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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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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid with preliminary material:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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*Set forth the amount on which the filing fee is calculated and how it was
determined.
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[YAHOO LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1999
------------------------
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, May 14, 1999, at 10:00 a.m., local time, for the following purposes:
1. To amend the Company's Articles of Incorporation to delete Article
VI which provides for a classified Board of Directors;
2. To elect six directors of the Company to serve until the 2000 Annual
Meeting of Shareholders or until their respective successors are elected and
qualified;
3. To change the state of incorporation of the Company from California
to Delaware;
4. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent accountants for the Company for the year ending December 31,
1999;
5. To amend the Company's 1995 Stock Plan to increase the shares
available for issuance under the plan by an aggregate of 40,000,000 shares,
to 126,000,000 shares;
6. To amend the Company's 1996 Directors' Stock Option Plan to revise
the four-year vesting schedule with respect to the annual option grants
under the plan, commencing with the options granted on the date of the
Company's 2000 Annual Meeting of Shareholders, such that 25% of the granted
options shall vest on the one-year anniversary of the date of grant, with
the remaining options to vest in equal monthly installments over the
36-month period thereafter; and
7. 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 March 17, 1999 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,
[LOGO]
John Place
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
Santa Clara, California
April 9, 1999
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[YAHOO LOGO]
3420 CENTRAL EXPRESSWAY
SANTA CLARA, CA 95051
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PROXY STATEMENT
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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, May 14, 1999, 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 on Form 10-K for the year ended December 31, 1998 are being mailed to
shareholders on or about April 9, 1999.
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 March 17, 1999 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 202,950,716 shares of
common stock outstanding held of record by approximately 3,066 shareholders.
Unless otherwise indicated, all information in this Proxy Statement has been
adjusted to reflect the Company's two-for-one stock splits which took effect on
August 3, 1998 and February 8, 1999.
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 amending the Company's
Articles of Incorporation, FOR the election of each of the six nominees named
below, FOR changing the state of incorporation of the Company from California to
Delaware, FOR ratification of the appointment of the designated independent
accountants, FOR amendment of the Company's 1995 Stock Plan (the "Stock
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Plan") to increase the shares available for issuance thereunder, FOR amendment
of the Company's 1996 Directors' Stock Option Plan (the "Directors' Plan") as
described herein, 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 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
AMENDMENT OF ARTICLES OF INCORPORATION
The Board believes that the best interests of the Company and its
shareholders will be served by deleting Article VI of the Company's Amended and
Restated Articles of Incorporation (the "Articles of Incorporation") which
provides for a classified Board of Directors.
The Articles of Incorporation currently require that the Company establish a
classified Board of Directors at such time as the Board consists of six members.
As the Company's Board of Directors was recently expanded to include a sixth
member, it has become necessary to either institute a classified board or amend
the Articles of Incorporation to eliminate the classification requirement. A
classified board is one on which the directors are subject to re-election on a
rotating basis, rather than every year. The Board believes that it will be in
the best interests of the Company and its shareholders to continue to have a
non-classified board whereby all directors are subject to re-election every
year. As a result, the Board recommends that the Articles of Incorporation be
amended, in the form attached hereto as APPENDIX A, to delete the classified
board requirement. In the event that neither this Proposal No. 1 nor Proposal
No. 3 ("Reincorporation in Delaware") is approved by the shareholders at the
Annual Meeting, the Company will, following the Annual Meeting, establish a
classified Board (which will consist of the six directors elected at the Annual
Meeting).
REQUIRED VOTE
Approval of the foregoing amendment to the Articles of Incorporation will
require the affirmative vote of holders of a majority of the outstanding common
stock of the Company.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR AN AMENDMENT TO THE COMPANY'S AMENDED AND
RESTATED ARTICLES OF INCORPORATION TO ELIMINATE THE CLASSIFIED BOARD
REQUIREMENT.
PROPOSAL NO. 2
ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, the shareholders will elect six directors to serve
until the 2000 Annual Meeting of Shareholders or until their respective
successors are elected and qualified. In the event any
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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 six 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 six nominees named below.
The names of the nominees, their ages as of March 1, 1999, and certain other
information about them are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Timothy Koogle....................................... 47 Chairman and Chief Executive Officer
Jeffrey Mallett...................................... 34 President, Chief Operating Officer and Director
Jerry Yang........................................... 30 Chief Yahoo and Director
Eric Hippeau(1)...................................... 47 Director
Arthur H. Kern(1)(2)................................. 52 Director
Michael Moritz(1)(2)................................. 44 Director
</TABLE>
- ------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
MR. KOOGLE was appointed as the Company's Chairman in January 1999. Mr.
Koogle has served as the Company's Chief Executive Officer and as a member of
the Board since joining the Company in August 1995. Prior to January 1999, Mr.
Koogle also served as the Company's President. 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 positions at Motorola, Inc. Mr. Koogle also serves as a director of
E-LOAN, 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. MALLETT has served as a member of the Board and as President of the
Company since January 1999. Mr. Mallett has served as Chief Operating Officer
since January 1998. Prior to that, he served as the Company's Senior Vice
President, Business Operations since October 1995. Prior to joining the Company,
Mr. Mallett was Vice President and General Manager of the WordPerfect consumer
division of Novell, Inc., a network operating system software company, from 1993
to 1995, and a member of Novell's Corporate Executive Marketing Group. Prior to
that, Mr. Mallett was a member of the founding team of Reference Software
International where he held various positions from 1988 to 1992, including Vice
President, Sales and Marketing. From 1985 to 1987, Mr. Mallett held the position
of Director, Sales and Marketing at IPT Corp., a privately held
telecommunications company. Mr. Mallett holds a degree in Business
Administration from Santa Rosa College.
MR. YANG, a founder of the Company, has served as a member of the Board 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
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Corporation and of Ziff-Davis Inc. ("Ziff-Davis"). Mr. Yang holds B.S. and M.S.
degrees in electrical engineering from Stanford University.
MR. HIPPEAU has served as a member of the Board since January 1996. Mr.
Hippeau has served as Chairman and Chief Executive Officer of Ziff-Davis since
1993. Ziff-Davis is majority owned by SOFTBANK America Inc. ("SOFTBANK"), a
principal shareholder of the Company. Mr. Hippeau joined Ziff-Davis in 1989 as
publisher of PC Magazine. He was promoted to Executive Vice President of
Ziff-Davis in 1990, and to President and Chief Operating Officer in February
1991. Mr. Hippeau also serves as a director of Ziff-Davis, Frontier Corporation
("Frontier") and GeoCities. Mr. Hippeau attended the Sorbonne in Paris.
MR. KERN has served as a member of the Board since January 1996. Mr. Kern is
a founder, Chairman and Chief Executive Officer of American Media, which holds
interests in several media and advertising companies. 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 Bronner Slossberg Humphrey. Mr. Kern is
a graduate of Yale University.
MR. MORITZ has served as a member of the Board since April 1995. He has been
a general partner of Sequoia Capital, a venture capital firm, since 1988. Mr.
Moritz also serves as a director of Flextronics International and eToys Inc., as
well as several private companies. Between 1979 and 1984, Mr. Moritz was
employed in a variety of positions by Time, Inc. Mr. Moritz holds 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 1998, the Board met nine times and took action by unanimous
written consent on six 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 1998. 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 held one meeting and took action by unanimous written consent on eight
occasions during 1998. Its functions are to establish and administer the
Company's policies regarding compensation. The Compensation Committee also
administers the 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.
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 Directors'
Plan provides that each person who becomes a non-employee director of the
Company will be granted a nonstatutory stock option to purchase 50,000 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 30,000 shares of
common stock if, on such date, he or she shall have served on the Board for at
least six months (which amount shall be
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reduced to 20,000 shares commencing at the date of the Company's 2000 Annual
Meeting of Shareholders). 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 30,000 shares of the
Company's common stock under the Directors' Plan if they are reelected to the
Board of Directors at the Annual Meeting. The exercise price of all stock
options granted under the Directors' Plan is equal to the closing sale price of
a share of the Company's common stock on the Nasdaq Stock Market 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. 3
REINCORPORATION IN DELAWARE
INTRODUCTION
For the reasons set forth below, the Board believes that the best interests
of the Company and its shareholders will be served by changing the state of
incorporation of the Company from California to Delaware (the "Reincorporation
Proposal"). Shareholders are urged to read carefully the following sections of
this Proxy Statement, including the related exhibits, before voting on the
Reincorporation Proposal. Throughout this Proxy Statement, the term "Yahoo!
California" refers to the existing California corporation and the term "Yahoo!
Delaware" refers to the wholly-owned Delaware subsidiary of Yahoo! California
and the proposed successor to Yahoo! California.
The Reincorporation Proposal will be effected by merging Yahoo! California
into Yahoo! Delaware (the "Merger"). Upon completion of the Merger, Yahoo!
California will cease to exist and Yahoo! Delaware will continue the business of
the Company under the name Yahoo! Inc. Pursuant to an Agreement and Plan of
Merger, a form of which is attached hereto as APPENDIX B (the "Merger
Agreement"), upon the effective date of the Merger, (i) each outstanding share
of Yahoo! California common stock, $0.00017 par value, will automatically be
converted into one share of Yahoo! Delaware common stock, $0.001 par value; (ii)
each outstanding option to purchase Yahoo! California common stock, including
options granted under the Stock Plan, the Directors' Plan and under the Four11
Corporation, Viaweb Inc. and Yoyodyne Entertainment, Inc. stock option plans
assumed by the Company in connection with the Company's acquisition of such
corporations, will be automatically assumed by Yahoo! Delaware and will
represent an option to acquire shares of Yahoo! Delaware common stock on the
basis of one share of Yahoo! Delaware common stock for each share of Yahoo!
California common stock and at an exercise price equal to the exercise price of
the Yahoo! California option; and (iii) each outstanding warrant, if any, to
purchase Yahoo! California capital stock shall become a warrant to purchase
Yahoo! Delaware capital stock, on the basis of one share of Yahoo! Delaware
capital stock for each share of Yahoo! California capital stock at an exercise
price per share equal to the exercise price per share in effect prior to the
Merger. Each certificate representing issued and outstanding shares of Yahoo!
California common stock will represent the number of shares of common stock of
Yahoo! Delaware into which such shares are converted by virtue of the Merger.
IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF YAHOO! CALIFORNIA TO EXCHANGE
THEIR EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES OF YAHOO! DELAWARE.
HOWEVER, SHAREHOLDERS MAY EXCHANGE THEIR CERTIFICATE IF THEY SO CHOOSE. The
common stock of Yahoo! California is listed for trading on the Nasdaq National
Market, and after the Merger, Yahoo! Delaware's common stock will continue to be
traded on the Nasdaq National Market without interruption, under the same symbol
YHOO used by Yahoo! California prior to the Merger. As of the date the Board
resolved to undertake the Reincorporation Proposal, the closing price of Yahoo!
California's common stock on the Nasdaq National Market was $152.875 per share.
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Under California law, the affirmative vote of holders of a majority of the
outstanding shares of the Company's common Stock is required for approval of the
terms of the Reincorporation Proposal. See "Vote Required for the
Reincorporation Proposal." The Reincorporation Proposal has been approved by
Yahoo! California's Board of Directors, which unanimously recommends a vote in
favor of such proposal. If approved by the shareholders, it is anticipated that
the Reincorporation Proposal will become effective as soon as practicable (the
"Effective Date"). However, pursuant to the Merger Agreement, the Merger may be
abandoned or the Merger Agreement may be amended (except that the principal
terms may not be amended without shareholder approval) either before or after
shareholder approval has been obtained and prior to the Effective Date if, in
the opinion of the Board of Directors of either Yahoo! California or Yahoo!
Delaware, circumstances arise which make it inadvisable to proceed.
Shareholders of Yahoo! California will not have dissenters' appraisal rights
with respect to the Merger. See "Significant Differences between the Corporation
Laws of California and Delaware-- Appraisal Rights."
The discussion contained herein is qualified in its entirety by reference to
the Merger Agreement, the Certificate of Incorporation of Yahoo! Delaware (the
"Certificate of Incorporation"), the Bylaws of Yahoo! Delaware (the "Bylaws"),
and the form of Indemnification Agreement of Yahoo! Delaware, copies of which
are attached hereto as APPENDICES B, C, D and E, respectively.
APPROVAL BY SHAREHOLDERS OF THE REINCORPORATION PROPOSAL WILL CONSTITUTE
APPROVAL OF THE MERGER AGREEMENT, THE CERTIFICATE OF INCORPORATION AND THE
BYLAWS OF YAHOO! DELAWARE. APPROVAL BY SHAREHOLDERS OF THE REINCORPORATION
PROPOSAL WILL ALSO CONSTITUTE APPROVAL OF AN INDEMNIFICATION AGREEMENT BETWEEN
YAHOO! DELAWARE AND EACH OF ITS OFFICERS AND DIRECTORS, IN SUBSTANTIALLY THE
FORM ATTACHED HERETO AS APPENDIX E, AND THE ASSUMPTION BY YAHOO! DELAWARE OF
YAHOO! CALIFORNIA'S EMPLOYEE BENEFIT PLANS AND ITS STOCK OPTION AND STOCK
PURCHASE PLANS.
PRINCIPAL REASONS FOR REINCORPORATION
As the Company plans for the future, the Board and management believe that
it is essential to be able to draw upon well established principles of corporate
governance in making legal and business decisions. The prominence and
predictability of Delaware corporate law provide a reliable foundation on which
the Company's governance decisions can be based and the Company believes that
shareholders will benefit from the responsiveness of Delaware corporate law to
their needs and to those of the corporation they own.
PROMINENCE, PREDICTABILITY AND FLEXIBILITY OF DELAWARE LAW. For many years,
the state of Delaware has followed a policy of encouraging incorporation in that
state and, in furtherance of that policy, has long been the leader in adopting,
construing and implementing comprehensive, flexible corporate laws responsive to
the legal and business needs of corporations. The General Corporation Law of the
State of Delaware is widely regarded as the most extensive and well-defined body
of corporate law in the United States. Many corporations have initially chosen
Delaware for their state of incorporation or have subsequently changed their
corporate domicile to Delaware in a manner similar to that proposed by Yahoo!
California. Because of Delaware's prominence as the state of incorporation for
many major corporations, both the legislature and courts in Delaware have
demonstrated an ability and a willingness to act quickly and effectively to meet
changing business needs. Moreover, the Delaware courts have developed
considerable expertise in dealing with corporate issues and a substantial body
of case law has been developed construing Delaware law and establishing public
policies with respect to corporate legal affairs. Furthermore, there is
substantial judicial precedent in the Delaware courts as to the legal principles
applicable to the conduct of the Board of Directors under the business judgment
rule. The Company believes that its shareholders will benefit from the
well-established and flexible principles of corporate governance that Delaware
law affords.
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INCREASED ABILITY TO ATTRACT AND RETAIN QUALIFIED DIRECTORS. Both California
and Delaware permit a corporation to include a provision in its charter which
reduces or limits the monetary liability of directors for breaches of fiduciary
duties in certain circumstances. The increasing frequency of claims and
litigation directed against directors and officers has greatly expanded the
risks facing directors and officers of corporations in exercising their
respective duties. The amount of time and money required to respond to such
claims and to defend such litigation can be substantial. It is the Company's
desire to reduce these risks to its directors and officers and to limit
situations in which monetary damages can be recovered against directors so that
the Company may continue to attract and retain qualified directors who otherwise
might be unwilling to serve because of the risks involved. The Company believes
that, in general, Delaware law provides greater protection to directors than
California law, and that Delaware case law regarding a corporation's ability to
limit director liability is more developed and provides more guidance than
California law.
ANTITAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a number of
measures through amendment of the corporate charter or bylaws or otherwise,
which measures are designed to reduce a corporation's vulnerability to
unsolicited takeover attempts. The Reincorporation Proposal is not being
proposed in order to prevent any present attempt known to the Board to acquire
control of the Company or to obtain representation on the Board.
The Board has considered or may consider in the future certain defensive
strategies designed to enhance the Board's ability to negotiate with an
unsolicited bidder. These strategies include, but are not limited to, the
adoption of a shareholder rights plan, severance agreements for its management
and key employees which become effective upon the occurrence of a change in
control of the Company, and the designation and issuance of preferred stock, the
rights and preferences of which are determined by the Board. Some of these
measures may be implemented under California law. There is nonetheless
substantial judicial precedent in the Delaware courts as to the legal principles
applicable to such defensive measures and as to the conduct of the Board of
Directors under the business judgment rule with respect to unsolicited takeover
attempts.
Certain effects of the Reincorporation Proposal may be considered to have
antitakeover implications. Section 203 of the Delaware General Corporation Law,
from which Yahoo! Delaware does NOT intend to opt out, restricts certain
"business combinations" with "interested stockholders" for three years following
the date that a person becomes an interested stockholder, unless the Board of
Directors approves the business combination. See "Significant Differences
Between the Corporation Laws of California and Delaware--Shareholder Approval of
Certain Business Combinations." Furthermore, certain changes to the relative
rights of shareholders and management which have antitakeover implications may
be implemented under Delaware law. These include the elimination of cumulative
voting, the establishment of a classified Board of Directors, and the
elimination of the right of shareholders controlling at least ten percent (10%)
of the voting shares to call a special meeting of shareholders. The elimination
of cumulative voting and the establishment of a classified Board of Directors
can also be undertaken under California law in certain circumstances. For a
detailed discussion of the changes which will be implemented as part of the
Reincorporation Proposal, see "Significant Differences between the Charters and
Bylaws of Yahoo! California and Yahoo! Delaware." For a discussion of
differences between the laws of California and Delaware that may affect the
shareholders, see "Significant Differences Between the Corporation Laws of
California and Delaware."
The Board believes that unsolicited takeover attempts may be unfair or
disadvantageous to the Company and its shareholders because:
(a) a non-negotiated takeover bid may be timed to take advantage of
temporarily depressed stock prices;
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(b) a non-negotiated takeover bid may be designed to foreclose or
minimize the possibility of more favorable competing bids; and
(c) a non-negotiated takeover bid may involve the acquisition of only a
controlling interest in the corporation's stock, without affording all
shareholders the opportunity to receive the same economic benefits.
By contrast, in a transaction in which an acquiror must negotiate with an
independent Board of Directors, the Board of Directors can and should take
account of the underlying and long-term values of assets, the possibilities for
alternative transactions on more favorable terms, possible advantages from a
tax-free reorganization, anticipated favorable developments in the corporation's
business not yet reflected in the stock price and equality of treatment of all
shareholders.
Despite the belief of the Board as to the benefits to shareholders of the
Reincorporation Proposal, it may be disadvantageous to the extent that it has
the effect of discouraging a future takeover attempt which is not approved by
the Board of Directors, but which a majority of the shareholders may deem to be
in their best interests or in which shareholders may receive a substantial
premium for their shares over the then-current market value or over their cost
basis in such shares. As a result of such effects of the Reincorporation
Proposal, shareholders who might wish to participate in a tender offer may not
have an opportunity to do so. In addition, to the extent that such provisions
enable the Board of Directors to resist a takeover or a change in control of the
Company, they could make it more difficult to change the existing Board of
Directors and management.
NO CHANGE WILL BE MADE IN THE NAME, BUSINESS OR PHYSICAL LOCATION OF THE COMPANY
The Reincorporation Proposal will effect only a change in the legal domicile
of Yahoo! California and other changes of a legal nature, certain of which are
described in this Proxy Statement. The reincorporation will NOT result in any
significant change in the name, business, management, fiscal year, location of
the principal executive offices, assets or liabilities of Yahoo! California. The
directors of Yahoo! California prior to the Merger will continue as directors of
Yahoo! Delaware. All employee benefit plans of Yahoo! California will be
continued by Yahoo! Delaware. Shareholders should note that approval of the
Reincorporation Proposal will also constitute approval of the assumption by
Yahoo! Delaware of Yahoo! California's stock option and stock purchase plans and
the options, warrants and other rights to purchase Yahoo! California capital
stock. Yahoo! California's other employee benefit arrangements will also be
continued by Yahoo! Delaware upon the terms and subject to the conditions in
effect prior to the Merger.
Prior to the Effective Date of the Merger, the Company will seek to obtain
any requisite consents to the Merger from parties with whom it may have material
contractual arrangements. Assuming such consents are obtained, Yahoo!
California's rights and obligations under such material contractual arrangements
will continue and be assumed by Yahoo! Delaware.
POSSIBLE DISADVANTAGES
Despite the unanimous belief of the Board that the Reincorporation Proposal
is in the best interests of Yahoo! California and its shareholders, it should be
noted that Delaware law has been criticized by some commentators on the grounds
that it does not afford minority shareholders the same substantive rights and
protections as are available in a number of other states. For a comparison of
shareholders' rights and the powers of management under Delaware and California
law, see "Significant Differences Between the Corporation Laws of California and
Delaware." In addition, the Reincorporation Proposal includes certain permitted
changes to the Articles of Incorporation or Bylaws of the Company which alter
the relative rights of shareholders and management and which reduce shareholder
participation in important corporate decisions. See "The Charters and Bylaws of
Yahoo! California and Yahoo! Delaware."
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THE CHARTERS AND BYLAWS OF YAHOO! CALIFORNIA AND YAHOO! DELAWARE
The provisions of the Yahoo! Delaware Certificate of Incorporation and
Bylaws are similar to those of the Yahoo! California Articles of Incorporation
and Bylaws in many respects. However, the Reincorporation Proposal includes the
implementation of certain provisions in the Yahoo! Delaware Certificate of
Incorporation and Bylaws which alter the rights of shareholders and the powers
of management and which reduce shareholder participation in important corporate
decisions. These provisions have antitakeover implications and are described in
detail below.
Approval by shareholders of the Reincorporation Proposal will constitute an
approval of the inclusion in the Yahoo! Delaware Certificate of Incorporation
and Bylaws of each of the provisions described below. In addition, certain other
changes altering the rights of shareholders and powers of management could be
implemented in the future by amendment of the Certificate of Incorporation
following shareholder approval and certain such changes could be implemented by
amendment of the Bylaws of Yahoo! Delaware without shareholder approval. For a
discussion of such changes, see "Significant Differences Between the Corporation
Laws of California and Delaware." This discussion of the Certificate of
Incorporation and Bylaws of Yahoo! Delaware is qualified by reference to
APPENDICES C and D hereto, respectively.
(1) CHANGE IN NUMBER OF DIRECTORS
Under Delaware law, the authorized number of directors may be changed by
resolution of the Board of Directors. Under California law, the directors can
change the authorized number of directors if the shareholders have adopted a
provision in the articles of incorporation or bylaws permitting the directors to
fix their number, but only within the bounds of stated minimum and maximum
numbers which have been approved by the shareholders. The Bylaws of Yahoo!
California provide that there shall be no fewer than four nor more than seven
directors, with the exact number currently fixed at six. The Bylaws of Yahoo!
Delaware provide that the number of directors shall be six, until amended by a
resolution of the Board of Directors or by the shareholders. Pursuant to the
Yahoo! California bylaws, the Board may change the number of directors without
shareholder approval so long as the size of the Board so revised is not less
than four nor more than seven. Following the Merger, the Board of Directors of
Yahoo! Delaware could amend the Bylaws to change the size of the Board of
Directors without shareholder approval without restriction to a specified range.
If the Reincorporation Proposal is approved, the elected directors of Yahoo!
California will continue to serve as directors of Yahoo! Delaware.
(2) INDEMNIFICATION AND LIMITATION OF LIABILITY
Under Delaware law, Delaware corporations are permitted to adopt a provision
in their certificates of incorporation reducing or eliminating the liability of
a director to the corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director, provided that such liability does not
arise from certain proscribed conduct (including intentional misconduct and
breach of the duty of loyalty). California law similarly permits a corporation
to adopt a provision reducing or eliminating director liability. Yahoo!
California has adopted such a provision in its Articles of Incorporation to
eliminate director liability to the fullest extent permissible under California
law and, if the Reincorporation Proposal is approved, the Yahoo! Delaware
Certificate of Incorporation will include a provision which eliminates director
liability to the fullest extent permissible under Delaware law. For a discussion
of the differences between California and Delaware law with respect to director
liability, see "Significant Differences between the Corporation Laws of
California and Delaware--Indemnification and Limitation of Liability."
The Delaware General Assembly adopted an amendment to the Delaware General
Corporation Law to add Section 102(b)(7), upon the recommendation of the
Delaware Bar Association, in response to changes in the market for directors'
liability insurance, including significant increases in the number and magnitude
of lawsuits against directors and the difficulty of obtaining such insurance on
traditional terms,
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or on any terms at all. The Delaware General Assembly considered this
development a threat to the quality and stability of the governance of Delaware
corporations because of the unwillingness of directors to serve without the
protections traditionally available to them against claims arising out of their
services and because of the deterrent effect on entrepreneurial decision-making
by directors who do serve. Article XI of the Certificate of Incorporation of
Yahoo! Delaware contains the limitation on liability permitted by Section
102(b)(7). The entire Certificate of Incorporation is set forth as APPENDIX C to
this Proxy Statement.
Article XI of the Certificate of Incorporation of Yahoo! Delaware eliminates
director liability to Yahoo! Delaware or its shareholders for monetary damages
arising out of a director's breach of his or her duty of care. The duty of care
refers to the fiduciary duty of a director to be sufficiently diligent and
careful in considering a transaction or taking or refusing to take some
corporate action. A breach of the duty of care by a director may give rise to
liability for monetary damages caused to Yahoo! Delaware or its shareholders.
Liability for a breach of the duty of care arises when directors have failed to
exercise sufficient care in reaching decisions or otherwise attending to their
responsibilities as directors. Article XI of the Certificate of Incorporation
does not eliminate the duty of care; it only eliminates monetary damage awards
occasioned by a breach of that duty. Thus, if the Reincorporation Proposal is
approved and Yahoo! California is reincorporated in Delaware, a breach of the
duty of care would remain a valid basis for a suit seeking to stop a proposed
transaction from occurring. After the transaction has occurred, however, the
shareholders would no longer have a claim against directors for monetary damages
based on the breach of the duty of care, even if that breach involved gross
negligence on the part of the directors.
The Certificate of Incorporation does not limit or eliminate liability based
on the following types of claims:
(a) Liability based on a breach of the director's duty of loyalty to Yahoo!
Delaware or its shareholders;
(b) Liability based on the payment of an improper dividend or an improper
repurchase of Yahoo! Delaware's stock under Section 174 of the Delaware General
Corporation Law;
(c) Liability for actions or failures to act which the director knew were in
violation of law;
(d) Liability arising out of intentional misconduct by the director;
(e) Liability arising out of any transaction pursuant to which the director
received some improper personal benefit; and
(f) Liability for actions taken or failures to act by the director not in
good faith.
Article XI of the Certificate of Incorporation further provides that any
repeal or modification of such Article XI by Yahoo! Delaware shareholders will
not adversely affect any right or protection of a director existing at the time
of such repeal or modification.
The Company is not aware of any pending or threatened claim that would be
covered by such Article XI, nor has there been any litigation in the recent past
that would have been affected had such Article XI been in place at the time of
the conduct referred to in such litigation.
The Board believes that Article XI of the Certificate of Incorporation is in
the best interests of Yahoo! Delaware and its shareholders in that it maintains
Yahoo! Delaware's ability to attract and retain qualified individuals to serve
as directors of Yahoo! Delaware by assuring directors (and potential directors)
that their good faith decisions will not be second-guessed by a court evaluating
decisions with the benefit of hindsight. Article XI, however, limits the
remedies available to shareholders dissatisfied with a Board decision which is
protected by Article XI; directors will not be liable to the Company or its
shareholders for business decisions made in good faith, including decisions made
in connection with attempts to acquire Yahoo! Delaware, even if such decisions
involved gross negligence on the part of the directors. In any such
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case, the shareholders' only remedy would be to sue to stop the completion of
the Board's action. In many situations, this remedy may not be effective due to
completion of the Board's action.
The Board believes that the diligence exercised by directors stems primarily
from their desire to act in the best interests of Yahoo! Delaware, and not from
a fear of monetary damage awards. Consequently, the Board believes that the
level of scrutiny and care exercised by directors will not be lessened by the
adoption of Article XI of the Certificate of Incorporation.
(3) NOTICE PROVISIONS
Yahoo! Delaware has included in its Bylaws provisions requiring advance
notice of new business and nominations for directors to be given in the manner
and to the extent provided in the Bylaws. These provisions could have the effect
of delaying, deferring or preventing a change in control of Yahoo! Delaware by
requiring that shareholders of Yahoo! Delaware give notice of any proposals
relating to such a change of control (including nominations to the Board of
Directors) sufficiently in advance of a meeting of shareholders of Yahoo!
Delaware to satisfy such notice provisions in the Bylaws.
(4) ELIMINATION OF SHAREHOLDER RIGHT TO CALL SPECIAL MEETINGS
Unlike the Bylaws of Yahoo! California, which provide that special meetings
of shareholders may be called by the Board of Directors, the Chairman of the
Board, the President and the holders of shares entitled to cast not less than
10% of the votes at such meeting, the Bylaws of Yahoo! Delaware provide that
special meetings of shareholders may be called only by the Board of Directors,
the Chairman of the Board or the President. Shareholders are not permitted to
call a special meeting or to require that the Board of Directors call a special
meeting of shareholders. Moreover, the business permitted to be conducted at any
special meeting of shareholders is limited to the business brought before the
meeting by or at the direction of the Board of Directors.
REASONS FOR ELIMINATION OF SHAREHOLDER RIGHT TO CALL SPECIAL MEETINGS. The
provisions regarding the elimination of the right of shareholders to call a
special meeting would mean that a shareholder could not force shareholder
consideration of a proposal over the opposition of the Board of Directors by
calling a special meeting of shareholders prior to such time as the Board
believed such consideration to be appropriate. By eliminating the use of the
written consent procedure and the ability of shareholders to call a special
meeting, the Company intends to encourage persons seeking to acquire control of
the Company to initiate such an acquisition through arm's-length negotiations
with the Company's management and Board of Directors.
POSSIBLE DISADVANTAGES OF ELIMINATION OF SHAREHOLDER RIGHT TO CALL SPECIAL
MEETINGS. The provisions eliminating shareholders' ability to call special
meetings may have the effect of delaying consideration of a shareholder proposal
until the next annual meeting unless a special meeting is called by the Board of
Directors. Because elimination of the procedures for shareholders to call
special meetings could make more difficult an attempt to obtain control of the
Company, such action could have the effect of discouraging a third party from
making a tender offer or otherwise attempting to obtain control of the Company.
Because tender offers for control usually involve a purchase price higher than
the prevailing market price, the provisions eliminating shareholders' ability to
call special meetings may have the effect of preventing or delaying a bid for
the Company's shares which could be beneficial to the Company and its
shareholders. The restriction on the ability of shareholders to call a special
meeting means that a proposal to replace the Company's Board of Directors could
be delayed until the next annual meeting. These provisions thus will make the
removal of directors more difficult.
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SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND DELAWARE
The General Corporation Laws of California and Delaware differ in many
respects. It is not practical to summarize all of such differences in this Proxy
Statement, but certain principal differences that could materially affect the
rights of shareholders include the following:
(1) CHANGES IN SIZE OF BOARD OF DIRECTORS
Under California law, although changes in the number of directors must in
general be approved by the shareholders, the shareholders may approve a
provision in the corporation's articles of incorporation or bylaws setting forth
a permissible range in the number of directors and the Board of Directors may
fix the exact number of directors within such stated range. Delaware law permits
corporations to provide in their certificates of incorporation that their boards
of directors are empowered to change the authorized number of directors by
amendment to the bylaws or in the manner provided in the bylaws unless the
number of directors is fixed in the certificate of incorporation, in which case
a change in the number of directors may be made only by amendment to the
certificate of incorporation. The Bylaws of Yahoo! Delaware have set the exact
number of directors and Yahoo! Delaware's Certificate of Incorporation empowers
its Board of Directors to amend the Bylaws. Thus, the size of the Board of
Directors of Yahoo! Delaware may be changed by either the Board of Directors
itself or by the shareholders.
(2) REMOVAL OF DIRECTORS
Under California law, any director or the entire Board of Directors may be
removed, with or without cause, with the approval of a majority of the
outstanding shares entitled to vote; however, no director may be removed (unless
the entire board is removed) if the number of votes cast against the removal
would be sufficient to elect the director under cumulative voting. Under
Delaware law, a director of a corporation that does not have a classified Board
of Directors or cumulative voting similarly may be removed without cause by a
majority shareholder vote. In the case of a Delaware corporation having
cumulative voting, if less than the entire board is to be removed, a director
may not be removed if the shares voted against such removal would be sufficient
to elect the director under cumulative voting. A director of a Delaware
corporation with a classified Board of Directors can be removed only for cause
unless the charter documents otherwise provide. The charter documents of Yahoo!
Delaware do not provide for cumulative voting or a classified Board of Directors
and the Bylaws of Yahoo! Delaware provide that any director may be removed, with
or without cause, by a majority shareholder vote.
(3) CLASSIFIED BOARD OF DIRECTORS
Under California law, directors must be elected annually and, therefore, a
classified board is not permitted (except for corporations listed on the
American or New York Stock Exchanges or with securities qualified for trading on
the Nasdaq Stock Market). As Yahoo!'s Common Stock is qualified for trading on
the Nasdaq National Market, Yahoo! California is permitted to have a classified
board under California law. The Yahoo! California's Articles of Incorporation
currently require a classified Board of Directors. (Please note, however, that
upon approval of Proposal No. 1 "Amendment of Articles of Incorporation," the
requirement to establish a classified Board of Directors will be eliminated.) A
classified board is one on which the directors are subject to re-election on a
rotating basis, not every year. Delaware law permits, but does not require, the
adoption of a classified Board of Directors, pursuant to which the directors can
be divided into as many as three classes with staggered terms of office and with
only one class of directors coming up for election each year. The Yahoo!
Delaware Certificate of Incorporation does not provide for a classified board.
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(4) CUMULATIVE VOTING
Under California law, any shareholder may cumulate his or her votes in the
election of directors upon proper notice of his or her intention to do so,
except that corporations listed on the American or New York Stock Exchanges or
with securities qualified for trading on the Nasdaq Stock Market, such as the
Company, may eliminate cumulative voting with shareholder approval. The Yahoo!
California Articles of Incorporation do not provide for cumulative voting. Under
Delaware law, cumulative voting in the election of directors is not mandatory,
and the Yahoo! Delaware Certificate of Incorporation does not provide for
cumulative voting.
(5) LOANS TO OFFICERS AND EMPLOYEES
Under Delaware law, a corporation may make loans to, guarantee the
obligations of, or otherwise assist, its officers or other employees and those
of its subsidiaries when such action, in the judgment of the directors, may
reasonably be expected to benefit the corporation. Under California law, any
such loan or guaranty to or for the benefit of a director or officer of the
corporation or any of its subsidiaries requires approval of the shareholders
unless such loan or guaranty is provided under a plan approved by a majority of
the shareholders of the corporation.
In addition, under California law, shareholders of any corporation with 100
or more shareholders of record may approve a bylaw authorizing the Board of
Directors alone to approve a loan or guaranty to or on behalf of an officer
(whether or not a director) if the board determines that such a loan or guaranty
may reasonably be expected to benefit the corporation. Yahoo! California
currently has more than 100 shareholders of record and the Yahoo! California
bylaws authorize the Board of Directors alone to approve a loan or guaranty to
or on behalf of an officer.
(6) POTENTIAL ELIMINATION OF SHAREHOLDER POWER TO CALL SPECIAL SHAREHOLDERS'
MEETING
Under California law, a special meeting of shareholders may be called by the
Board of Directors, the Chairman of the Board, the President, the holders of
shares entitled to cast not less than 10% of the votes at such meeting and such
persons as are authorized by the articles of incorporation or bylaws. Under
Delaware law, a special meeting of shareholders may be called by the Board of
Directors or by any other person authorized to do so in the certificate of
incorporation or the bylaws. Shareholders of a Delaware corporation do not have
the right to call a special meeting unless authorized under the corporation's
certificate of incorporation or bylaws. Neither the Certificate of Incorporation
nor Bylaws of Yahoo! Delaware permit a shareholder to call a special meeting of
shareholders.
(7) SHAREHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS
In the last several years, a number of states have adopted special laws
designed to make certain kinds of "unfriendly" corporate takeovers, or other
transactions involving a corporation and one or more of its significant
shareholders, more difficult. Under Section 203 of the Delaware General
Corporation Law ("Section 203"), certain "business combinations" with
"interested stockholders" of Delaware corporations are subject to a three-year
moratorium unless specified conditions are met.
Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for three years following the date
that such person becomes an interested stockholder. With certain exceptions, an
interested stockholder is a person or group who or which owns 15% or more of the
corporation's outstanding voting stock (including any rights to acquire stock
pursuant to an option, warrant, agreement, arrangement or understanding, or upon
the exercise of conversion or exchange rights, and stock with respect to which
the person has voting rights only), or is an affiliate or associate of the
corporation and was the owner of 15% or more of such voting stock at any time
within the previous three years.
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For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder; sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation or a
subsidiary equal to 10% or more of the aggregate market value of the
corporation's consolidated assets or its outstanding stock; the issuance or
transfer by the corporation or a subsidiary of stock of the corporation or such
subsidiary to the interested stockholder (except for transfers in a conversion
or exchange or a pro rata distribution or certain other transactions, none of
which increase the interested stockholder's proportionate ownership of any class
or series of the corporation's or such subsidiary's stock); or receipt by the
interested stockholder (except proportionately as a stockholder), directly or
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on business combinations by Section 203
does not apply if: (a) prior to the date on which such stockholder becomes an
interested stockholder the Board of Directors approves either the business
combination or the transaction which resulted in the person becoming an
interested stockholder; (b) the interested stockholder owns 85% of the
corporation's voting stock upon consummation of the transaction which made him
or her a 15% stockholder (excluding from the 85% calculation shares owned by
directors who are also officers of the target corporation and shares held by
employee stock plans which do not permit employees to decide confidentially
whether to accept a tender or exchange offer); or (c) on or after the date such
person becomes an interested stockholder, the board approves the business
combination and it is also approved at a stockholder meeting by 66 2/3% of the
voting stock not owned by the interested stockholder.
Section 203 only applies to certain publicly held Delaware corporations
which have a class of voting stock that is (a) listed on a national securities
exchange, (b) quoted on an interdealer quotation system such as Nasdaq or (c)
held of record by more than 2,000 shareholders. Yahoo! Delaware will meet these
qualifications immediately after the Merger. A Delaware corporation to which
Section 203 applies may elect not to be governed by Section 203. Yahoo! Delaware
does NOT intend to make such an election.
Section 203 has been challenged in lawsuits arising out of ongoing takeover
disputes, and it is not yet clear whether and to what extent its
constitutionality will be upheld by the courts. Although the United States
District Court for the District of Delaware has consistently upheld the
constitutionality of Section 203, the Delaware Supreme Court has not yet
considered the issue. Yahoo! Delaware believes that so long as the
constitutionality of Section 203 is upheld, Section 203 will encourage any
potential acquiror to negotiate with the Board of Directors of Yahoo! Delaware.
Section 203 also has the effect of limiting the ability of a potential acquiror
to make a two-tiered bid for Yahoo! Delaware in which all shareholders would not
be treated equally. Shareholders should note that the application of Section 203
to Yahoo! Delaware will confer upon the Board the power to reject a proposed
business combination in certain circumstances, even though a potential acquiror
may be offering a substantial premium for Yahoo! Delaware's shares over the
then-current market price. Section 203 should also discourage certain potential
acquirors unwilling to comply with its provisions.
(8) INDEMNIFICATION AND LIMITATION OF LIABILITY
California and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. The laws of
both states also permit corporations to adopt a provision in their articles or
certificate of incorporation eliminating the liability of a director to the
corporation or its shareholders for monetary damages for breach of the
director's fiduciary duty of care. There are nonetheless certain differences
between the laws of the two states respecting indemnification and limitation of
liability.
The Articles of Incorporation of Yahoo! California eliminate the liability
of directors to the corporation to the fullest extent permissible under
California law. California law does not permit the elimination
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of monetary liability where such liability is based on: (a) intentional
misconduct or knowing and culpable violation of law; (b) acts or omissions that
a director believes to be contrary to the best interests of the corporation or
its shareholders, or that involve the absence of good faith on the part of the
director; (c) receipt of an improper personal benefit; (d) acts or omissions
that show reckless disregard for the director's duty to the corporation or its
shareholders, where the director in the ordinary course of performing a
director's duties should be aware of a risk of serious injury to the corporation
or its shareholders; (e) acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
corporation and its shareholders; (f) interested transactions between the
corporation and a director in which a director has a material financial
interest; and (g) liability for improper distributions, loans or guarantees.
The Certificate of Incorporation of Yahoo! Delaware similarly eliminates the
liability of directors to the fullest extent permissible under Delaware law, as
such law exists currently or as it may be amended in the future. Under Delaware
law, such provision may not eliminate or limit director monetary liability for:
(a) breaches of the director's duty of loyalty to the corporation or its
shareholders; (b) acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law; (c) the payment of unlawful dividends
or unlawful stock repurchases or redemptions; or (d) transactions in which the
director received an improper personal benefit. Further, such limitation of
liability provision may not limit a director's liability for violation of, or
otherwise relieve Yahoo! Delaware or its directors from the necessity of
complying with, federal or state securities laws, or affect the availability of
non-monetary remedies such as injunctive relief or rescission.
California law permits indemnification of expenses incurred in derivative or
third-party actions, except that with respect to derivative actions (a) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine, and (b) no indemnification
may be made without court approval in respect of amounts paid or expenses
incurred in settling or otherwise disposing of a threatened or pending action or
amounts incurred in defending a pending action which is settled or otherwise
disposed of without court approval.
Indemnification is permitted by California law only for acts taken in good
faith and believed to be in the best interests of the corporation and its
shareholders, as determined by a majority vote of a disinterested quorum of the
directors, independent legal counsel (if a quorum of independent directors is
not obtainable), a majority vote of a quorum of the shareholders (excluding
shares owned by the indemnified party), or the court handling the action.
California law requires indemnification only when the individual has
successfully defended the action on the merits.
Delaware law generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third party action, provided there is a
determination by a disinterested quorum of the directors, by independent legal
counsel, or by a majority vote of a quorum of the shareholders that the person
seeking indemnification acted in good faith and in a manner reasonably believed
to be in or (in contrast to California law) not opposed to the best interests of
the corporation. Without court approval, however, no indemnification may be made
in respect of any derivative action in which such person is adjudged liable for
negligence or misconduct in the performance of his or her duty to the
corporation. Delaware law requires indemnification of expenses when the
individual being indemnified has successfully defended the action on the merits
or otherwise (as opposed to California law, which requires indemnification only
when an individual has successfully defended the action on the merits).
California corporations may include in their articles of incorporation a
provision which extends the scope of indemnification through agreements, bylaws
or other corporate action beyond that specifically authorized by statute. As
permitted by Yahoo! California's Articles of Incorporation, the Company entered
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into indemnification agreements with its officers and directors, following
approval of such agreements by the Company's shareholders.
A provision of Delaware law states that the indemnification provided by
statute shall not be deemed exclusive of any other rights under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise. If the
Reincorporation Proposal is approved, Yahoo! Delaware will enter into
indemnification agreements with its officers and directors, under Delaware law,
in substantially the form attached hereto as APPENDIX E, and a vote in favor of
the Reincorporation Proposal will also constitute approval of such
indemnification agreements. In particular, the indemnification agreements will
include within their purview future changes in Delaware law which expand the
permissible scope of indemnification of directors and officers of Delaware
corporations.
Currently, there are no actions pending or threatened against officers or
directors of Yahoo! California or Yahoo! Delaware in their capacities as such.
The indemnification and limitation of liability provisions of California
law, and not Delaware law, will apply to actions of the directors and officers
of Yahoo! California made prior to the Merger.
(9) INSPECTION OF SHAREHOLDERS' LIST
Both California and Delaware law allow any shareholder to inspect the
shareholders' list for a purpose reasonably related to such person's interest as
a shareholder. California law provides, in addition, for an absolute right to
inspect and copy the corporation's shareholders' list by a person or persons
holding 5% or more of a corporation's voting shares, or any shareholder or
shareholders holding 1% or more of such shares who have filed a Schedule 14B
with the Securities and Exchange Commission relating to the election of
directors. Delaware law does not provide for any such absolute right of
inspection.
(10) DIVIDENDS AND REPURCHASE OF SHARES
Delaware law permits a corporation, unless otherwise restricted by its
certificate of incorporation, to declare and pay dividends out of surplus or, if
there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or for the preceding fiscal year as long as the amount
of capital of the corporation is not less than the aggregate amount of the
capital represented by the issued and outstanding stock of all classes having
preference upon the distribution of assets. In addition, Delaware law generally
provides that a corporation may redeem or repurchase its shares only if such
redemption or repurchase would not impair the capital of the corporation. The
ability of a Delaware corporation to pay dividends on, or to make repurchases or
redemptions of, its shares is dependent on the financial status of the
corporation standing alone and not on a consolidated basis. In determining the
amount of surplus of a Delaware corporation, the assets of the corporation,
including stock of subsidiaries owned by the corporation, must be valued at
their fair market value as determined by the Board of Directors, regardless of
their historical book value.
Under California law, a corporation may not make any distribution (including
dividends, whether in cash or other property, and including repurchases of its
shares) unless either the corporation's retained earnings immediately prior to
the proposed distribution equal or exceed the amount of the proposed
distribution or, immediately after giving effect to such distribution, the
corporation's assets (exclusive of good will, capitalized research and
development expenses and deferred charges) would be at least equal to 1 1/4
times its liabilities (not including deferred taxes, deferred income and other
deferred credits), and the corporation's current assets, as defined, would be at
least equal to its current liabilities (or 1 1/4 times its current liabilities
if the average pre-tax and pre-interest earnings for the preceding two fiscal
years were less than the average interest expenses for such years). Such tests
are applied to California corporations on a consolidated basis. Under California
law, there are certain exceptions to the foregoing rules for repurchases of
shares in connection with certain rescission actions and certain repurchases
pursuant to employee stock plans.
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(11) APPROVAL OF CERTAIN CORPORATE TRANSACTIONS
Under both California and Delaware law, with certain exceptions, any merger,
consolidation or sale of all or substantially all the assets must be approved by
the Board of Directors and by a majority of the outstanding shares entitled to
vote. Under California law, similar board and shareholder approval is also
required in connection with certain additional acquisition transactions. See
"Appraisal Rights" and "Voting and Appraisal Rights in Certain Reorganizations."
(12) CLASS VOTING IN CERTAIN CORPORATE TRANSACTIONS
Under California law, with certain exceptions, any merger, certain sales of
all or substantially all the assets of a corporation and certain other
transactions must be approved by a majority of the outstanding shares of each
class of stock (without regard to limitations on voting rights). Delaware law
does not generally require class voting, except in connection with certain
amendments to the certificate of incorporation that, among other things,
adversely affect a class of stock in a manner different than the other classes.
(13) APPRAISAL RIGHTS
Under both California and Delaware law, a shareholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal rights, pursuant to which such
shareholder may receive cash in the amount of the fair market value of the
shares held by such shareholder (as determined by agreement of the corporation
and the shareholder or by a court) in lieu of the consideration such shareholder
would otherwise receive in the transaction. Under Delaware law, such appraisal
rights are not available to (a) shareholders with respect to a merger or
consolidation by a corporation the shares of which are either listed on a
national securities exchange or are held of record by more than 2,000 holders if
such shareholders receive only shares of the surviving corporation or shares of
any other corporation that are either listed on a national securities exchange
or held of record by more than 2,000 holders; or (b) shareholders of a
corporation surviving a merger if no vote of the shareholders of the surviving
corporation is required to approve the merger because, among other things, the
number of shares to be issued in the merger does not exceed 20% of the shares of
the surviving corporation outstanding immediately prior to the merger and if
certain other conditions are met.
The limitations on the availability of appraisal rights under California law
are somewhat different from those under Delaware law. Shareholders of a
California corporation whose shares are listed on a national securities exchange
or on a list of over-the-counter margin stocks issued by the Board of Governors
of the Federal Reserve System generally do not have such appraisal rights unless
the holders of at least 5% of the class of outstanding shares claim the right.
Appraisal rights are not available to shareholders of Yahoo! California with
respect to the Merger described in this Reincorporation Proposal.
(14) VOTING AND APPRAISAL RIGHTS IN CERTAIN REORGANIZATIONS
Delaware law does not provide shareholders of a corporation with appraisal
rights when the corporation acquires another business through the issuance of
its stock (a) in exchange for the assets of the business to be acquired, (b) in
exchange for the outstanding stock of the corporation to be acquired or (c) in a
merger of the corporation to be acquired with a subsidiary of the acquiring
corporation. California law treats these kinds of acquisitions in the same
manner as a direct merger of the acquiring corporation with the corporation to
be acquired. See "Appraisal Rights."
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(15) TENDER OFFER STATUTE
The Merger may provide to Yahoo! Delaware and its shareholders the benefit
and protection of the Delaware tender offer statute. This statute, which applies
to tender offers to more than 30 shareholders, requires, among other things,
that 20 days advance notice of the basic terms of a proposed tender offer be
given to the company which is to be the target of such an offer and requires
that such offer, once made, remain open for a minimum of 20 days. California has
no similar legislation to regulate tender offers, although there are provisions
of federal law, known as the Williams Act, which would regulate certain aspects
of tender offers for shares of Yahoo! California in the event of, and following
registration of the common stock under Section 12 of the Securities Exchange Act
of 1934, as amended. The Williams Act does not require any advance notice of the
tender offer but does require a tender offer to remain open for 20 days.
Several court decisions have held that tender offer statutes similar to the
Delaware statute are invalid as being in conflict with or preempted by
provisions of the Williams Act. In addition, a federal district court decision
has held that the Delaware tender offer statute was invalid for such reasons. In
light of the decision of the United States Supreme Court in EDGAR V. MITE
CORPORATION (1982), holding a similar tender offer statute in Illinois
unconstitutional, the constitutionality of the Delaware tender offer statute is
uncertain.
(16) DISSOLUTION
Under California law, shareholders holding 50% or more of the total voting
power of a corporation may authorize its dissolution, with or without the
approval of the corporation's Board of Directors, and this right may not be
modified by the Articles of Incorporation. Under Delaware law, unless the Board
of Directors approves the proposal to dissolve, the dissolution must be approved
by shareholders holding 100% of the total voting power of the corporation. Only
if the dissolution is initially approved by the Board of Directors may it be
approved by a simple majority of the corporation's shareholders. In the event of
such a Board-initiated dissolution, Delaware law permits a Delaware corporation
to include in its certificate of incorporation a supermajority voting
requirement in connection with dissolutions. Yahoo! Delaware's Certificate of
Incorporation contains no such supermajority voting requirement, however, and a
majority of shares voting at a meeting at which a quorum is present would be
sufficient to approve a dissolution of Yahoo! Delaware which had previously been
approved by its Board of Directors.
(17) INTERESTED DIRECTOR TRANSACTIONS
Under both California and Delaware law, certain contracts or transactions in
which one or more of a corporation's directors has an interest are not void or
voidable because of such interest provided that certain conditions, such as
obtaining the required approval and fulfilling the requirements of good faith
and full disclosure, are met. With certain exceptions, the conditions are
similar under California and Delaware law. Under California and Delaware law,
(a) either the shareholders or the Board of Directors must approve any such
contract or transaction after full disclosure of the material facts, and, in the
case of Board of Director approval, the contract or transaction must also be
"just and reasonable" (in California) or "fair" (in Delaware) to the
corporation, or (b) the contract or transaction must have been just and
reasonable or fair as to the corporation at the time it was approved. In the
latter case, California law explicitly places the burden of proof on the
interested director. Under California law, if shareholder approval is sought,
the interested director is not entitled to vote his or her shares at a
shareholder meeting with respect to any action regarding such contract or
transaction. If board of director approval is sought, the contract or
transaction must be approved by a majority vote of a quorum of the directors,
without counting the vote of any interested directors (except that interested
directors may be counted for purposes of establishing a quorum). Under Delaware
law, if board of director approval is sought, the contract or transaction must
be approved by a majority of the disinterested directors (even though less than
a majority of a quorum). Therefore, certain transactions that the Board of
Directors of Yahoo! California might not
18
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be able to approve because of the number of interested directors could be
approved by a majority of the disinterested directors of Yahoo! Delaware,
although less than a majority of a quorum. Neither Yahoo! California nor Yahoo!
Delaware is aware of any plans to propose any transaction involving directors
that could not be so approved under California law but could be so approved
under Delaware law.
(18) SHAREHOLDER DERIVATIVE SUITS
California law provides that a shareholder bringing a derivative action on
behalf of a corporation need not have been a shareholder at the time of the
transaction in question, provided that certain tests are met. Under Delaware
law, a shareholder may only bring a derivative action on behalf of the
corporation if the shareholder was a shareholder of the corporation at the time
of the transaction in question or his or her stock thereafter devolved upon him
or her by operation of law. California law also provides that the corporation or
the defendant in a derivative suit may make a motion to the court for an order
requiring the plaintiff shareholder to furnish a security bond. Delaware does
not have a similar bonding requirement.
APPLICATION OF CALIFORNIA GENERAL CORPORATION LAW TO DELAWARE CORPORATIONS
Under Section 2115 of the California General Corporation Law, certain
foreign corporations (i.e., corporations not organized under California law) are
placed in a special category (referred to in this discussion as
"pseudo-California" corporations) if they have characteristics of ownership and
operation which indicate that they have significant contacts with California. So
long as a Delaware or other foreign corporation is in this special category and
it does not qualify for one of the statutory exemptions, it is subject to a
number of key provisions of the California General Corporation Law applicable to
corporations incorporated in California. Among the more important provisions are
those relating to the election and removal of directors, cumulative voting,
prohibition of classified boards of directors unless certain requirements are
met, standard of liability and indemnification of directors, distributions,
dividends and repurchases of shares, shareholder meetings, approval of certain
corporate transactions, dissenters' appraisal rights and inspection of corporate
records.
Nevertheless, even if a foreign corporation otherwise qualifies as a
pseudo-California corporation, an exemption from Section 2115 is provided for
corporations with shares listed on the New York Stock Exchange or the American
Stock Exchange or whose shares are traded on the Nasdaq Stock Market and which
have 800 or more shareholders. The Company will NOT be treated as a
pseudo-California corporation following the Merger.
FEDERAL INCOME TAX CONSIDERATIONS
This discussion summarizes certain federal income tax considerations with
respect to the Merger that are generally applicable to holders of Yahoo!
California capital stock who receive Yahoo! Delaware capital stock in exchange
for their Yahoo! California capital stock in the Merger. This summary is for
general information purposes only and does not purport to address all the
federal income tax considerations that may be relevant to particular Yahoo!
California shareholders in light of their particular circumstances or who are
subject to special treatment under the federal income tax laws (such as
shareholders that are dealers in securities, foreign persons, shareholders that
acquired their shares in connection with a stock option plan or other
compensatory transaction, shareholders who hold Yahoo! California capital stock
as part of a hedging or straddle arrangement or have previously entered into a
constructive sale of such stock, or holders of warrants to acquire Yahoo!
California capital stock who receive warrants to acquire Yahoo! Delaware capital
stock in the Merger). Furthermore, no foreign, state or local tax considerations
are addressed herein. This summary is based on current federal income tax law,
which is subject to change at any time, possibly with retroactive effect.
Accordingly, ALL YAHOO! CALIFORNIA SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS AS TO THE SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES TO THEM OF THE MERGER.
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Subject to the limitations, qualifications and exceptions described herein,
and assuming the Merger qualifies as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
the following tax consequences generally should result:
(a) No gain or loss should be recognized by a Yahoo! California
shareholder who exchanges all of such shareholder's Yahoo! California
capital stock sold for Yahoo! Delaware capital stock in the Merger;
(b) The aggregate tax basis of the Yahoo! Delaware capital stock
received by a Yahoo! California shareholder in the Merger should be equal to
the aggregate tax basis of Yahoo! California capital stock surrendered in
exchange therefor;
(c) The holding period of the Yahoo! Delaware capital stock received in
the Merger should include the period for which the Yahoo! California capital
stock surrendered in exchange therefor was held, provided that the Yahoo!
California capital stock is held as a capital asset at the time of the
Merger; and
(d) The Company should not recognize gain or loss for federal income tax
purposes as a result of the merger.
The Company does not intend to request a ruling from the Internal Revenue
Service regarding the federal income tax consequences of the Merger. The Company
will, however, receive an opinion from the law firm of Venture Law Group, A
Professional Corporation, to the effect that the Merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code. This opinion
(the "Tax Opinion") will neither bind the IRS nor preclude the IRS from
successfully asserting a contrary position. In addition, the Tax Opinion will be
subject to certain assumptions and qualifications and will be based on the truth
and accuracy of representations made by Yahoo! Delaware, Yahoo! California and
certain shareholders of Yahoo! California.
A successful IRS challenge to the "reorganization" status of the Merger (in
consequence of a failure to satisfy the "continuity of interest" requirement or
otherwise) would result in a Yahoo! California shareholder recognizing gain or
loss with respect to each share of Yahoo! California capital stock exchanged in
the Merger equal to the difference between the shareholder's basis in such share
and the fair market value of the Yahoo! Delaware capital stock received in
exchange therefor. A shareholder's aggregate basis in the Yahoo! Delaware
capital stock so received would equal the stock's fair market value, and the
shareholder's holding period for such stock would begin the day after the
Merger. In addition, in such event Yahoo! California would recognize gain or
loss on the transfer of its assets to and assumption of its liabilities by
Yahoo! Delaware in the Merger as though it had sold those accounts in a taxable
transaction.
Even if the Merger qualifies as a "reorganization," a shareholder who
exchanges Yahoo! California capital stock for Yahoo! Delaware capital stock in
the Merger would recognize gain to the extent the shareholder was treated as
receiving (actually or constructively) consideration other than Yahoo! Delaware
capital stock (commonly known as "boot") in exchange for such shareholder's
Yahoo! California capital stock. Such a shareholder's basis in its Yahoo!
Delaware capital stock would be reduced by an amount equal to the fair market
value of any boot received in the Merger and increased to the extent of any gain
recognized in connection therewith. Furthermore, a recipient of Yahoo! Inc.
capital stock would recognize gain to the extent such shares were considered to
be received in exchange for services or property other than Yahoo! Inc. capital
stock. All or a portion of such gain may be taxable as ordinary income.
State, local or foreign income tax consequences to shareholders may vary
from the federal tax consequences described above.
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REQUIRED VOTE
Approval of the Reincorporation Proposal, which will also constitute
approval of (i) the Merger Agreement, the Certificate of Incorporation and
Bylaws of Yahoo! Delaware, (ii) the assumption of Yahoo! California's employee
benefit plans, stock option plans, stock purchase plans and outstanding stock
options and warrants by Yahoo! Delaware and (iii) Yahoo! Delaware's
indemnification agreements with its officers and directors in substantially the
form attached as APPENDIX E, will require the affirmative vote of holders of a
majority of the outstanding common stock of Yahoo! California.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSED REINCORPORATION IN THE STATE OF
DELAWARE.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Effective February 1, 1996, PricewaterhouseCoopers 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, 1999. 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 PricewaterhouseCoopers 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.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1999.
PROPOSAL NO. 5
AMENDMENT TO THE 1995 STOCK PLAN
At the Annual Meeting, the Company's shareholders are being asked to approve
an amendment to the Stock Plan to increase the number of shares of common stock
reserved for issuance under the Stock Plan by 40,000,000 shares, to an aggregate
of 126,000,000 shares. The Board adopted the amendment, subject to shareholder
approval at the Annual Meeting. Set forth below is a summary of the principal
features of the Stock Plan. The summary, however, does not purport to be a
complete description of all the provisions of the Stock Plan. Any shareholder of
the Company who wishes to obtain a copy of the actual plan document may do so
upon written request to the Secretary at the Company's principal offices at 3420
Central Expressway, Santa Clara, CA 95051.
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 March 1,
1999, options to purchase 50,002,448 shares were outstanding under the Stock
Plan, 27,190,114 shares had been issued pursuant to the exercise of options
granted under such plan and 8,807,438 shares remained available for future
grants. The Board 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 40,000,000 shares.
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Options granted under the Stock Plan may be either "incentive stock options"
within the meaning of Section 422 of 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.
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 March 1, 1999, the aggregate fair
market value of shares subject to outstanding options under the Stock Plan was
$8,006,641,986, 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, 1998, 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 March 1, 1999,
there were approximately 880 employees, officers, consultants and directors
eligible to receive grants under the Stock Plan.
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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 6,000,000, 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.
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 sale
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 30 days nor more than three months in the case of an incentive stock
option or not less than 30 days nor more than 12 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 30 day period following
termination of the optionee's employment or consulting relationship
(including service as a director), options may be exercised within 12 months
after the date of death (but in no event later than the expiration of its
term) 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 30 days after
termination of employment or consulting relationship.
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(f) EXTENSION OF EXERCISE PERIOD. The Stock Plan provides that,
notwithstanding the limited periods 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 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 30 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 30 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.
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.
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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 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 granted from January 1, 1998 through December 31,
1998 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, 1998 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...................................................... 550,000 $ 99.00
Jeffrey Mallett..................................................... 410,000 $ 88.12
Gary Valenzuela..................................................... 120,000 $ 99.00
Farzad Nazem........................................................ 220,000 $ 78.72
Anil Singh.......................................................... 340,000 $ 92.44
All current executive officers as a group (7 persons)............... 1,640,000 $ 92.20
All current directors (other than executive officers) as a group (3
persons).......................................................... 0 0
All employees and consultants (including all current officers who
are not executive officers) as a group (826 persons).............. 17,564,060 $ 52.39
</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 Internal Revenue Code, or
nonstatutory stock options.
The recipient of an incentive stock option does not incur ordinary taxable
income at the time of grant or exercise of the option. However, the optionee may
incur alternative minimum tax upon exercise of the option. The Company is not
entitled to a tax deduction at the time of 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 one year after receipt of the shares by the
optionee and two years after grant of the incentive stock option, any gain is
treated as long-term capital gain. If these holding periods are not satisfied,
the optionee recognizes ordinary taxable income 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. In turn, the Company
is entitled to a tax deduction for the amount of the ordinary income recognized
by the optionee. Any gain to the optionee in excess of the ordinary income from
a disposition which does not meet the
25
<PAGE>
statutory holding period requirements, is long-term capital gain if the sale
occurs more than one year after exercise or short-term capital gain if the sale
occurs within one year after the exercise. The current federal tax rate on
long-term capital gain is capped at 20%. Capital losses may be netted against
capital gains. Net capital losses up to $3,000 annually may offset ordinary and
other income.
Options which do not qualify as incentive stock options are nonstatutory
stock options. An optionee does not recognize taxable income at the time of
grant of a nonstatutory stock option. However, upon exercise, the optionee does
recognize ordinary taxable income equal to the excess of the fair market value
of the shares at time of exercise over the exercise price. The income recognized
by an optionee who is also an employee of the Company is subject to income tax
withholding. 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) is treated as capital gain or loss.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Company's common
stock present at the Annual Meeting in person or by proxy and entitled to vote
is required to approve the proposed amendment of the Stock Plan.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE STOCK
PLAN AS DESCRIBED ABOVE.
PROPOSAL NO. 6
AMENDMENT OF 1996 DIRECTORS' STOCK OPTION PLAN
At the Annual Meeting, the Company's shareholders are being asked to approve
the amendment of the Directors' Plan in order to revise the four-year vesting
schedule with respect to the ANNUAL option grants issued to non-employee
directors thereunder such that 25% of the granted options shall vest on the
one-year anniversary of the date of grant, with the remaining options to vest in
equal monthly installments over the 36-month period thereafter. The Board
adopted the amendment, subject to shareholder approval at the Annual Meeting. If
approved by the shareholders, this amendment will first become effective with
respect to the annual option grants granted on the date of the Company's 2000
Annual Meeting of Shareholders. Set forth below is a summary of the principal
features of the Directors' Plan, including certain other amendments adopted by
the Board which did not require shareholder approval as they reduce certain
benefits under the Directors' Plan. The summary, however, does not purport to be
a complete description of all the provisions of the Directors' Plan. Any
shareholder of the Company who wishes to obtain a copy of the actual plan
document may do so upon written request to the Secretary at the Company's
principal offices at 3420 Central Expressway, Santa Clara, CA 95051.
GENERAL
The Directors' Plan was adopted by the Board of Directors in March 1996 and
the Board has reserved a total of 1,200,000 shares of Common Stock for issuance
thereunder.
The Directors' Plan provides for the grant of nonstatutory stock options to
non-employee directors of the Company. It is designed to work automatically and
not to require administration; however, to the extent administration is
necessary, it will be provided by the Company's Board of Directors.
26
<PAGE>
PURPOSE
The purpose of the Directors' Plan is to provide an incentive for directors
to continue to serve the Company as directors and to assist the Company in
recruiting highly qualified individuals when vacancies occur on the Board of
Directors.
GRANT AND EXERCISE OF OPTION
The Directors' Plan provides that each person who becomes a non-employee
director after the effective date of the Directors' Plan shall be automatically
granted an initial option to purchase 50,000 shares of common stock on the date
on which such person first becomes a non-employee director, whether through
election by the shareholders of the Company or appointment by the Board of
Directors to fill a vacancy. The Board recently amended the Directors' Plan to
revise this initial option grant from 240,000 shares of common stock to 50,000
shares of common stock. The Directors' Plan also provides that a subsequent
option to purchase 30,000 shares of common stock is automatically granted to
each non-employee director on the date of each annual meeting of the
shareholders after which the director remains on the Board, provided that on
that date the non-employee director has served on the Board of Directors for at
least six months. The Board recently amended the Directors' Plan to revise this
annual option grant from 30,000 shares of common stock, to 20,000 shares of
common stock, effective at the date of the Company's 2000 Annual Meeting of
Shareholders.
The Directors' Plan provides for neither a maximum nor a minimum number of
shares subject to options that may be granted to any one non-employee director,
but does provide for the number of shares that may be included in any grant and
the method of making a grant. No option granted under the Directors' Plan is
transferable by the optionee other than by will or the laws of descent or
distribution or pursuant to the terms of a qualified domestic relations order
(as defined by the Code), and each option is exercisable, during the lifetime of
the optionee, only by such optionee.
The Directors' Plan currently provides that each INITIAL option granted
thereunder becomes exercisable in installments cumulatively as to 1/48 of the
shares subject to the initial option at the end of each month following the date
of grant of the initial option, and as to 100% of the shares subject to the
subsequent ANNUAL options on the fourth anniversary of the date of grant of such
options. The amendment proposed hereby would alter the vesting schedule for the
ANNUAL option grants, commencing with the options granted on the date of the
Company's 2000 Annual Meeting of Shareholders, so that 25% of such options will
vest on the one-year anniversary of the date of grant, with the remaining
options to vest in equal monthly installments over the 36-month period
thereafter. The options remain exercisable for up to 90 days following the
optionee's termination of service as a director of the Company, unless such
termination is a result of disability, in which case the options remain
exercisable for a six-month period (or such other period of time not exceeding
12 months as is determined by the Board of Directors) following the date of such
termination, or death, in which case the options remain exercisable by the
inheritor of such options (and, as determined by the Board, continue to vest)
for a six-month period following the date of death. In the event that an
optionee dies within three months after termination of service as a director,
the option may be exercised by the inheritor of such option at any time within
six months of the date of the optionee's death. Notwithstanding the foregoing,
in no event may an option be exercised after the expiration of its term.
EXERCISE PRICE AND TERM OF OPTIONS
The exercise price of all stock options granted under the Directors' Plan
shall be equal to the fair market value of a share of the Company's common stock
on the date of grant of the option, which is defined to be the closing sale
price of the Company's common stock on the Nasdaq Stock Market on the date of
grant. Options granted under the Directors' Plan have a term of ten years.
27
<PAGE>
PLAN BENEFITS
The following table sets forth information with respect to the stock options
granted to the non-employee directors of the Company (3 persons) as of March 1,
1999. As discussed above, the executive officers of the Company and the
employees of the Company are not eligible for grants under the Directors' Plan.
<TABLE>
<CAPTION>
NUMBER OF SHARES SUBJECT WEIGHTED AVERAGE
TO OPTIONS GRANTED UNDER EXERCISE PRICE
DIRECTOR THE DIRECTORS' PLAN PER SHARE
- -------------------------------------------------- ------------------------- -----------------
<S> <C> <C>
Eric Hippeau...................................... 60,000 $ 18.03
Arthur H. Kern.................................... 60,000 $ 18.03
Michael Moritz.................................... 60,000 $ 18.03
</TABLE>
MERGER OR SALE OF ASSETS
In the event of the dissolution or liquidation of the Company, a sale of all
or substantially all of the assets of the Company, or the merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving corporation or any other capital reorganization in
which more than 50% of the shares of the Company entitled to vote are exchanged,
each non-employee director shall have a reasonable time within which to exercise
the option, including any part of the option that would not otherwise be
exercisable, prior to the effectiveness of such dissolution, liquidation, sale,
merger or reorganization, at the end of which time the option shall terminate,
or shall receive a substitute option with comparable terms, as to an equivalent
number of shares of stock of the corporation succeeding the Company or acquiring
its business by reason of such dissolution, liquidation, sale, merger,
consolidation or reorganization.
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 and the number
of shares available for issuance under the Directors' Plan.
AMENDMENT AND TERMINATION
The Board of Directors may at any time amend or terminate the Directors'
Plan, except that such termination cannot affect options previously granted
without the agreement of any optionee so affected and provided that shareholder
approval for amendment to the Directors' Plan must be obtained to the extent
required by applicable law. Notwithstanding the foregoing, the provisions
regarding the grant of options under the Directors' Plan may be amended only
once in any six-month period, other than to comport with changes in the Code,
the Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
If not terminated earlier, the Directors' Plan will expire in 2006.
FEDERAL INCOME TAX ASPECTS OF DIRECTORS' PLAN
The following is a brief summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Directors Plan, does not purport to be complete, and does not
discuss the income tax laws of any municipality, state or foreign country in
which an optionee may reside. The Company advises all eligible directors to
consult their own tax advisors
28
<PAGE>
concerning tax implications of option grants and exercises and the disposition
of stock acquired upon such exercises under the Directors' Plan.
Options granted under the Directors' Plan are nonstatutory stock options. An
optionee does not recognize taxable income at the time of grant of a
nonstatutory stock option. However upon its exercise, the optionee does
recognize ordinary taxable income equal to the excess of the fair market value
of the shares at the time of exercise over the exercise price. 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 as capital gain or loss, and will be long-term capital gain if
the optionee has held the shares more than one year. The current federal income
tax rate on long-term capital gain is capped at 20%. Capital losses may be
netted against capital gains. Net capital losses up to $3,000 annually may
offset ordinary and other income. The Company will be entitled to a tax
deduction in the amount and at the time that the optionee recognizes ordinary
income with respect to shares acquired upon exercise of a nonstatutory stock
option.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Company's common
stock present at the Annual Meeting in person or by proxy and entitled to vote
is required to approve the proposed amendment of the Directors' Plan.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT OF THE DIRECTORS' PLAN AS SET
FORTH ABOVE.
29
<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 March 1, 1999, (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 (as defined below) 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(3)........................................................................ 56,265,128 27.8%
300 Delaware Avenue, Suite 900
Wilmington, DE 19801
David Filo......................................................................... 23,417,896 11.6%
c/o Yahoo! Inc.
3420 Central Expressway
Santa Clara, CA 95051
Jerry Yang......................................................................... 22,817,206 11.3%
c/o Yahoo! Inc.
3420 Central Expressway
Santa Clara, CA 95051
Michael Moritz(4).................................................................. 859,308 *
c/o Sequoia Capital
3000 Sand Hill Road
Suite 280, Bldg. 4
Menlo Park, CA 94025
Timothy Koogle(5).................................................................. 4,054,797 2.0%
c/o Yahoo! Inc.
3420 Central Expressway
Santa Clara, CA 95051
Farzad Nazem(6).................................................................... 1,696,059 *
c/o Yahoo! Inc.
3420 Central Expressway
Santa Clara, CA 95051
Jeffrey Mallett(7)................................................................. 1,091,804 *
c/o Yahoo! Inc.
3420 Central Expressway
Santa Clara, CA 95051
Arthur H. Kern(8).................................................................. 356,020 *
c/o Yahoo! Inc.
3420 Central Expressway
Santa Clara, CA 95051
Gary Valenzuela(9)................................................................. 488,848 *
c/o Yahoo! Inc.
3420 Central Expressway
Santa Clara, CA 95051
Eric Hippeau(10)................................................................... 144,000 *
Ziff-Davis Inc.
One Park Avenue
New York, NY 10016
Anil Singh(11)..................................................................... 132,817 *
c/o Yahoo! Inc.
3420 Central Expressway
Santa Clara, CA 95051
All directors and executive officers as a group (10 persons)(12)................... 55,058,755 26.3%
</TABLE>
- --------------------------
* Less than one percent.
30
<PAGE>
(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 within 60 days of March 1, 1999 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 202,325,813 shares of common stock outstanding on March 1, 1999.
(3) SOFTBANK is a wholly owned subsidiary of SOFTBANK Holdings Inc. ("SOFTBANK
Holdings"), which is wholly owned by SOFTBANK Corp. Masayoshi Son is the
President and Chief Executive Officer of and owns approximately 43.3%
interest in SOFTBANK Corp. Accordingly, securities owned by SOFTBANK may be
regarded as being beneficially owned by SOFTBANK Holdings; securities owned
by SOFTBANK Holdings may be regarded as being beneficially owned by SOFTBANK
Corp. and securities owned by SOFTBANK Corp. may be regarded as being
beneficially owned by Mr. Son. On December 13, 1996, SOFTBANK Holdings
granted an option to purchase 240,000 shares of common stock (the "Option"),
which currently are owned by SOFTBANK, to Mr. Hippeau at a purchase price
per share of $3.3125. 20% 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 March 1,
1999 (i.e., April 30, 1999).
(4) Represents 3,381 shares held by Mr. Moritz, 54,954 shares held by Sequoia
Capital VI ("Sequoia Capital"), 816 shares held by Sequoia Technology
Partners VI ("Sequoia Technology") and 800,157 shares held by the Maximus
Trust, of which Mr. Moritz is a trustee. 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 3,654,563 shares issuable upon exercise of options exercisable
within 60 days of March 1, 1999 under the Company's 1995 Stock Plan.
(6) Includes 1,682,261 shares issuable upon exercise of options exercisable
within 60 days of March 1, 1999 under the Company's 1995 Stock Plan.
(7) Includes 1,084,164 shares issuable upon exercise of options exercisable
within 60 days of March 1, 1999 under the Company's 1995 Stock Plan.
(8) Represents 356,020 shares issuable upon exercise of an option exercisable
within 60 days of March 1, 1999 under the Company's 1995 Stock Plan.
(9) Includes 118,806 shares issuable upon exercise of options exercisable within
60 days of March 1, 1999 under the Company's 1995 Stock Plan.
(10) Represents 144,000 shares issuable upon exercise of an option exercisable
within 60 days of March 1, 1999, which option was granted by SOFTBANK
Holdings. See footnote 3 above. Mr. Hippeau serves as Chairman and Chief
Executive Officer of Ziff-Davis, which is majority owned by SOFTBANK.
(11) Includes 57,115 shares issuable upon exercise of options exercisable within
60 days of March 1, 1999 under the Company's 1995 Stock Plan.
(12) Includes 855,927 shares held by entities affiliated with Mr. Moritz, a
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 and 3,381 shares held directly by Mr. Moritz. Also includes
6,952,929 shares issuable upon exercise, by certain directors and executive
officers, of options exercisable within 60 days of March 1, 1999 under the
Company's 1995 Stock Plan. Does not include 56,265,128 shares held by
SOFTBANK, which owns approximately 69.9% of the outstanding stock of
Ziff-Davis, of which Eric Hippeau, a director of the Company, is Chairman
and Chief Executive Officer.
31
<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, 1998
(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.......................................... 1998 195,000 -- 550,000 870
President and Chief Executive Officer 1997 165,000 -- 500,000 887
(Beginning January 1999, Mr. Koogle will 1996 150,000 -- 480,000 870
serve as Chairman and Chief Executive Officer)
Jeffrey Mallett......................................... 1998 185,000 -- 410,000 270
Chief Operating Officer (Beginning 1997 150,000 -- 320,000 270
January 1999, Mr. Mallett will serve as 1996 125,000 -- 270,000 216
President and Chief Operating Officer)
Gary Valenzuela(2)...................................... 1998 170,000 -- 120,000 3,010
Senior Vice President, Finance 1997 145,000 -- 240,000 2,865
and Administration, and Chief 1996 123,750 -- 2,610,000 1,547
Financial Officer
Farzad Nazem(3)......................................... 1998 175,000 -- 220,000 2,830
Senior Vice President, Product 1997 145,000 -- 280,000 2,692
Development and Operations, and Chief 1996 101,770 -- 2,850,000 3,574
Technology Officer
Anil Singh(4)........................................... 1998 175,000 75,000(5) 340,000 3,010
Vice President, Advertising Sales 1997 137,533 43,750(5) 100,000 2,656
1996 75,480 43,750(5) 210,000 1,707
</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 $2,500 for each such executive officer in 1998, $2,375 for each such
executive officer in 1997 and $1,305, $1,575 and $3,356, respectively, in
1996.
(2) Mr. Valenzuela joined the Company in February 1996.
(3) Mr. Nazem joined the Company in March 1996.
(4) Mr. Singh became an executive officer of the Company in December 1996.
(5) Consists of advertising sales commissions.
32
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information with respect to stock
options granted to the Named Executive Officers during the year ended December
31, 1998. In addition, as required by SEC rules, the table sets forth the
hypothetical gains that would exist for the options based on assumed annual
compounded rates of stock price appreciation during the option term.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED ANNUAL
NUMBER OF OPTIONS EXERCISE RATES OF STOCK PRICE
SECURITIES GRANTED TO PRICE OR APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES BASE DATE TERM(2)
OPTIONS IN FISCAL PER SHARE EXPIRATION ------------------------
NAME GRANTED(#) YEAR(%)(3) ($/SH) DATE 5%($) 10%($)
- ---------------------------------- ----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Timothy Koogle.................... 550,000 2.88% 99.000 12/15/2008 34,243,312 86,779,277
Jeffrey Mallett................... 80,000 0.42% 43.219 07/02/2008 2,174,403 5,510,365
330,000 1.73% 99.000 12/15/2008 20,545,987 52,067,566
Gary Valenzuela................... 120,000 0.63% 99.000 12/15/2008 7,471,268 18,933,660
Farzad Nazem...................... 80,000 0.42% 43.219 07/02/2008 2,174,403 5,510,365
140,000 0.73% 99.000 12/15/2008 8,716,480 22,089,270
Anil Singh........................ 40,000 0.21% 43.219 07/02/2008 1,087,202 2,755,182
300,000 1.57% 99.000 12/15/2008 18,678,170 47,334,151
</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.
(3) The Company granted stock options representing 19,117,310 shares to
employees in the last fiscal year.
33
<PAGE>
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, 1998 and the fiscal year-end value of unexercised options held by the Named
Executive Officers.
<TABLE>
<CAPTION>
VALUE NUMBER OF SECURITIES
REALIZED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF (MARKET PRICE OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES AT EXERCISE YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED ON LESS EXERCISE ---------------------------- ----------------------------
NAME EXERCISE(#) PRICE)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- -------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Timothy Koogle........ 253,070 7,317,509 3,060,162 2,062,456 360,160,987 184,152,811
Jeffrey Mallett....... 680,000 15,462,945 884,998 1,535,006 103,382,379 142,105,224
Gary Valenzuela....... 707,572 16,395,197 257,516 1,104,912 29,643,221 116,179,016
Farzad Nazem.......... 240,000 4,277,965 1,510,000 1,360,004 176,089,999 139,712,031
Anil Singh............ 236,932 4,095,478 211,956 726,104 24,658,371 53,253,526
</TABLE>
- ------------------------
(1) Value is based on the $118.46875 per share closing price of the Company's
common stock on the Nasdaq Stock Market on December 31, 1998, less the
exercise price.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934
THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE
OR IN PART, THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK
PERFORMANCE GRAPH WHICH FOLLOWS SHALL NOT BE DEEMED TO BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILINGS.
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 1999, 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."
34
<PAGE>
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 1999 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 $195,000
to $290,000 effective as of January 1, 1999, based upon, among other factors,
the Compensation Committee's positive assessment of Mr. Koogle's performance
during 1998 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 1998, 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 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, 1999. 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 1998, the third consecutive year of the review, the Compensation
Committee approved the grant of options to Mr. Koogle for an additional 550,000
shares of the Company's common stock, reflecting Mr. Koogle's successful
achievement of the business objectives described above. The Compensation
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Committee granted all executive officers as a group (including Mr. Koogle)
additional options to purchase an aggregate of 1,790,000 shares of the Company's
common stock. The options granted are commensurate and consistent with both
performance and past grants.
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 has approved an amendment to increase by an aggregate of
40,000,000 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. 5, 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 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
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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,
which is majority owned by SOFTBANK, 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, 1998:
In October 1998, SOFTBANK Ventures, Inc., an entity owned by SOFTBANK
Corp., acquired 91,502 shares of the Company's common stock (along with a
warrant to purchase an additional 13,998 shares of the Company's common
stock) in connection with the Company's acquisition of Yoyodyne
Entertainment, Inc. ("Yoyodyne"), a company of which SOFTBANK Ventures, Inc.
was a stockholder.
In July 1998, SOFTBANK Holdings acquired 5,453,760 newly issued shares
of Yahoo! common stock for an aggregate purchase price of approximately $250
million through a private placement. The shares purchased by SOFTBANK
Holdings are subject to a pre-existing agreement, entered into in 1996, that
prohibits SOFTBANK Holdings from purchasing additional shares of the
Company's capital stock if such purchase would result in SOFTBANK Holdings
owning more than 35% of the Company's capital stock (assuming exercise of
all outstanding options and warrants to purchase capital stock). On December
31, 1998, SOFTBANK Holdings transferred these shares to SOFTBANK.
In December 1997 and in January 1998, the Company and SOFTBANK Holdings
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 Holdings
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 Holdings 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 Holdings to GeoCities and the shareholders of GeoCities in the
transaction. On December 31, 1998, SOFTBANK Holdings transferred 7,056,086
shares of GeoCities stock to SOFTBANK. In January 1999, the Company
announced the signing of a definitive agreement to acquire GeoCities, which
is expected to be completed in the second quarter of 1999, subject to
certain conditions, regulatory approvals and approval by GeoCities
stockholders. Upon completion of the acquisition, SOFTBANK and certain
related entities will receive an aggregate of approximately 6,045,488 shares
of Yahoo! common stock in exchange for their GeoCities stock.
In April 1996, the Company and SOFTBANK Corp. 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 Corp.
owns 51% and the Company owns 34% of the equity of the joint venture. 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.
During 1998, the Company received payments totaling $290,000 under this
agreement.
In 1996, the Company entered into an agreement with SOFTBANK Holdings
under which SOFTBANK Holdings 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, and other similar
37
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agreements with SOFTBANK Holdings or its affiliates, SOFTBANK Holdings and
its affiliates purchased an aggregate of approximately $9,900,000 of
advertising from the Company in 1998, 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 $170,000 in 1998.
Mr. Moritz is a general partner of Sequoia Capital and Sequoia Technology
(collectively, the "Sequoia Funds"), which are shareholders of the Company.
SOFTBANK Holdings and an entity affiliated with the Sequoia Funds are investors
in GlobalCenter. In February 1998, GlobalCenter was acquired by Frontier. Mr.
Moritz was, prior to the acquisition, a director of GlobalCenter. Mr. Hippeau is
a director of Frontier. During 1998, the Company paid Frontier/GlobalCenter
approximately $2.7 million for Internet access and hosting services.
An entity affiliated with the Sequoia Funds is a shareholder of Chip Shot
Golf Corporation ("Chip Shot") and PlanetRx, Inc. ("PlanetRx"). Mr. Moritz
serves as a director of PlanetRx. In December 1998, the Company entered into an
agreement with Chip Shot, pursuant to which the Company agreed to provide
certain advertising and promotional services to Chip Shot in exchange for
payment during 1999 of $1,118,000, plus a percentage of Chip Shot revenues in
excess of such dollar amount. In March 1999, the Company entered into an
agreement with PlanetRx, pursuant to which PlanetRx agreed to purchase an
aggregate of $1,281,440 of advertising and promotional services from the Company
in 1999.
See Proposal No. 2 "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 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, and will be on terms no less favorable
to the Company than could be obtained from unaffiliated third parties.
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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) and the last trading day of each of the
Company's fiscal years ended December 31, 1996, December 31, 1997 and December
31, 1998. 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
12/31/98 $5,467.79 $199.61 $300.27
</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. If the Reincorporation Proposal is approved, the Company will
enter into indemnification agreements with each of its directors and executive
officers, substantially in the form attached as APPENDIX E hereto.
Certain other transactions are described under the caption "Compensation
Committee Interlocks and Insider Participation."
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL SHAREHOLDERS' MEETING
Proposals of shareholders intended to be included in the Company's proxy
statement for the Company's 2000 Annual Meeting of Shareholders must be received
by Yahoo! Inc., Attn: Secretary at 3420 Central Expressway, Santa Clara, CA
95051, no later than December 11, 1999. If the Company is not notified of a
shareholder proposal by 60 days prior to the one-year anniversary of this year's
Annual Meeting, then the proxies held by management of the Company provide
discretionary authority to vote against such shareholder proposal, even though
such proposal is not discussed in the Proxy Statement.
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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, 1998, all Reporting Persons complied with all applicable
filing requirements, with the following exceptions: Jerry Yang filed a late Form
4 with respect to the sale in February 1998 of 300 shares of the Company's
common stock by his wife; and SOFTBANK and/or certain of its affiliates filed a
late Form 4 with respect to SOFTBANK Holdings' July 1998 purchase of Company
common stock and filed a late Form 4 and a late amended Form 4 with respect to
the October 1998 acquisition of Company securities in connection with the
Yoyodyne acquisition.
OTHER MATTERS
The Board 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
April 9, 1999
40
<PAGE>
APPENDIX A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
YAHOO! INC.
JEFFREY MALLETT and JOHN PLACE certify that:
1. They are the President and Secretary, respectively, of YAHOO! INC., a
California corporation.
2. The Articles of Incorporation of this corporation are amended and
restated to read in their entirety as follows:
I.
The name of this corporation is YAHOO! INC.
II.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporation Code.
III.
(a) This corporation is authorized to issue two classes of shares designated
"Preferred Stock" and "Common Stock," respectively. The total number of shares
which this corporation shall have authority to issue is Nine Hundred Ten Million
(910,000,000), par value of $0.00017 per share. The number of shares of
Preferred Stock authorized to be issued is Ten Million (10,000,000), and the
number of shares of Common Stock authorized to be issued is Nine Hundred Million
(900,000,000).
(b) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in these Articles of Incorporation to determine or alter the
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and the number of shares constituting
any such series and the designation thereof, or any of them; and to increase or
decrease the number of shares of any series subsequent to the issue of shares of
that series, but not below the number of shares of such series then outstanding.
In case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
IV.
Shareholders shall not be entitled to cumulate their votes for the election
of directors of the corporation.
This Article IV shall become effective only when the corporation becomes,
and only for so long as the corporation remains, a listed corporation within the
meaning of Section 301.5 of the California Corporations Code.
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V.
No action shall be taken by the shareholders of the corporation other than
at an annual or special meeting of the shareholders, upon due notice and in
accordance with the provisions of the corporation's bylaws.
VI.
Section 1. LIMITATION OF DIRECTORS' LIABILITY. The liability of the
directors of the corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
Section 2. INDEMNIFICATION OF CORPORATE AGENTS. This corporation is
authorized to provide indemnification of agents (as defined in Section 317 of
the California Corporations Code) through bylaw provisions, agreements with
agents, vote of shareholders or disinterested directors or otherwise, in excess
of the indemnification otherwise permitted by such Section 317 of the California
Corporations Code, subject only to the applicable limits set forth in Section
204 of the California Corporations Code with respect to actions for breach of
duty to the corporation and its shareholders.
Section 3. REPEAL OR MODIFICATION. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification."
3. The foregoing amendment and restatement of these Articles of
Incorporation has been duly approved by the Board of Directors.
4. The foregoing amendment was approved by the holders of the requisite
number of shares of this corporation in accordance with Sections 902 and 903 of
the California General Corporation Law. The total number of outstanding shares
entitled to vote with respect to the foregoing amendment was shares
of Common Stock. The number of shares voting in favor of the foregoing amendment
equaled or exceeded the vote required. The percentage vote required was a
majority of the outstanding shares of Common Stock. There are no shares of
Preferred Stock outstanding.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in the foregoing certificate are true of
our own knowledge. Executed at Santa Clara, California on May , 1999.
--------------------------------------
JEFFREY MALLETT, President and
Chief Operating Officer
--------------------------------------
JOHN PLACE, Secretary
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APPENDIX B
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
OF YAHOO! INC.
A DELAWARE CORPORATION,
AND
YAHOO! INC.
A CALIFORNIA CORPORATION
This Agreement and Plan of Merger dated as of , 1999 (the
"Agreement") is between Yahoo! Inc., a California corporation
("Yahoo!-California"), and Yahoo! Inc., a Delaware corporation
("Yahoo!-Delaware"). Yahoo!-Delaware and Yahoo!-California are sometimes
referred to in this Agreement as the "Constituent Corporations."
RECITALS
A. Yahoo!-Delaware is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of nine-hundred ten
million (910,000,000) shares, each with a par value of $0.001. Of the authorized
capital, nine hundred million (900,000,000) shares are designated common stock
("Common Stock") and ten million (10,000,000) shares are designated preferred
stock (the "Preferred Stock"). Immediately prior to the effectiveness of this
Agreement, 1,000 shares of Yahoo!-Delaware Common Stock were issued and
outstanding, all of which are held by Yahoo!-California, and no shares of
Preferred Stock were issued and outstanding.
B. Yahoo!-California is a corporation duly organized and existing under the
laws of the State of California and has an authorized capital of nine-hundred
ten million (910,000,000) shares, each with a par value of $0.00017. Of the
authorized capital, nine hundred million (900,000,000) shares are designated
common stock ("Common Stock") and ten million (10,000,000) shares are designated
preferred stock (the "Preferred Stock"). As of March 1, 1999, 202,325,813 shares
of Common Stock were issued and outstanding and no shares of Preferred Stock
were issued and outstanding.
C. The Board of Directors of Yahoo!-California has determined that, for the
purpose of effecting the reincorporation of Yahoo!-California in the State of
Delaware, it is advisable and in the best interests of Yahoo!-California that
Yahoo!-California merge with and into Yahoo!-Delaware upon the terms and
conditions provided in this Agreement.
D. The respective Boards of Directors of Yahoo!-Delaware and
Yahoo!-California have approved this Agreement and have directed that this
Agreement be submitted to a vote of their respective stockholders and executed
by the undersigned officers.
AGREEMENT
In consideration of the mutual agreements and covenants set forth herein,
Yahoo!-Delaware and Yahoo!-California hereby agree, subject to the terms and
conditions hereinafter set forth, as follows:
1. MERGER.
1.1 MERGER. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the California General Corporation Law,
Yahoo!-California shall be merged with and into Yahoo!-Delaware (the "Merger"),
the separate existence of Yahoo!-California shall cease and Yahoo!-Delaware
shall be, and is sometimes referred to below as, the "Surviving Corporation,"
and the name of the Surviving Corporation shall be Yahoo! Inc.
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1.2 FILING AND EFFECTIVENESS. The Merger shall become effective upon
completion of the following actions:
(a) Adoption and approval of this Agreement and the Merger by the
stockholders of each Constituent Corporation in accordance with the applicable
requirements of the Delaware General Corporation Law and the California General
Corporation Law;
(b) The satisfaction or waiver of all of the conditions precedent to the
consummation of the Merger as specified in this Agreement; and
(c) The filing with the Secretary of State of Delaware of an executed
Certificate of Merger or an executed counterpart of this Agreement meeting the
requirements of the Delaware General Corporation Law.
The date and time when the Merger becomes effective is referred to in this
Agreement as the "Effective Date of the Merger."
1.3 EFFECT OF THE MERGER. Upon the Effective Date of the Merger, the
separate existence of Yahoo!-California shall cease and Yahoo!-Delaware, as the
Surviving Corporation, (a) shall continue to possess all of its assets, rights,
powers and property as constituted immediately prior to the Effective Date of
the Merger, (b) shall be subject to all actions previously taken by its and
Yahoo!-California's Board of Directors, (c) shall succeed, without other
transfer, to all of the assets, rights, powers and property of Yahoo!-California
in the manner more fully set forth in Section 259 of the Delaware General
Corporation Law, (d) shall continue to be subject to all of the debts,
liabilities and obligations of Yahoo!-Delaware as constituted immediately prior
to the Effective Date of the Merger, and (e) shall succeed, without other
transfer, to all of the debts, liabilities and obligations of Yahoo!-California
in the same manner as if Yahoo!-Delaware had itself incurred them, all as more
fully provided under the applicable provisions of the Delaware General
Corporation Law and the California General Corporation Law.
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Yahoo!-Delaware as in effect immediately prior to the Effective Date of the
Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
2.2 BYLAWS. The Bylaws of Yahoo!-Delaware as in effect immediately prior to
the Effective Date of the Merger shall continue in full force and effect as the
Bylaws of the Surviving Corporation until duly amended in accordance with the
provisions thereof and applicable law.
2.3 DIRECTORS AND OFFICERS. The directors and officers of Yahoo!-Delaware
immediately prior to the Effective Date of the Merger shall be the directors and
officers of the Surviving Corporation until their successors shall have been
duly elected and qualified or as otherwise provided by law, the Certificate of
Incorporation of the Surviving Corporation or the Bylaws of the Surviving
Corporation.
3. MANNER OF CONVERSION OF STOCK
3.1 YAHOO!-CALIFORNIA COMMON STOCK. Upon the Effective Date of the Merger,
each one share of Yahoo!-California Common Stock issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any action
by the Constituent Corporations, the holder of such share or any other person,
be converted into and exchanged for one (1) fully paid and nonassessable share
of Common Stock, $0.001 par value, of the Surviving Corporation.
3.2 YAHOO!-CALIFORNIA OPTIONS, WARRANTS STOCK PURCHASE RIGHTS AND
CONVERTIBLE SECURITIES.
(a) Upon the Effective Date of the Merger, the Surviving Corporation shall
assume the obligations of Yahoo!-California under Yahoo!-California's 1995 Stock
Plan, 1996 Directors' Stock Option Plan, 1996
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Employee Stock Purchase Plan and under the Four11 Corporation, Viaweb Inc. and
Yoyodyne Entertainment, Inc. stock option plans assumed by Yahoo!-California in
connection with Yahoo!-California's acquisition of such corporations and all
other employee benefit plans of Yahoo!-California. Each outstanding and
unexercised option, warrant, or other right to purchase, or security convertible
into, Yahoo!-California Common Stock (a "Right") shall become, subject to the
provisions in paragraph (c) hereof, an option, warrant, right to purchase, or a
security convertible into the Surviving Corporation's Common Stock on the basis
of one share of the Surviving Corporation's Common Stock for each one share of
Yahoo!-California Common Stock, issuable pursuant to any such Right, on the same
terms and conditions and at an exercise price equal to the exercise price
applicable to any such Yahoo!-California Right at the Effective Date of the
Merger. This paragraph 3.2(a) shall not apply to Yahoo!-California Common Stock.
Such Common Stock is subject to paragraph 3.1 hereof.
(b) A number of shares of the Surviving Corporation's Common Stock shall be
reserved for issuance upon the exercise or conversion of Rights equal to the
number of shares of Yahoo!-California Common Stock so reserved immediately prior
to the Effective Date of the Merger.
(c) The assumed Rights shall not entitle any holder thereof to a fractional
share upon exercise or conversion. In lieu thereof, any fractional share
interests to which a holder of an assumed Right would otherwise be entitled upon
exercise or conversion shall be aggregated (but only with other similar Rights
which have the same per share terms). To the extent that after such aggregation,
the holder would still be entitled to a fractional share with respect thereto
upon exercise or conversion, the holder shall be entitled upon the exercise or
conversion of all such assumed Rights pursuant to their terms (as modified
herein), to one full share of Common Stock in lieu of such fractional share.
With respect to each class of such similar Rights, no holder will be entitled to
more than one full share in lieu of a fractional share upon exercise or
conversion.
Notwithstanding the foregoing, with respect to options issued under the
Yahoo!-California 1995 Stock Plan, 1996 Directors' Stock Option Plan, 1996
Employee Stock Purchase Plan and under the Four11 Corporation, Viaweb Inc. and
Yoyodyne Entertainment, Inc. stock option plans assumed by Yahoo!-California in
connection with Yahoo!-California's acquisition of such corporations that are
assumed in the Merger, the number of shares of Common Stock to which the holder
would be otherwise entitled upon exercise of each such assumed option following
the Merger shall be rounded down to the nearest whole number and the exercise
price shall be rounded up to the nearest whole cent. In addition, no "additional
benefits" (within the meaning of Section 424(a)(2) of the Internal Revenue Code
of 1986, as amended) shall be accorded to the optionees pursuant to the
assumption of their options.
3.3 YAHOO!-DELAWARE COMMON STOCK. Upon the Effective Date of the Merger,
each share of Common Stock, $0.001 par value, of Yahoo!-Delaware issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by Yahoo!-Delaware, the holder of such shares or any other person, be
canceled and returned to the status of authorized but unissued shares.
3.4 EXCHANGE OF CERTIFICATES. After the Effective Date of the Merger, each
holder of an outstanding certificate representing shares of Yahoo!-California
Common Stock may be asked to surrender the same for cancellation to an exchange
agent, whose name will be delivered to holders prior to any requested exchange
(the "Exchange Agent"), and each such holder shall be entitled to receive in
exchange therefor a certificate or certificates representing the number of
shares of the appropriate class and series of the Surviving Corporation's
capital stock into which the surrendered shares were converted as herein
provided. Until so surrendered, each outstanding certificate theretofore
representing shares of Yahoo!-California capital stock shall be deemed for all
purposes to represent the number of whole shares of the appropriate class and
series of the Surviving Corporation's capital stock into which such shares of
Yahoo!-California capital stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation
or the Exchange Agent of any such outstanding certificate shall, until such
certificate shall have been surrendered for transfer or
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<PAGE>
conversion or otherwise accounted for to the Surviving Corporation or the
Exchange Agent, have and be entitled to exercise any voting and other rights
with respect to and to receive dividends and other distributions upon the shares
of capital stock of the Surviving Corporation represented by such outstanding
certificate as provided above.
Each certificate representing capital stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of Yahoo!-California so
converted and given in exchange therefor, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws.
If any certificate for shares of Surviving Corporation's stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, that such transfer otherwise be proper and comply with
applicable securities laws and that the person requesting such transfer pay to
the Exchange Agent any transfer or other taxes payable by reason of the issuance
of such new certificate in a name other than that of the registered holder of
the certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not payable.
4. GENERAL
4.1 COVENANTS OF YAHOO!-DELAWARE. Yahoo!-Delaware covenants and agrees that
it will, on or before the Effective Date of the Merger:
(a) Qualify to do business as a foreign corporation in the State of
California and irrevocably appoint an agent for service of process as required
under the provisions of Section 2105 of the California General Corporation Law.
(b) File any and all documents with the California Franchise Tax Board
necessary for the assumption by Yahoo! Delaware of all of the franchise tax
liabilities of Yahoo!-California; and
(c) Take such other actions as may be required by the California General
Corporation Law.
4.2 FURTHER ASSURANCES. From time to time, as and when required by
Yahoo!-Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of Yahoo!-California such deeds and other instruments, and
there shall be taken or caused to be taken by it such further and other actions,
as shall be appropriate or necessary in order to vest or perfect in or conform
of record or otherwise by Yahoo!-Delaware the title to and possession of all the
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of Yahoo!-California and otherwise to carry out the purposes of
this Agreement, and the officers and directors of Yahoo!-Delaware are fully
authorized in the name and on behalf of Yahoo!-California or otherwise to take
any and all such action and to execute and deliver any and all such deeds and
other instruments.
4.3 ABANDONMENT. At any time before the Effective Date of the Merger, this
Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either Yahoo!-California or
Yahoo!-Delaware, or both, notwithstanding the approval of this Agreement by the
shareholders of Yahoo!-California or by the sole stockholder of Yahoo!-Delaware,
or by both.
4.4 AMENDMENT. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretary of State of the State of
Delaware, provided that an amendment made subsequent to the adoption of this
Agreement by the stockholders of either Constituent Corporation shall not: (a)
alter or change the amount or kind of shares, securities, cash, property and/or
rights to be received in exchange for or on conversion of all or any of the
shares of any class or series thereof of such Constituent Corporation, (b) alter
or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (c) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
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adversely affect the holders of any class of shares or series of capital stock
of such Constituent Corporation.
4.5 REGISTERED OFFICE. The registered office of the Surviving Corporation in
the State of Delaware is located at 1013 Centre Road, in the City of Wilmington,
Delaware 19801, County of New Castle, and CSC The United States Corporation is
the registered agent of the Surviving Corporation at such address.
4.6 FIRPTA NOTIFICATION.
(a) On the Effective Date of the Merger, Yahoo!-California shall deliver to
Yahoo!-Delaware, as agent for the shareholders of Yahoo!-California, a properly
executed statement (the "Statement") in substantially the form attached hereto
as Exhibit A. Yahoo!-Delaware shall retain the Statement for a period of not
less than seven (7) years and shall, upon request, provide a copy thereof to any
person that was a shareholder of Yahoo!-California immediately prior to the
Merger. In consequence of the approval of the Merger by the shareholders of
Yahoo!-California, (i) such shareholders shall be considered to have requested
that the Statement be delivered to Yahoo!-Delaware as their agent and (ii)
Yahoo!-Delaware shall be considered to have received a copy of the Statement at
the request of the Yahoo!-California shareholders for purposes of satisfying
Yahoo!-Delaware's obligations under Treasury Regulation Section 1.1445-2(c)(3).
(b) Yahoo!-California shall deliver to the Internal Revenue Service a notice
regarding the Statement in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2).
4.7 AGREEMENT. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 3420 Central
Expressway, Santa Clara, California 95051, and copies thereof will be furnished
to any stockholder of either Constituent Corporation, upon request and without
cost.
4.8 GOVERNING LAW. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
4.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
[Signature Page Follows]
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The undersigned authorized representatives of the Constituent Corporation
have executed and acknowledged this Agreement as of the date first set forth
above.
<TABLE>
<S> <C> <C>
YAHOO! Inc., a Delaware corporation
By:
-----------------------------------------
Jeffrey A. Mallet,
PRESIDENT AND CHIEF OPERATING OFFICER
Yahoo! Inc., a California corporation
-----------------------------------------
Jeffrey A. Mallett,
PRESIDENT AND CHIEF OPERATING OFFICER
</TABLE>
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<PAGE>
APPENDIX C
CERTIFICATE OF INCORPORATION
OF
YAHOO! INC.
ARTICLE I
The name of this corporation is Yahoo! Inc. (the "CORPORATION").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle. The name
of its registered agent at such address is Corporation Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
(A) Classes of Stock. The Corporation is authorized to issue two classes of
stock to be designated, respectively, "COMMON STOCK" and "PREFERRED STOCK." The
total number of shares which the Corporation is authorized to issue is Nine
Hundred Ten Million (910,000,000) shares, each with a par value of $0.001 per
share. Nine Hundred Million (900,000,000) shares shall be Common Stock and Ten
Million (10,000,000) shares shall be Preferred Stock.
(B) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Certificate of Incorporation, to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock and the number of shares
constituting any such series and the designation thereof, or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
ARTICLE V
The number of directors of the Corporation shall be fixed from time to time
by a bylaw or amendment thereof duly adopted by the Board of Directors.
ARTICLE VI
In the election of directors, each holder of shares of any class or series
of capital stock of the Corporation shall be entitled to one vote for each share
held. No stockholder will be permitted to cumulate votes at any election of
directors.
ARTICLE VII
No action shall be taken by the stockholders of the Corporation other than
at an annual or special meeting of the stockholders, upon due notice and in
accordance with the provisions of the Corporation's bylaws.
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ARTICLE VIII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE IX
The Board of Directors of the Corporation is expressly authorized to make,
alter or repeal the Bylaws of the Corporation.
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE XI
(A) To the fullest extent permitted by the General Corporation Law of
Delaware, as the same may be amended from time to time, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director. If
the General Corporation Law of Delaware is hereafter amended to authorize, with
the approval of a corporation's stockholders, further reductions in the
liability of the Corporation's directors for breach of fiduciary duty, then a
director of the Corporation shall not be liable for any such breach to the
fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
(B) Any repeal or modification of the foregoing provisions of this Article
XI shall not adversely affect any right or protection of a director of the
Corporation with respect to any acts or omissions of such director occurring
prior to such repeal or modification.
ARTICLE XII
(A) To the fullest extent permitted by applicable law, the Corporation is
also authorized to provide indemnification of (and advancement of expenses to)
agents (and any other persons to which Delaware law permits the Corporation to
provide indemnification) through bylaw provisions, agreements with such agents
or other persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by Section
145 of the Delaware General Corporation Law, subject only to limits created by
applicable Delaware law (statutory or non-statutory), with respect to actions
for breach of duty to a corporation, its stockholders, and others.
(B) Any repeal or modification of any of the foregoing provisions of this
Article XII shall not adversely affect any right or protection of a director,
officer, agent or other person existing at the time of, or increase the
liability of any director of the Corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification.
ARTICLE XIII
The name and mailing address of the incorporator are as follows:
John E. Place
Yahoo! Inc.
3420 Central Expressway
Santa Clara, CA 95051
Executed at , California, on , 1999.
<TABLE>
<S> <C>
- --------------------------------------
John E. Place, Incorporator
</TABLE>
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<PAGE>
APPENDIX D
BYLAWS
OF
YAHOO! INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C> <C>
ARTICLE I--CORPORATE OFFICES........................................................................................ D-1
1.1 Registered Office............................................................................. D-1
1.2 Other Offices................................................................................. D-1
ARTICLE II--MEETINGS OF STOCKHOLDERS................................................................................ D-1
2.1 Place of Meetings............................................................................. D-1
2.2 Annual Meeting................................................................................ D-1
2.3 Special Meeting............................................................................... D-2
2.4 Notice of Stockholder's Meeting; Affidavit of Notice.......................................... D-2
2.5 Advance Notice of Stockholder Nominees........................................................ D-2
2.6 Quorum........................................................................................ D-3
2.7 Adjourned Meeting; Notice..................................................................... D-3
2.8 Conduct of Business........................................................................... D-3
2.9 Voting........................................................................................ D-3
2.10 Waiver of Notice.............................................................................. D-4
2.11 Record Date for Stockholder Notice; Voting.................................................... D-4
2.12 Proxies....................................................................................... D-4
ARTICLE III--DIRECTOR............................................................................................... D-4
3.1 Powers........................................................................................ D-4
3.2 Number of Directors........................................................................... D-5
3.3 Election, Qualification and Term of Office of Directors....................................... D-5
3.4 Resignation and Vacancies..................................................................... D-5
3.5 Place of Meetings; Meetings by Telephone...................................................... D-6
3.6 Regular Meetings.............................................................................. D-6
3.7 Special Meetings; Notice...................................................................... D-6
3.8 Quorum........................................................................................ D-6
3.9 Waiver of Notice.............................................................................. D-6
3.10 Board Action by Written Consent without a Meeting............................................. D-7
3.11 Fees and Compensation of Directors............................................................ D-7
3.12 Approval of Loans to Officers................................................................. D-7
3.13 Removal of Directors.......................................................................... D-7
3.14 Chairman of the Board of Directors............................................................ D-7
ARTICLE IV--COMMITTEES.............................................................................................. D-7
4.1 Committees of Directors....................................................................... D-7
4.2 Committee Minutes............................................................................. D-8
4.3 Meetings and Action of Committees............................................................. D-8
ARTICLE V--OFFICERS................................................................................................. D-8
5.1 Officers...................................................................................... D-8
5.2 Appointment of Officers....................................................................... D-9
5.3 Subordinate Officers.......................................................................... D-9
5.4 Removal and Resignation of Officers........................................................... D-9
5.5 Vacancies in Offices.......................................................................... D-9
5.6 Chief Executive Officer....................................................................... D-9
5.7 President..................................................................................... D-9
</TABLE>
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<TABLE>
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PAGE
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5.8 Vice Presidents............................................................................... D-9
5.9 Secretary..................................................................................... D-10
5.10 Chief Financial Officer....................................................................... D-10
5.11 Representation of Shares of Other Corporations................................................ D-10
5.12 Authority and Duties of Officers.............................................................. D-10
ARTICLE VI-- INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS....................................
D-10
6.1 Indemnification of Directors and Officers..................................................... D-10
6.2 Indemnification of Others..................................................................... D-11
6.3 Payment of Expenses in Advance................................................................ D-11
6.4 Indemnity Not Exclusive....................................................................... D-11
6.5 Insurance..................................................................................... D-11
6.6 Conflicts..................................................................................... D-11
ARTICLE VII--RECORDS AND REPORTS.................................................................................... D-12
7.1 Maintenance and Inspection of Records......................................................... D-12
7.2 Inspection by Directors....................................................................... D-12
7.3 Annual Statement to Stockholders.............................................................. D-12
ARTICLE VIII--GENERAL MATTERS....................................................................................... D-12
8.1 Checks........................................................................................ D-12
8.2 Execution of Corporate Contracts and Instruments.............................................. D-12
8.3 Stock Certificates; Partly Paid Shares........................................................ D-13
8.4 Special Designation on Certificates........................................................... D-13
8.5 Lost Certificates............................................................................. D-13
8.6 Construction; Definitions..................................................................... D-14
8.7 Dividends..................................................................................... D-14
8.8 Fiscal Year................................................................................... D-14
8.9 Seal.......................................................................................... D-14
8.10 Transfer of Stock............................................................................. D-14
8.11 Stock Transfer Agreements..................................................................... D-14
8.12 Registered Stockholders....................................................................... D-14
ARTICLE IX--AMENDMENTS.............................................................................................. D-14
</TABLE>
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<PAGE>
BYLAWS
OF
YAHOO! INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE.
The address of the Corporation's registered office in the State of Delaware
is 1013 Centre Road, Wilmington, County of New Castle. The name of its
registered agent at such address is Corporation Service Company.
1.2 OTHER OFFICES.
The Board of Directors may at any time establish other offices at any place
or places where the Corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS.
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the Board of Directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the Corporation.
2.2 ANNUAL MEETING.
(a) The annual meeting of stockholders shall be held each year on a date and
at a time designated by the Board of Directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the third
Tuesday of May in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected and any
other proper business may be transacted.
(b) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be transacted by the stockholders
may be made at an annual meeting of stockholders (i) pursuant to the
Corporation's notice with respect to such meeting, (ii) by or at the direction
of the Board of Directors or (iii) by any stockholder of the Corporation who was
a stockholder of record at the time of giving of the notice provided for in this
Section 2.2, who is entitled to vote at the meeting and who has complied with
the notice procedures set forth in this Section 2.2.
(c) In addition to the requirements of Section 2.5, for nominations or other
business to be properly brought before an annual meeting by a stockholder
pursuant to clause (iii) of paragraph (b) of this Section 2.2, the stockholder
must have given timely notice thereof in writing to the secretary of the
Corporation and such business must be a proper matter for stockholder action
under the General Corporation Law of Delaware. To be timely, a stockholder's
notice shall be delivered to the secretary at the principal executive offices of
the Corporation not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting of stockholders; provided,
however, that in the event that the date of the annual meeting is more than 30
days prior to or more than 60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made. Such
stockholder's notice shall set forth (i) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each
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case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); (ii) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of such business, the reasons for
conducting such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (iii) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (A)
the name and address of such stockholder, as they appear on the Corporation's
books, and of such beneficial owner and (B) the class and number of shares of
the Corporation which are owned beneficially and of record by such stockholder
and such beneficial owner.
(d) Only such business shall be conducted at an annual meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 2.2. The chairman of the meeting shall
determine whether a nomination or any business proposed to be transacted by the
stockholders has been properly brought before the meeting and, if any proposed
nomination or business has not been properly brought before the meeting, the
chairman shall declare that such proposed business or nomination shall not be
presented for stockholder action at the meeting.
(e) For purposes of this Section 2.2, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service.
(f) Nothing in this Section 2.2 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the Board
of Directors, or by the chairman of the board, or by the president.
2.4 NOTICE OF STOCKHOLDER'S MEETINGS; AFFIDAVIT OF NOTICE.
All notices of meetings of stockholders shall be in writing and shall be
sent or otherwise given in accordance with this Section 2.4 of these Bylaws not
less than 10 nor more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting (or such longer or shorter time as
is required by Section 2.5 of these Bylaws, if applicable). The notice shall
specify the place, date, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the Corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES.
Only persons who are nominated in accordance with the procedures set forth
in this Section 2.5 shall be eligible for election as directors. Nominations of
persons for election to the Board of Directors of the Corporation may be made at
a meeting of stockholders by or at the direction of the Board of Directors or by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 2.5. Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice in writing to
the secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 60 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be
D-2
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timely must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such stockholder's notice shall set forth (a)
as to each person whom the stockholder proposes to nominate for election or
re-election as a director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act (including, without limitation, such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); and (b) as to the stockholder giving the
notice (i) the name and address, as they appear on the Corporation's books, of
such stockholder and (ii) the class and number of shares of the Corporation
which are beneficially owned by such stockholder. At the request of the Board of
Directors any person nominated by the Board of Directors for election as a
director shall furnish to the secretary of the Corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 2.5. The chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the Bylaws, and if he or she should so determine, he or
she shall so declare to the meeting and the defective nomination shall be
disregarded.
2.6 QUORUM.
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the Certificate of Incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then either (a) the chairman of the meeting or (b) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE.
When a meeting is adjourned to another time or place, unless these Bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.8 CONDUCT OF BUSINESS.
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including the manner of voting and
the conduct of business.
2.9 VOTING.
(a) The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these Bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
(b) Except as may be otherwise provided in the Certificate of Incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.
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2.10 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the Certificate of Incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the Certificate of Incorporation or these Bylaws.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action. If the Board of Directors does not
so fix a record date:
(a) The record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held.
(b) The record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the Board of Directors adopts
the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
2.12 PROXIES.
Each stockholder entitled to vote at a meeting of stockholders may authorize
another person or persons to act for such stockholder by a written proxy, signed
by the stockholder and filed with the secretary of the Corporation, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(e) of the General Corporation Law of Delaware.
ARTICLE III
DIRECTORS
3.1 POWERS.
Subject to the provisions of the General Corporation Law of Delaware and any
limitations in the Certificate of Incorporation or these Bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the Corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the Board of Directors.
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3.2 NUMBER OF DIRECTORS.
Upon the adoption of these Bylaws, the number of directors constituting the
entire Board of Directors shall be six. Thereafter, this number may be changed
by a resolution of the Board of Directors or of the stockholders, subject to
Section 3.4 of these Bylaws. No reduction of the authorized number of directors
shall have the effect of removing any director before that director's term of
office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.
Except as provided in Section 3.4 of these Bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
Certificate of Incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES.
Any director may resign at any time upon written notice to the attention of
the secretary of the Corporation. When one or more directors so resigns and the
resignation is effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies. A vacancy
created by the removal of a director by the vote of the stockholders or by court
order may be filled only by the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute a majority of the quorum.
Each director so elected shall hold office until the next annual meeting of the
stockholders and until a successor has been elected and qualified.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws:
(a) Vacancies and newly created directorships resulting from any increase in
the authorized number of directors elected by all of the stockholders having the
right to vote as a single class may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director.
(b) Whenever the holders of any class or classes of stock or series thereof
are entitled to elect one or more directors by the provisions of the Certificate
of Incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole remaining
director so elected.
If at any time, by reason of death or resignation or other cause, the
Corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the Certificate of Incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole Board
of Directors (as constituted immediately prior to any such increase), then the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least 10% of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
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3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.
The Board of Directors of the Corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held without notice at
such time and at such place as shall from time to time be determined by the
Board of Directors.
3.7 SPECIAL MEETINGS; NOTICE.
Special meetings of the Board of Directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the Corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four days before the time
of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least 48 hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly communicate it to
the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
Corporation.
3.8 QUORUM.
At all meetings of the Board of Directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the Certificate of Incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the Certificate of
Incorporation or these Bylaws.
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3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board of Directors or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee. Written consents
representing actions taken by the board or committee may be executed by telex,
telecopy or other facsimile transmission, and such facsimile shall be valid and
binding to the same extent as if it were an original.
3.11 FEES AND COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, the Board of Directors shall have the authority to fix the compensation
of directors. No such compensation shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
3.12 APPROVAL OF LOANS TO OFFICERS.
The Corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or of its
subsidiary, including any officer or employee who is a director of the
Corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
Corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this Section 3.2 contained shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the Corporation
at common law or under any statute.
3.13 REMOVAL OF DIRECTORS.
Unless otherwise restricted by statute, by the Certificate of Incorporation
or by these Bylaws, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors; provided, however, that if the
stockholders of the Corporation are entitled to cumulative voting, if less than
the entire Board of Directors is to be removed, no director may be removed
without cause if the votes cast against his removal would be sufficient to elect
him if then cumulatively voted at an election of the entire Board of Directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS.
The Corporation may also have, at the discretion of the Board of Directors,
a chairman of the Board of Directors who shall not be considered an officer of
the Corporation.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS.
The Board of Directors may, by resolution passed by a majority of the whole
Board of Directors, designate one or more committees, with each committee to
consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of
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the Board of Directors or in the Bylaws of the Corporation, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (a) amend the Certificate of
Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), (b) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (c) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the Corporation's property and assets, (d) recommend to
the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or (e) amend the Bylaws of the Corporation; and, unless the board
resolution establishing the committee, the Bylaws or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES.
Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES.
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Section 3.5 (place of meetings and
meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with such changes in
the context of such provisions as are necessary to substitute the committee and
its members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the Board of Directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of any
committee not inconsistent with the provisions of these Bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS.
The officers of the Corporation shall be a chief executive officer, a
president, a secretary, and a chief financial officer. The Corporation may also
have, at the discretion of the Board of Directors, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these Bylaws. Any number of offices may be held by the same
person.
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5.2 APPOINTMENT OF OFFICERS.
The officers of the Corporation, except such officers as may be appointed in
accordance with the provisions of Sections 5.3 or 5.5 of these Bylaws, shall be
appointed by the Board of Directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS.
The Board of Directors may appoint, or empower the chief executive officer
or the president to appoint, such other officers and agents as the business of
the Corporation may require, each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in these Bylaws or
as the Board of Directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS.
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the Board of Directors or, except in the case of an officer
chosen by the Board of Directors, by any officer upon whom such power of removal
may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the attention
of the secretary of the Corporation. Any resignation shall take effect at the
date of the receipt of that notice or at any later time specified in that
notice; and, unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective. Any resignation is
without prejudice to the rights, if any, of the Corporation under any contract
to which the officer is a party.
5.5 VACANCIES IN OFFICES.
Any vacancy occurring in any office of the Corporation shall be filled by
the Board of Directors.
5.6 CHIEF EXECUTIVE OFFICER.
Subject to such supervisory powers, if any, as may be given by the Board of
Directors to the chairman of the board, if any, the chief executive officer of
the Corporation shall, subject to the control of the Board of Directors, have
general supervision, direction, and control of the business and the officers of
the Corporation. He or she shall preside at all meetings of the stockholders
and, in the absence or nonexistence of a chairman of the board, at all meetings
of the Board of Directors and shall have the general powers and duties of
management usually vested in the office of chief executive officer of a
corporation and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws.
5.7 PRESIDENT.
Subject to such supervisory powers, if any, as may be given by the Board of
Directors to the chairman of the board, if any, or the chief executive officer,
the president shall have general supervision, direction, and control of the
business and other officers of the Corporation. He or she shall have the general
powers and duties of management usually vested in the office of president of a
corporation and such other powers and duties as may be prescribed by the Board
of Directors or these Bylaws.
5.8 VICE PRESIDENTS.
In the absence or disability of the chief executive officer and president,
the vice presidents, if any, in order of their rank as fixed by the Board of
Directors or, if not ranked, a vice president designated by the Board of
Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.
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5.9 SECRETARY.
The secretary shall keep or cause to be kept, at the principal executive
office of the Corporation or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at stockholders' meetings,
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the Corporation or at the office of the Corporation's transfer agent
or registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the Board of Directors required to be given by law or by
these Bylaws. He or she shall keep the seal of the Corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by these Bylaws.
5.10 CHIEF FINANCIAL OFFICER.
The chief financial officer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of the properties
and business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital retained earnings,
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The chief financial officer shall deposit all moneys and other valuables in
the name and to the credit of the Corporation with such depositories as may be
designated by the Board of Directors. He or she shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, shall render to the
president, the chief executive officer, or the directors, upon request, an
account of all his or her transactions as chief financial officer and of the
financial condition of the Corporation, and shall have other powers and perform
such other duties as may be prescribed by the Board of Directors or the Bylaws.
5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairman of the board, the chief executive officer, the president, any
vice president, the chief financial officer, the secretary or assistant
secretary of this Corporation, or any other person authorized by the Board of
Directors or the chief executive officer or the president or a vice president,
is authorized to vote, represent, and exercise on behalf of this Corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this Corporation. The authority granted herein may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by the person having such
authority.
5.12 AUTHORITY AND DUTIES OF OFFICERS.
In addition to the foregoing authority and duties, all officers of the
Corporation shall respectively have such authority and perform such duties in
the management of the business of the Corporation as may be designated from time
to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including
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attorneys' fees), judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding, arising by reason of the
fact that such person is or was an agent of the Corporation. For purposes of
this Section 6.1, a "director" or "officer" of the Corporation includes any
person (a) who is or was a director or officer of the Corporation, (b) who is or
was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise, or
(c) who was a director or officer of a Corporation which was a predecessor
corporation of the Corporation or of another enterprise at the request of such
predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS.
The Corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware, to indemnify each
of its employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the Corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the Corporation (other
than a director or officer) includes any person (a) who is or was an employee or
agent of the Corporation, (b) who is or was serving at the request of the
Corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (c) who was an employee or agent of a
corporation which was a predecessor corporation of the Corporation or of another
enterprise at the request of such predecessor corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE.
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted pursuant to Section 6.2 following authorization thereof by the
Board of Directors shall be paid by the Corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any Bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the Certificate of
Incorporation.
6.5 INSURANCE.
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
6.6 CONFLICTS.
No indemnification or advance shall be made under this Article VI, except
where such indemnification or advance is mandated by law or the order, judgment
or decree of any court of competent jurisdiction, in any circumstance where it
appears:
(a) That it would be inconsistent with a provision of the Certificate of
Incorporation, these Bylaws, a resolution of the stockholders or an agreement in
effect at the time of the accrual of the alleged cause of
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the action asserted in the proceeding in which the expenses were incurred or
other amounts were paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed by a
court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS.
The Corporation shall, either at its principal executive offices or at such
place or places as designated by the Board of Directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
Corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS.
Any director shall have the right to examine the Corporation's stock ledger,
a list of its stockholders, and its other books and records for a purpose
reasonably related to his or her position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
Corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.
The Board of Directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the Corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS.
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the Corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.
The Board of Directors, except as otherwise provided in these Bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on
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behalf of the Corporation; such authority may be general or confined to specific
instances. Unless so authorized or ratified by the Board of Directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the Corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.
The shares of the Corporation shall be represented by certificates, provided
that the Board of Directors of the Corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the Corporation by the chairman or vice-chairman of
the Board of Directors, or the chief executive officer or the president or
vice-president, and by the chief financial officer or an assistant treasurer, or
the secretary or an assistant secretary of the Corporation representing the
number of shares registered in certificate form. Any or all of the signatures on
the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the Corporation with the same
effect as if he or she were such officer, transfer agent or registrar at the
date of issue.
The Corporation may issue the whole or any part of its shares as partly paid
and subject to call for the remainder of the consideration to be paid therefor.
Upon the face or back of each stock certificate issued to represent any such
partly paid shares, upon the books and records of the Corporation in the case of
uncertificated partly paid shares, the total amount of the consideration to be
paid therefor and the amount paid thereon shall be stated. Upon the declaration
of any dividend on fully paid shares, the Corporation shall declare a dividend
upon partly paid shares of the same class, but only upon the basis of the
percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES.
If the Corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the Corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the Corporation shall issue to represent
such class or series of stock a statement that the Corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES.
Except as provided in this Section 8.5, no new certificates for shares shall
be issued to replace a previously issued certificate unless the latter is
surrendered to the Corporation and canceled at the same time. The Corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate previously issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or the owner's legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
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8.6 CONSTRUCTION; DEFINITIONS.
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 DIVIDENDS.
The directors of the Corporation, subject to any restrictions contained in
(a) the General Corporation Law of Delaware or (b) the Certificate of
Incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
Corporation's capital stock.
The directors of the Corporation may set apart out of any of the funds of
the Corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
Corporation, and meeting contingencies.
8.8 FISCAL YEAR.
The fiscal year of the Corporation shall be fixed by resolution of the Board
of Directors and may be changed by the Board of Directors.
8.9 SEAL.
The Corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK.
Upon surrender to the Corporation or the transfer agent of the Corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS.
The Corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
Corporation to restrict the transfer of shares of stock of the Corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS.
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The Bylaws of the Corporation may be adopted, amended or repealed by the
stockholders entitled to vote; provided, however, that the Corporation may, in
its Certificate of Incorporation, confer the power to adopt, amend or repeal
Bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal Bylaws.
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<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
YAHOO! INC.
ADOPTION BY INCORPORATOR
The undersigned person appointed in the certificate of incorporation to act
as the Incorporator of Yahoo! Inc. hereby adopts the foregoing bylaws as the
Bylaws of the corporation.
Executed this day of , 1999.
--------------------------------------
John E. Place, Incorporator
CERTIFICATE BY SECRETARY OF ADOPTION BY INCORPORATOR
The undersigned hereby certifies that the undersigned is the duly elected,
qualified, and acting Secretary of Yahoo! Inc. and that the foregoing Bylaws
were adopted as the Bylaws of the corporation on , 1999, by the
person appointed in the certificate of incorporation to act as the Incorporator
of the corporation.
Executed this day of , 1999.
--------------------------------------
John E. Place, Secretary
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APPENDIX E
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of , by
and between Yahoo! Inc., a Delaware corporation (the "Company"), and
("Indemnitee").
RECITALS
The Company and Indemnitee recognize the increasing difficulty in obtaining
directors' and officers' liability insurance, the increases in the cost of such
insurance and the general reductions in the coverage of such insurance.
The Company and Indemnitee further recognize the substantial increase in
corporate litigation in general, subjecting officers and directors to expensive
litigation risks at the same time as the availability and coverage of liability
insurance has been severely limited.
Indemnitee does not regard the current protection available as adequate
under the present circumstances, and Indemnitee and other officers and directors
of the Company may not be willing to continue to serve as officers and directors
without additional protection.
The Company desires to attract and retain the services of highly qualified
individuals, such as Indemnitee, to serve as officers and directors of the
Company and to indemnify its officers and directors so as to provide them with
the maximum protection permitted by law.
AGREEMENT
In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) GENERAL AGREEMENT. The Company shall indemnify Indemnitee if
Indemnitee is or was a party to or witness or other participant in, or is
threatened to be made a party to or witness or other participant to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of
the Company, by reason of any action or inaction on the part of Indemnitee
while an officer or director or by reason of the fact that Indemnitee is or
was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees and costs),
judgments, fines, any interest, assessments, and other charges and amounts
paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld) actually and
reasonably incurred by Indemnitee in connection with such action, suit or
proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that Indemnitee did not act in
good faith and in a manner which Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that
Indemnitee's conduct was unlawful.
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(b) MANDATORY PAYMENT OF EXPENSES. To the extent that Indemnitee has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Subsection (a) of this Section 1 or the defense of
any claim, issue or matter therein, Indemnitee shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith.
2. NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement is intended
to create in Indemnitee any right to continued employment.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. Subject to the terms and conditions of
this Agreement, the Company shall advance all expenses incurred by
Indemnitee in connection with the investigation, defense, settlement or
appeal of any civil or criminal action, suit or proceeding referenced in
Section 1(a) hereof (including amounts actually paid in settlement of any
such action, suit or proceeding). Indemnitee hereby undertakes to repay such
amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company
as authorized hereby. Any advances made hereunder shall be paid by the
Company to Indemnitee within twenty (20) days following delivery of a
written request therefor by Indemnitee to the Company.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a condition
precedent to his or her right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under
this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page
of this Agreement (or such other address as the Company shall designate in
writing to Indemnitee). Notice shall be deemed received three (3) business
days after the date postmarked if sent by domestic certified or registered
mail, properly addressed, otherwise notice shall be deemed received when
such notice shall actually be received by the Company. In addition,
Indemnitee shall give the Company such information and cooperation as it may
reasonably require and as shall be within Indemnitee's power.
(c) PROCEDURE. Any indemnification and advances provided for in
Section 1 shall be made no later than forty-five (45) days after receipt of
the written request of Indemnitee. If a claim under this Agreement, under
any statute, or under any provision of the Company's Certificate of
Incorporation or Bylaws providing for indemnification, is not paid in full
by the Company within forty-five (45) days after a written request for
payment thereof has first been received by the Company, Indemnitee may, but
need not, at any time thereafter bring an action against the Company to
recover the unpaid amount of the claim and, subject to Section 13 of this
Agreement, Indemnitee shall also be entitled to be paid for the expenses
(including attorneys' fees and interest, at the Bank of America prime rate
in effect on the date of Indemnitee's written request, on the unpaid amount
of the claim) of bringing such action. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses
incurred in connection with any action, suit or proceeding in advance of its
final disposition) that Indemnitee has not met the standards of conduct
which make it permissible under applicable law for the Company to indemnify
Indemnitee for the amount claimed. Indemnitee shall be entitled to receive
interim payments of expenses pursuant to Subsection 3(a) unless and until
such defense may be finally adjudicated by court order or judgment from
which no further right of appeal exists. It is the parties' intention that
if the Company contests Indemnitee's right to indemnification, the question
of Indemnitee's right to indemnification shall be for the court to decide,
and neither the failure of the Company (including its Board of Directors,
any committee or subgroup of the Board of Directors, independent legal
counsel, or its stockholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct required by applicable
law, nor an actual determination by the Company
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(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) that Indemnitee
has not met such applicable standard of conduct, shall create a presumption
that Indemnitee has or has not met the applicable standard of conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a notice of
a claim pursuant to Section 3(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice
of the commencement of such proceeding to the insurers in accordance with
the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to
pay, on behalf of the Indemnitee, all amounts payable as a result of such
proceeding in accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be obligated
under Section 3(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently
incurred by Indemnitee with respect to the same proceeding, provided that
(i) Indemnitee shall have the right to employ his or her counsel in any such
proceeding at Indemnitee's expense; and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such
defense, or (C) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
(f) (i) A Change in Control shall be deemed to have occurred if (A)
any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 30%
or more of the total voting power represented by the Company's then
outstanding voting securities or (B) during any period of two (2)
consecutive years, individuals who at the beginning of such period
constitute the Board and any new director whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board, or (C) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation that would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 80% of the total voting
power represented by the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or (D)
the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company (in
one transaction or a series of transactions) of all or substantially all of
the Company's assets.
(ii) With respect to all matters arising after a Change in Control
(other than a Change in Control approved by a majority of the directors on
the Board who were directors immediately prior to such Change in Control)
concerning the rights of Indemnitee to indemnity payments and advancement of
expenses under this Agreement, the Company shall seek legal advice only from
independent counsel selected by Indemnitee and approved by the Company
(which approval shall not be unreasonably withheld) (the "Independent
Counsel"), and who has not otherwise performed services for the Company or
the Indemnitee (other than in connection with indemnification matters)
within the last five years. The Independent Counsel shall not include any
person who, under the applicable standards
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of professional conduct then prevailing, would have a conflict of interest
in representing either the Company or Indemnitee in an action to determine
Indemnitee's rights under this Agreement. Such counsel, among other things,
shall render its written opinion to the Company and Indemnitee as to whether
and to what extent the Indemnitee should be permitted to be indemnified
under applicable law. The Company agrees to pay the reasonable fees of the
Independent Counsel and to indemnify fully such counsel against any and all
expenses (including attorneys' fees), claims, liabilities, loss, and damages
arising out of or relating to this Agreement or the engagement of
Independent Counsel pursuant hereto.
(g) ESTABLISHMENT OF TRUST. In the event of a Change in Control (other
than a Change in Control approved by a majority of the directors on the
Board who were directors immediately prior to such Change in Control) the
Company shall, upon written request by Indemnitee, create a trust for the
benefit of the Indemnitee and from time to time upon written request of
Indemnitee shall fund the trust in an amount sufficient to satisfy any and
all expenses reasonably anticipated at the time of each such request to be
incurred in connection with investigating, preparing for, participating in,
and/or defending any proceeding relating to any indemnifiable event covered
herein. The amount or amounts to be deposited in the trust pursuant to the
foregoing funding obligation shall be determined by the Independent Counsel.
The terms of the trust shall provide that (i) the trust shall not be revoked
or the principal thereof invaded without the written consent of the
Indemnitee, (ii) the trustee shall advance, within ten business days of a
request by the Indemnitee, any and all expenses to the Indemnitee (and the
Indemnitee hereby agrees to reimburse the trust under the same circumstances
for which the Indemnitee would be required to reimburse the Company under
Section 3(a) of this Agreement), (iii) the trust shall continue to be funded
by the Company in accordance with the funding obligation set forth above,
(iv) the trustee shall promptly pay to the Indemnitee all amounts for which
the Indemnitee shall be entitled to indemnification pursuant to this
Agreement or otherwise, and (v) all unexpended funds in the trust shall
revert to the Company upon a final determination by the Independent Counsel
or a court of competent jurisdiction, as the case may be, that the
Indemnitee has been fully indemnified under the terms of this Agreement. The
trustee shall be chosen by the Indemnitee. Nothing in this Section 3(g)
shall relieve the Company of any of its obligations under this Agreement.
All income earned on the assets held in the trust shall be reported as
income by the Company for federal, state, local, and foreign tax purposes.
The Company shall pay all costs of establishing and maintaining the trust
and shall indemnify the trustee against any and all expenses (including
attorneys' fees), claims, liabilities, loss, and damages arising out of or
relating to this Agreement or the establishment and maintenance of the
trust.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this Agreement, the
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute.
In the event of any change in any applicable law, statute or rule which
narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall
have no effect on this Agreement or the parties' rights and obligations
hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Certificate of Incorporation, its Bylaws, any
agreement, any vote of stockholders or disinterested members of the
Company's Board of Directors, the General Corporation Law of the State of
Delaware, or otherwise, both as to action in Indemnitee's official capacity
and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to
Indemnitee for
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any action taken or not taken while serving in an indemnified capacity even
though he or she may have ceased to serve in such capacity at the time of
any action, suit or other covered proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred by him
or her in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge that
in certain instances, Federal law or applicable public policy may prohibit the
Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from time
to time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. Notwithstanding the
foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
necessary or is not reasonably available, if the premium costs for such
insurance are disproportionate to the amount of coverage provided, if the
coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar insurance
maintained by a subsidiary or parent of the Company. However, the Company's
decision whether or not to adopt and maintain such insurance shall not affect in
any way its obligations to indemnify its officers and directors under this
Agreement or otherwise. In all policies of director and officer liability
insurance, Indemnitee shall be named as an insured in such a manner as to
provide Indemnitee the same rights and benefits as are accorded to the most
favorably insured of the Company's directors, if Indemnitee is a director; or of
the Company's officers, if Indemnitee is not a director of the Company, but is
an officer; or of the Company's key employees, if Indemnitee is not an officer
or director, but is a key employee.
8. SEVERABILITY. Nothing in this Agreement is intended to require or shall
be construed as requiring the Company to do or fail to do any act in violation
of applicable law. The Company's inability, pursuant to court order, to perform
its obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Section 8. If this Agreement or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. EXCEPTIONS. Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such
indemnification or advancement of expenses may be
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provided by the Company in specific cases if the Board of Directors has
approved the initiation or bringing of such suit.
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous.
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) to the extent such expenses or liabilities have been paid
directly to Indemnitee by an insurance carrier under a policy of officers'
and directors' liability insurance maintained by the Company.
(d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee
of securities in violation of Section 16(b) of the Securities Exchange Act
of 1934, as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "COMPANY" shall
include any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that if Indemnitee is or
was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to
such constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "OTHER ENTERPRISES",
shall include employee benefit plans; references to "FINES" shall include
any excise taxes assessed on Indemnitee with respect to an employee benefit
plan; and references to "SERVING AT THE REQUEST OF THE COMPANY" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and if Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall
be deemed to have acted in a manner "NOT OPPOSED TO THE BEST INTERESTS OF
THE COMPANY" as referred to in this Agreement.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
12. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expense, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action.
The Company hereby consents to service of process and to appear in any such
action. In the event of an action instituted by or in the name of the Company
under this Agreement or to enforce or interpret any of the terms of this
Agreement, Indemnitee shall be entitled to be paid all court costs and expenses,
including attorneys' fees and costs, incurred by Indemnitee in defense of such
action (including with respect to Indemnitee's counterclaims and cross-claims
made in such action).
13. NOTICE. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party
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addressee, on the date of such receipt, or (ii) if mailed by domestic certified
or registered mail with postage prepaid, on the third business day after the
date postmarked. Addresses for notice to either party are as shown on the
signature page of this Agreement, or as subsequently modified by written notice.
14. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of California
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of California.
15. CHOICE OF LAW. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
16. MODIFICATION. This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof. All prior
negotiations, agreements and understandings between parties with respect thereto
are superseded hereby. This Agreement may not be modified or amended except by
an instrument in writing signed by or on behalf of the parties hereto.
The parties hereto have executed this Agreement as of the day and year set
forth on the first page of this Agreement.
YAHOO! INC.
By:
-----------------------------------
Title:
---------------------------------
Address: 3420 Central Expressway
Santa Clara, CA 95051
AGREED TO AND ACCEPTED:
INDEMNITEE:
- --------------------------------------
(Signature)
Address:
- -------------------------------------------------------------------------------
-------------------------------
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SKU-1508-PS-99
<PAGE>
DETACH HERE
PROXY
YAHOO! INC.
1999 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 April 9, 1999, 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 1999 Annual Meeting of Shareholders of the Company to be
held on May 14, 1999, 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.
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE BELOW
1. To amend the Company's Articles of Incorporation to delete Article VI
which provides for a classified Board of Directors;
FOR AGAINST ABSTAIN
/ / / / / /
2. To elect six directors of the Company to serve until the 2000 Annual
Meeting of Shareholders or until their respective successors are elected
and qualified;
NOMINEES: Timothy Koogle, Jerry Yang, Eric Hippeau, Arthur H. Kern,
Michael Moritz, Jeffrey Mallett
FOR WITHHOLD
/ / / /
/ / __________________________________________________
For all nominees except as noted on the line above
3. To change the state of incorporation FOR AGAINST ABSTAIN
of the Company from California to Delaware; / / / / / /
4. To ratify the appointment of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP as / / / / / /
the independent accountants for
the Company for the year ending
December 31, 1999;
5. To amend the Company's 1995 Stock FOR AGAINST ABSTAIN
Plan to increase the shares available / / / / / /
for issuance under the plan by an
aggregate of 40,000,000 shares, to
126,000,000 shares;
6. To amend the Company's 1996 FOR AGAINST ABSTAIN
Directors' Stock Option Plan to / / / / / /
revise the four-year vesting
schedule with respect to the
annual option grants under the plan,
commencing with the options granted
on the date of the Company's 2000
Annual Meeting of Shareholders, such
that 25% of the granted options shall
vest on the one-year anniversary of
the date of grant, with the remaining
options to vest in equal monthly
installments over the 36-month
period thereafter; and
7. To transact such other business as FOR AGAINST ABSTAIN
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:____________________
<PAGE>
Appendix F
YAHOO! INC.
1995 STOCK PLAN
(PROPOSED MAY 1999 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 126,000,000 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>
Appendix G
YAHOO! INC.
1996 DIRECTORS' STOCK OPTION PLAN
(PROPOSED MAY 1999 AMENDMENT)
1. PURPOSES OF THE PLAN. The purposes of this Directors' Stock Option
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their
continued service on the Board.
All options granted hereunder shall be "nonstatutory stock options".
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean Yahoo! Inc., a California corporation.
(e) "CONTINUOUS STATUS AS A DIRECTOR" shall mean the absence of
any interruption or termination of service as a Director.
(f) "DIRECTOR" shall mean a member of the Board.
(g) "EMPLOYEE" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient in and of itself to constitute "employment" by the Company.
(h) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
(i) "OPTION" shall mean a stock option granted pursuant to the
Plan. All options shall be nonstatutory stock options (i.e., options that are
not intended to qualify as incentive stock options under Section 422 of the
Code).
(j) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
(k) "OPTIONEE" shall mean an Outside Director who receives an
Option.
(l) "OUTSIDE DIRECTOR" shall mean a Director who is not an
Employee.
(m) "PARENT" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
<PAGE>
(n) "PLAN" shall mean this 1996 Directors' Stock Option Plan.
(o) "SHARE" shall mean a share of the Common Stock, as adjusted
in accordance with Section 11 of the Plan.
(p) "SUBSIDIARY" shall mean a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 1,200,000 Shares (the "Pool") 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 which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. If Shares which were acquired upon
exercise of an Option are subsequently repurchased by the Company, such
Shares shall not in any event be returned to the Plan and shall not become
available for future grant under the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) ADMINISTRATOR. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall
be automatic and nondiscretionary and shall be made strictly in accordance
with the following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of
Shares to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 50,000 Shares (the "First Option") on the date on which
such person first becomes an Outside Director, whether through election by
the shareholders of the Company or appointment by the Board of Directors to
fill a vacancy.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 30,000 Shares (a "Subsequent Option") on the date of each
Annual Meeting of the Company's Shareholders (which Subsequent Option shall
be decreased to 20,000 Shares commencing with the grants made on the date of
the Company's 2000 Annual Meeting) immediately following which such Outside
Director is serving on the Board, with the first such grant being made at the
1997 Annual Meeting, provided that, on such date, he or she shall have served
on the Board for at least six (6) months prior to the date of such Annual
Meeting.
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, in the event that a grant would cause the number of Shares
subject to outstanding Options plus the number of Shares previously purchased
upon exercise of Options to exceed the Pool, then each
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<PAGE>
such automatic grant shall be for that number of Shares determined by
dividing the total number of Shares remaining available for grant by the
number of Outside Directors receiving an Option on such date on the automatic
grant date. Any further grants shall then be deferred until such time, if
any, as additional Shares become available for grant under the Plan through
action of the shareholders to increase the number of Shares which may be
issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any grant of an Option made before the Company has obtained
shareholder approval of the Plan in accordance with Section 17 hereof shall
be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 17 hereof.
(vi) The terms of each First Option granted hereunder shall be
as follows:
(1) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof.
(2) the exercise price per Share shall be 100% of the
fair market value per Share on the date of grant of the First Option,
determined in accordance with Section 8 hereof.
(3) the First Option shall become exercisable in
installments cumulatively as to 1/48 of the Shares subject to the First
Option at the end of each month following the date of grant of the Option.
(vii) The terms of each Subsequent Option granted hereunder
shall be as follows:
(1) the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Section 9 hereof.
(2) the exercise price per Share shall be 100% of the
fair market value per Share on the date of grant of the Subsequent Option,
determined in accordance with Section 8 hereof.
(3) the Subsequent Option shall become exercisable as to
twenty five percent (25%) of the Shares subject to the Subsequent Option on
the first anniversary of the date of grant of the Subsequent Option and shall
thereafter become exercisable in installments cumulatively as to 1/48 of the
Shares subject to the Subsequent Option at the end of each month following
such first anniversary; provided, however, that Subsequent Options granted
prior to the date of the Company's 2000 Annual Meeting of Shareholders shall
become exercisable as to 100% of the Shares subject to the Subsequent Option
on the four-year anniversary of the date of grant of the Subsequent Option.
(c) POWERS OF THE BOARD. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its
discretion: (i) to determine, upon review of relevant information and in
accordance with Section 8(b) of the Plan, the fair market value of the Common
Stock; (ii) to determine the exercise price per share of Options to be
granted, which exercise price shall be determined in accordance with Section
8(a) of the Plan; (iii) to interpret the Plan; (iv) to prescribe, amend and
rescind rules and regulations relating to the Plan; (v) to authorize any
person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option
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<PAGE>
previously granted hereunder; and (vi) to make all other determinations
deemed necessary or advisable for the administration of the Plan.
(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and
any other holders of any Options granted under the Plan.
(e) SUSPENSION OR TERMINATION OF OPTION. If the President or his
or her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the
Outside Director accused of such misconduct). If the Board of Directors
(excluding the Outside Director accused of such misconduct) determines an
Optionee has committed an act of embezzlement, fraud, dishonesty, nonpayment
of an obligation owed to the Company, breach of fiduciary duty or deliberate
disregard of the Company rules resulting in loss, damage or injury to the
Company, or if an Optionee makes an unauthorized disclosure of any Company
trade secret or confidential information, engages in any conduct constituting
unfair competition, induces any Company customer to breach a contract with
the Company or induces any principal for whom the Company acts as agent to
terminate such agency relationship, neither the Optionee nor his or her
estate shall be entitled to exercise any option whatsoever. In making such
determination, the Board of Directors (excluding the Outside Director accused
of such misconduct) shall act fairly and shall give the Optionee an
opportunity to appear and present evidence on Optionee's behalf at a hearing
before the Board or a committee of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors.
All Options shall be automatically granted in accordance with the terms set
forth in Section 4(b) hereof. An Outside Director who has been granted an
Option may, if he or she is otherwise eligible, be granted an additional
Option or Options in accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect
to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the
Director or the Company may have to terminate his or her directorship at any
time.
6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective on
the effectiveness of the registration statement under the Securities Act of
1933 relating to the Company's initial public offering of securities. It
shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 13 of the Plan.
7. TERM OF OPTIONS. The term of each Option shall be ten (10) years
from the date of grant thereof.
8. 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 100% of the fair
market value per Share on the date of grant of the Option.
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<PAGE>
(b) FAIR MARKET VALUE. The fair market value shall be determined
by the Board; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid
and asked prices of the Common Stock in the over-the-counter market on the
date of grant, as reported in The Wall Street Journal (or, if not so
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation ("Nasdaq") System) or, in the event the Common
Stock is traded on the Nasdaq National Market or listed on a stock exchange,
the fair market value per Share shall be the closing price on such system or
exchange on the date of grant of the Option, as reported in The Wall Street
Journal. With respect to any Options granted hereunder concurrently with the
initial effectiveness of the Plan, the fair market value shall be the Price
to Public as set forth in the final prospectus relating to such initial
public offering.
(c) FORM OF CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of
cash, check, other Shares of Common Stock having a fair market value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised (which, if acquired from the Company,
shall have been held for at least six months), or any combination of such
methods of payment and/or any other consideration or method of payment as
shall be permitted under applicable corporate law.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4(b) hereof; provided, however, that no Options shall be exercisable
prior to shareholder approval of the Plan in accordance with Section 17
hereof has been obtained.
An Option may not be exercised for a fraction of a Share.
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 full payment
for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may consist of any consideration and
method of payment allowable under Section 8(c) 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, notwithstanding the exercise of the Option. A share certificate for
the number of Shares so acquired shall be issued to the Optionee as soon as
practicable after 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 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which 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.
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<PAGE>
(b) TERMINATION OF STATUS AS A DIRECTOR. If an Outside Director
ceases to serve as a Director, he or she may, but only within ninety (90)
days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to
exercise it at the date of such termination. Notwithstanding the foregoing,
in no event may the Option be exercised after its term set forth in Section 7
has expired. To the extent that such Outside Director was not entitled to
exercise an Option at the date of such termination, or does not exercise such
Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 9(b) above,
in the event a Director is unable to continue his or her service as a
Director with the Company as a result of his or her total and permanent
disability (as defined in Section 22(e)(3) of the Internal Revenue Code), he
or she may, but only within six (6) months (or such other period of time not
exceeding twelve (12) months as is determined by the Board) from the date of
such termination, exercise his or her Option to the extent he or she was
entitled to exercise it at the date of such termination. Notwithstanding the
foregoing, in no event may the Option be exercised after its term set forth
in Section 7 has expired. To the extent that he or she was not entitled to
exercise the Option at the date of termination, or if he or she does not
exercise such Option (which he or she was entitled to exercise) within the
time specified herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:
(i) During the term of the Option who is, at the time of his
or her death, a Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the Option may be
exercised, at any time within six (6) months following the date of death, 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 of the right to
exercise that would have accrued had the Optionee continued living and
remained in Continuous Status as Director for six (6) months (or such lesser
period of time as is determined by the Board) after the date of death.
Notwithstanding the foregoing, in no event may the Option be exercised after
its term set forth in Section 7 has expired.
(ii) Within three (3) months after the termination of
Continuous Status as a Director, the Option may be exercised, at any time
within six (6) months following the date of death, 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 of the right to exercise that had accrued
at the date of termination. Notwithstanding the foregoing, in no event may
the option be exercised after its term set forth in Section 7 has expired.
10. NONTRANSFERABILITY OF OPTIONS. The Option 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 or pursuant to a
qualified domestic relations order (as defined by the Code or the rules
thereunder). The designation of a beneficiary by an Optionee does not
constitute a transfer. An Option may be exercised during the lifetime of an
Optionee only by the Optionee or a transferee permitted by this Section.
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<PAGE>
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have
yet been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock
covered by each such outstanding Option, 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 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.
(b) CORPORATE TRANSACTIONS. In the event of (i) a dissolution or
liquidation of the Company, (ii) a sale of all or substantially all of the
Company's assets, (iii) a merger or consolidation in which the Company is not
the surviving corporation, or (iv) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote
are exchanged, the Company shall give to the Eligible Director, at the time
of adoption of the plan for liquidation, dissolution, sale, merger,
consolidation or reorganization, either a reasonable time thereafter within
which to exercise the Option, including Shares as to which the Option would
not be otherwise exercisable, prior to the effectiveness of such liquidation,
dissolution, sale, merger, consolidation or reorganization, at the end of
which time the Option shall terminate, or the right to exercise the Option,
including Shares as to which the Option would not be otherwise exercisable
(or receive a substitute option with comparable terms), as to an equivalent
number of shares of stock of the corporation succeeding the Company or
acquiring its business by reason of such liquidation, dissolution, sale,
merger, consolidation or reorganization.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date determined in accordance with Section 4(b)
hereof. Notice of the determination shall be given to each Outside Director
to whom an Option is so granted within a reasonable time after the date of
such grant.
13. 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, to the extent necessary and desirable to comply with Rule
16b-3 under the Exchange Act (or any other applicable law or regulation), the
Company shall obtain approval of the shareholders of the Company to Plan
amendments to the extent and in the manner required by such law or
regulation. Notwithstanding the foregoing, the provisions set forth in
Section 4 of this Plan (and any other
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<PAGE>
Sections of this Plan that affect the formula award terms required to be
specified in this Plan by Rule 16b-3) shall not be amended more than once
every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall
not affect Options already granted to such Optionee 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.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such
Option 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, state securities laws, and the
requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance. 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 any of the aforementioned relevant provisions
of law.
15. 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. 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.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option
hereunder. If such shareholder approval is obtained at a duly held
shareholders' meeting, it may be obtained by the affirmative vote of the
holders of a majority of the outstanding shares of the Company present or
represented and entitled to vote thereon. If such shareholder approval is
obtained by written consent, it may be obtained by the written consent of the
holders of a majority of the outstanding shares of the Company. Options may
be granted, but not exercised, before such shareholder approval.
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