 
    At the Annual Meeting, the shareholders will elect five directors to serve
until the 1999 Annual Meeting of Shareholders or until their respective
successors are elected and qualified. In the event any nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting, the proxies
may be voted for the balance of those nominees named and for any substitute
nominee designated by the present Board or the proxy holders to fill such
vacancy, or for the balance of the nominees named without nomination of a
substitute, or the Board may be reduced in accordance with the Bylaws of the
Company. As of the date of this Proxy Statement, the Board has no reason to
believe that any of the persons named below will be unable or unwilling to serve
as a nominee or as a director if elected.
 
    Assuming a quorum is present, the five nominees receiving the highest number
of affirmative votes of shares entitled to be voted for them will be elected as
directors of the Company for the ensuing year. Shareholders are not entitled to
cumulate votes in the election of directors. Unless marked otherwise, proxies
received will be voted FOR the election of each of the five nominees named
below.
 
    The names of the nominees, their ages as of February 27, 1998, and certain
other information about them are set forth below:
 
<TABLE>
<CAPTION>
NAME                                                 AGE                            POSITION
- -----------------------------------------------      ---      -----------------------------------------------------
<S>                                              <C>          <C>
Timothy Koogle.................................          46   President, Chief Executive Officer and Director
Jerry Yang.....................................          29   Chief Yahoo and Director
Eric Hippeau(1)................................          46   Director
Arthur H. Kern(1)(2)...........................          51   Director
Michael Moritz(1)(2)...........................          43   Director
</TABLE>
 
- ------------------------
 
(1) Member of the Compensation Committee
 
(2) Member of the Audit Committee
 
    MR. KOOGLE has served as the Company's President and Chief Executive Officer
and as a member of the Company's Board of Directors since August 1995. Prior to
joining the Company, Mr. Koogle was President of Intermec Corporation, a
manufacturer of data collection and data communication products, from 1992 to
1995. During that time, he also served as a corporate Vice President of
Intermec's parent company, Western Atlas. From 1982 to 1991, Mr. Koogle held
various operations and executive management
 
                                       2
<PAGE>
positions at Motorola, Inc. Mr. Koogle holds a B.S. degree in mechanical
engineering from the University of Virginia and M.S. and Engr. D. degrees in
mechanical engineering from Stanford University.
 
    MR. YANG, a founder of the Company, has served as a member of the Company's
Board of Directors and an officer of the Company since March 1995. Mr. Yang
co-developed Yahoo! in 1994 while he was working towards his Ph.D. in electrical
engineering at Stanford University. Mr. Yang also serves as a director of Yahoo!
Japan Corporation. Mr. Yang holds B.S. and M.S. degrees in electrical
engineering from Stanford University.
 
    MR. HIPPEAU has served as a member of the Company's Board of Directors since
January 1996. Mr. Hippeau has served as Chairman and Chief Executive Officer of
Ziff-Davis Inc. ("Ziff-Davis") since 1993. Mr. Hippeau joined Ziff-Davis in 1989
as publisher of PC Magazine. He was promoted to Executive Vice President of
Ziff-Davis in 1990, President and Chief Operating Officer in February 1991. Mr.
Hippeau attended the Sorbonne in Paris.
 
    MR. KERN has served as a member of the Company's Board of Directors since
January 1996. Mr. Kern is a founder, Chairman and Chief Executive Officer of
American Media, which owns and operates four commercial radio stations in the
Michigan area. From 1969 to 1986, Mr. Kern served in a variety of television
sales management and general management positions with Group W/Westinghouse
Broadcasting Company. Mr. Kern also serves on the Board of Directors of
Northwest Broadcasting, a group owner of Fox-affiliated television stations, and
Total Entertainment Network. Mr. Kern is a graduate of Yale University.
 
    MR. MORITZ has served as a member of the Company's Board of Directors since
April 1995. He has been a general partner of Sequoia Capital, a venture capital
firm, since 1988. Sequoia provided the original venture capital financing and
helped organize companies such as Cisco Systems, C-Cube Microsystems, Arbor
Software, LSI Logic, Linear Technology, and Microchip Technology. Mr. Moritz
also serves as a Director of Flextronics International and NeoMagic, as well as
several private companies. Between 1979 and 1984, Mr. Moritz was employed in a
variety of positions by Time, Inc. Mr. Moritz has an M.A. degree in history from
Oxford University and an M.B.A. from the Wharton School.
 
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
 
    During fiscal 1997, the Board met eight times and took action by unanimous
written consent on five occasions, and no director then in office attended fewer
than 75% of the aggregate number of meetings of the Board and meetings of the
committees of the Board on which he serves. The Board has an Audit Committee and
a Compensation Committee. There is no standing nominating committee.
 
    The Audit Committee consists of directors Kern and Moritz, two of the
Company's non-employee directors, and met three times during 1997. The Audit
Committee recommends the engagement of the firm of certified public accountants
to audit the financial statements of the Company, and monitors the effectiveness
of the audit effort, the Company's financial and accounting organization and its
system of internal accounting controls.
 
    The Compensation Committee consists of directors Kern, Moritz and Hippeau
(Chair), three of the Company's non-employee directors. The Compensation
Committee met once and took action by unanimous written consent on six occasions
during 1997. Its functions are to establish and administer the Company's
policies regarding compensation. The Compensation Committee also administers the
Company's 1995 Stock Plan and the Company's 1996 Employee Stock Purchase Plan.
Compensation-related matters for employee officers subject to the provisions of
Internal Revenue Code Section 162(m) are administered by a subcommittee of the
Compensation Committee consisting of Messrs. Moritz and Kern.
 
                                       3
<PAGE>
DIRECTOR COMPENSATION
 
    The Company does not pay fees to its directors for attendance at meetings.
The Company reimburses its directors for their out-of-pocket expenses incurred
in the performance of their duties as directors of the Company. The Company's
1996 Directors' Stock Option Plan (the "Directors' Plan") provides that each
person who becomes a non-employee director of the Company will be granted a
nonstatutory stock option to purchase 60,000 shares of Common Stock on the date
on which the optionee first becomes a non-employee director of the Company.
Thereafter, on the date of each annual meeting of the Company's shareholders at
which such director is elected, each such non-employee director shall be granted
an additional option to purchase 7,500 shares of Common Stock if, on such date,
he or she shall have served on the Company's Board of Directors for at least six
months. Each of the non-employee nominees for director named in this Proxy
Statement will have served for more than six months at the time of the Annual
Meeting, and so will receive options to purchase 7,500 shares of the Company's
Common Stock under the Directors' Plan if they are reelected to the Board at the
Annual Meeting. The exercise price of all stock options granted under the
Directors' Plan is equal to the fair market value of a share of the Company's
Common Stock on the date of grant of the option.
 
RECOMMENDATION OF THE BOARD
 
    THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE.
 
                                 PROPOSAL NO. 2
                        AMENDMENT TO THE 1995 STOCK PLAN
 
    At the Annual Meeting, the Company's shareholders are being asked to approve
an amendment to the 1995 Stock Plan (the "Stock Plan") to increase the number of
shares of Common Stock reserved for issuance under the Stock Plan by 2,000,000
shares to an aggregate of 21,500,000 shares. The Board of Directors adopted the
amendment, subject to shareholder approval at the Annual Meeting.
 
GENERAL
 
    The Company believes that long-term equity compensation in the form of stock
options is critical in order to attract qualified employees to the Company and
to retain and provide incentive to current employees, particularly in light of
the increasingly competitive environment for talented personnel. As of February
27, 1998, options to purchase 11,140,306 shares were outstanding under the Stock
Plan, 4,093,237 shares had been issued pursuant to the exercise of options
granted under such plan and 4,266,457 shares remained available for future
grants. The Board of Directors believes that the number of shares currently
available under the Stock Plan is likely to be insufficient in light of
potential continued growth in the Company's operations, including potential
increases in the number of employees if and to the extent the Company completes
acquisitions of other companies or businesses. For this reason, the Board has
determined that it is in the best interests of the Company to increase the
number of shares available for issuance under the Stock Plan by 2,000,000
shares.
 
    Options granted under the Stock Plan may be either "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or nonstatutory stock options, at the discretion of the
Board of Directors and as reflected in the terms of the written option
agreement. The Board of Directors, at its discretion, may also grant rights to
purchase Common Stock directly, rather than pursuant to stock options, subject
to certain restrictions discussed below.
 
    The Stock Plan is not a tax-qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
 
                                       4
<PAGE>
    No stock purchase rights have been granted under the Stock Plan. Shares not
purchased under an option prior to its expiration will be available for future
option grants under the Stock Plan. As of February 27, 1998, the aggregate fair
market value of shares subject to outstanding options under the Stock Plan was
$815,331,145, based upon the closing price of the Common Stock as reported on
The Nasdaq Stock Market on such date. The actual benefits, if any, to the
holders of stock options issued under the Stock Plan are not determinable prior
to exercise as the value, if any, of such stock options to their holders is
represented by the difference between the market price of a share of the
Company's Common Stock on the date of exercise and the exercise price of a
holder's stock option, as set forth below. As of December 31, 1997, the Named
Executive Officers (as defined below under the caption "Executive Officer
Compensation and Other Matters") and directors of the Company have received
grants under the Stock Plan of options to purchase Common Stock of the Company
as set forth under the heading "Plan Benefits."
 
PURPOSE
 
    The purposes of the Stock Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees and consultants of the Company and to promote the success
of the Company's business.
 
ADMINISTRATION
 
    The Stock Plan may be administered by the Board of Directors or by a
committee of the Board of Directors. The Stock Plan is currently being
administered by the Compensation Committee of the Board of Directors. The
Compensation Committee, which shall be constituted to satisfy the applicable
requirement of Rule 16b-3 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Code Section 162(m), has the exclusive authority to
grant stock options and purchase rights and otherwise administer the Stock Plan
with respect to the officers and directors. Members of the Board of Directors
receive no additional compensation for their services in connection with the
administration of the Stock Plan.
 
ELIGIBILITY
 
    The Stock Plan provides that either incentive stock options or nonstatutory
stock options may be granted to employees (including officers and directors) of
the Company or any of its subsidiaries or affiliates (including a partnership or
limited liability company in which the Company owns any equity interest),
provided, however, that employees of an affiliate are not eligible to receive
incentive stock options. In addition, the Stock Plan provides that nonstatutory
stock options may be granted to consultants (including directors who are not
employees of the Company) of the Company or any of its subsidiaries or
affiliates. The Board of Directors or the Compensation Committee selects the
optionees and determines the number of shares to be subject to each option. In
making such determination, a number of factors are taken into account, including
the duties and responsibilities of the optionee, the value of the optionee's
services to the Company, the optionee's present and potential contribution to
the success of the Company, and other relevant factors. As of February 27, 1998,
there were approximately 440 employees, officers, consultants and directors
eligible to participate in the Stock Plan.
 
    The Stock Plan provides that the maximum number of shares of Common Stock
which may be granted under options to any one employee during any fiscal year
shall be 1,500,000, subject to adjustment as provided in the Stock Plan. There
is also a limit on the aggregate market value of shares subject to all incentive
stock options that may be granted to an optionee during any calendar year.
 
                                       5
<PAGE>
TERMS OF OPTIONS
 
    Each option is evidenced by a stock option agreement between the Company and
the optionee. Under the Stock Plan as amended, each option is subject to the
following additional terms and conditions:
 
        (a)  EXERCISE OF THE OPTION.  The Board of Directors or its committee
    determines when options may be exercised. An option is exercised by giving
    written notice of exercise to the Company specifying the number of full
    shares of Common Stock to be purchased and by tendering payment of the
    purchase price. The purchase price of the shares purchased upon exercise of
    an option shall be paid in consideration of such form as is determined by
    the Board of Directors or its committee and specified in the option
    agreement, and such form of consideration may vary for each option.
 
        (b)  EXERCISE PRICE.  The exercise price under the Stock Plan is
    determined by the Board of Directors or its committee and may not be less
    than 100 percent of the fair market value of the Common Stock on the date
    the option is granted, or 85 percent in the case of nonstatutory stock
    options granted to optionees who are not "covered employees" under Code
    Section 162(m). The fair market value per share is equal to the closing
    price on The Nasdaq Stock Market on the date of grant. In the case of an
    incentive stock option granted to an optionee who owns more than ten percent
    of the total combined voting power of all classes of stock of the Company or
    any of its subsidiaries, the exercise price must not be less than 110
    percent of the fair market value on the date of grant.
 
        (c)  TERMINATION OF EMPLOYMENT.  If the optionee's employment or
    consulting relationship (including service as a director) terminates for any
    reason other than disability or death, options under the Stock Plan may be
    exercised not later than three months (or such other period of time not less
    than thirty days in the case of an incentive stock option or not more than
    twelve months in the case of a nonstatutory stock option as is determined by
    the Board of Directors or its committee, with such determination in the case
    of an incentive stock option being made at the time of grant) after such
    termination and may be exercised only to the extent the option was
    exercisable on the date of termination. In no event may an option be
    exercised by any person after the expiration of its term. The Company has
    entered into agreements with certain officers that provide for acceleration
    of option vesting under certain circumstances. See "Executive Officer
    Compensation and Other Matters."
 
        (d)  DISABILITY.  If an optionee is unable to continue his or her
    employment or consulting relationship with the Company as a result of his or
    her total and permanent disability, options may be exercised within twelve
    months of termination and may be exercised only to the extent the option was
    exercisable on the date of termination, but in no event may the option be
    exercised after the expiration of its term.
 
        (e)  DEATH.  Under the Stock Plan, if an optionee should die while
    employed or retained by the Company or during the thirty day period
    following termination of the optionee's employment or consulting
    relationship (including service as a director), options may be exercised
    within twelve months after the date of death to the extent the options would
    have been exercisable (i) on the date of death, in the case of an optionee
    who dies while employed or retained by the Company, or (ii) on the date of
    termination of employment or consulting relationship, in the case of an
    optionee who dies within thirty days after termination of employment or
    consulting relationship.
 
        (f)  EXTENSION OF EXERCISE PERIOD.  The Stock Plan provides that,
    notwithstanding the limited period described above following termination of
    employment, disability or death of an optionee, the Board of Directors or
    its committee can extend the period of time for which an option will remain
    exercisable following termination of an optionee's employment or consulting
    relationship with the Company. In no event, however, may an option be
    exercised by any person after its expiration.
 
        (g)  TERMINATION OF OPTIONS.  The Stock Plan provides that options
    granted under the Stock Plan have the term provided in the option agreement.
    In general, these agreements currently provide for a term of ten years.
    Incentive stock options granted to an optionee who, immediately before the
    grant of
 
                                       6
<PAGE>
    such option, owned more than ten percent of the total combined voting power
    of all classes of stock of the Company or any of its subsidiaries, may not
    in any case have a term of more than five years. No option may be exercised
    by any person after its expiration.
 
        (h)  OPTION NOT TRANSFERABLE.  An option is nontransferable by the
    optionee other than by will or the laws of descent and distribution, and is
    exercisable only by the optionee during his or her lifetime or, in the event
    of the optionee's death, by a person who acquires the right to exercise the
    option by bequest or inheritance or by reason of the death, provided,
    however, that the Stock Plan permits the Board of Directors or its committee
    in its discretion to grant transferable nonstatutory stock options that
    comply with applicable laws.
 
        (i)  ASSUMPTION OR SUBSTITUTION OF OPTIONS.  In the event of a merger or
    consolidation in which the Company is not the surviving entity, the Board of
    Directors is obligated to either accomplish a substitution or assumption of
    options or give thirty days notice of the optionee's right to exercise his
    or her outstanding options as to some or all of the optioned stock at any
    time within thirty days of such notice.
 
        (j)  OTHER PROVISIONS.  The option agreement may contain such other
    terms, provisions and conditions not inconsistent with the Stock Plan as may
    be determined by the Board of Directors or its committee.
 
RESTRICTED STOCK PURCHASE RIGHTS
 
    The Stock Plan permits the granting of rights to purchase Common Stock of
the Company either alone, in addition to, or in tandem with other awards made by
the Company. No such grants have been made to date. Upon the granting of a stock
purchase right under the Stock Plan, the offeree is advised in writing of the
terms, conditions and restrictions related to the offer, including the number of
shares of Common Stock that such person is entitled to purchase, the price to be
paid and the time in which such person must accept such offer. The purchase
price for stock purchased pursuant to such rights shall not be less than 85
percent of the fair market value of such shares on the date of grant. Stock
purchase rights granted to persons subject to Section 16 of the Exchange Act,
will be subject to any restrictions necessary to comply with Rule 16b-3.
 
    Unless the Administrator of the Stock Plan determines otherwise, the
underlying stock purchase agreement for stock purchased pursuant to a stock
purchase right granted under the Stock Plan will grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
disability).
 
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
 
    In the event any change, such as a stock split or dividend, is made in the
Company's capitalization that results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the exercise price of each
outstanding option, the number of shares subject to each option, the annual
limitation on grants to employees, as well as the number of shares available for
issuance under the Stock Plan. In the event of the proposed dissolution or
liquidation of the Company, each option will terminate unless otherwise provided
by the Board of Directors or its committee.
 
AMENDMENT AND TERMINATION
 
    The Board of Directors may amend the Stock Plan at any time or may terminate
it without approval of the shareholders, provided however, that shareholder
approval is required for any amendment to the Stock Plan that increases the
number of shares that may be issued under the Stock Plan, modifies the standards
of eligibility, modifies the limitation on grants to employees described in the
Stock Plan or results in other
 
                                       7
<PAGE>
changes which would require shareholder approval to qualify options granted
under the Stock Plan as performance-based compensation under Section 162(m) of
the Code. However, no action by the Board of Directors or shareholders may alter
or impair any option previously granted under the Stock Plan. The Stock Plan
shall terminate in May, 2005, provided that any options then outstanding under
the Stock Plan shall remain outstanding until they expire by their terms.
 
PLAN BENEFITS
 
    The Company cannot currently determine the number of shares subject to
options that may be granted in the future to executive officers, directors and
employees under the Stock Plan. The following table sets forth information with
respect to the stock options from January 1, 1997 through December 31, 1997 to
the Named Executive Officers, all current executive officers as a group and all
employees and consultants (including all current officers who are not executive
officers) as a group under the Stock Plan. No additional stock options were
granted to the Named Executive Officers after December 31, 1997 and prior to the
date of this Proxy Statement.
 
<TABLE>
<CAPTION>
                                                             NUMBER OF SHARES SUBJECT
                                                                        TO              WEIGHTED AVERAGE
                                                              OPTIONS GRANTED UNDER      EXERCISE PRICE
NAME                                                              THE STOCK PLAN           PER SHARE
- ----------------------------------------------------------  --------------------------  ----------------
<S>                                                         <C>                         <C>
Timothy Koogle............................................              125,000            $  53.875
Jeffrey Mallett...........................................               80,000            $  53.875
Gary Valenzuela...........................................               60,000            $  53.875
Farzad Nazem..............................................               70,000            $  53.875
Anil Singh................................................               25,000            $  53.875
All current executive officers as a group (7 persons).....              360,000            $  53.875
All current directors (other than executive officers) as a
  group (3 persons).......................................                   --                     --
All employees and consultants (including all current
  officers who are not executive officers) as a group (362
  persons)................................................            4,141,716            $  36.66
</TABLE>
 
FEDERAL INCOME TAX ASPECTS OF THE STOCK PLAN
 
    Options granted under the Stock Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or nonstatutory stock options.
 
    If an option granted under the Stock Plan is an incentive stock option,
under Federal tax laws the optionee will recognize no income upon grant of the
incentive stock option and incur no tax liability due to the exercise unless the
optionee is subject to the alternative minimum tax. The Company will not be
allowed a deduction for Federal income tax purposes as a result of the exercise
of an incentive stock option regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange of the shares at least two years after
grant of the incentive stock option and one year after receipt of the shares by
the optionee, any gain will be treated as long-term capital gain under Federal
tax laws. If these holding periods are not satisfied, the optionee will
recognize ordinary income under Federal tax laws equal to the difference between
the exercise price and the lower of the fair market value of the stock at the
date of the option exercise or the sale price of the stock. The Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain recognized on such a premature disposition of the shares
in excess of the amount treated as ordinary income will be characterized under
Federal tax laws as long-term capital gain if the sale occurs more than one year
after exercise of the option or as short-term capital gain if the sale is made
earlier. The current Federal tax rate on long-term capital gain is capped at 28
percent for shares held more than one year, but not more than 18 months after
exercise, and at 20% for shares held more than 18 months after exercise. Capital
losses are allowed under Federal tax laws in full against capital gains plus
$3,000 on an annual basis of other income.
 
                                       8
<PAGE>
    All other options which do not qualify as incentive stock options are
referred to as nonstatutory stock options. An optionee will not recognize any
taxable income under Federal tax laws at the time he or she is granted a
nonstatutory stock option. However, upon its exercise, the optionee will
recognize ordinary income for Federal tax law purposes measured by the excess of
the then fair market value of the shares over the exercise price. In certain
circumstances, where the shares are subject to a substantial risk of forfeiture
when acquired or where the optionee is an officer, director or ten percent
shareholder of the Company, the date of taxation under Federal tax laws may be
deferred unless the optionee files a timely election with the Internal Revenue
Service under Section 83(b) of the Code. The income recognized by an optionee
who is also an employee of the Company will be subject to tax withholding by the
Company by payment in cash or out of the current earnings paid to the optionee.
Upon resale of such shares by the optionee, any difference between the sale
price and the optionee's tax basis (exercise price plus the income recognized
upon exercise) will be treated under Federal tax laws as capital gain or loss,
and will qualify for long-term capital gain or loss treatment if the shares have
been held for more than one year.
 
REQUIRED VOTE
 
    The approval of the amendment to the Stock Plan to increase the number of
shares reserved for issuance thereunder by 2,000,000 shares requires the
affirmative vote of the holders of a majority of the total votes cast on the
proposal at the Annual Meeting in person or by proxy.
 
RECOMMENDATION OF THE BOARD OF DIRECTORS
 
    THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE STOCK PLAN AS DESCRIBED ABOVE.
 
                                 PROPOSAL NO. 3
             RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
 
    Effective February 1, 1996, Price Waterhouse LLP was engaged as the
Company's independent accountants and has been appointed by the Board to
continue as the Company's independent accountants for the fiscal year ending
December 31, 1998. In the event that ratification of this selection of
accountants is not approved by a majority of the shares of Common Stock voting
at the Annual Meeting in person or by proxy, management will review its future
selection of accountants.
 
    A representative of Price Waterhouse LLP is expected to be present at the
Annual Meeting. This representative will have an opportunity to make a statement
and will be available to respond to appropriate questions.
 
    Prior to February 1, 1996, Coopers & Lybrand L.L.P. had been the Company's
independent accountants. The decision to change independent accountants was
approved by the Company's Board of Directors. Coopers & Lybrand L.L.P. has not
audited or reported on any financial statements of the Company as of any date or
for any period and has not consulted with the Company on any matters of
accounting principles or practices. Prior to February 1, 1996, the Company had
not consulted with Price Waterhouse LLP on any items which involved the
Company's accounting principles or the form of audit opinion to be issued on the
Company's financial statements.
 
RECOMMENDATION OF THE BOARD
 
    THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF PRICE
WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1998.
 
                                       9
<PAGE>
                 INFORMATION REGARDING BENEFICIAL OWNERSHIP OF
                     PRINCIPAL SHAREHOLDERS AND MANAGEMENT
 
    The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of February 27, 1998, (i)
by each person known by the Company to own beneficially more than five percent
of the outstanding shares of the Company's Common Stock, (ii) by each director
and Named Executive Officer of the Company who beneficially owns shares of
Common Stock and (iii) by all directors and executive officers of the Company as
a group.
 
<TABLE>
<CAPTION>
                                                                                      AMOUNT AND
                                                                                      NATURE OF       PERCENT OF
                                                                                      BENEFICIAL     COMMON STOCK
BENEFICIAL OWNER                                                                     OWNERSHIP(1)   OUTSTANDING(2)
- -----------------------------------------------------------------------------------  ------------  -----------------
<S>                                                                                  <C>           <C>
SOFTBANK Holdings Inc.(3)..........................................................   13,428,842            29.3%
  10 Langley Road, Suite 403
  Newton Center, MA 02159
 
David Filo.........................................................................    5,854,474            12.8%
  c/o Yahoo! Inc.
  3420 Central Expressway
  Santa Clara, CA 95051
 
Jerry Yang.........................................................................    5,745,045            12.5%
  c/o Yahoo! Inc.
  3420 Central Expressway
  Santa Clara, CA 95051
 
Michael Moritz(4)..................................................................    1,838,094             4.0%
  c/o Sequoia Capital
  3000 Sand Hill Road
  Suite 280, Bldg. 4
  Menlo Park, CA 94025
 
Timothy Koogle(5)..................................................................      622,392             1.3%
  c/o Yahoo! Inc.
  3420 Central Expressway
  Santa Clara, CA 95051
 
Farzad Nazem(6)....................................................................      254,572           *
  c/o Yahoo! Inc.
  3420 Central Expressway
  Santa Clara, CA 95051
 
Jeffrey Mallett(7).................................................................      121,799           *
  c/o Yahoo! Inc.
  3420 Central Expressway
  Santa Clara, CA 95051
 
Arthur H. Kern(8)..................................................................       71,239           *
  c/o Yahoo! Inc.
  3420 Central Expressway
  Santa Clara, CA 95051
 
Gary Valenzuela(9).................................................................       41,318           *
  c/o Yahoo! Inc.
  3420 Central Expressway
  Santa Clara, CA 95051
</TABLE>
 
                                       10
<PAGE>
<TABLE>
<CAPTION>
                                                                                      AMOUNT AND
                                                                                      NATURE OF       PERCENT OF
                                                                                      BENEFICIAL     COMMON STOCK
BENEFICIAL OWNER                                                                     OWNERSHIP(1)   OUTSTANDING(2)
- -----------------------------------------------------------------------------------  ------------  -----------------
<S>                                                                                  <C>           <C>
Eric Hippeau(10)...................................................................       24,000           *
  Ziff-Davis Inc.
  One Park Avenue
  New York , NY 10016
 
Anil Singh(11).....................................................................       11,567           *
  c/o Yahoo! Inc.
  3420 Central Expressway
  Santa Clara, CA 95051
 
All directors and executive officers as a group....................................   14,584,500            31.2%
  (10 persons)(12)
</TABLE>
 
- ------------------------
 
  *  Less than one percent.
 
 (1) Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission (the "SEC"). In computing the number of
     shares beneficially owned by a person and the percentage ownership of that
     person, shares of Common Stock subject to options or warrants held by that
     person that are exercisable on or before April 28, 1998 are deemed
     outstanding. Such shares, however, are not deemed outstanding for purposes
     of computing the ownership of any other person. Except as indicated in the
     footnotes to this table and pursuant to applicable community property laws,
     the shareholder named in the table has sole voting and investment power
     with respect to the shares set forth opposite such shareholder's name.
 
 (2) Based on 45,829,896 shares of Common Stock outstanding on February 27,
     1998.
 
 (3) SOFTBANK Holdings Inc. ("SOFTBANK") is a wholly-owned subsidiary of
     SOFTBANK Corp. Masayoshi Son is the President and Chief Executive Officer
     of and owns approximately 50% interest in SOFTBANK Corp., and, therefore,
     he may be deemed to beneficially own such shares, although Mr. Son
     disclaims beneficial ownership of all such shares except to the extent of
     his pecuniary interest therein. On December 13, 1996, SOFTBANK granted an
     option to purchase 60,000 shares of Common Stock (the "Option"), which are
     owned by SOFTBANK, to Mr. Hippeau at a purchase price per share of $13.25.
     Twenty percent of the Option shares vest and become exercisable in five
     annual equal installments beginning April 1, 1997. Mr. Hippeau disclaims
     beneficial ownership of all shares owned by SOFTBANK, except those shares
     under the Option which are exercisable within 60 days of February 27, 1998
     (i.e., April 28, 1998).
 
 (4) Includes 1,601,158 shares held by Sequoia Capital VI ("Sequoia Capital")
     and 87,915 shares held by Sequoia Technology Partners VI ("Sequoia
     Technology"). Mr. Moritz, as general partner of each of Sequoia Capital and
     Sequoia Technology, may be deemed to beneficially own such shares, although
     Mr. Moritz disclaims beneficial ownership of all such shares except to the
     extent of his pecuniary interest therein.
 
 (5) Includes 490,694 shares issuable upon exercise of options within 60 days of
     February 27, 1998 under the Company's 1995 Stock Plan.
 
 (6) Includes 251,406 shares issuable upon exercise of options within 60 days of
     February 27, 1998 under the Company's 1995 Stock Plan.
 
 (7) Includes 119,999 shares issuable upon exercise of options within 60 days of
     February 27, 1998 under the Company's 1995 Stock Plan.
 
                                       11
<PAGE>
 (8) Represents shares issuable upon exercise of an option within 60 days of
     February 27, 1998 under the Company's 1995 Stock Plan.
 
 (9) Includes 40,781 shares issuable upon exercise of options within 60 days of
     February 27, 1998 under the Company's 1995 Stock Plan.
 
 (10) Represents shares issuable upon exercise of an option within 60 days of
      February 27, 1998, which option was granted by SOFTBANK. See footnote 3
      above. Mr. Hippeau serves as Chairman and Chief Executive Officer of
      Ziff-Davis, a subsidiary of SOFTBANK.
 
 (11) Includes 11,564 shares issuable upon exercise of options within 60 days of
      February 27, 1998 under the Company's 1995 Stock Plan.
 
 (12) Includes 1,689,073 shares held by entities affiliated with Mr. Moritz,
      director of the Company, as described in footnote 4 above, as to which Mr.
      Moritz disclaims beneficial ownership except to the extent of his
      pecuniary interest. Also includes 985,682 shares issuable upon exercise,
      by certain directors and executive officers, of options within 60 days of
      February 27, 1998 under the Company's 1995 Stock Plan. Does not include
      13,428,842 shares held by SOFTBANK, which owns all the outstanding stock
      of Ziff-Davis, of which Eric Hippeau, a director of the Company, is
      Chairman and Chief Executive Officer.
 
                                       12
<PAGE>
                EXECUTIVE OFFICER COMPENSATION AND OTHER MATTERS
 
SUMMARY COMPENSATION TABLE
 
    The following table sets forth certain information concerning compensation
of (i) the Company's Chief Executive Officer and (ii) the four other most highly
compensated executive officers of the Company serving at December 31, 1997
(collectively, the "Named Executive Officers").
 
<TABLE>
<CAPTION>
                                                                         LONG-TERM
                                                                        COMPENSATION
                                                                        ------------
                                                                           AWARDS
                                            ANNUAL COMPENSATION         ------------
                                       ------------------------------    SECURITIES     ALL OTHER
                                                       OTHER ANNUAL      UNDERLYING    COMPENSATION
NAME AND PRINCIPAL POSITION            YEAR  SALARY($) COMPENSATION($)   OPTIONS(#)       ($)(1)
- -------------------------------------  ----  -------  ---------------   ------------   ------------
<S>                                    <C>   <C>      <C>               <C>            <C>
Timothy Koogle (2) ..................  1997  165,000      --               125,000          887
  President and Chief Executive        1996  150,000      --               120,000          870
  Officer                              1995   68,750      --             1,538,265        --
 
Jeffrey Mallett (3) .................  1997  150,000      --                80,000      270 216
  Chief Operating Officer              1996  125,000      --                67,500        --
                                       1995   27,748      --               900,000
 
Gary Valenzuela (4) .................  1997  145,000      --                60,000        2,865
  Senior Vice President, Finance and   1996  123,750      --               652,500        1,547
  Administration, and Chief Financial
  Officer
 
Farzad Nazem (5) ....................  1997  145,000      --                70,000        2,692
  Senior Vice President, Product       1996  101,770      --               712,500        3,574
  Development and Operations, and
  Chief Technology Officer
 
Anil Singh (6) ......................  1997  137,533      43,750(7)         25,000        2,656
  Vice President, Advertising Sales    1996   75,480      43,750(7)         52,500        1,707
                                       1995    5,817      --               225,000        --
</TABLE>
 
- ------------------------
 
(1) Represents premiums paid for Group Term Life Insurance for each of the
    executive officers, except that for Messrs. Valenzuela, Singh and Nazem the
    amounts also include Company contributions under the Company's 401(k) Plan
    of $2,375 for each such executive officer in 1997 and $1,305, $1,575 and
    $3,356, respectively, in 1996.
 
(2) Mr. Koogle joined the Company in August 1995.
 
(3) Mr. Mallett joined the Company in October 1995.
 
(4) Mr. Valenzuela joined the Company in February 1996.
 
(5) Mr. Nazem joined the Company in March 1996.
 
(6) Mr. Singh joined the Company in November 1995 and became an executive
    officer of the Company in December 1996.
 
(7) Consists of advertising sales commissions.
 
                                       13
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
 
    The following table provides certain information with respect to stock
options granted to the Named Executive Officers during the year end December 31,
1997. In addition, as required by SEC rules, the table sets forth the
hypothetical gains that would exist for the options based on assumed annual
compounded rates of stock price appreciation during the option term.
 
<TABLE>
<CAPTION>
                                                                                       POTENTIAL REALIZABLE
                                              INDIVIDUAL GRANTS(1)                       VALUE AT ASSUMED
                           ----------------------------------------------------------     ANNUAL RATES OF
                           NUMBER OF    PERCENT OF TOTAL     EXERCISE                       STOCK PRICE
                           SECURITIES       OPTIONS        PRICE OR BASE                 APPRECIATION FOR
                           UNDERLYING      GRANTED TO          PRICE                      OPTION TERM(2)
                            OPTIONS       EMPLOYEES IN       PER SHARE     EXPIRATION  ---------------------
NAME                       GRANTED(#)    FISCAL YEAR(%)       ($/SH)          DATE       5%($)      10%($)
- -------------------------  ----------   ----------------   -------------   ----------  ---------  ----------
<S>                        <C>          <C>                <C>             <C>         <C>        <C>
Timothy Koogle...........   125,000           2.71%           53.875       12/02/2007  4,235,212  10,732,859
Jeffrey Mallett..........    80,000           1.74%           53.875       12/02/2007  2,710,536   6,868,030
Gary Valenzuela..........    60,000           1.30%           53.875       12/02/2007  2,032,902   5,151,773
Farzad Nazem.............    70,000           1.52%           53.875       12/02/2007  2,371,719   6,010,401
Anil Singh...............    25,000           0.54%           53.875       12/02/2007    847,042   2,146,572
</TABLE>
 
- ------------------------
 
(1) Options vest ratably on an annual basis over four years. The options have a
    ten-year term, but are subject to earlier termination in connection with
    termination of employment. In the event of certain change-in-control
    transactions, options held by Messrs. Koogle, Mallett, Valenzuela and Nazem
    shall be exercisable to the extent of the number of shares that would
    otherwise vest if such officers remained employed by the Company or its
    successor for two years after the effective date of the transaction, subject
    to certain conditions, including the optionee's acceptance of a comparable
    two-year employment contract with the acquiring party and certain
    non-competition agreements.
 
(2) The potential realizable value illustrates value that might be realized upon
    exercise of the options immediately prior to the expiration of their terms,
    assuming the specified compounded rates of appreciation of the market price
    per share from the date of grant to the end of the option term. Actual
    gains, if any, on stock option exercise are dependent upon a number of
    factors, including the future performance of the Common Stock and the timing
    of option exercises, as well as the optionee's continued employment through
    the vesting period. There can be no assurance that the amounts reflected in
    this table will be achieved.
 
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
  VALUES
 
    The following table sets forth certain information with respect to stock
options exercised by the Named Executive Officers during the year ended December
31, 1997 and the fiscal year-end value of unexercised options held by the Named
Executive Officers.
 
<TABLE>
<CAPTION>
                                                                    NUMBER OF SECURITIES
                                                                   UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED
                             NUMBER OF        VALUE REALIZED             OPTIONS AT               IN-THE-MONEY OPTIONS
                               SHARES        (MARKET PRICE AT        FISCAL YEAR-END(#)         AT FISCAL YEAR-END($)(1)
                              ACQUIRED        EXERCISE LESS      ---------------------------   ---------------------------
NAME                       ON EXERCISE(#)   EXERCISE PRICE)($)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
- -------------------------  --------------   ------------------   -----------   -------------   -----------   -------------
<S>                        <C>              <C>                  <C>           <C>             <C>           <C>
Timothy Koogle...........     576,843           12,490,574         382,506        823,916       26,143,840    49,293,689
Jeffrey Mallett..........     150,000            3,561,750         129,374        543,126        8,766,411    32,722,214
Gary Valenzuela..........     225,000            5,473,201          63,135        424,365        4,190,009    25,491,866
Farzad Nazem.............      60,000            1,464,579         242,016        480,484       15,542,700    27,324,175
Anil Singh...............      37,502              920,956          36,579        172,169        2,369,033    10,083,141
</TABLE>
 
- ------------------------
 
(1) Value is based on the $69.25 per share closing price of the Company's Common
    Stock on The Nasdaq Stock Market on December 31, 1997, less the exercise
    price.
 
                                       14
<PAGE>
                      REPORT OF THE COMPENSATION COMMITTEE
                           OF THE BOARD OF DIRECTORS
                           ON EXECUTIVE COMPENSATION
 
    Three non-employee members of the Company's Board of Directors, Eric
Hippeau, Arthur H. Kern and Michael Moritz, serve as the Compensation Committee
of the Board. The Compensation Committee reviews, recommends and approves
changes to the Company's compensation policies and benefits programs,
administers the Company's stock option plans, including approving stock option
grants, and otherwise seeks to ensure that the Company's compensation philosophy
is consistent with the Company's best interests and is properly implemented.
Compensation determinations for executive officers who are subject to the
provisions of Internal Revenue Code 162(m) are independently reviewed and
approved by the Executive Officer Compensation Subcommittee, which consists of
Messrs. Kern and Moritz.
 
COMPENSATION PHILOSOPHY AND REVIEW
 
    The Company's compensation philosophy for executive officers serves two
principal purposes: (i) to provide a total compensation package for officers
that is competitive and enables the Company to attract and retain key executive
and employee talent needed to accomplish the Company's business objectives and
(ii) to directly link compensation to improvements in Company performance and
increases in shareholder value as measured principally by the trading price of
the Company's Common Stock.
 
    In determining compensation levels for 1998, the Compensation Committee
obtained survey information from a third-party consultant with respect to cash
compensation and stock option grants to similarly situated officers of high
technology companies of comparable size and market capitalization. The
Compensation Committee also relied upon publicly available compensation
information and informal survey information obtained by management with respect
to other Internet-related companies. The Compensation Committee did not
determine it necessary to, and did not attempt to, specifically analyze
compensation levels at companies included in the index under the caption,
"Performance Graph."
 
ELEMENTS OF EXECUTIVE OFFICER COMPENSATION
 
    The Company's executive compensation consists primarily of salary, health
insurance and similar benefits, and the award of stock options. The Company
emphasizes the award of stock options and to date the Company has not made use
of cash incentive bonuses. The Compensation Committee believes that in the
highly competitive, emerging markets in which the Company operates, equity-based
compensation provides the greatest incentive for outstanding executive
performance and the greatest alignment of management and shareholder long-term
interests.
 
    OFFICER SALARIES.  The Compensation Committee reviews each senior executive
officer's salary annually. In determining the appropriate salary levels, the
Compensation Committee considers, among other factors, the officer's scope of
responsibility, prior experience, past accomplishments, and data on prevailing
compensation levels in relevant markets for executive talent. Based on the
findings of the compensation review discussed earlier, the Compensation
Committee has approved salary increases for certain executive officers effective
for fiscal 1998 which the Compensation Committee believes appropriately reflect
the increase in the level of the Company's operations and officer
responsibility, officer performance and compensation levels for comparable
companies considered by the Compensation Committee.
 
    The Compensation Committee increased the salary of Mr. Koogle from $160,000
to $195,000 effective as of January 1, 1998, based upon, among other factors,
the Compensation Committee's positive assessment of Mr. Koogle's performance
during 1997 and his increased responsibilities associated with the rapid recent
growth in the Company's operations. In reviewing Mr. Koogle's performance, the
Compensation Committee noted in particular a number of Company achievements
during 1997, including the sequential increases in quarterly revenues, the
completion of a number of significant strategic acquisitions, business alliances
and relationships, the successful launch of several additional online media
properties, and the
 
                                       15
<PAGE>
successful recruiting and hiring of other key employees. The Compensation
Committee also increased the salary levels of several of the other members of
the Company's senior management team effective January 1, 1998. In general,
these increases were consistent with Mr. Koogle's increase, and were based upon
a similar analysis of the officers' increased responsibility and positive
performance assessments.
 
    The Compensation Committee believes that the base salary levels of the
executive officers, including Mr. Koogle, are at or below the median of base
salary levels for comparable companies considered in the survey data and
informal information reviewed by the Compensation Committee. The Compensation
Committee believes this is appropriate in light of the Company's emphasis on
long-term equity compensation.
 
    STOCK OPTION GRANTS.  As noted above, the Company has relied substantially
on long-term equity compensation as the principal means of compensating and
incentivizing its executive officers. It is the Company's practice to set option
exercise prices for officers at not less than 100% of the stock fair market
value on the date of grant. Thus, the value of the shareholders' investment in
the Company must appreciate before an optionee receives any financial benefit
from the option. Options are generally granted for a term of ten years. Options
granted to executive officers generally provide that they are not exercisable
until one year after the date of grant, at which time they become exercisable on
a cumulative basis at a maximum annual rate of 25% of the total number of shares
underlying the option grant.
 
    In determining the size of the stock option grants, the Compensation
Committee considers various subjective factors primarily relating to the
responsibilities of the individual officers, and also to their expected future
contributions and the number of shares owned by the officer or which continue to
be subject to vesting under outstanding options. In addition, the Compensation
Committee examines the level of equity incentives held by each officer relative
to the other officers' equity positions and their tenure, responsibilities,
experience, and value to the Company. As part of the annual compensation review
at the end of 1997, the Compensation Committee approved the grant of options to
Mr. Koogle for an additional 125,000 shares of the Company's Common Stock,
reflecting Mr. Koogle's successful achievement of the business objectives
described above. The Compensation Committee granted all executive officers as a
group (including Mr. Koogle) additional options to purchase an aggregate of
360,000 shares of the Company's Common Stock.
 
    The Company has entered into agreements with each of Messrs. Koogle,
Mallett, Valenzuela and Nazem, that provide, in the event of certain
change-in-control transactions, for the acceleration of options held by such
officers whereby each such option shall be exercisable to the extent of the
number of shares that would otherwise vest if the officer remained employed by
the Company or its successor for two years after the effective date of the
transaction, subject to certain conditions, including the optionee's acceptance
of a comparable two-year employment contract with the acquiring party and
certain non-competition agreements. The Company otherwise does not have any
employment agreements with any of the executive officers.
 
    Because of the Company's rapid personnel growth and potential additional
growth that may result from acquisitions of other companies and businesses, the
Board of Directors have approved an amendment to increase by an aggregate of
2,000,000 shares, the number of shares of Common Stock that may be issued
pursuant to the exercise of options granted under the Company's 1995 Stock Plan.
The Company is seeking approval of this amendment by the shareholders at the
Annual Meeting. See "Proposal No. 2, Amendment to the 1995 Stock Plan."
 
POLICY ON DEDUCTIBILITY OF COMPENSATION
 
    Section 162(m) of the U.S. Internal Revenue Code limits the tax
deductibility by a corporation of compensation in excess of $1 million paid to
the Chief Executive Officer and any other of its four most highly compensated
executive officers. However, compensation which qualifies as "performance-based"
is
 
                                       16
<PAGE>
excluded from the $1 million limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals under a plan approved by shareholders.
 
    The Compensation Committee does not presently expect total cash compensation
payable for salaries to exceed the $1 million limit for any individual
executive. Having considered the requirements of Section 162(m), the
Compensation Committee believes that stock option grants to date meet the
requirement that such grants be "performance-based" and are, therefore, exempt
from the limitations on deductibility. The Compensation Committee will continue
to monitor the compensation levels potentially payable under the Company's cash
compensation programs, but intends to retain the flexibility necessary to
provide total cash compensation in line with competitive practice, the Company's
compensation philosophy, and the Company's best interests.
 
                                          By the Compensation Committee
                                          of the Board of Directors,
 
                                          Eric Hippeau
                                          Arthur H. Kern
                                          Michael Moritz
 
          COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
    There are currently no employee directors serving on the Compensation
Committee. The following non-employee directors serve on the Compensation
Committee: Eric Hippeau, Arthur H. Kern and Michael Moritz.
 
    Mr. Hippeau is also Chairman and Chief Executive Officer of Ziff-Davis, a
subsidiary of SOFTBANK Holdings Inc., a principal shareholder of the Company.
The Company has entered into the following transactions with SOFTBANK or its
affiliates during the fiscal year ended December 31, 1997:
 
        In December 1997 and in January 1998, the Company and SOFTBANK purchased
    shares of capital stock of GeoCities, a provider of free Web home page and
    community services, from GeoCities and certain shareholders of GeoCities.
    The Company's total investment in GeoCities equity was approximately $5
    million which was paid for with newly-issued Yahoo! common stock and
    represents a minority interest in GeoCities. SOFTBANK acquired approximately
    $51 million in equity of GeoCities through a combination of an exchange of
    Yahoo! common stock and cash proceeds from sales of some Yahoo! common stock
    in the open market. This investment by SOFTBANK followed a prior minority
    investment in GeoCities by a SOFTBANK venture affiliate. Mr. Hippeau serves
    on the Board of Directors of GeoCities. The Company registered the resale of
    all shares of the Company's Common Stock acquired by GeoCities and GeoCities
    shareholders in the transaction, including the shares of the Company's
    Common Stock transferred by SOFTBANK to GeoCities and the shareholders of
    GeoCities in the transaction.
 
        In August 1997, the Company entered into a joint venture agreement with
    SOFTBANK and other SOFTBANK affiliate companies whereby Yahoo! Korea
    Corporation was formed to develop and operate a version of the Yahoo!
    Internet Guide localized for Korea. The Company owns 60% of the equity of
    the joint venture, and the remaining 40% is owned by SOFTBANK and other
    SOFTBANK affiliate companies. The Company has licensed certain elements of
    the Yahoo! Internet Guide to the joint venture on an exclusive basis in
    exchange for certain license fees.
 
        In November 1996, the Company and SB Holdings (Europe) Ltd., a
    subsidiary of SOFTBANK, entered into an agreement for the joint development
    and operation of localized versions of the Yahoo! Internet Guide in several
    European countries, which will be implemented through joint venture
    companies in such countries. The Company owns 70% of each joint venture and
    SB Holdings (Europe) Ltd. owns the remaining 30%. The Company has licensed
    certain elements of the Yahoo!
 
                                       17
<PAGE>
    Internet Guide to the joint venture companies on an exclusive basis in
    exchange for certain license fees. Ziff-Davis provided sales and marketing
    and related services to the joint venture companies during 1997 for fees of
    approximately $260,000.
 
        In April 1996, the Company and SOFTBANK signed a joint venture agreement
    whereby Yahoo! Japan Corporation was formed to develop and operate a version
    of the Yahoo! Internet Guide localized for Japan. SOFTBANK owns 66% of the
    equity of the joint venture and the remaining 34% is owned by the Company.
    The Company has licensed certain elements of the Yahoo! Internet Guide to
    the joint venture on an exclusive basis in exchange for certain license
    fees.
 
        In 1996, the Company entered into an agreement with SOFTBANK under which
    SOFTBANK agreed to purchase $2,000,000 of advertising on the Company's
    online properties during 1996 and annually for four years thereafter. Under
    this arrangement, SOFTBANK and its affiliates purchased an aggregate of
    approximately $2,200,000 of advertising from the Company in 1997, at rates
    that are comparable to those offered to other major customers.
 
        In 1995, the Company and Ziff-Davis entered into an agreement relating
    to the development and publication of certain print and online properties
    under the "Yahoo!" brand. Under this agreement, the Company recognized
    publication revenues of approximately $250,000 in 1997.
 
        In 1995, the Company retained an advertising sales representative firm
    to sell substantially all of the advertising on the Company's online
    properties under an exclusive arrangement. During 1996, SOFTBANK acquired a
    controlling interest in this firm, which is now known as SOFTBANK
    Interactive Marketing ("SIM"), and Mr. Hippeau, one of the Company's
    directors, joined the Board of Directors of SIM. The exclusive arrangement
    was terminated as of December 31, 1996. On December 31, 1997 SOFTBANK sold
    its voting interest in SIM to a third-party and Mr. Hippeau ceased to be a
    director. Under this arrangement, the Company paid an aggregate of
    approximately $1,600,000 in advertising sales commissions in 1997.
 
    Mr. Moritz is also a general partner of Sequoia Capital, a principal
shareholder of the Company. Sequoia Capital and SOFTBANK are investors in
GlobalCenter. During 1997, the Company paid GlobalCenter approximately
$1,300,000 for Internet access and hosting services.
 
    See "Proposal No. 1--Election of Directors" for a discussion of certain
information with respect to all outside directors, including directors serving
on the Compensation Committee.
 
    The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. The Board of Directors has established a policy that
requires that all transactions between the Company and its officers, directors
and principal shareholders and their affiliates must be approved by a majority
of the disinterested members of the Board of Directors, and will be on terms no
less favorable to the Company than could be obtained from unaffiliated third
parties.
 
                                       18
<PAGE>
                               PERFORMANCE GRAPH
 
    The following graph compares, for the period that the Company's Common Stock
has been registered under Section 12 of the Exchange Act (which commenced April
11, 1996), the cumulative total shareholder return for the Company, the NASDAQ
Stock Market (U.S. companies) Index (the "NASDAQ Market Index"), and the
Hambrecht & Quist Internet Index ("H&Q Internet Index"). Measurement points are
April 12, 1996 (the first trading day), the last trading day of the Company's
fiscal year ended December 31, 1996 and the last trading day of the Company's
fiscal year ended December 31, 1997. The graph assumes that $100 was invested on
April 12, 1996 in the Common Stock of the Company, the NASDAQ Market Index and
the H&Q Internet Index, and further assumes no payment or reinvestment of
dividends. The stock price performance on the following graph is not necessarily
indicative of future stock price performance.
 
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
 
<TABLE>
<CAPTION>
           YAHOO! INC.   NASDAQ MARKET INDEX    H&Q INTERNET INDEX
<S>        <C>          <C>                     <C>
4/12/96        $100.00                 $100.00              $100.00
12/31/96      $ 130.77                $ 117.53              $ 96.11
12/31/97      $ 799.04                $ 142.96             $ 128.98
</TABLE>
 
                              CERTAIN TRANSACTIONS
 
    The Company has entered into indemnification agreements with each of its
directors and executive officers. The agreements require the Company to
indemnify such individuals for certain liabilities to which they may be subject
as a result of their affiliation with the Company, to the fullest extent allowed
by California law.
 
    Certain other transactions are described under the caption "Compensation
Committee Interlocks and Insider Participation."
 
                                       19
<PAGE>
          SHAREHOLDER PROPOSALS FOR 1998 ANNUAL SHAREHOLDERS' MEETING
 
    Proposals of shareholders intended to be presented at the Company's 1999
Annual Meeting of Shareholders must be received by Yahoo! Inc., Attn: Secretary
at 3420 Central Expressway, Santa Clara, CA 95051, no later than November 12,
1998.
 
            SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
    Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file with the SEC initial reports
of ownership and changes in ownership of the Company's Common Stock. Reporting
Persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) reports they file.
 
    To the Company's knowledge, based solely on its review of the copies of such
reports received or written representations from certain Reporting Persons that
no other reports were required, the Company believes that during its fiscal year
ended December 31, 1997, all Reporting Persons complied with all applicable
filing requirements, with the following exceptions: (a) a Form 4 prepared on
behalf of Timothy Koogle to report Mr. Koogle's two stock sales in April 1997
was filed late; (b) a Form 3 prepared on behalf of James J. Nelson to report Mr.
Nelson's appointment as Vice President, Finance in July 1997 and the securities
beneficially owned by him was filed late; (c) a Form 3 prepared on behalf of
John Place to report Mr. Place's appointment as General Counsel and Secretary in
January 1997 and the securities beneficially owned by him was filed late and (d)
an amended Form 3 prepared on behalf of Farzad Nazem was filed in March 1998 to
report the securities beneficially owned by him.
 
                                 OTHER MATTERS
 
    The Board of Directors knows of no other business which will be presented at
the Annual Meeting. If any other business is properly brought before the Annual
Meeting, proxies in the enclosed form will be voted in respect thereof as the
proxy holders deem advisable.
 
    It is important that the proxies be returned promptly and that your shares
be represented. Shareholders are urged to mark, date, sign and promptly return
the accompanying proxy card in the enclosed envelope.
 
Santa Clara, California
March 12, 1998
 
                                       20
<PAGE>
                                  YAHOO! INC.
                                       
                                1995 STOCK PLAN
                                       
                        (PROPOSED APRIL 1998 AMENDMENT)
                                       
                                       
     1.   PURPOSES OF THE PLAN.  The purposes of this 1995 Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business.  Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject
to the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.  Stock purchase rights may also be granted
under the Plan.

     2.   DEFINITIONS.  As used herein, the following definitions shall apply:

          (a)  "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.

          (b)  "AFFILIATE" shall mean an entity (including a partnership or
limited liability company) in which the Company, directly or indirectly through
any subsidiary, owns an equity interest, but which entity is not a Subsidiary.

          (c)  "APPLICABLE LAWS" has the meaning set forth in Section 4(a)
below.

          (d)  "BOARD" means the Board of Directors of the Company.

          (e)  "CODE" means the Internal Revenue Code of 1986, as amended.

          (f)  "COMMITTEE" means the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan.

          (g)  "COMMON STOCK" means the Common Stock of the Company.

          (h)  "COMPANY" means Yahoo! Inc., a California corporation.

          (i)  "CONSULTANT" means any person, including a Director, who is
engaged by the Company or any Parent, Subsidiary or Affiliate to render
services and is compensated for such services.

          (j)  "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the
absence of any interruption or termination of service as an Employee or
Consultant.  Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of:  (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expi-


<PAGE>

ration of such leave is guaranteed by contract or statute, or unless provided 
otherwise pursuant to Company policy adopted from time to time; or (iv) in 
the case of transfers between locations of the Company or between the 
Company, its Subsidiaries or their respective successors.  For purposes of 
this Plan, a change in status from an Employee to a Consultant or from a 
Consultant to an Employee will not constitute an interruption of Continuous 
Status as an Employee or Consultant.

          (k)  "DIRECTOR" means a member of the Board.

          (l)  "EMPLOYEE" means any person, including Named Executives,
Officers and Directors, employed by the Company or any Parent, Subsidiary or
Affiliate of the Company, with the status of employment determined based upon
such minimum number of hours or periods worked as shall be determined by the
Administrator in its discretion, subject to any requirements of the Code.  The
payment of a director's fee by the Company to a Director shall not be
sufficient to constitute "employment" of the Director by the Company.

          (m)  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

          (n)  "FAIR MARKET VALUE" means, as of any date, the fair market value
of Common Stock determined as follows:

              (i)   If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales
price for such stock as quoted on such system on the date of determination (if
for a given day no sales were reported, the closing bid on that day shall be
used), as such price is reported in The Wall Street Journal or such other
source as the Administrator deems reliable;

             (ii)   If the Common Stock is quoted on the Nasdaq System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the bid and asked prices for the Common Stock on the date of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or

            (iii)   In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (o)  "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.

          (p)  "NAMED EXECUTIVE" means any individual who, on the last day of
the Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four highest compensated officers of the
Company (other than the chief 


<PAGE>
executive officer).  Such officer status shall be determined pursuant to the 
executive compensation disclosure rules under the Exchange Act.

          (q)  "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.

          (r)  "OPTION" means a stock option granted pursuant to the Plan.

          (s)  "OPTIONED STOCK" means the Common Stock subject to an Option or
a Stock Purchase Right.

          (t)  "OPTIONEE" means an Employee or Consultant who receives an
Option or a Stock Purchase Right.

          (u)  "PARENT" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any successor provision.

          (v)  "PLAN" means this 1995 Stock Plan.

          (w)  "REPORTING PERSON" means an Officer, Director, or greater than
ten percent shareholder of the Company within the meaning of Rule 16a-2 under
the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under
the Exchange Act.

          (x)  "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.

          (y)  "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange
Act, as the same may be amended from time to time, or any successor provision.

          (z)  "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.

          (aa) "STOCK EXCHANGE" means any stock exchange or consolidated stock
price reporting system on which prices for the Common Stock are quoted at any
given time.

          (bb) "STOCK PURCHASE RIGHT" means the right to purchase Common Stock
pursuant to Section 11 below.

          (cc) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.

     3.   STOCK SUBJECT TO THE PLAN.  Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is 21,500,000 shares of Common Stock.  The Shares may be
authorized, but unissued, or reacquired Common Stock.  If an Option should
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased Shares that were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan.
In addition, 


<PAGE>
any Shares of Common Stock which are retained by the Company upon exercise of 
an Option or Stock Purchase Right in order to satisfy the exercise or 
purchase price for such Option or Stock Purchase Right or any withholding 
taxes due with respect to such exercise shall be treated as not issued and 
shall continue to be available under the Plan.

     4.   ADMINISTRATION OF THE PLAN.

        (a)    MULTIPLE ADMINISTRATIVE BODIES.  If permitted by Rule 16b-3 and
by the legal requirements relating to the administration of incentive stock
option plans, if any, of applicable securities laws and the Code (collectively
the "Applicable Laws"), grants under the Plan may be made by different bodies
with respect to Directors, Officers who are not Directors and Employees or
Consultants who are not Reporting Persons.

        (b)    ADMINISTRATION WITH RESPECT TO REPORTING PERSONS.  With respect
to grants of Options or Stock Purchase Rights to Employees or Consultants who
are Reporting Persons, grants under the Plan shall be made by (A) the Board, if
the Board may make grants under the Plan in compliance with Rule 16b-3, or
(B) a Committee designated by the Board to make grants under the Plan, which
committee shall be constituted in such a manner as to permit grants under the
Plan to comply with Rule 16b-3, to qualify grants of Options to Named
Executives as performance-based compensation under Section 162(m) of the Code
and otherwise so as to satisfy the Applicable Laws.

        (c)    ADMINISTRATION WITH RESPECT TO OTHER PERSONS.  With respect to
grants of Options or Stock Purchase Rights to Employees or Consultants who are
not Reporting Persons, the Plan shall be administered by (A) the Board or (B) a
Committee designated by the Board, which committee shall be constituted in such
a manner as to satisfy the Applicable Laws.

        (d)    GENERAL.  If a Committee has been appointed pursuant to
subsection (ii) or (iii) of this Section 4(a), such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board.  From
time to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and
remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable Laws, and, in the case of a
Committee appointed under subsection (ii), to the extent permitted by Rule 
16b-3, and to the extent required under Section 162(m) of the Code to qualify
grants of Options to Named Executives as performance-based compensation.

          (e)  POWERS OF THE ADMINISTRATOR.  Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:

             (i)    to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(m) of the Plan;


<PAGE>
            (ii)    to select the Consultants and Employees to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;

           (iii)    to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;

            (iv)    to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;

             (v)    to approve forms of agreement for use under the Plan;

            (vi)    to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder, including, but not
limited to, the share price and any restriction or limitation, the vesting of
any Option or the acceleration of vesting or waiver of a forfeiture
restructure, based in each case on such factors as the Administrator shall
determine, in its sole discretion;

           (vii)    to determine whether and under what circumstances an Option
may be settled in cash under Section 10(g) instead of Common Stock;

          (viii)    to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;

            (ix)    to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights; and

             (x)    to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;

            (xi)    in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options or Stock Purchase Rights to
participants who are foreign nationals or employed outside of the United States
in order to recognize differences in local law, tax policies or customs.

          (f)  EFFECT OF ADMINISTRATOR'S DECISION.  All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options or Stock Purchase Rights.

     5.   ELIGIBILITY.

          (a)  RECIPIENTS OF GRANTS.  Nonstatutory Stock Options and Stock
Purchase Rights may be granted to Employees and Consultants; provided, however,
that no person subject to the reporting requirements of  Section 16 of the
Exchange Act may receive an option or stock purchase right unless such person
is employed by or a consultant to the Company or any Parent or Subsidiary.
Incentive Stock Options may be granted only to Employees, provided, however,


<PAGE>
that Employees of an Affiliate shall be not be eligible to receive Incentive
Stock Options.  An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if he or she is otherwise eligible, be granted
additional Options or Stock Purchase Rights.

          (b)  TYPE OF OPTION.  Each Option shall be designated in the 
written option agreement as either an Incentive Stock Option or a 
Nonstatutory Stock Option.  However, notwithstanding such designations, to 
the extent that the aggregate Fair Market Value of Shares with respect to 
which Options designated as Incentive Stock Options are exercisable for the 
first time by any Optionee during any calendar year (under all plans of the 
Company or any Parent or Subsidiary) exceeds $100,000, such excess Options 
shall be treated as Nonstatutory Stock Options.  For purposes of this Section 
5(b), Incentive Stock Options shall be taken into account in the order in 
which they were granted, and the Fair Market Value of the Shares subject to 
an Incentive Stock Option shall be determined as of the date of the grant of 
such Option.

          (c)  NO EMPLOYMENT RIGHTS.  The Plan shall not confer upon any
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with such
Optionee's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.

     6.   TERM OF PLAN.  The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 20 of the Plan.  It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 16 of the Plan.

     7.   TERM OF OPTION.  The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the written option agreement.

     8.   LIMITATION ON GRANTS TO EMPLOYEES.  Subject to adjustment as provided
in this Plan, the maximum number of Shares which may be subject to Options
granted to any one Employee under this Plan for any fiscal year of the Company
shall be 1,500,000.

     9.   OPTION EXERCISE PRICE AND CONSIDERATION.

          (a)  EXERCISE PRICE.  The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be such price as is
determined by the Board and set forth in the applicable agreement, but shall be
subject to the following:

             (i)    In the case of an Incentive Stock Option that is:


<PAGE>
                    (A)  granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.

                    (B)  granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.

            (ii)    In the case of a Nonstatutory Stock Option that is:

                    (A)  granted to a person who, at the time of grant of such
Option, is a Named Executive of the Company, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant;
and

                    (B)  granted to any person other than a Named Executive,
the per Share exercise price shall be no less than 85% of the Fair Market Value
per Share on the date of grant.

          (b)  PERMISSIBLE CONSIDERATION.  The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of (1) cash, (2) check, (3) promissory note, (4) other Shares
that (x) in the case of Shares acquired upon exercise of an Option, have been
owned by the Optionee for more than six months on the date of surrender or such
other period as may be required to avoid a charge to the Company's earnings,
and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which such Option shall be
exercised, (5) authorization for the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised, (6) delivery of a
properly executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price and any applicable income or employment
taxes, (7) any combination of the foregoing methods of payment, or (9) such
other consideration and method of payment for the issuance of Shares to the
extent permitted under Applicable Laws.  In making its determination as to the
type of consideration to accept, the Administrator shall consider if acceptance
of such consideration may be reasonably expected to benefit the Company.

     10.  EXERCISE OF OPTION.

          (a)  PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER.  Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, and reflected in the written option
agreement, which may include vesting requirements and/or performance criteria
with respect to the Company and/or the Optionee.

               An Option may not be exercised for a fraction of a Share.


<PAGE>
               An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised.  Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 9(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, not withstanding the exercise of the Option.  The Company shall issue
(or cause to be issued) such stock certificate promptly upon exercise of the
Option.  No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 13 of the Plan.

               Exercise of an Option in any manner shall result in a decrease
in the number of Shares that thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

          (b)  TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP.  Subject
to Section 10(c), in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant with the Company, such Optionee may, but
only within three (3) months (or such other period of time not less than thirty
(30) days and not more than twelve (12) months as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option and not exceeding three (3)
months) after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that the Optionee was
entitled to exercise it at the date of such termination.  To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.  No
termination shall be deemed to occur and this Section 10(b) shall not apply if
(I) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.

          (c)  DISABILITY OF OPTIONEE.  Notwithstanding Section 10(b) above, in
the event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of his or her total and permanent disability (within the
meaning of Section 22(e)(3) of the Code), Optionee may, but only within twelve
(12) months from the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination.  To the extent that Optionee was not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.

          (d)  DEATH OF OPTIONEE.  In the event of the death of an Optionee
during the period of Continuous Status as an Employee or Consultant, or within
thirty (30) days following the termination of the Optionee's Continuous Status
as an Employee or Consultant, the Option 


<PAGE>
may be exercised, at any time within twelve (12) months following the date of 
death (but in no event later than the expiration date of the term of such 
Option as set forth in the Option Agreement), by the Optionee's estate or by 
a person who acquired the right to exercise the Option by bequest or 
inheritance, but only to the extent the Optionee was entitled to exercise the 
Option at the date of death or, if earlier, the date of termination of the 
Continuous Status as an Employee or Consultant.  To the extent that Optionee 
was not entitled to exercise the Option at the date of death or termination, 
as the case may be, or if Optionee does not exercise such Option to the 
extent so entitled within the time specified herein, the Option shall 
terminate.

          (e)  EXTENSION OF EXERCISE PERIOD.  Notwithstanding the limitations
set forth in Sections 10(b), (c) and (d) above, the Administrator has full
power and authority to extend the period of time for which any Option granted
under the Plan is to remain exercisable following termination of an Optionee's
Continuous Status as an Employee or Consultant from the limited period set
forth in the written option agreement to such greater period of time as the
Administrator shall deem appropriate; provided, however, that in no event shall
such Option be exercisable after the specified expiration date of the Option
term.

          (f)  RULE 16b-3.  Options granted to Reporting Persons shall comply
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.

          (g)  BUYOUT PROVISIONS.  The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.

     11.  STOCK PURCHASE RIGHTS.

          (a)  RIGHTS TO PURCHASE.  Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan.  After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid (which price shall not be less than 85% of
the Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right.  The offer shall be accepted
by execution of a Restricted Stock purchase agreement in the form determined by
the Administrator.  Shares purchased pursuant to the grant of a Stock Purchase
Right shall be referred to herein as "Restricted Stock."

          (b)  REPURCHASE OPTION.  Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability).  The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original purchase price paid
by 


<PAGE>
the purchaser and may be paid by cancellation of any indebtedness of the 
Purchaser to the Company.  The repurchase option shall lapse at such rate as 
the Administrator may determine.

          (c)  OTHER PROVISIONS.  The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.  In
addition, the provisions of Restricted Stock purchase agreements need not be
the same with respect to each purchaser.

          (d)  RIGHTS AS A SHAREHOLDER.  Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company.  No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Stock Purchase Right is exercised, except as provided
in Section 13 of the Plan.

     12.  STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS.  At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph.  When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by one or
some combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, (c) if permitted by the Administrator, in its
discretion, by surrendering to the Company Shares that (I) in the case of
Shares previously acquired from the Company, have been owned by the Optionee
for more than six months on the date of surrender, and (ii) have a fair market
value on the date of surrender equal to or less than Optionee's marginal tax
rate times the ordinary income recognized, or (d) by electing to have the
Company withhold from the Shares to be issued upon exercise of the Option, or
the Shares to be issued in connection with the Stock Purchase Right, if any,
that number of Shares having a fair market value equal to the amount required
to be withheld.  For this purpose, the fair market value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined (the "Tax Date").

               Any surrender by a Reporting Person of previously owned Shares
to satisfy tax withholding obligations arising upon exercise of this Option
must comply with the applicable provisions of Rule 16b-3.

               All elections by an Optionee to have Shares withheld to satisfy
tax withholding obligations shall be made in writing in a form acceptable to
the Administrator and shall be subject to the following restrictions:

          (a)  the election must be made on or prior to the applicable Tax
Date;

          (b)  once made, the election shall be irrevocable as to the
particular Shares of the Option or Stock Purchase Right as to which the
election is made; and


<PAGE>
          (c)  all elections shall be subject to the consent or disapproval of
the Administrator.

               In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.

     13.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, CORPORATE TRANSACTIONS.

          (a)  CHANGES IN CAPITALIZATION.  Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock that have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or that have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, the maximum number of Shares of Common Stock for which Options
may be granted to any Employee under Section 8 of the Plan and the price per
share of Common Stock covered by each such outstanding Option or Stock Purchase
Right, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination, recapitalization or reclassification
of the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration."  Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.  Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.

          (b)  CORPORATE TRANSACTIONS.  In the event of the proposed
dissolution or liquidation of the Company, the Option will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Administrator.  The Administrator may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate as
of a date fixed by the Administrator and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.  In
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Administrator determines, in the exercise of its sole discretion and
in lieu of such assumption or substitution, that the Optionee shall have the
right to exercise the Option as to some or all of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable.  If the
Administrator makes an Option exercisable in lieu of assumption or substitution
in the event of a 


<PAGE>
merger or sale of assets, the Administrator shall notify the Optionee that 
the Option shall be exercisable for a period of thirty (30) days from the 
date of such notice, and the Option will terminate upon the expiration of 
such period.

     14.  NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS.  Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution; provided, however, that the Administrator may in its
discretion grant transferable Nonstatutory Stock Options pursuant to option
agreements specifying (i) the manner in which such Nonstatutory Stock Options
are transferable and (ii) that any such transfer shall be subject to the
Applicable Laws.  Options and Stock Purchase Rights may be exercised or
purchased during the lifetime of the Optionee or Stock Purchase Rights Holder
only by the Optionee, Stock Purchase Rights Holder or a transferee permitted by
this Section 14.

     15.  TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS.  The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or
Stock Purchase Right, or such other date as is determined by the Board.  Notice
of the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.

     16.  AMENDMENT AND TERMINATION OF THE PLAN.

          (a)  AMENDMENT AND TERMINATION.   The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval of
the shareholders of the Company in the manner described in Section 20 of the
Plan:

               (i)  any increase in the number of Shares subject to the Plan,
          other than an adjustment under Section 14 of the Plan;
          
               (ii)  any change in the designation of the class of persons
          eligible to be granted Options; or
          
               (iii)  any change in the limitation on grants to employees as
          described in Section 8 of the Plan or other changes which would
          require shareholder approval to qualify options granted hereunder as
          performance-based compensation under Section 162(m) of the Code.
          

          (b)  SHAREHOLDER APPROVAL.  If any amendment requiring shareholder
approval under Section 16(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section 12
of the Exchange Act, such shareholder approval shall be solicited as described
in Section 20 of the Plan.


<PAGE>
          (c)  EFFECT OF AMENDMENT OR TERMINATION.  Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.

     17.  CONDITIONS UPON ISSUANCE OF SHARES.  Shares shall not be issued 
pursuant to the exercise of an Option or Stock Purchase Right unless the 
exercise of such Option or Stock Purchase Right and the issuance and delivery 
of such Shares pursuant thereto shall comply with all relevant provisions of 
law, including, without limitation, the Securities Act of 1933, as amended, 
the Exchange Act, the rules and regulations promulgated thereunder, and the 
requirements of any Stock Exchange.  As a condition to the exercise of an 
Option, the Company may require the person exercising such Option to 
represent and warrant at the time of any such exercise that the Shares are 
being purchased only for investment and without any present intention to sell 
or distribute such Shares if, in the opinion of counsel for the Company, such 
a representation is required by law.

     18.  RESERVATION OF SHARES.  The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.  The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

     19.  AGREEMENTS.  Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Administrator shall approve from time to
time.

     20.  SHAREHOLDER APPROVAL.

          (a)  Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted.  Such shareholder approval shall be obtained in the manner
and to the degree required under applicable federal and state law and the rules
of any stock exchange upon which the Shares are listed.

          (b)  In the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required approval of
the shareholders of the Company obtained after such registration shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act
and the rules and regulations promulgated thereunder.

          (c)  If any required approval by the shareholders of the Plan itself
or of any amendment thereto is solicited at any time otherwise than in the
manner described in Section 20(b) hereof, then the Company shall, at or prior
to the first annual meeting of shareholders held subsequent to the later of (1)
the first registration of any class of equity securities of the Com-


<PAGE>
pany under Section 12 of the Exchange Act or (2) the granting of an Option 
hereunder to an officer or director after such registration, do the following:

               (i)   furnish in writing to the holders entitled to vote for the
Plan substantially the same information that would be required (if proxies to
be voted with respect to approval or disapproval of the Plan or amendment were
then being solicited) by the rules and regulations in effect under Section
14(a) of the Exchange Act at the time such information is furnished; and

               (ii)   file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is
first sent or given to shareholders.

     21.  INFORMATION TO OPTIONEES.  The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company.

<PAGE>
                                 DETACH HERE


                                    PROXY

                                 YAHOO! INC.

                    1998 ANNUAL MEETING OF SHAREHOLDERS

  The undersigned shareholder of Yahoo! Inc. (the "Company"), a California 
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of 
Shareholders and Proxy Statement, each dated March 12, 1998, and hereby 
appoints John E. Place, proxy and attorney-in-fact, with full power of 
substitution, on behalf and in the name of the undersigned to represent the 
undersigned at the 1998 Annual Meeting of Shareholders of the Company to be 
held on April 17, 1998, at 10:00 a.m., local time, at the Company's corporate 
headquarters located at 3420 Central Expressway, Santa Clara, California 
95051 and at any postponement or adjournment thereof, and to vote all shares 
of Common Stock which the undersigned would be entitled to cast if personally 
present, on the matters set forth on the reverse side.

  ANY SHAREHOLDER COMPLETING THIS PROXY THAT FAILS TO MARK ONE OF THE BOXES 
FOR THE PROPOSAL WILL BE DEEMED TO HAVE GIVEN THE PROXY HOLDERS COMPLETE 
DISCRETION IN VOTING HIS, HER, OR ITS SHARES ON SUCH PROPOSAL AT THE MEETING. 
IF A BOX IS CHECKED, YOUR SHARES SHALL BE VOTED IN ACCORDANCE WITH YOUR 
INSTRUCTIONS.

              CONTINUED AND TO BE SIGNED ON REVERSE SIDE        / SEE REVERSE /
                                                                /    SIDE     /

<PAGE>

                                 DETACH HERE

/ X / PLEASE MARK
      VOTES AS IN
      THIS EXAMPLE.

THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE DIRECTORS 
LISTED BELOW AND A VOTE FOR THE OTHER PROPOSALS.

1. To elect the following directors to serve until the 1999 Annual Meeting
   of Shareholders or until their successors are elected and qualified:

   Nominees:   Timothy Koogle, Jerry Yang, Eric Hippeau,
               Arthur H. Kern, Michael Moritz

                  FOR         WITHHOLD
                  / /           / /

/ / __________________________________________________          MARK HERE
    For all nominees except as noted on the line above         FOR ADDRESS  / /
                                                                CHANGE AND
                                                                NOTE BELOW



                                              FOR    AGAINST   ABSTAIN
2. To approve an amendment to the 1995         / /      / /       / /
   Stock Plan to increase the number of
   shares of Common Stock reserved for
   issuance thereunder by 2,000,000 shares.

                                              FOR    AGAINST   ABSTAIN
3. To ratify the appointment of Price          / /      / /       / /
   Waterhouse LLP as the independent
   accountants for the Company for the year
   ending December 31, 1998.

                                              FOR    AGAINST   ABSTAIN
4. To transact such other business as may      / /      / /       / /
   properly come before the Annual Meeting
   and any adjournment or postponement
   thereof.

Please sign exactly as your name(s) appear(s) on your stock certificate. 
Joint owners should each sign personally. If signed by an attorney-in-fact, 
the power of attorney should be attached. A corporation is requested to sign 
its name by its President or other authorized officer, with the office held 
indicated. Executors, administrators, trustees, etc. should indicate their 
status when signing.

Signature: ________________________________________ Date:_________________


Signature: ________________________________________ Date:_________________


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