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As Of Filer Filing For·On·As Docs:Size Issuer Agent 4/04/05 Yahoo Inc DEF 14A 5/19/05 1:452K Merrill Corp/New/FA |
Document/Exhibit Description Pages Size 1: DEF 14A Definitive Proxy Solicitation Material HTML 436K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Filed by a Party other than the Registrant o |
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Check the appropriate box: |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
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YAHOO! INC. |
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(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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Fee paid previously with preliminary materials. |
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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. |
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Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 19, 2005
We will hold the annual meeting of stockholders of Yahoo! Inc., a Delaware corporation (the "Company"), at the Santa Clara Convention Center, located at 5001 Great America Parkway, Santa Clara, California, on May 19, 2005, at 10:00 a.m., local time, for the following purposes:
These items of business, including the nominees for directors, are more fully described in the proxy statement accompanying this Notice.
The board of directors has fixed the close of business on March 23, 2005 as the record date for determining the stockholders entitled to notice of and to vote at the annual meeting and any adjournment or postponement thereof.
All stockholders 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, or vote electronically through the Internet or by telephone, to ensure your representation and the presence of a quorum at the annual meeting. If you submit your proxy 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. Only stockholders of record as of the close of business on March 23, 2005 are entitled to receive notice of, to attend and to vote at the meeting.
| By Order of the Board of Directors, | ||
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Michael J. Callahan Senior Vice President, General Counsel and Secretary |
Sunnyvale,
California
April 4, 2005
701
First Avenue
Sunnyvale, CA 94089
This proxy statement is furnished in connection with the solicitation by the board of directors of Yahoo! Inc., a Delaware corporation (the "Company", "Yahoo!", or "us"), of proxies for use in voting at the 2005 annual meeting of stockholders, to be held at the Santa Clara Convention Center, located at 5001 Great America Parkway, Santa Clara, California, on May 19, 2005, at 10:00 a.m., local time, and any adjournment or postponement thereof. On or about April 8, 2005, this proxy statement, the enclosed proxy card and the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004 are being mailed to stockholders entitled to vote at the annual meeting.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND
OUR 2005 ANNUAL MEETING
Q: Why am I receiving these materials?
A: The board of directors of Yahoo! is providing these proxy materials to you in connection with our 2005 annual meeting of stockholders, which will take place on May 19, 2005. As a stockholder, you are invited to attend the annual meeting and are entitled to and requested to vote on the proposals described in this proxy statement.
Q: What proposals will be voted on at the annual meeting?
A: Stockholders will vote on four proposals at the annual meeting:
We will also consider other business that properly comes before the annual meeting.
Q: How does the board recommend I vote on these proposals?
A: Yahoo!'s board of directors recommends that you vote your shares:
Q: Who is entitled to vote?
A: Stockholders of record as of the close of business on March 23, 2005, the record date, are entitled to notice of and to vote at the annual meeting.
Q: How many shares can vote?
A: At the close of business on the record date, 1,387,954,609 shares of common stock were outstanding and entitled to vote. (All references to numbers of shares and share or exercise prices in this proxy statement are presented after giving effect to our two-for-one stock split effected in May 2004.) We have no other class of stock outstanding.
Q: What shares can I vote?
A: You may vote all shares of Yahoo! common stock owned by you as of the close of business on the record date of March 23, 2005. You may cast one vote per share that you held on the record date. A list of stockholders entitled to vote at the annual meeting will be available during ordinary business hours at Yahoo!'s offices at 701 First Avenue, Sunnyvale, CA 94089 for a period of at least 10 days prior to the annual meeting.
Q: How can I vote my shares at the annual meeting?
A: If your shares are registered directly in your name with our transfer agent, EquiServe Trust Company, N.A., you are considered the "stockholder of record" with respect to those shares and the proxy materials and proxy card are being sent directly to you by Yahoo! As the stockholder of record, you have the right to vote in person at the meeting. If you choose to do so, you can bring the enclosed proxy card or vote using the ballot provided at the meeting. Most stockholders of Yahoo! hold their shares through a broker, bank or other nominee (that is, in "street name") rather than directly in their own name. If you hold your shares in street name, the proxy materials are being forwarded to you by your broker, bank or other nominee together with a voting instruction card. Because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a "legal proxy" from the broker, bank or other nominee that holds your shares, giving you the right to vote the shares at the meeting. Even if you plan to attend the annual meeting, we recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the annual meeting.
Q: What do I need for admission to the annual meeting?
A: You are entitled to attend the annual meeting only if you are a stockholder of record or a beneficial owner as of March 23, 2005 or you hold a valid proxy for the annual meeting. You should be prepared to present photo identification for admittance. If you are the stockholder of record your name will be verified against the list of stockholders of record prior to your being admitted to the annual meeting. If you hold your shares in street name, you should provide proof of beneficial ownership on the record date, such as a brokerage account statement showing that you owned Yahoo! stock as of the record date, a copy of the voting instruction card provided by your broker, bank or other nominee, or other similar evidence of ownership as of the record date. If you do not provide photo identification or comply with the other procedures outlined above upon request, you will not be admitted to the annual meeting.
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Q: How can I vote my shares without attending the annual meeting?
A: Whether you are the stockholder of record or hold your shares in street name, you may direct your vote without attending the annual meeting by completing and mailing your proxy card or voting instruction in the enclosed pre-paid envelope. In addition, if you are the stockholder of record, you may grant a proxy to vote your shares at the annual meeting by telephone, by calling 1-877-PRX-VOTE (1-877-779-8683) and following the simple recorded instructions, twenty-four hours a day, seven days a week, at any time prior to 11:59 p.m. Eastern Time the day before the annual meeting. Alternatively, you may vote via the Internet at any time prior to 11:59 p.m. Eastern Time the day before the annual meeting, by going to http://www.eproxyvote.com/yhoo and following the instructions to create an electronic ballot. If you vote by telephone or the Internet, you will be required to provide the control number contained on your proxy card. If your shares are held in street name, your proxy card may contain instructions from your broker, bank or nominee that allow you to vote your shares using the Internet or by telephone. Please consult with your broker, bank or nominee if you have any questions regarding the electronic voting of shares held in street name. The granting of proxies electronically is allowed by Section 212(c)(2) of the Delaware General Corporation Law. If you do not attend the annual meeting, you can listen to a webcast of the proceedings at Yahoo!'s investor relations site at www.yahoo.com/info/investor.
Q: How will my shares be voted if I return a blank proxy card?
A: If you are a stockholder of record, and you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by our board of directors on all matters and as the proxyholders may determine in their discretion with respect to any other matters properly presented for a vote before the meeting. If you hold your shares in street name and do not provide your broker with voting instructions (including by returning a blank voting instruction card), your shares may constitute "broker non-votes." Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given.
Q: Can I change my vote or revoke my proxy?
A: You may change your vote or revoke your proxy at any time before your proxy is voted at the annual meeting. If you are a stockholder of record, you may change your vote or revoke your proxy by: (1) delivering to Yahoo! (Attention: Corporate Secretary) at the address on the first page of this proxy statement a written notice of revocation of your proxy; (2) delivering to Yahoo! an authorized proxy bearing a later date (including a proxy by telephone or over the Internet); or (3) attending the annual meeting and voting in person. Attendance at the meeting in and of itself, without voting in person at the meeting, will not cause your previously granted proxy to be revoked. For shares you hold in street name, you may change your vote by submitting new voting instructions to your broker, bank or other nominee or, if you have obtained a legal proxy from your broker, bank or other nominee giving you the right to vote your shares at the annual meeting, by attending the meeting and voting in person.
Q: How are abstentions and broker non-votes treated?
A: Abstentions have the same effect as votes "AGAINST" a matter. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal. Therefore, broker non-votes will not affect the outcome of any matter being voted on at the meeting.
Q: How many shares must be present or represented to conduct business at the annual meeting?
A: The quorum requirement for holding the annual meeting and transacting business is that holders of a majority of the outstanding shares of common stock entitled to vote must be present in person or represented by proxy. Both abstentions and broker non-votes are counted for the purpose of determining the presence of a quorum.
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Q: What if a quorum is not present at the meeting?
A: If a quorum is not present at the scheduled time of the annual meeting, we may adjourn the meeting, either with or without the vote of the stockholders. If we propose to have the stockholders vote whether to adjourn the meeting, the proxyholders will vote all shares for which they have authority in favor of the adjournment.
Q: What vote is required to approve each of the proposals?
A: In the election of directors, the nine persons receiving the highest number of "FOR" votes at the annual meeting will be elected. All other proposals require the affirmative "FOR" vote of a majority of those shares present in person or represented by proxy and entitled to vote on those proposals.
Q: What happens if additional matters are presented at the annual meeting?
A: Other than the four proposals described in this proxy statement, we are not aware of any other business to be acted upon at the annual meeting. If you grant a proxy, the persons named as proxyholders, Michael J. Callahan and Susan L. Decker, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting.
Q: Who will count the votes?
A: A representative of Equiserve Trust Company, N.A. will tabulate the votes and act as Inspector of Elections.
Q: Where can I find the voting results of the annual meeting?
A: Yahoo! will announce preliminary voting results at the annual meeting and publish final results in Yahoo!'s quarterly report on Form 10-Q for the second quarter of fiscal 2005.
Q: Who will bear the cost of soliciting votes for the annual meeting?
A: The solicitation of proxies will be conducted by mail, and Yahoo! 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 Yahoo! common stock. Yahoo! may conduct further solicitation personally, telephonically, through the Internet or by facsimile through its officers, directors and employees, none of whom will receive additional compensation for assisting with the solicitation. Yahoo! has retained Georgeson Shareholder Communications, Inc. to assist in the solicitation of proxies, for a fee estimated to be approximately $20,000 plus out of pocket expenses. Yahoo! may generate other expenses in connection with the solicitation of proxies for the annual meeting.
Q: May I propose actions for consideration at next year's annual meeting or nominate individuals to serve as directors?
A: Yes. The following requirements apply to stockholder proposals, including director nominations.
Stockholder Proposals:
Stockholders interested in submitting a proposal for inclusion in the proxy materials distributed by us for the 2006 annual meeting of stockholders may do so by following the procedures prescribed in Rule 14a-8 promulgated by the Securities and Exchange Commission ("SEC"). To be eligible for inclusion, stockholder proposals must be received no later than December 5, 2005 and must comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be sent to Yahoo!'s Corporate Secretary at 701 First Avenue, Sunnyvale, California 94089.
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Stockholders who otherwise wish to present a proposal at the 2006 annual meeting of stockholders must deliver written notice of the proposal to the Corporate Secretary at the above address no earlier than February 18, 2006 and no later than March 20, 2006 (provided, however, that if the 2006 annual meeting is held earlier than April 19, 2006 or later than July 18, 2006, proposals must be received no earlier than the 90th day prior to the date of the 2006 annual meeting and no later than the later of the 60th day prior to the date of the 2006 annual meeting or the 10th day following the day on which public announcement of the date of the 2006 annual meeting is first made). The submission must include certain information concerning the stockholder and the proposal, as specified in the Company's bylaws.
Nomination of Director Candidates:
Stockholders who wish to nominate persons for election to the board of directors at a meeting must deliver written notice of the proposal to the Corporate Secretary at the above address no earlier than 90 days and no later than 60 days prior to the meeting (provided, however, that in the event less than 60 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice of a nomination must be received no later than the close of business on the 10th day following the day on which the notice or public announcement of the date of the meeting is mailed or made). The submission must include certain information concerning the stockholder and the nominee, as specified in the Company's bylaws.
Copy of Bylaws:
To obtain a copy of the bylaws at no charge, you may write to Yahoo!'s Corporate Secretary at the above address.
Q: How do I obtain a separate set of proxy materials if I share an address with other stockholders?
A: As permitted by applicable law, only one copy of this proxy statement is being delivered to stockholders residing at the same address, unless such stockholders have notified Yahoo! of their desire to receive multiple copies of the proxy statement. Yahoo! will promptly deliver, upon oral or written request, a separate copy of the proxy statement to any stockholder residing at an address to which only one copy was mailed. Requests for additional copies should be directed to Investor Relations, Yahoo! Inc., 701 First Avenue, Sunnyvale, California 94089 or by telephone at (408) 349-3300.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
At the annual meeting, the stockholders will elect nine directors to serve until the 2006 annual meeting of stockholders or until their respective successors are elected and qualified. The authorized number of directors is currently ten. The Company believes leaving a vacancy on the board will provide the directors with flexibility during the year to appoint an additional member to the board when and if an individual whose services would be beneficial to the Company and its stockholders is identified. Unless marked otherwise, proxies received will be voted "FOR" the election of the nine nominees named below.
Assuming a quorum is present, the nine nominees receiving the highest number of affirmative votes of shares entitled to be voted for them will be elected as directors of the Company. Stockholders are not entitled to cumulate votes in the election of directors. All nominees have consented to serve as directors, if elected. If any nominee is unable or unwilling to serve as a director at the time of the annual meeting, the persons who are designated as proxies intend to vote, in their discretion, for such other persons, if any, as may be designated by the board of directors. As of the date of this proxy statement, the board of directors 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.
The names of the nominees, their ages as of February 11, 2005, and certain other information about them are set forth below:
| Name |
Age |
Position |
||
|---|---|---|---|---|
| Terry S. Semel | 61 | Chairman and Chief Executive Officer | ||
| Jerry Yang | 36 | Chief Yahoo! and Director | ||
| Roy J. Bostock (2)(3) | 64 | Director | ||
| Ronald W. Burkle (3) | 52 | Director | ||
| Eric Hippeau | 53 | Director | ||
| Arthur H. Kern (1)(2)(3) | 58 | Director | ||
| Robert A. Kotick (1) | 41 | Director | ||
| Edward R. Kozel (2) | 49 | Director | ||
| Gary L. Wilson (1)(2) | 65 | Director |
Each of the director nominees listed above was elected to be a director at the Company's annual meeting of stockholders held on May 21, 2004. There are no family relationships among any of the directors or executive officers of the Company. Our board of directors has affirmatively determined that each of Messrs. Bostock, Burkle, Hippeau, Kern, Kotick, Kozel and Wilson is an independent director as defined in the rules of The Nasdaq Stock Market ("Nasdaq").
Mr. Semel was appointed as the Company's Chairman of the board of directors and Chief Executive Officer on May 1, 2001. Since September 1999, Mr. Semel has also served as Chairman and Chief Executive Officer of Windsor Media, Inc. From March 1994 to September 1999, Mr. Semel served as Chairman of the board of directors and Co-Chief Executive Officer of Warner Bros. and Warner Music Group, entertainment and media companies. Mr. Semel also serves as a director of Polo Ralph Lauren Corporation. Mr. Semel holds a B.S. degree in accounting from Long Island University.
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Mr. Yang, a founder of the Company and Chief Yahoo!, has served as a member of the board of directors and an officer of the Company since March 1995. Mr. Yang co-developed Yahoo! in 1994 while he was working towards his Ph.D. in electrical engineering at Stanford University. As Chief Yahoo!, Mr. Yang reports to the Chairman and Chief Executive Officer, Terry Semel. Mr. Yang is involved in guiding the Company's vision, is involved in many key aspects of the business at a strategic and operational level, and serves as a stalwart of the Company's employee culture and morale. Mr. Yang also serves as a director of Yahoo! Japan Corporation and Cisco Systems, Inc. Mr. Yang holds B.S. and M.S. degrees in electrical engineering from Stanford University.
Mr. Bostock has served as a member of the board of directors since May 2003. Mr. Bostock has been Chairman Emeritus of BCom3 Group, Inc., an advertising and marketing services firm, since September 2002 and served as Chairman from January 2000 to September 2002. From July 1990 to January 2000, Mr. Bostock served as Chairman and Chief Executive Officer of MacManus Group, Inc., an advertising and marketing services firm. Mr. Bostock is Chairman of the Partnership for a Drug-Free America, a not-for-profit corporation creating advertising to reduce the use of illicit drugs in the United States. Mr. Bostock holds a Bachelor's degree from Duke University and an M.B.A. from Harvard University.
Mr. Burkle has served as a member of the board of directors since November 2001. Mr. Burkle is managing partner of The Yucaipa Companies, a private investment firm, which he co-founded in 1986. Mr. Burkle also serves as a director of Yucaipa Equity Partners, L.P., Occidental Petroleum Corp., and KB Home Corporation.
Mr. Hippeau has served as a member of the board of directors since January 1996. Mr. Hippeau has been a Managing Partner of SOFTBANK Capital, a technology oriented venture capital firm, since 2000. Before joining SOFTBANK Capital, from 1993-2000, Mr. Hippeau served as Chairman and CEO of Ziff-Davis, Inc., an integrated media and marketing services company serving the technology community. Mr. Hippeau joined Ziff-Davis, Inc. in 1989 as Publisher of PC Magazine and held several senior executive positions before becoming Chairman and CEO. His experience prior to Ziff-Davis includes senior executive positions at International Data Group and as an international technology business investor and media leader. Mr. Hippeau also serves as a director of Starwood Hotels and Resorts WorldWide, Inc.
Mr. Kern has served as a member of the board of directors since January 1996. Mr. Kern is an investor in several media and marketing companies. Prior to that, Mr. Kern was co-founder and Chief Executive Officer of American Media, a group owner of commercial radio stations sold to AMFM (now part of Clear Channel Communications, Inc.) in October 1994. Mr. Kern also serves as a director of Digitas, Inc. Mr. Kern is a graduate of Yale University.
Mr. Kotick has been a director of the Company since March 2003. Since February 1991, Mr. Kotick has been the Chairman and Chief Executive Officer of Activision, Inc., a publisher of interactive entertainment software products.
Mr. Kozel has served as a member of the board of directors since October 2000. He has been the managing member of Open Range Ventures, a venture capital firm, since January 2000. Between January 2004 and December 2004, Mr. Kozel was a managing director of Integrated Finance Ltd. Between October 2000 and March 2001, Mr. Kozel was the Chief Technology Officer, Service Provider Line of Business of Cisco Systems, Inc., a network and communications company. Prior to that time, he was Senior Vice President, Corporate Development at Cisco from April 1998 to January 2000, and Senior Vice President and Chief Technical Officer from January 1996 to April 1998. Mr. Kozel also serves as a director of Reuters Group PLC, Red Hat Linux, Inc., and Symbol Technologies, Inc. Mr. Kozel holds a B.S. degree in electrical engineering from the University of California, Davis.
Mr. Wilson has served as a member of the board of directors since November 2001. Mr. Wilson has served as Chairman of the board of directors of Northwest Airlines Corporation, the parent of Northwest
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Airlines, Inc. since April 1997. Mr. Wilson also serves as a director of The Walt Disney Company, where he worked for 15 years, and as a director of CB Richard Ellis Group, Inc. Mr. Wilson holds a Bachelor's degree from Duke University and an M.B.A. from the Wharton Graduate School of Business.
Meetings and Committees of the Board of Directors
During fiscal 2004, the board of directors held nine meetings and took action by unanimous written consent on five occasions. During fiscal 2004, no incumbent director then in office attended fewer than 75% of the aggregate of the total number of meetings of the board of directors held during the period in which he was a director and the total number of meetings held by all of the committees of the board of directors on which he served. The board of directors has an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee.
Audit Committee. The Audit Committee is comprised of four of the Company's non-employee directors: Messrs. Kozel (Chair), Bostock, Kern and Wilson. It met nine times during fiscal 2004. The Audit Committee is responsible for the appointment, retention and termination of a firm of independent registered public accountants and monitors the effectiveness of the audit effort, the Company's financial and accounting organization and its system of internal accounting and disclosure controls. Each member of the Audit Committee is independent within the meaning of the rules of the SEC and Nasdaq. The board has determined that Mr. Wilson qualifies as an audit committee financial expert within the meaning of SEC rules.
The Audit Committee is governed by a charter, which was amended on May 19, 2004. The amended charter is attached to this proxy statement as Exhibit A, and is also available on our corporate website at www.yahoo.com. The charter may be found on our website as follows: From our main web page, first click on "Company Info" at the bottom of the page and then on "Investor Relations." Next click on "Corporate Governance", then "Board Committees" and "Audit Committee Charter."
Compensation Committee; Compensation Committee Interlocks and Insider Participation. The Compensation Committee consists (and consisted during all of fiscal 2004) of three of the Company's non-employee directors: Messrs. Kotick (Chair), Kern and Wilson. Each of the members of the Compensation Committee is an independent director as defined in Nasdaq rules. The Compensation Committee held ten meetings and took action by unanimous written consent on thirty-one occasions during fiscal 2004. The Compensation Committee's functions are to establish and administer the Company's policies regarding compensation. The Compensation Committee also administers the 1995 Stock Plan and the Company's Amended and Restated 1996 Employee Stock Purchase Plan.
None of the members of the Compensation Committee (i) was an officer or employee of the Company or any of its subsidiaries during the fiscal year, (ii) was formerly an officer of the Company or any of its subsidiaries, or (iii) had any relationships requiring disclosure by the Company under the SEC's rules requiring disclosure of certain relationships and related party transactions. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or Compensation Committee.
The Compensation Committee is governed by a charter, which is available on our corporate website at www.yahoo.com. The charter may be found as follows: From our main web page, first click on "Company Info" at the bottom of the page and then on "Investor Relations." Next click on "Corporate Governance", then "Board Committees" and "Compensation Committee Charter."
Nominating and Corporate Governance Committee. The Company has a Nominating and Corporate Governance Committee (the "Nominating/Governance Committee"). The functions of the Nominating/Governance Committee include (i) identifying and recommending to the board of directors individuals qualified to serve as directors of the Company and on the committees of the board; (ii) advising the board with respect to matters of board composition, procedures and committees; (iii) developing and
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recommending to the board a set of corporate governance principles applicable to the Company and overseeing corporate governance matters generally; and (iv) overseeing the annual evaluation of the board and the Company's management.
The Nominating/Governance Committee is governed by a charter, a current copy of which is available on our corporate website at www.yahoo.com. The charter may be found as follows: From our main web page, first click on "Company Info" at the bottom of the page and then on "Investor Relations." Next click on "Corporate Governance", then "Board Committees" and "Nominating & Corporate Governance Committee Charter."
The members of the Nominating/Governance Committee are Messrs. Kern (Chair), Bostock and Burkle, each of whom is an independent director as defined in Nasdaq rules. The Nominating/Governance Committee met four times during 2004.
The Nominating/Governance Committee will consider director candidates recommended by stockholders. In evaluating candidates submitted by stockholders, the Nominating/Governance Committee will consider (in addition to the criteria applicable to all director candidates described below) the needs of the board and the qualifications of the candidate, and may also take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held. To have a candidate considered by the Nominating/Governance Committee, a stockholder must submit the recommendation in writing and must include the following information:
The stockholder recommendation and information described above must be sent to the Corporate Secretary at 701 First Avenue, Sunnyvale, California 94089.
The Nominating/Governance Committee believes that the minimum qualifications for service as a director of the Company are that a nominee possess (i) an ability, as demonstrated by recognized success in his or her field, to make meaningful contributions to the board's oversight of the business and affairs of the Company, and (ii) an impeccable reputation of integrity and competence in his or her personal or professional activities. Pursuant to its charter, the Nominating/Governance Committee's evaluation of potential candidates is consistent with the board's criteria for selecting new directors. Such criteria include an understanding of the Company's business environment and the possession of such knowledge, skills, expertise and diversity of experience as may enhance the board's ability to manage and direct the affairs and business of the Company and, where applicable, improve the ability of board committees to fulfill their duties. The Committee also takes into account, as applicable, the satisfaction of any independence requirements imposed by any applicable laws, regulations or rules and the Company's Corporate Governance Guidelines.
The Nominating/Governance Committee may receive suggestions from current board members, company executive officers or other sources, which may be either unsolicited or in response to requests from the Nominating/Governance Committee for such candidates. The Nominating/Governance Committee also, from time to time, may engage firms that specialize in identifying director candidates. As described above, the Nominating/Governance Committee will also consider candidates recommended by stockholders.
Once a person has been identified by the Nominating/Governance Committee as a potential candidate, the Nominating/Governance Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Nominating/
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Governance Committee determines that the candidate warrants further consideration, the Chairman or another member of the Nominating/Governance Committee may contact the person. Generally, if the person expresses a willingness to be considered and to serve on the board, the Nominating/Governance Committee may request information from the candidate, review the person's accomplishments and qualifications and may conduct one or more interviews with the candidate. The Nominating/Governance Committee may consider all such information in light of information regarding any other candidates that the Nominating/Governance Committee might be evaluating for membership on the board. In certain instances, Nominating/Governance Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate's accomplishments. The Nominating/Governance Committee's evaluation process does not vary based on whether or not a candidate is recommended by a stockholder, although, as stated above, in the case of such a candidate the board may take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held.
Communications with Directors
The board has established a process to receive communications from stockholders. Stockholders and other interested parties may contact any member (or all members) of the board, or the non-management directors as a group, any board committee or any chair of any such committee by mail or electronically. To communicate with the board of directors, any individual directors or any group or committee of directors, correspondence should be addressed to the board of directors or any such individual directors or group or committee of directors by either name or title. All such correspondence should be sent "c/o Corporate Secretary" at 701 First Avenue, Sunnyvale, California 94089. To communicate with any of our directors electronically, stockholders should send an email to CorporateSecretary@yahoo-inc.com.
All communications received as set forth in the preceding paragraph will be opened by the Corporate Secretary for the sole purpose of determining whether the contents represent a message to our directors. The Corporate Secretary will forward copies of all correspondence that, in the opinion of the Corporate Secretary, deals with the functions of the board of directors or its committees or that he or she otherwise determines requires the attention of any member, group or committee of the board of directors.
It is the Company's policy that directors are invited and encouraged to attend the annual meeting. Eight of our directors were in attendance at the 2004 annual meeting.
Director Compensation
The Company does not pay fees to its directors for performance of their duties as directors of the Company. The Company does reimburse its directors for their out-of-pocket expenses incurred in connection with attendance at board, committee and stockholder meetings, and other business of the Company. The Directors' Plan provides that each newly appointed or elected non-employee director of the Company will be granted a nonqualified stock option to purchase 100,000 shares of common stock on the date on which he or she first becomes a director. This initial option is scheduled to vest ratably over the 48-month period following the date of grant. Thereafter, on the date of each annual meeting of the Company's stockholders at which such non-employee director is elected, he or she will be granted an additional option to purchase 50,000 shares of common stock if, on such date, he or she shall have served on the board of directors for at least six months of the preceding 12 months. This annual option is scheduled to vest as to 25% of the options on the first anniversary of the date of grant, and the remainder of the option will vest ratably over the 36-month period following the first anniversary of the date of grant. All options will become exercisable upon the occurrence of a change of control event, as described in the Directors' Plan. Each of the non-employee nominees for director named in this proxy statement will have served for more than six months of the preceding 12 months at the time of the annual meeting, and will therefore be granted an option to purchase 50,000 shares of the Company's common stock under the
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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 Nasdaq on the date of grant of the option.
Required Vote
Directors are elected by a plurality of the votes of the shares present in person or by proxy at the annual meeting and entitled to vote on the election of directors. The nine persons receiving the highest number of "FOR" votes at the annual meeting will be elected as directors.
Recommendation of the Board of Directors
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE.
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PROPOSAL NO. 2
APPROVAL OF AMENDMENTS TO THE 1995 STOCK PLAN
We are asking the Company's stockholders to approve an amended and restated version of the 1995 Stock Plan, which was adopted, subject to stockholder approval, by the board of directors on April 1, 2005. The amended and restated version of the 1995 Stock Plan reflects the following amendments which are subject to stockholder approval of this proposal:
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his or her death or disability, a termination by the Company without "cause," or a termination by the award holder for "good reason."
The board of directors approved the additional share authority requested under the 1995 Stock Plan based, in part, on a belief that the number of shares currently available under the 1995 Stock Plan does not give the Company sufficient authority and flexibility to adequately provide for future incentives. The Company also believes that operation of the 1995 Stock Plan is important in attracting and retaining employees in a competitive labor market, which is essential to the Company's long-term growth and success.
SUMMARY DESCRIPTION OF THE 1995 STOCK PLAN (AS PROPOSED TO BE AMENDED)
The principal features of the 1995 Stock Plan, including the proposed amendments, are summarized below. The following summary of the 1995 Stock Plan does not purport to be complete, and is subject to and qualified in its entirety by reference to the complete text of the amended and restated 1995 Stock Plan, which has been filed as Annex A with the Securities and Exchange Commission with this proxy statement. Any stockholder of the Company who wishes to obtain a copy of the amended and restated 1995 Stock Plan document may do so upon written request to the Secretary at the Company's principal executive offices.
General
The maximum number of shares of the Company's common stock that may be issued or transferred pursuant to awards granted under the existing 1995 Stock Plan is 574,000,000 shares, of which 32,085,211 shares of common stock remain available for future award grants as of March 18, 2005. If stockholders approve the 1995 Stock Plan proposal, this share limit will be increased to 654,000,000 shares, which will increase the number of shares which remain available for future grants by 80,000,000.
A maximum of twenty percent (20%) of the foregoing share limit may be issued as restricted stock granted under the plan. If stockholders approve the 1995 Stock Plan proposal, this limit on restricted stock grants will be replaced with a formula for calculating the number of shares that may be issued with respect to "full-value awards" granted under the plan on or after May 19, 2005. For this purpose, a "full-value award" means any award under the 1995 Stock Plan except options and stock appreciation rights with an exercise or base price that is no less than the fair market value of a share of common stock on the date the award is granted. Shares issued in respect of any such full-value award granted under the 1995 Stock Plan on or after May 19, 2005 would count against the aggregate share limit under the plan as 1.75 shares for every one share actually issued in connection with the award. For example, if 100 shares are issued with respect to a restricted stock award granted under the 1995 Stock Plan on or after May 19, 2005, 175 shares will be counted against the plan's aggregate share limit in connection with that award. Accordingly, the maximum number of shares that could be issued with respect to new full-value awards granted under the 1995 Stock Plan at any time on or after May 19, 2005 would equal the number of shares then available for award grant purposes under the plan divided by 1.75.
The maximum number of shares of common stock which may be subject to options and stock appreciation rights granted under the 1995 Stock Plan to any one individual during any fiscal year shall be 15,000,000, subject to adjustment as provided in the 1995 Stock Plan.
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As of March 18, 2005, options to purchase 197,319,599 shares of common stock were subject to outstanding awards under the 1995 Stock Plan, 344,595,190 shares of common stock had been issued pursuant to awards granted under the plan (of which 3,001,032 shares were subject to outstanding and unvested restricted stock awards as of that date) and 32,085,211 shares of common stock remained available for future award grants. To the extent that an award is settled in cash or a form other than shares, the shares that would have been delivered had there been no such cash or other settlement will not be counted against the shares available for issuance under the 1995 Stock Plan. As of March 18, 2005, stock options outstanding under all of the Company's equity compensation plans (other than the Company's 1996 Employee Stock Purchase Plan) covered 210,876,179 shares of common stock in the aggregate and an additional 37,631,879 shares of common stock in the aggregate remained available for future award grants. As of that date, the weighted average exercise price of these options was $24.30 per share and the average remaining contractual life of these options was 6.9 years. No additional awards, however, may be granted under any Company equity compensation plan other than the 1995 Stock Plan, the Company's Directors' Plan, and the Company's 1996 Employee Stock Purchase Plan.
To the extent that shares are delivered pursuant to the exercise of a stock appreciation right or stock option, the number of underlying shares as to which the exercise related shall be counted against the applicable share limits, as opposed to only counting the shares actually issued. (For purposes of clarity, if a stock appreciation right relates to 100,000 shares and is exercised at a time when the payment due to the participant is 15,000 shares, 100,000 shares shall be charged against the applicable share limits with respect to such exercise.) If an award expires, becomes forfeited or becomes unexercisable for any reason without having been exercised or becoming nonforfeitable in full, the unpurchased shares that were subject to the award will become available for future grants under the 1995 Stock Plan, unless the 1995 Stock Plan has been terminated.
The 1995 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.
On March 18, 2005, the per share closing price of the common stock was $31.11 as reported on Nasdaq. The actual benefits, if any, to the holders of stock options issued under the 1995 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, 2004, the Named Executive Officers and directors of the Company have received grants under the 1995 Stock Plan of options to purchase common stock of the Company as set forth under the heading "Plan Benefits."
Purpose
The purposes of the 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 to promote the success of the Company's business.
Administration
The 1995 Stock Plan may be administered by the board of directors or by a committee of the board of directors. The board has delegated general administrative authority for the 1995 Stock Plan to the Compensation Committee, which is constituted to satisfy the applicable requirements of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Code Section 162(m). If the 1995 Stock Plan proposal is approved by stockholders, a committee may delegate some or all of its authority with respect to the 1995 Stock Plan to another committee of directors, and certain limited authority to grant awards to employees other than executive officers may be delegated to one or more officers of the Company. (The appropriate acting body, be it the board of directors, a committee within its delegated
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authority, or an officer within his or her delegated authority is referred to in this proposal as the "Administrator.") Members of the board of directors receive no additional compensation for their services in connection with the administration of the 1995 Stock Plan.
Eligibility
The 1995 Stock Plan provides that awards 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). The Administrator selects the participants who will receive awards under the 1995 Stock Plan and determines the types and terms of awards to be granted and the number of shares subject to these awards. In making these determinations, a number of factors are taken into account, including the duties and responsibilities of the participant, the value of the participant's services to the Company, the participant's present and potential contribution to the success of the Company, and other relevant factors. As of March 18, 2005, there were approximately 7,890 employees, officers, consultants and directors eligible to receive grants under the 1995 Stock Plan.
Terms of Options
Options granted under the 1995 Stock Plan may be either incentive stock options, within the meaning of Section 422 of the Code, or nonqualified stock options, as designated in the terms of the written option agreement. Incentive stock options are subject to more restrictive terms and are limited in amount by the U.S. Internal Revenue Code and the 1995 Stock Plan. Incentive stock options may only be granted to employees of the Company or a subsidiary. Each option is evidenced by a stock option agreement between the Company and the optionee. Under the 1995 Stock Plan, each option is subject to the following additional terms and conditions:
(a) EXERCISE OF THE OPTION. An option may be exercised in accordance with the terms established by the Administrator in the option agreement. 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 (or completing such other exercise procedures as the Administrator may establish from time to time) 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 Administrator and specified in the option agreement, and such form of consideration may vary for each option.
(b) EXERCISE PRICE. The per share exercise price for the shares to be issued pursuant to exercise of an option granted under the 1995 Stock Plan shall be such price as is determined by the Administrator and set forth in the applicable award agreement. The exercise price shall be no less than 100% of the fair market value of a share of the common stock on the date of grant. The fair market value per share is equal to the closing sale price on Nasdaq on the date of grant. In the case of indexed options, which have an exercise price that may change in accordance with an established percentage or a published index, the Administrator shall determine the exercise price of any such indexed option and the terms and conditions, if any, that affect any adjustments to the exercise price of such indexed option.
(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 1995 Stock Plan may be exercised, to the extent the option was exercisable on the date of termination, for a period of time after the termination as established by the Administrator in the option agreement, provided that such period may not be less than 30 days nor, in the case of incentive stock options, more than three months. In no event may the option be exercised after its expiration date. The Company has entered into agreements with certain officers that provide for
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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 12 months of termination or as set forth in the individual's option grant agreement, 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. If an optionee dies 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 or as otherwise provided in the individual's option grant agreement (but in no event later than the expiration of their 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.
(f) EXTENSION OF EXERCISE PERIOD. The 1995 Stock Plan provides that, regardless of the limited periods described above following termination of employment, disability or death of an optionee, the Administrator 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 term of options granted under the 1995 Stock Plan is set forth in the option agreement. Options generally have a term of ten years. If stockholders approve the 1995 Stock Plan proposal, the maximum term of options and other awards granted under the plan on or after the date of the 2005 Annual Meeting of stockholders will be reduced to seven 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 1995 Stock Plan permits the Administrator in its discretion to grant nonqualified stock options that are transferable to certain family members of the optionee through a gift or pursuant to a domestic relations order.
(i) ASSET SALE, MERGER OR CONSOLIDATION, ASSUMPTION OR SUBSTITUTION OF AWARDS. In the event of an asset sale, or merger or consolidation in which the Company is not the surviving entity, the board of directors may provide for the substitution or assumption of options by a successor entity. If an award is not assumed or substituted for, then the option will become vested and nonforfeitable, and the Administrator must give 30 days notice of the optionee's right to exercise his or her outstanding options (including options not otherwise exercisable) at any time within 30 days of such notice.
(j) OTHER PROVISIONS. The option agreement between the optionee and the Company may contain such other terms, provisions and conditions not inconsistent with the 1995 Stock Plan as may be determined by the Administrator, including whether an option may be settled in cash.
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Restricted Stock
The 1995 Stock Plan permits the granting of restricted stock either alone, in addition to, or in tandem with other awards made by the Company. Upon the granting of restricted stock under the 1995 Stock Plan, the participant is advised in writing of the terms, conditions and restrictions related to the award, including among other things, the number of shares of common stock that such person is entitled to purchase, the price to be paid, if any, and the other terms, conditions and restrictions applicable to the award as determined by the Administrator.
The Administrator will prescribe the vesting requirements for a restricted stock award at the time of grant. In general, restricted stock that is subject to time-based vesting will remain subject to forfeiture for a period of at least three (3) years, provided that the Administrator may provide that such awards will fully or partially vest, and any restrictions on such awards will lapse, if the Company terminates the recipient's employment without "cause" (as determined by the Administrator or as set forth in the award agreement). With respect to restricted stock that is subject to performance-based vesting, the measurement date for determining whether the performance objectives have been attained must be at least one (1) year after the date the award is granted. However, certain restricted stock awards granted under the 1995 Stock Plan are not required to comply with the restrictions described above, provided that the number of shares of common stock subject to such awards is not more than 25% of the total number of shares subject to all restricted stock awards granted under the 1995 Stock Plan. If stockholders approve the 1995 Stock Plan proposal, the Administrator may provide that restricted stock that is subject to time-based vesting will automatically become fully or partially vested if the participant's employment terminates due to the participant's death or disability or if the participant terminates employment for "good reason" (as determined by the Administrator or as set forth in the award agreement). In addition, the foregoing 25% limitation will be modified so that the maximum number of shares of common stock subject to restricted stock awards that are not required to comply with the restrictions described above will be reduced to 3,250,000 shares.
Restricted Stock Units
Restricted stock units granted under the 1995 Stock Plan will be subject to those terms and conditions including, without limitation, the duration of the period during which, and the conditions under which, the restricted stock units may be forfeited to the Company, as may be determined by the Administrator in its sole discretion. In general, awards of restricted stock units that are subject to time-based vesting will remain subject to forfeiture for a period of at least three (3) years. With respect to awards of restricted stock units that are subject to performance-based vesting, the measurement date for determining whether the performance objectives have been attained must be at least one (1) year after the date the award is granted. Restricted stock units will be paid in cash, shares, other securities or other property, as determined in the sole discretion of the Administrator, upon the lapse of the restrictions applicable thereto, or otherwise in accordance with the applicable award agreement. If stockholders approve the 1995 Stock Plan proposal, the Administrator may provide that restricted stock units that are subject to time-based vesting will automatically become fully or partially vested if the participant's employment terminates due to the participant's death or disability, or if the Company terminates the participant's employment without "cause" (as determined by the Administrator or as set forth in the award agreement), or if the participant terminates employment for "good reason" (as determined by the Administrator or as set forth in the award agreement).
Stock Appreciation Rights
Stock appreciation rights granted under the 1995 Stock Plan will be subject to such terms, including grant price and the conditions and limitations applicable to exercise thereof, as may be determined by the Administrator and specified in the applicable award agreement or thereafter, provided that stock appreciation rights may not be exercisable earlier than six months after the date of grant. Stock
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appreciation rights may be granted in tandem with another award, in addition to another award, or freestanding and unrelated to another award. A stock appreciation right will entitle the participant to receive an amount equal to the excess of the fair market value of a share on the date of exercise of the stock appreciation right over the grant price thereof. The Administrator will determine whether a stock appreciation right will be settled in cash, shares or a combination of cash and shares.
Dividend Equivalents
Dividend equivalents entitle the award recipient to receive shares of the Company's common stock as dividends paid with respect to a specified number of shares. The Administrator may provide, at the date of grant or thereafter, that dividend equivalents will be paid or distributed when accrued; provided, that dividend equivalents (other than freestanding dividend equivalents) will be subject to all conditions and restrictions of the underlying awards to which they relate. Dividend equivalents may be awarded on a free-standing basis or in connection with another award, and may be paid currently or on a deferred basis.
Performance-Based Awards
If stockholders approve the 1995 Stock Plan proposal, the Company would have enhanced authority to grant awards that are intended to be performance-based awards within the meaning of Section 162(m) of the U.S. Internal Revenue Code ("Performance-Based Awards"). Performance-Based Awards are in addition to any of the other types of awards that may be granted under the 1995 Stock Plan (including options and stock appreciation rights which may also qualify as performance-based awards for Section 162(m) purposes). Performance-Based Awards may be in the form of restricted stock, performance stock, stock units, or other types of awards authorized under the plan.
The vesting or payment of Performance-Based Awards (other than options or stock appreciation rights) will depend on the absolute or relative performance of the Company on a consolidated, subsidiary, segment, division, or business unit basis. The Administrator will establish the criterion or criteria and target(s) on which performance will be measured. The Administrator must establish criteria and targets in advance of applicable deadlines under the U.S. Internal Revenue Code and while the attainment of the performance targets remains substantially uncertain. The criteria that the Administrator may use for this purpose will include one or more of the following: revenue, revenue excluding traffic acquisition costs, gross profit, operating cash flow (operating income before depreciation and amortization), operating income, net income, cash flow from operations, capital expenditures, free cash flow, earnings per share (basic and diluted), revenue growth (organic and acquisition related), return on equity or on assets or on net investment, cost containment or reduction, unique users/registered users/paying subscribers/paying users/paying relationships, page views/searches, implementation, completion or attainment of objective goals with respect to research and development of specific products, systems or projects, or any combination thereof. The performance measurement period with respect to an award may range from three months to seven years. Performance targets will be adjusted to mitigate the unbudgeted impact of material, unusual or nonrecurring gains and losses, accounting changes or other extraordinary events not foreseen at the time the targets were set unless the Administrator provides otherwise at the time of establishing the targets.
Performance-Based Awards may be paid in stock or in cash. The maximum aggregate payment that may be made pursuant to Performance-Based Awards (other than options or stock appreciation rights) granted to any participant in any one calendar year is 2,000,000 shares of common stock (or cash of equivalent value at the time of payment). Before any Performance-Based Award (other than an option or stock appreciation right) is paid, the Administrator must certify that the performance target or targets have been satisfied. The Administrator has discretion to determine the performance target or targets and any other restrictions or other limitations of Performance-Based Awards and may reserve discretion to reduce payments below maximum award limits.
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Adjustments Upon Changes in Capitalization, Dissolution, Liquidation or Sale
In the event any change, such as a stock split or stock 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 will be made, if applicable, in the exercise price of each outstanding award, the number of shares subject to each award, the annual limitation on grants to employees, the number of shares available for issuance of grants under the 1995 Stock Plan, generally, and of restricted stock, including restricted stock that is not subject to prescribed vesting or performance requirements, and the number of shares subject to options with respect to which the Administrator may reduce the exercise price without stockholder approval, as described above.
In the event of the proposed dissolution or liquidation of the Company, each award will terminate unless otherwise provided by the Administrator. Additionally, the Administrator may provide that awards granted under the 1995 Stock Plan will vest and become non-forfeitable, as to all or any part of such award, as of the date of such dissolution or liquidation. 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, each award under the 1995 Stock Plan will be assumed or an equivalent award will be substituted by the successor corporation or a parent or subsidiary of such successor corporation, unless the Administrator determines and in lieu of such assumption or substitution, that the option will vest and become non-forfeitable, as to all or any part of such option, as of the date of such transaction. If the Administrator makes an award exercisable or non-forfeitable in lieu of assumption or substitution in the event of a merger or sale of assets, it will notify the holder that such award will be exercisable for a period of thirty (30) days from the date of such notice, and thereafter will terminate.
No Repricing
If stockholders approve the 1995 Stock Plan proposal, in no case (except due to an adjustment to reflect a stock split or similar event or any repricing that may be approved by stockholders) would any adjustment be made to a stock option or stock appreciation right award under the 1995 Stock Plan (by amendment, cancellation and regrant, exchange or other means) that would constitute a repricing of the per-share exercise or base price of the award.
No Limit on Other Authority
The 1995 Stock Plan does not limit the authority of the board of directors or any committee to grant awards or authorize any other compensation, with or without reference to the Company's common stock, under any other plan or authority.
Amendment and Termination
The board of directors may amend or terminate the 1995 Stock Plan or any portion thereof at any time; provided, that no such amendment or termination will be made without stockholder approval if such approval is necessary to comply with any tax, securities or regulatory law or requirement or any applicable stock exchange requirement with which the board of directors intends the Plan to comply. In addition, stockholder approval will be required for any amendment that (i) materially increases the benefits accruing to participants under the 1995 Stock Plan, (ii) materially increases the number of securities that may be issued under the 1995 Stock Plan, (iii) materially modifies the requirements for participation in the 1995 Stock Plan, or (iv) is otherwise deemed a material amendment by the Administrator pursuant to applicable law or accounting or stock exchange rules. However, no action by the board of directors or stockholders may adversely affect the rights of any recipient of an award granted under the 1995 Stock Plan without the consent of the recipient. The 1995 Stock Plan will terminate in May 2013, provided that any options or awards then outstanding under the 1995 Stock Plan will remain outstanding until they expire by their terms.
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Plan Benefits
The Company cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to executive officers and employees (including employee directors) under the 1995 Stock Plan. If the proposed increase in the share limit for the 1995 Stock Plan had been in effect in 2004, the Company expects that its award grants for 2004 would not have been substantially different from those actually made in that year under the 1995 Stock Plan.
The following table sets forth information as of March 18, 2005 with respect to the stock options granted under the 1995 Stock Plan 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 1995 Stock Plan.
| Name |
Number of Shares Subject to Options Granted Under the 1995 Stock Plan |
Weighted Average Exercise Price Per Share ($) |
||
|---|---|---|---|---|
| Terry S. Semel | 24,615,650 | 21.43 | ||
| Susan L. Decker | 4,640,000 | 27.59 | ||
| Daniel L. Rosensweig | 2,666,750 | 16.13 | ||
| Farzad Nazem | 6,313,324 | 13.77 | ||
| Michael J. Callahan | 598,418 | 32.93 | ||
| All current executive officers as a group (8 persons) | 42,334,142 | 19.61 | ||
| All current directors (other than executive officers) as a group (7 persons) | 749,832 | .04 | ||
| All employees and consultants (including all current officers who are not executive officers) as a group (7,882 persons) | 154,985,457 | 26.17 |
Federal Income Tax Aspects of the 1995 Stock Plan
The U.S. federal income tax consequences of the 1995 Stock Plan under current federal law, which is subject to change, are summarized in the following discussion of the general tax principles applicable to the plan. This summary is not intended to be exhaustive and, among other considerations, does not describe state, local, or international tax consequences.
With respect to nonqualified stock options, the Company is generally entitled to deduct and the participant recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. With respect to incentive stock options, the Company is generally not entitled to a deduction nor does the participant recognize income at the time of exercise, although the participant may be subject to the U.S. federal alternative minimum tax.
The current federal income tax consequences of other awards authorized under the 1995 Stock Plan generally follow certain basic patterns: nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); bonuses, stock appreciation rights, cash and stock-based performance awards, dividend equivalents, stock units, and other types of awards are generally subject to tax at the time of payment; and compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes income.
If an award is accelerated under the 1995 Stock Plan in connection with a "change in control" (as this term is used under the U.S. Internal Revenue Code), the Company may not be permitted to deduct the portion of the compensation attributable to the acceleration ("parachute payments") if it exceeds certain threshold limits under the U.S. Internal Revenue Code (and certain related excise taxes may be triggered). Furthermore, the aggregate compensation in excess of $1,000,000 attributable to awards that are not
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"performance-based" within the meaning of Section 162(m) of the U.S. Internal Revenue Code may not be permitted to be deducted by the Company in certain circumstances.
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 on this proposal is required to approve the proposed amendments to the 1995 Stock Plan.
Recommendation of the Board of Directors
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENTS TO THE 1995 STOCK PLAN AS DESCRIBED ABOVE.
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PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO THE 1996 DIRECTORS' STOCK OPTION PLAN
We are asking the Company's stockholders to approve an amended and restated version of the Directors' Plan, which was adopted, subject to stockholder approval, by the board of directors on April 1, 2005. The amended and restated version of the Directors' Plan extends the term of the plan until April 1, 2015, subject to stockholder approval.
The Company is seeking approval of the extension of the Directors' Plan, which expires by its terms on April 11, 2006, because the Company believes that continued operation of the Directors' Plan is important in attracting and retaining the best available personnel for service as directors of the Company and encouraging their continued service on the board, which is essential to the Company's long-term growth and success.
SUMMARY DESCRIPTION OF THE DIRECTORS' PLAN
The principal features of the Directors' Plan, including the proposed amendments, are summarized below. The following summary of the Directors' Plan does not purport to be complete, and is subject to and qualified in its entirety by reference to the complete text of the amended and restated Directors' Plan, which has been filed as Annex B with the Securities and Exchange Commission with this Proxy Statement. Any stockholder of the Company who wishes to obtain a copy of the amended and restated Directors' Plan document may do so upon written request to the Secretary at the Company's principal executive offices.
General
The Directors' Plan was adopted by the board of directors in March 1996 and approved by the stockholders in April 1999. The maximum number of shares of the Company's common stock that may be issued or transferred pursuant to awards granted under the Directors' Plan is 8,800,000 shares, of which 5,546,668 shares remain available for issuance as of March 18, 2005. 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 board of directors.
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. The Company does not compensate its Directors for their service other than pursuant to the Directors' Plan.
Grant and Exercise of Options
The Directors' Plan provides that each person who first becomes a non-employee director after the effective date of the Directors' Plan, whether through election by the stockholders of the Company or appointment by the board of directors to fill a vacancy, shall be automatically granted an initial option to purchase 100,000 shares of the Company's common stock on the date on which such person first becomes a non-employee director (an "initial option"). The Directors' Plan also provides that a subsequent option to purchase 50,000 shares of the Company's common stock will be automatically granted to each non-employee director on the date of each annual meeting of the stockholders after which the director continues to serve as a director, provided that on that date the non-employee director has served on the board of directors for at least six months (a "subsequent option").
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.
22
The Directors' Plan 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. With respect to subsequent option grants, 25% of such options vest on the first anniversary of the date of grant, with the remaining options vesting 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 beneficiary of such options and continue to vest for a six-month period (or such lesser period as determined by the board of directors) following the date of death. If an optionee dies within three months after termination of service as a director, the options may be exercised by the inheritor of such options 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. The purchase price payable upon exercise of the options will consist of cash, check or other shares of the Company's common stock (which, if acquired from the Company, have been held for at least six months), a combination of the foregoing, or an other consideration or method permitted under applicable law. Options granted under the Directors' Plan have a term of ten years.
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, options granted under the Directors' Plan will become fully vested, and the Company shall provide each optionee either a reasonable time within which to exercise the option or 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 corporate transaction.
Adjustments Upon Changes in Capitalization
In the event any change, such as a stock split or stock 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 will 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.
No Limit on Other Authority
The Directors' Plan does not limit the authority of the board of directors or any committee to grant awards or authorize any other compensation, with or without reference to the Company's common stock, under any other plan or authority.
Amendment and Termination
The board of directors may at any time amend or terminate the Directors' Plan, except that such termination may not affect options previously granted without the agreement of any optionee so affected and provided that stockholder approval for amendment to the Directors' Plan must be obtained to the
23
extent required by applicable law. If stockholders approve the Directors' Plan proposal and the plan is not earlier terminated by the Board, the plan will terminate on April 1, 2015.
Plan Benefits
The following table sets forth information with respect to the stock options granted to the seven non-employee directors of the Company as of March 18, 2005. As discussed above, the executive officers of the Company and the employees of the Company are not eligible for grants under the Directors' Plan.
| Director |
Number of Shares Subject to Options Granted Under the 1996 Directors' Plan |
Weighted Average Exercise Price Per Share ($) |
||
|---|---|---|---|---|
| Roy J. Bostock | 236,000 | 16.98 | ||
| Ronald W. Burkle | 350,000 | 12.03 | ||
| Eric Hippeau | 690,000 | 17.75 | ||
| Arthur H. Kern | 690,000 | 17.75 | ||
| Robert A. Kotick | 216,650 | 13.88 | ||
| Edward Kozel | 256,418 | 27.13 | ||
| Gary L. Wilson | 263,200 | 13.70 |
Specific Benefits
None of the Company's executive officers (including any of the Named Executive Officers) will be eligible to receive option grants under the Directors' Plan (subject to any future amendments to the Directors' Plan). The number of stock options that will be allocated, based on the following assumptions, to the Company's seven non-employee directors as a group pursuant to the formulaic annual option grants is 3,500,000 (50,000 × 7 × 10). This represents the aggregate number of shares subject to grants of stock options for calendar years 2005 through 2014, assuming, among other future variables, that there are no new eligible directors, there continues to be seven eligible directors seated and that the number of shares subject to each annual grant (50,000) is not increased or decreased. The actual number of shares that will be subject to stock options for initial one-time grants to new directors under the Directors' Plan and the number of other awards to any of the foregoing persons or groups is not determinable.
Federal Income Tax Aspects of Directors' Plan
This summary of the general U.S. federal income tax principles applicable to the Directors' Plan under current federal law, which is subject to change, is not intended to be exhaustive and, among other considerations, does not describe state, local, or international tax consequences.
As noted above, nonstatutory stock options are the only awards that may be granted under the Directors' Plan. On exercise of nonstatutory stock options, the Company is generally entitled to deduct and the optionee recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise.
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 to the Directors' Plan.
Recommendation of the Board of Directors
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE 1996 DIRECTORS' STOCK OPTION PLAN.
24
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP has served as the Company's independent registered public accounting firm since February 1996 and has been appointed by the Audit Committee to continue as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2005. In the event that ratification of this selection is not approved by a majority of the shares of common stock of the Company represented at the annual meeting in person or by proxy and entitled to vote on the matter, the Audit Committee and the board of directors will review the Audit Committee's future selection of independent registered public accounting firm.
Representatives of PricewaterhouseCoopers LLP will be present at the annual meeting. The Representatives will have an opportunity to make a statement and will be available to respond to appropriate questions.
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 on this proposal is required to approve the ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the current fiscal year.
Recommendation of the Board of Directors
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005.
25
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information that has been provided to the Company with respect to beneficial ownership of shares of the Company's common stock as of February 11, 2005 (except where another date is indicated) for (i) each person who is known by the Company to own beneficially more than five percent of the outstanding shares of common stock, (ii) each director and nominee for director of the Company, (iii) each of the Named Executive Officers (as defined below under the caption "Executive Officer Compensation and Other Matters"), and (iv) all directors and executive officers of the Company as a group.
| Beneficial Owner |
Amount and Nature of Beneficial Ownership (1) |
Percent of Common Stock Outstanding (2) |
|||
|---|---|---|---|---|---|
FMR Corp. (3) 82 Devonshire Street Boston, MA 02109 |
106,339,840 |
7.7 |
% |
||
AXA Financial, Inc. and affiliates (4) 1290 Avenue of the Americas New York, NY 10104 |
78,425,961 |
5.7 |
% |
||
David Filo (5) |
87,643,394 |
6.3 |
% |
||
Jerry Yang (6) |
66,587,862 |
4.8 |
% |
||
Terry S. Semel (7) |
20,968,349 |
1.5 |
% |
||
Farzad Nazem (8) |
5,578,109 |
* |
|||
Susan L. Decker (9) |
3,072,102 |
* |
|||
Arthur H. Kern (10) |
1,386,647 |
* |
|||
Daniel L. Rosensweig (11) |
1,193,113 |
* |
|||
Eric Hippeau (12) |
991,145 |
* |
|||
Michael J. Callahan (13) |
320,553 |
* |
|||
Ronald W. Burkle (14) |
212,499 |
* |
|||
Edward R. Kozel (15) |
127,233 |
* |
|||
Gary L. Wilson (16) |
125,699 |
* |
|||
Roy J. Bostock (17) |
77,666 |
* |
|||
Robert A. Kotick (18) |
70,896 |
* |
|||
All directors and executive officers as a group (15 persons) (19) |
188,370,267 |
13.3 |
% |
26
the stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholder's name.
27
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, 2004, all Reporting Persons timely complied with all applicable filing requirements.
28
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2004 with respect to shares of the Company's common stock that may be issued under the Company's existing equity compensation plans, including the 1995 Stock Plan, the Directors' Plan, and the 1996 Employee Stock Purchase Plan, as amended (the "ESPP").
| Plan Category |
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights |
Weighted Average Exercise Price of Outstanding Options, Warrants and Rights |
Number of Securities Remaining Available for Future Issuance |
|||||
|---|---|---|---|---|---|---|---|---|
| Equity compensation plans approved by security holders (1) | 200,847,000 | $ | 24.03 | 62,500,000 | (2) | |||
29
Executive officers are elected by and serve at the discretion of the board. Set forth below is information regarding our executive officers as of February 11, 2005.
| Name |
Age |
Position |
||
|---|---|---|---|---|
| Terry S. Semel | 61 | Chairman and Chief Executive Officer | ||
| Jerry Yang | 36 | Chief Yahoo! and Director | ||
| David Filo | 38 | Chief Yahoo! | ||
| Susan L. Decker | 42 | Chief Financial Officer and Executive Vice President, Finance and Administration | ||
| Daniel L. Rosensweig | 43 | Chief Operating Officer | ||
| Farzad Nazem | 43 | Executive Vice President and Chief Technology Officer, Engineering and Site Operations | ||
| Michael J. Callahan | 36 | Senior Vice President, General Counsel and Secretary | ||
| Michael A. Murray | 48 | Senior Vice President, Finance |
Mr. Semel's biography is set forth under the heading "Proposal 1—Election of Directors."
Mr. Yang's biography is set forth under the heading "Proposal 1—Election of Directors."
Mr. Filo, Chief Yahoo! and a founder of Yahoo!, has served as an officer of Yahoo! since March 1995, and served as a director of Yahoo! from its founding through February 1996. Mr. Filo reports to Chairman and Chief Executive Officer, Terry Semel. He is involved in guiding Yahoo!'s vision, is involved in many key aspects of the business at a strategic and operational level, and is a stalwart of the Company's employee culture and morale. Mr. Filo co-developed Yahoo! in 1994 while working towards his Ph.D. in electrical engineering at Stanford University, and co-founded Yahoo! in 1995.
Ms. Decker has served as Yahoo!'s Chief Financial Officer since June 2000 and as Executive Vice President, Finance and Administration since January 2002. Prior to that, Ms. Decker served as Senior Vice President, Finance and Administration from June 2000 to January 2002. From August 1986 to May 2000, Ms. Decker held several positions for Donaldson, Lufkin & Jenrette, including Director of Global Research from 1998 to 2000. Prior to 1998, she was a Publishing & Advertising Equity Securities Analyst for 12 years. Ms. Decker also serves as a director of Pixar and Costco Co. Inc.
Mr. Rosensweig has served as Chief Operating Officer since April 2002. Prior to joining Yahoo!, Mr. Rosensweig was President of CNET Networks from October 2000. Prior to that, Mr. Rosensweig served as Chief Executive Officer of ZDNet, Inc. from January 1999 and President of ZDNet, Inc. from 1997 to July 2000. Mr. Rosensweig served as President of Ziff-Davis Internet Publishing Group from 1996 to 1997.
Mr. Nazem has served as Executive Vice President and Chief Technology Officer since January 2002. Prior to that, from February 2001 to January 2002, Mr. Nazem served as Senior Vice President, Communications and Technical Services and Chief Technology Officer. From January 1998 to February 2001, Mr. Nazem served as Chief Technology Officer. Prior to that, he served as Yahoo!'s Senior Vice President, Product Development and Site Operations from March 1996 to January 1998. From 1985 to 1996, Mr. Nazem held a number of technical and executive management positions at Oracle Corporation, including Vice President of Oracle's Media and Web Server Division and member of the Product Division Management Committee.
Mr. Callahan has served as Senior Vice President, General Counsel and Secretary since September 2003. Prior to that, Mr. Callahan served as Deputy General Counsel and Assistant Secretary from June 2001 to September 2003 and served in various other positions in the Yahoo! legal department from December 1999 to June 2001. Prior to joining Yahoo! in December 1999, Mr. Callahan held positions with Electronics for Imaging Inc. and the law firm of Skadden, Arps, Slate, Meagher & Flom LLP.
Mr. Murray has served as Senior Vice President, Finance since October 2004. Prior to joining the Company, Mr. Murray held several positions with Sun Microsystems, Inc., including Vice President, Global Financial Services and Treasurer from July 2002, Treasurer from July 2001 to June 2002 and Vice President Finance, Sun Services from April 1998 to July 2001.
30
EXECUTIVE OFFICER COMPENSATION AND OTHER MATTERS
Summary Compensation Table
The following table sets forth certain information concerning the compensation earned during the last three completed fiscal years by (i) Terry Semel, the Company's Chief Executive Officer, and (ii) the four other most highly compensated individuals who served as executive officers of the Company as of the end of the fiscal year ended December 31, 2004 (such officers collectively referred to as the "Named Executive Officers").
| |
Annual Compensation |
Long-Term Compensation |
|
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
|
|
|
Awards |
|
|||||||
| Name and Principal Position |
Year |
Salary ($) |
Bonus ($) |
Restricted Stock Awards ($) |
Securities Underlying Options (#) |
All Other Compensation ($) (1) |
||||||
| Terry S. Semel Chairman and Chief Executive Officer |
2004 2003 2002 |
600,000 600,000 450,000 |
— — 895,500 |
— — — |
7,200,000 — 5,600,000 |
(2) (2) |
1,980 1,980 1,290 |
|||||
Susan L. Decker Executive Vice President, Finance and Administration, and Chief Financial Officer |
2004 2003 2002 |
500,000 500,000 425,000 |
900,000 700,000 518,750 |
1,854,000 1,852,200 — |
(3) (4) |
150,000 250,000 2,700,000 |
3,550 3,300 3,050 |
|||||
Daniel L. Rosensweig (5) Chief Operating Officer |
2004 2003 2002 |
500,000 500,000 342,949 |
1,425,000 1,375,000 500,000 |
(6) (6) |
1,854,000 1,852,200 — |
(3) (4) |
150,000 250,000 3,200,000 |
958 84,768 87,738 |
||||
Farzad Nazem Chief Technical Officer and Executive Vice President, Engineering and Site Operations |
2004 2003 2002 |
450,000 450,000 425,000 |
700,000 560,000 406,250 |
1,854,000 1,852,200 — |
(3) (4) |
150,000 250,000 600,000 |
3,550 3,300 3,050 |
|||||
Michael J. Callahan (7) Senior Vice President, General Counsel and Secretary |
2004 2003 |
275,000 221,667 |
175,000 140,000 |
— — |
65,000 140,000 |
3,520 3,270 |
||||||
31
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 fiscal year ended December 31, 2004. In addition, as required by SEC rules, the table sets forth the hypothetical gains that would exist for the shares subject to such options based on assumed annual compounded rates of stock price appreciation during the option term.
| |
Individual Grants |
|
|
|
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
|
Percent of Total Options Granted to Employees in Fiscal Year(%) (2) |
|
|
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation For Option Term (3) |
|||||||
| |
Number of Securities Underlying Options Granted(#) (1) |
|
|
|||||||||
| Name |
Exercise Price Per Share ($/sh) |
Expiration Date |
||||||||||
| 5% ($) |
10% ($) |
|||||||||||
| Terry S. Semel | 1,400,000 | (4) | 3.51 | % | 37.08 | 12/16/14 | 32,647,178 | 82,734,359 | ||||
Terry S. Semel |
5,800,000 |
(5) |
14.56 |
% |
20.85 |
3/10/14 |
76,052,227 |
192,731,276 |
||||
Susan L. Decker |
150,000 |
(6) |
0.38 |
% |
37.08 |
12/16/14 |
3,497,912 |
8,864,396 |
||||
Daniel L. Rosensweig |
150,000 |
(6) |
0.38 |
% |
37.08 |
12/16/14 |
3,497,912 |
8,864,396 |
||||
Farzad Nazem |
150,000 |
(6) |
0.38 |
% |
37.08 |
12/16/14 |
3,497,912 |
8,864,396 |
||||
Michael J. Callahan |
65,000 |
(6) |
0.16 |
% |
37.08 |
12/16/14 |
1,515,762 |
3,841,238 |
||||
32
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
The following table sets forth certain information with respect to stock options exercised by the Named Executive Officers during the fiscal year ended December 31, 2004. In addition, the table sets forth the number of shares covered by unexercised stock options held by the Named Executive Officers as of December 31, 2004, and the value of "in-the-money" stock options, which represents the positive spread between the exercise price of a stock option and the market price of the shares subject to such option as of December 31, 2004.
| |
|
|
Number of Securities Underlying Unexercised Options at Fiscal Year-End (#) |
|
|
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
|
|
Value of Unexercised In-the Money Options at Fiscal Year-End ($) (2) |
|||||||||
| |
Number of Shares Acquired on Exercise (#) |
|
||||||||||
| Name |
Value Realized ($) (1) |
|||||||||||
| Exercisable |
Unexercisable |
Exercisable |
Unexercisable |
|||||||||
| Terry S. Semel | 10,126,400 | 229,951,740.78 | 17,590,261 | 5,083,339 | 324,459,486.88 | 71,415,011.98 | ||||||
Susan L. Decker |
1,200,000 |
27,703,143.48 |
2,475,415 |
1,614,585 |
35,149,019.02 |
42,109,412.49 |
||||||
Daniel L. Rosensweig |
817,000 |
18,352,925.00 |
823,916 |
1,520,834 |
23,873,011.00 |
38,916,270.25 |
||||||
Farzad Nazem |
2,100,000 |
60,221,900.00 |
4,931,239 |
832,085 |
130,841,706.30 |
18,502,873.80 |
||||||
Michael J. Callahan |
77,500 |
1,792,122.50 |
251,751 |
246,667 |
1,992,706.58 |
4,242,761.02 |
||||||
Employment Contracts, Termination of Employment and Change in Control Arrangements
In April 2001, the Company entered into an employment letter agreement with Mr. Semel, our Chief Executive Officer. The agreement provided for a base salary of $310,000, subject to discretionary increases through annual reviews. Pursuant to the agreement, as part of his compensation, Mr. Semel was initially granted a total of four stock options to purchase an aggregate of 20,000,000 shares, as follows: 10,000,000 shares at fair market value on the date of grant, 5,000,000 shares at $15 per share, 3,000,000 shares at $30 per share, and 2,000,000 shares at $37.50 per share. The first option became exercisable as to 5,000,000
33
shares on the first anniversary of the grant. The options on the remaining 15,000,000 shares became exercisable in equal monthly installments (of 416,666 shares) over the next three years in order of exercise beginning with the lowest exercise price. These options may be exercised for a period of three years after the date of any termination of employment (although in no event later than 10 years after the grant date).
In April 2002, the Company entered into an employment agreement with Mr. Rosensweig to become Chief Operating Officer of the Company. The agreement provided for minimum base salaries of $500,000 for each of calendar years 2002 and 2003, $550,000 for calendar year 2004 and $600,000 for calendar year 2005. (In 2003, Mr. Rosensweig waived his right to the $550,000 base salary for 2004, and the Compensation Committee instead approved a base salary of $500,000 for 2004.) In addition, Mr. Rosensweig received reimbursement of relocation expenses, including a loan from the Company to purchase a principal residence in the San Francisco Bay Area in the principal amount of $1,000,000 (further described in "Certain Transactions" below) and a mortgage subsidy. In April 2002, the Company entered into a special retention bonus plan with Mr. Rosensweig under which Mr. Rosensweig received a $675,000 annual bonus payment in April 2003 and a $525,000 annual bonus payment in April 2004, and will receive a $150,000 annual bonus in each of April 2005 and April 2006 if he continues to be employed by the Company at the respective bonus dates. If, prior to the fourth anniversary of employment with the Company, Mr. Rosensweig's employment is terminated by the Company without Cause or Mr. Rosensweig terminates his employment for Good Reason, as those terms are defined in his employment agreement, Mr. Rosensweig will be entitled to receive the remaining retention bonus which would have been available to him had he remained employed through his fourth anniversary of employment with the Company. Mr. Rosensweig has elected to defer payment of each of these retention bonus payments until the fourth anniversary of his employment with the Company.
In 1996, the Company entered into an agreement with Mr. Nazem, our Executive Vice President, Engineering and Chief Technical Officer, that provides, in the event of certain change-in-control transactions, for the acceleration of options held by Mr. Nazem whereby each such option shall become exercisable to the extent of the number of shares that would otherwise vest if Mr. Nazem remained employed by the Company or its successor for two years after the effective date of the transaction, subject to certain conditions, including Mr. Nazem's acceptance of a comparable two-year employment contract with the acquiring party and his entering into certain non-competition agreements.
34
Notwithstanding anything to the contrary set forth in any of the Company's filings under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act that might incorporate future filings, including this Proxy Statement, in whole or in part, the following Report of the Compensation Committee, the Audit Committee Report and the Stock Performance Graph which follows shall not be deemed to be "Soliciting Material," is not deemed "filed" with the SEC and shall not be incorporated by reference into any filings under the Securities Act or Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in such filing except to the extent that the Company specifically requests that the information be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
During 2004, the Compensation Committee of the Company's board of directors consisted of Arthur H. Kern, Gary L. Wilson, and Robert A. Kotick, as Chairman of the Compensation Committee. The Compensation Committee is composed of independent non-employee directors and reviews, recommends and approves changes to the Company's compensation policies and benefits programs, administers the Company's stock option plans and otherwise seeks to ensure that the Company's compensation philosophy is consistent with the Company's best interests and is properly implemented. The Compensation Committee operates under a written charter adopted by the Board of Directors as of March 19, 2004, as amended, which appears on the Company's website. The Compensation Committee met ten times during 2004, including several meetings in executive session without management representatives present.
Compensation Philosophy and Review
The Company's compensation philosophy for executive officers is intended to achieve two principal purposes: (i) to provide a total compensation package that is competitive with the current market for executive talent and enables the Company to attract and retain key executive and employee talent needed to achieve the Company's business objectives, and (ii) to link executive compensation to improvements in Company performance and increases in stockholder value as measured principally by the trading price of the Company's common stock.
In February 2004, the Compensation Committee retained an independent consulting firm (the "Independent Consultant"), to advise the Compensation Committee on compensation matters. To assist in the determination of executive compensation levels, the Compensation Committee reviewed, with input from the Independent Consultant, among other materials, information compiled from proprietary surveys and publicly available compensation information with respect to selected Internet-related, technology and media companies and other relevant 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." Instead, the Compensation Committee focused more specifically on direct potential competitors for executive talent.
Elements of Executive Officer Compensation
The Company's executive compensation consists primarily of salary, incentive bonuses, a 401(k) plan, health insurance and similar benefits, and the award of stock options and restricted stock grants. There are no retirement plans (other than the 401(k) plan) and no supplemental executive retirement plans ("SERPs"). The Company has in the past and continues to emphasize the award of stock options in its executive compensation policy, combined with relatively modest cash compensation. The Compensation Committee believes that in the highly competitive emerging markets in which the Company operates, equity-based compensation is an important incentive for outstanding executive performance and encourages the alignment of management and stockholder long-term interests. It also believes that stock
35
options are an effective way to deliver these and other incentives and to align the interests of shareholders and executives. It further believes that in certain situations, especially as a tool for retention and executive ownership, restricted stock is also useful.
Base Salary and Bonus.
Base salaries are evaluated annually for all executive officers, including the Chief Executive Officer. In determining the appropriate salary levels for such officers, the Compensation Committee considers, among other factors, the officer's scope of responsibility, prior experience, past performance and data on prevailing compensation levels in relevant markets for executive talent. To determine annual bonus payments, the Compensation Committee considers individual performance as well as the extent to which the Company achieved its overall financial plan.
The Compensation Committee has determined that the base salary levels and bonus payments to executive officers, including Mr. Semel's, during the year 2004 were at or below the median of base salary and bonus levels for comparable companies considered in the survey data and other information reviewed by the Compensation Committee. The Compensation Committee believes this to be especially true based on the Company's relative financial performance and shareholder returns during 2004. Salary increases for 2005 were given to various executive officers other than Mr. Semel.
Stock Option and Restricted Stock Grants.
As noted above, the Company has in the past relied substantially on long-term equity-based compensation as an important means of compensating and motivating its executive officers. It is the Company's practice to set option exercise prices for officers at not less than 100% of the fair market value of the common stock on the date of grant. Thus, the value of the stockholders' investment in the Company must appreciate before an optionee receives any financial benefit from the option. Options have generally been granted for a maximum term of ten years. The Company generally makes annual grants of options to a large number of its employees, including its executive officers, in December of each year after conducting its annual compensation review process.
In determining the number of shares subject to the stock option grants to executive officers, the Compensation Committee considers various subjective factors primarily relating to the responsibilities of the individual officers, their expected future contributions and the number of shares owned by the officer or which continue to be subject to vesting under outstanding options previously granted to such officer. In addition, the Compensation Committee examines the quantity and type of equity incentives held by each executive officer relative to the other executive officers' equity positions and their tenure, responsibilities, experience and value to the Company.
As part of the annual compensation review for performance in 2004, the Compensation Committee in December 2004 granted all of the Named Executive Officers of the Company grants of options, which generally vest ratably over a four-year period, following a one year cliff. The Compensation Committee also granted restricted stock awards of 50,000 shares of the Company's common stock each to three of the Company's Named Executive Officers. The restricted stock is subject to the Company's repurchase option, which lapses with respect to 35,000 shares on the third anniversary of the grant date and lapses with respect to the remaining 15,000 shares upon the satisfaction of certain performance-based objectives, but in no event prior to the first anniversary of the grant date. The performance criteria include operating cash flow and revenue targets.
To enhance the retention incentives for certain executives of the Company into 2009, the Compensation Committee in February 2005 granted additional options and shares of restricted stock to the Named Executive Officers (other than Mr. Semel, whose grant is described below). To provide a substantial retention incentive, these retention options vest with regard to one third of the covered shares on the third anniversary of the grant date and the remaining two thirds of the covered shares on the fourth
36
anniversary of the grant date. The restricted shares vest in full on the third anniversary of the grant date and neither the options nor the restricted shares are subject to accelerated vesting except in the event of death on a pro rata basis. In deciding to make these 2005 retention grants, the Compensation Committee considered, among other things, the performance of the executives, the importance of their retention to the Company, and the vesting dates of the recipients' other outstanding equity grants. Recognizing the value of these additional grants, the Compensation Committee does not intend to make these types of grants to the recipients on a regular basis.
Compensation of Chief Executive Officer
The Compensation Committee believes that Mr. Semel's leadership has contributed to the Company's success in establishing its brand and creating shareholder value. There is also recognition that Mr. Semel's unique skills, experience spanning the internet and media industries, and repeated past success make him an attractive candidate to competing organizations that believe they could leverage his compensation into significant shareholder returns. Consequently, the Compensation Committee took aggressive action in 2004 to retain Mr. Semel. This was done primarily through equity-based grants designed to position him in the top-quartile of major global-company CEOs, provided that the Company is in the top quartile of shareholder value creation and he remains employed as the Company's CEO.
In determining Mr. Semel's compensation, with the assistance and advice of the Independent Consultant, the Compensation Committee reviewed Mr. Semel's compensation package in view of its philosophy described above and in comparison with the compensation packages of chief executive officers of selected Internet-related, technology and media companies. The Compensation Committee decided not to increase Mr. Semel's base salary for 2005 despite finding it to be lower than that of comparable companies, consistent with the Committee's philosophy of placing heavy emphasis on long-term incentive compensation.
In March 2004, the Compensation Committee addressed Mr. Semel's 2003 performance. It awarded Mr. Semel a bonus nonstatutory stock option grant for 1,800,000 shares of common stock rather than a cash bonus for 2003 (the "Bonus Option"). The grant of the Bonus Option was based on the board's positive assessment of Mr. Semel's performance during 2003 and was also intended to provide an incentive for future performance. The Bonus Option was fully vested and exercisable as of the grant date. The Compensation Committee in March 2004 also granted Mr. Semel an annual review option to purchase 4,000,000 shares of the Company's common stock, based upon, among other factors, the Compensation Committee's positive assessment of Mr. Semel's performance during 2003. The option becomes exercisable on the fourth anniversary of the date of grant, subject to acceleration on December 31, 2004 with regard to 2,000,000 of the covered shares, and on December 31, 2005 with regard to the remaining 2,000,000 covered shares if certain performance criteria regarding the Company's adjusted earnings are satisfied during the prior-year periods. The Company satisfied the applicable performance criteria for performance through December 31, 2004, with the effect that Mr. Semel vested in 2,000,000 of the options as of that date.
In December 2004, the Compensation Committee addressed Mr. Semel's 2004 performance. The Compensation Committee noted in particular the strengthening of the Company's core businesses, including premium services and advertising; the completion of a number of strategic alliances and acquisitions both domestically and internationally, including 3721 Network Software Company Limited, Kelkoo, S.A. and MusicMatch Inc.; and the Company's enhanced financial and stock performance. As part of such annual compensation review, the Compensation Committee granted Mr. Semel a fully vested option to purchase 1,200,000 shares of the Company's common stock (rather than a cash bonus). Consistent with its provision of annual review grants to employees, the Compensation Committee also awarded Mr. Semel an annual review option grant to purchase 200,000 shares of the Company's common stock, which grant vests over a four year period, with 25% of such shares becoming vested on the first anniversary of the date of grant and the remainder vesting ratably each quarter over the remaining three years.
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As discussed above, in February 2005, the Compensation Committee determined to provide retention grants to certain of its key employees. The Compensation Committee granted Mr. Semel, as part of that program, a retention option to purchase 2,000,000 shares of the Company's common stock and a retention grant of 250,000 restricted shares of the Company's common stock. The option becomes exercisable on the fourth anniversary of the grant date, subject to acceleration with regard to 1,000,000 of the covered shares following December 31, 2005, and the remaining 1,000,000 covered shares following December 31, 2006, if certain performance criteria regarding the Company's operating cash flow are satisfied during the prior-year periods. The restrictions on the restricted shares lapse in full on the third anniversary of the grant date, subject to pro rata accelerated vesting in the case of death.
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits the tax deductibility by a corporation of compensation in excess of $1 million paid to its 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 the corporation's stockholders.
It is the Company's policy to qualify, to the extent reasonable, its executive officers' compensation for deductibility under applicable tax law. However, the Company 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. It therefore may from time to time pay compensation to its executive officers that may not be deductible. However, the Compensation Committee believes that the realized gains on nonqualified stock options at time of exercise are fully deductible under the terms of the Company's shareholder-approved stock plan.
| By the Compensation Committee of the Board of Directors, | ||
Robert A. Kotick (Chairman) Arthur H. Kern Gary L. Wilson |
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The audit committee of the Company's board of directors (the "Audit Committee") consists of four non-employee directors, Edward R. Kozel, as chairman, Roy J. Bostock, Arthur H. Kern and Gary L. Wilson, each of whom the board of directors has determined to be independent directors as defined in the rules of Nasdaq. The Audit Committee is a standing committee of the board of directors and operates under a written charter adopted by the board of directors, which is available on our website, www.yahoo.com. From our main web page, first click on "Company Info" at the bottom of the page and then on "Investor Relations." Next click on "Corporate Governance" then "Board Committees" and "Audit Committee Charter." Among its other functions, the Audit Committee, subject to stockholder ratification, has the authority and responsibility to retain and terminate the engagement of the Company's independent registered public accounting firm ("independent auditors").
Management is responsible for the Company's internal controls and the financial reporting process. The independent auditors are responsible for performing an independent audit of the Company's consolidated financial statements and internal control over financial reporting in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States) and to issue a report thereon. The Audit Committee's responsibility is to monitor and oversee these processes.
During fiscal 2004, at each of its meetings, the Audit Committee met with the senior members of the Company's financial management team and the independent auditors. The Audit Committee's agenda is established by the Audit Committee's chairman and senior members of the Company's financial management team. The Audit Committee met in private sessions with the Company's independent auditors at certain of its meetings, and also separately with the Company's head of internal audit, without management representation, to discuss financial management, accounting and internal control issues. The Audit Committee has reviewed with management and the independent auditors the audited consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2004, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the consolidated financial statements. Management represented to the Audit Committee that the Company's consolidated financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee discussed with the independent auditors matters required to be discussed by Statement on Auditing Standards No. 61, "Communication with Audit Committees."
The Company's independent auditors also provided to the Audit Committee the written disclosures and the letter required by Independence Standards Board Standard No. 1, "Independence Discussions with Audit Committees." The Committee discussed with the independent auditors that firm's independence and considered whether the non-audit services provided by the independent auditors are compatible with maintaining its independence.
Based on the Audit Committee's discussion with management and the independent auditors, and the Audit Committee's review of the representation of management and the report of the independent auditors to the Audit Committee, the Audit Committee recommended that the board of directors include the audited consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2004 filed with the Securities and Exchange Commission.
| Submitted by the Audit Committee of the Company's Board of Directors, | ||
Edward R. Kozel (Chairman) Roy J. Bostock Arthur H. Kern Gary L. Wilson |
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FEES BILLED FOR SERVICES RENDERED BY PRINCIPAL
REGISTERED PUBLIC ACCOUNTING FIRM
For the fiscal year ended December 31, 2004, PricewaterhouseCoopers LLP, our independent registered public accounting firm, billed the approximate fees set forth below (in millions):
| |
2004 |
2003 |
||||
|---|---|---|---|---|---|---|
| Audit Fees (1) | $ | 7.1 | $ | 3.4 | ||
| Audit-Related Fees (2) | 0.9 | 1.2 | ||||
| Tax Fees (3) | 1.4 | 1.9 | ||||
| All Other Fees | — | — | ||||
| Total | $ | 9.4 | $ | 6.5 | ||
The Audit Committee has adopted certain policies and procedures regarding permitted audit and non-audit services and the annual pre-approval of such services. Each year, the Audit Committee will ratify the types of audit and non-audit services of which the Company management may wish to avail itself, subject to pre-approval of specific services. Each year, management and the independent registered public accounting firm will jointly submit a pre-approval request, which will list each known and/or anticipated audit and non-audit service for the upcoming calendar year and which will include associated budgeted fees. The Audit Committee will review the requests and approve a list of annual pre-approved non-audit services. The Audit Committee will also designate a member (currently Mr. Kozel, the Audit Committee Chairman) to have the authority to pre-approve interim requests for additional non-audit services that were not contained in the annual pre-approval request. Such member shall approve or reject any interim non-audit service requests and report any interim service pre-approvals at the following Audit Committee meeting.
All services provided by PricewaterhouseCoopers LLP during the fiscal year ended December 31, 2004 were approved by the Audit Committee.
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The following graph compares, for the five year period ended December 31, 2004, the cumulative total stockholder return for the Company's common stock, the Nasdaq Stock Market (U.S. companies) Index (the "Nasdaq Market Index"), the Goldman Sachs Internet Index (the "GIN") and the Standard & Poor's 500 Stock Index (the "S&P 500 Stock Index"). Measurement points are the last trading day of each of the Company's fiscal years ended December 31, 1999, December 31, 2000, December 29, 2001, December 31, 2002, December 31, 2003 and December 31, 2004. The graph assumes that $100 was invested on December 31, 1999 in the common stock of the Company, the Nasdaq Market Index, the GIN and the S&P 500 Stock Index and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
| Measurement Point |
Yahoo! Inc. |
Nasdaq Market Index |
GIN |
S&P 500 Index |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/1999 | $ | 100.00 | $ | 100.00 | $ | 100.00 | $ | 100.00 | ||||
| 12/29/2000 | 13.90 | 60.71 | 25.50 | 89.86 | ||||||||
| 12/31/2001 | 8.20 | 47.93 | 14.73 | 78.14 | ||||||||
| 12/31/2002 | 7.56 | 32.82 | 10.48 | 59.88 | ||||||||
| 12/31/2003 | 20.81 | 49.23 | 20.31 | 75.68 | ||||||||
| 12/31/2004 | 34.83 | 53.46 | 25.03 | 82.49 | ||||||||
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The Company has entered into indemnification agreements with each of its directors and executive officers. These agreements require the Company to indemnify such individuals, to the fullest extent permitted by Delaware law, for certain liabilities to which they may become subject as a result of their affiliation with the Company.
In April 2002, in connection with his relocation to California as a result of his joining Yahoo!, Mr. Rosensweig, our Chief Operating Officer, entered into a non-interest bearing term loan with us in the principal amount of $1,000,000. The loan to Mr. Rosensweig is secured by his principal place of residence. Payment of the entire principal of $1,000,000 is due on April 30, 2006. The maximum indebtedness of Mr. Rosensweig to us during 2004 was $1,000,000.
On or about February 4, 2004, a shareholder derivative action was filed in the Court of Chancery of the State of Delaware in and for New Castle County, against the Company (as nominal defendant) and certain of its current and former officers and directors, including current directors Jerry Yang, Eric Hippeau, Arthur H. Kern and Edward R. Kozel (the "Derivative Defendants"). Two similar shareholder derivative actions were filed in the California Superior Court for the County of San Mateo on February 13, 2004. The complaints generally allege breaches of fiduciary duties by the Derivative Defendants related to the alleged purchase of shares in initial public offerings or the alleged acquiescence in such conduct. The complaints seek unspecified monetary damages and other relief purportedly on behalf of the Company from the Derivative Defendants. In April 2004, Yahoo! filed a motion to dismiss the Delaware action for failure to plead demand futility. On August 2, 2004, the Delaware Court of Chancery granted the motion to dismiss. On October 18, 2004, the plaintiffs appealed the granting of the motion to dismiss. On January 21, 2005, the Supreme Court of the State of Delaware affirmed the opinion of the Delaware Court of Chancery granting the motion to dismiss. The Company understands the Derivative Defendants deny any impropriety and intend to defend the remaining lawsuits vigorously.
The board of directors knows of no other business that 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 proxyholders deem advisable.
It is important that the proxies be returned promptly and that your shares be represented. Stockholders are urged to mark, date, sign and promptly return the accompanying proxy card in the enclosed envelope or vote their shares by telephone or over the Internet.
The form of proxy and this proxy statement have been approved by the board of directors and are being mailed and delivered to stockholders by its authority.
| By Order of the Board of Directors, | ||
|
|
||
Michael J. Callahan Senior Vice President, General Counsel and Secretary |
Sunnyvale,
California
April 4, 2005
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EXHIBIT A
YAHOO! INC.
Charter for the Audit Committee
of the Board of Directors
Authority
The Audit Committee (the "Committee") of the Board of Directors (the "Board") of Yahoo! Inc. (the "Company") is established pursuant to Article 4.1 of the Company's Amended Bylaws and Section 141 (c) of the Delaware General Corporation Law.
Purpose
The purpose of the Committee is to assist Board oversight of (i) the integrity of the Company's financial statements, (ii) the Company's compliance with legal and regulatory requirements, (iii) the independent auditors' qualifications and independence, and (iv) the performance of the Company's internal audit function and independent auditors.
While the Committee has the duties and responsibilities set forth in this charter, the Committee is not responsible for planning or conducting the audit or determining whether the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles. Such activities are the responsibility of management and the Company's independent auditors. The Committee does not itself prepare financial statements or perform audits or auditing services, and its members are not auditors, certifiers of the Company's financial statements or guarantors of the Company's independent auditors' reports. It is not the duty or responsibility of the Committee to insure that the Company complies with all laws and regulations. Each member of the Committee shall be entitled to rely on (a) the integrity of those persons and organizations within and outside of the Company from which it receives information, (b) the accuracy of the financial and other information provided to the Committee by such persons or organizations absent actual knowledge to the contrary (which shall be promptly reported to the Board) and (c) representations made by management as to any audit and non-audit services provided by the independent auditors to the Company.
The independent auditors for the Company are accountable to the Board and the Committee, as representatives for the stockholders. The Committee has the ultimate authority and responsibility to retain and terminate the Company's independent auditors (subject, if applicable, to stockholder ratification) in connection with the provision of all audit and non-audit related services.
Charter Review
The Committee will review and reassess the adequacy of this charter at least once per year. Additionally, to the extent and in the manner that the Company is legally required to do by the rules of the Securities and Exchange Commission (the "SEC"), this charter (as then constituted) shall be publicly filed.
Membership
The Committee shall be comprised of at least three members of the Board each of whom has been affirmatively determined in the business judgment of the Board to qualify as independent directors ("Independent Directors") under (a) the rules of the New York Stock Exchange ("NYSE") and the rules of the National Association of Securities Dealers' Nasdaq Stock Market ("Nasdaq"), including, as applicable, the standards set forth under Rule 10A-3 ("Rule 10A-3") of the Securities Exchange Act of 1934 (the rules of NYSE, Nasdaq and Rule 10A-3, taken together, "Applicable Listing Rules") and (b) the Company's Corporate Governance Guidelines. Such members will be elected by and serve at the pleasure of the Board.
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The Board shall designate the Chairperson of the Committee, provided that if the Board does not so designate a Chairperson, the members of the Committee, by majority vote, may designate a Chairperson. Each member of the Committee shall be "financially literate" under the Applicable Listing Rules, as such qualifications are interpreted by the Board in its business judgment. At least one member of the Committee shall have "accounting or related financial management expertise", under the Applicable Listing Rules, as such qualifications are interpreted by the Board in its business judgment. In addition, at least one member of the Committee should be an "audit committee financial expert," as such term is defined in the rules and regulations promulgated by the SEC. The name of the person(s) designated as "audit committee financial expert" (or, if no member of the Committee is an "audit committee financial expert", the reasons why the Committee does not have a member who is an "audit committee financial expert"), and whether such "audit committee financial expert(s)" are independent of management shall be disclosed in the Company's public filings and as otherwise required under Applicable Listing Rules and applicable law.
No director may serve as a member of the Committee if such director serves on the audit committees of more than two other public companies unless the Board determines that such simultaneous service would not impair the ability of such director to effectively serve on the Committee.
Any vacancy of the Committee shall be filled by majority vote of the Board at the next meeting of the Board following the occurrence of the vacancy. No member of the Committee shall be removed except by majority vote of the Board.
The Board will determine, as necessary, any further requirements for membership on the Committee in the exercise of its business judgment.
Compensation
Committee members shall receive no compensation from the Company other than fees as members of the Board and of committees of the Board in accordance with Applicable Listing Rules.
Meetings
The timing and frequency of the Committee meetings will be determined by the Committee; however, the Committee will meet at least once each quarter. The presence in person or by telephone of a majority of the Committee's members shall constitute a quorum for any meeting of the Committee. All actions of the Committee will require the vote of a majority of its members present at the meeting of the Committee at which a quorum is present. The Committee will meet with the independent auditors and the Company's internal auditor upon the completion of the annual audit to review the independent auditors' examination and management report. The Committee shall meet at such other times as it deems appropriate. The Committee, at its discretion, may ask members of management, the Company's counsel, or others to attend its meetings (or portions thereof) and to provide pertinent information as necessary.
At least once each quarter, the Committee shall meet separately with management, independent auditors and the Company's internal auditor of the Company to discuss any matters that the Committee or any of these persons or firms believes should be discussed privately.
Duties and Responsibilities
In carrying out its duties and responsibilities, the Committee's policies and procedures should remain flexible, so that it may be in a position to best react or respond to changing circumstances or conditions. The following are within the authority of the Committee:
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and its subsidiaries for each fiscal year and each such registered public accounting firm must report directly to the Committee (the registered public accounting firm engaged for the purpose of preparing or issuing an audit report for inclusion in the Company's Annual Report on Form 10-K is referred to herein as the "independent auditors");
The Committee should present its conclusions with respect to the above matters to the Board along with a recommendation as to appropriate action, if any, the Board should take to oversee independence of the Company's independent auditors. The Committee should also present to the Board its review and evaluation of the lead audit partner of the independent auditors, and its views on whether there should be a regular rotation of the independent auditors. In assessing the qualifications, performance and independence of the lead audit partner and the independent auditors, the Committee shall take into account the opinions of management and the Company's internal auditor.
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ratification), compensation, retention, oversight and termination of the Company's independent auditors;
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response with respect thereto, any restrictions on the scope of the independent auditors' activities or on access to requested information and any significant disagreements with management. In connection therewith, the Committee may consider reviewing with the independent auditors the following:
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Minutes and Reports
The Committee will, to the extent deemed appropriate, record summaries of its recommendations to the Board in written form that will be incorporated as a part of the minutes of the Board.
The Committee will prepare the report required by the rules of the SEC to be included in the Company's annual proxy statement.
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Other Tasks and Responsibilities
The Committee may form subcommittees for any purpose that the Committee deems appropriate and may delegate to such subcommittees such power and authority as the Committee deems appropriate; provided, however, that no subcommittee shall consist of fewer than two members; and provided further that the Committee shall not delegate to a subcommittee any power or authority required by any law, regulation or listing standard to be exercised by the Committee as a whole.
The Committee shall also have the authority to conduct or authorize investigations into any matters within the scope of its responsibilities, in connection with this authority, the Committee shall have the authority to retain such outside counsel, experts and other advisors as it determines appropriate to assist in the full performance of its duties.
The Committee may, at its sole discretion, commit Committee and Company resources to further the training of Committee members to remain abreast of current accounting and financial management policy, rules and developments.
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Annex A
YAHOO! INC.
1995 STOCK PLAN
(AS AMENDED AND
RESTATED , 2005)
(REFLECTING THE MAY 2004 STOCK SPLIT)
"Administrator" means the Board or any of its Committees appointed pursuant to Section 4 of the Plan.
"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.
"Applicable Laws" means any legal requirements of all state and federal laws, including without limitation securities laws and the Code, relating to the administration of stock incentive plans such as the Plan.
"Award" means an award of Options, Indexed Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Dividend Equivalents, or Performance-Based Awards (each as defined below).
"Board" means the Board of Directors of the Company.
"Cause" shall have such meaning as determined by the Administrator or as provided in the applicable Award agreement. Unless otherwise expressly provided in the applicable Award agreement, the determination of Cause with respect to an Award shall be made by the Administrator in its sole discretion.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Committee appointed by the Board of Directors in accordance with Section 4(a) of the Plan.
"Common Stock" means the common stock of the Company.
"Company" means Yahoo! Inc., a Delaware corporation.
"Consultant" means any person, but not including a Non-Employee Director, who is engaged by the Company or any Parent, Subsidiary or Affiliate to render services and is compensated for such services.
"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
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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 expiration 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.
"Director" means a member of the Board.
"Dividend Equivalent" means a right granted under Section 14 of the Plan to receive Shares as dividends paid with respect to a specified number of Shares.
"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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, as of any date, the fair market value of Common Stock determined as follows:
"Full-Value Award" means any Award under this Plan that is not either: (1) an Option (except that Indexed Options shall be Full-Value Awards), or (2) a Stock Appreciation Right with a grant price that is no less than the Fair Market Value of a Share on the date of grant of the Award.
"Good Reason" shall have such meaning as determined by the Administrator or as provided in the applicable Award agreement. Unless otherwise expressly provided in the applicable Award agreement, the determination of Good Reason with respect to an Award shall be made by the Administrator in its sole discretion.
"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.
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"Indexed Option" means an Option with an exercise price which either increases by a fixed percentage over time or changes by reference to a published index, as determined by the Administrator and set forth in the applicable written Option agreement.
"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 executive officer). Such officer status shall be determined pursuant to the executive compensation disclosure rules under the Exchange Act.
"Non-Employee Director" shall mean a Director who is not an Employee.
"Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option, as designated in the applicable written Option agreement.
"Officer" means an officer of the Company or any Parent, Subsidiary or Affiliate of the Company.
"Option" means a stock option granted pursuant to the Plan and includes an Indexed Option.
"Optioned Stock" means the Common Stock subject to an Option or Restricted Stock.
"Optionee" means an Employee or Consultant who receives an Option or Restricted Stock.
"Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code, or any successor provision.
"Performance-Based Award" means an Award granted pursuant to Appendix A of the Plan. Performance-Based Awards may be in the form of any of the types of Awards authorized under the Plan.
"Plan" means this 1995 Stock Plan, as amended from time to time.
"Reporting Person" means an Officer, Director, or greater than ten percent stockholder 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.
"Restricted Period" has the meaning set forth in Section 11(b) of the Plan.
"Restricted Stock" means Shares acquired pursuant to Section 11 of the Plan.
"Restricted Stock Unit" means the right to receive in cash or Shares the Fair Market Value of a Share granted pursuant to Section 12 of the Plan.
"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.
"Share" means a share of the Common Stock, as adjusted in accordance with Section 16 of the Plan.
"Stock Appreciation Right" means any right granted under Section 13 of the Plan.
"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.
"Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code, or any successor provision.
"Total Disability" means a total and permanent disability within the meaning of Section 22(e)(3) of the Code.
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Unless otherwise provided in the Bylaws of the Company or the applicable charter of any Administrator: (a) a majority of the members of the acting Administrator shall constitute a quorum, and (b) the vote of a majority of the members present assuming the presence of a quorum or the unanimous written consent of the members of the Administrator shall constitute action by the acting Administrator.
With respect to awards intended to satisfy the requirements for performance-based compensation under Section 162(m) of the Code, the Plan shall be administered by a committee consisting solely of two or more outside directors (as this requirement is applied under Section 162(m) of the Code); provided, however, that the failure to satisfy such requirement shall not affect the validity of the action of any committee otherwise duly authorized and acting in the matter. Award grants, and transactions in or involving Awards, intended to be exempt under Rule 16b-3 under the Exchange Act, must be duly and timely authorized by the Board or a committee consisting solely of two or more non-employee directors (as this requirement is applied under Rule 16b-3 promulgated under the Exchange Act). To the extent required by any applicable Stock Exchange, the Plan shall be administered by a committee composed entirely of independent directors (within the meaning of the applicable Stock Exchange rules).
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An Option may not be exercised for a fraction of a Share.
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An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company (or such other administrative exercise procedures as the Administrator may implement from time to time have been completed) 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 such Shares are actually issued to and held of record by the Optionee, the Optionee shall have no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to such Shares, not withstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares 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 such Shares are issued, except as provided in Section 16 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.
A-8
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discretion, determine. These Awards shall not be subject to the provisions of Section 11(b)(i) above.
A-10
date of such termination. The Administrator may also provide, in its sole discretion, that upon the termination of such recipient's Continuous Status as an Employee or Consultant due to the recipient's death or Total Disability, such Award of Restricted Stock Units shall become fully or partially non-forfeitable on the date of such termination. With respect to an Award of Restricted Stock Units that becomes non-forfeitable due to the satisfaction of certain pre-established performance-based objectives or any conditions imposed by the Administrator other than the lapse of time, the measurement date of whether such performance-based objectives or other conditions have been satisfied shall be a date no earlier than the first anniversary of the grant date of the Award.
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to which they relate. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award, and may be paid currently or on a deferred basis.
In any case where a tax is required to be withheld in connection with the delivery of Shares under the Plan, the Administrator may in its sole discretion (subject to Applicable Laws) grant (either at the time of the Award or thereafter) to the Award recipient the right to elect, pursuant to such rules and subject to such conditions as the Administrator may establish, to (i) have the Company reduce the number of Shares to be delivered by (or otherwise reacquire from the recipient) the appropriate number of Shares, valued in a consistent manner at their Fair Market Value or at the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy the minimum applicable withholding obligation on exercise, vesting or payment, or (ii) surrender to the Company Shares which (A) in the case of Shares previously acquired from the Company, have been owned by the Award recipient for more than six months on the date of surrender, and (B) have a Fair Market Value equal to the minimum amount required to be withheld. For these purposes, the Fair Market Value of the Shares to be withheld or repurchased, as applicable, 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 incurred in connection with an Award granted under the Plan must comply with the applicable provisions of Rule 16b-3.
All elections by an Award recipient 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-12
(iv) the price per share of Common Stock covered by each such outstanding Award, and (v) the number of shares of Common Stock that may be granted in the form of Restricted Stock, including the number that may be granted that are not subject to Section 11(b)(i) of the Plan, 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 Award.
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APPENDIX A
Performance-Based Awards
Section 162(m) Performance-Based Awards. Any of the types of Awards authorized under the Plan may be granted as Awards intended to satisfy the requirements for "performance-based compensation" within the meaning of Section 162(m) of the Code ("Performance-Based Awards"). The grant, vesting, exercisability or payment of Performance-Based Awards may depend (or, in the case of Qualifying Options or Qualifying Stock Appreciation Rights (each as defined below), may also depend) on the degree of achievement of one or more performance goals relative to a pre-established targeted level or level using one or more of the Business Criteria set forth below (on an absolute or relative basis) for the Company on a consolidated basis or for one or more of the Company's subsidiaries, segments, divisions or business units, or any combination of the foregoing. Any Qualifying Option or Qualifying Stock Appreciation Right shall be subject only to the requirements of Section A.1 and A.3 in order for such Award to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code. Any other Performance-Based Award shall be subject to all of the following provisions of this Appendix A. (Options (other than Indexed Options) and Stock Appreciation Rights granted with an exercise or base price not less than the Fair Market Value of a share of Common Stock at the date of grant are referred to as "Qualifying Options" and "Qualifying Stock Appreciation Rights," respectively.)
A.1 Class; Administrator. The eligible class of persons for Performance-Based Awards under this Appendix A shall be officers and employees of the Company or one of its Subsidiaries. The Administrator approving Performance-Based Awards or making any certification required pursuant to Section A.4 must be constituted as provided in Section 4 of the Plan for Awards that are intended as performance-based compensation under Section 162(m) of the Code.
A.2 Performance Goals. The specific performance goals for Performance-Based Awards (other than Qualifying Options and Qualifying Stock Appreciation Rights) shall be, on an absolute or relative basis, established based on one or more of the following business criteria ("Business Criteria") as selected by the Administrator in its sole discretion: revenue, revenue excluding traffic acquisition costs, gross profit, operating cash flow (operating income before depreciation and amortization), operating income, net income, cash flow from operations, capital expenditures, free cash flow, earnings per share (basic and diluted), revenue growth (organic and acquisition related), return on equity or on assets or on net investment, cost containment or reduction, unique users/registered users/paying subscribers/paying users/paying relationships, page views/searches, implementation, completion or attainment of objective goals with respect to research and development of specific products, systems or projects, or any combination thereof. These terms are used as applied under generally accepted accounting principles or in the financial reporting of the Company or of its Subsidiaries. To qualify awards as performance-based under Section 162(m), the applicable Business Criterion (or Business Criteria, as the case may be) and specific performance goal or goals ("targets") must be established and approved by the Administrator during the first 90 days of the performance period (and, in the case of performance periods of less than one year, in no event after 25% or more of the performance period has elapsed) and while performance relating to such target(s) remains substantially uncertain within the meaning of Section 162(m) of the Code. Performance targets shall be adjusted to mitigate the unbudgeted impact of material, unusual or nonrecurring gains and losses, accounting changes or other extraordinary events not foreseen at the time the targets were set unless the Administrator provides otherwise at the time of establishing the targets. The applicable performance measurement period may not be less than three months nor more than 7 years.
A.3 Form of Payment; Maximum Performance-Based Award. Grants of Qualifying Options and Qualifying Stock Appreciation Rights to any one participant in any one calendar year shall be
1
subject to the limit set forth in Section 8 of the Plan. The maximum aggregate payment which may be made pursuant to Performance-Based Awards (other than Qualifying Options and Qualifying Stock Appreciation Rights) that are granted to any one participant in any one calendar year is 2,000,000 shares of Common Stock (or cash of equivalent value at the time of payment), subject to adjustment as provided in Section 16(a) of the Plan. Awards that are cancelled during the year shall be counted against this limit to the extent required by Section 162(m) of the Code.
A.4 Certification of Payment. Before any Performance-Based Award under this Appendix A (other than Qualifying Options and Qualifying Stock Appreciation Rights) is paid and to the extent required to qualify the award as performance-based compensation within the meaning of Section 162(m) of the Code, the Administrator must certify in writing that the performance target(s) and any other material terms of the Performance-Based Award were in fact timely satisfied.
A.5 Reservation of Discretion. The Administrator will have the discretion to determine the restrictions or other limitations of the individual Awards granted under this Appendix A including the authority to reduce Awards, payouts or vesting or to pay no Awards, in its sole discretion, if the Administrator preserves such authority at the time of grant by language to this effect in its authorizing resolutions or otherwise.
A.6 Expiration of Grant Authority. As required pursuant to Section 162(m) of the Code and the regulations promulgated thereunder, the Administrator's authority to grant new Awards that are intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code (other than Qualifying Options and Qualifying Stock Appreciation Rights) shall terminate upon the first meeting of the Company's stockholders that occurs in the fifth year following the year in which the Company's stockholders first approve this Appendix.
2
Annex B
YAHOO! INC.
1996 DIRECTORS' STOCK OPTION PLAN
(AS AMENDED AND
RESTATED , 2005)
(REFLECTING THE MAY 2004 STOCK SPLIT)
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the Common Stock of the Company.
"Company" shall mean Yahoo! Inc., a Delaware corporation.
"Continuous Status as a Director" shall mean the absence of any interruption or termination of service as a Director.
"Director" shall mean a member of the Board.
"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.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"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).
"Optioned Stock" shall mean the Common Stock subject to an Option.
"Optionee" shall mean an Outside Director who receives an Option.
"Outside Director" shall mean a Director who is not an Employee.
"Parent" shall mean a "parent corporation", whether now or hereafter existing, as defined in Section 424(e) of the Code.
"Plan" shall mean this 1996 Directors' Stock Option Plan.
"Share" shall mean a share of the Common Stock, as adjusted in accordance with Section 11 of the Plan.
"Subsidiary" shall mean a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code.
B-1
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.
B-2
B-3
determination, the Board 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.
B-4
received by the Company. Full payment may consist of any consideration and method of payment allowable under Section 8(c) hereof. Until such Shares are actually issued to and held of record by the Optionee, the Optionee shall have no right to vote or receive dividends or any other rights as a stockholder with respect to such Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares 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 such Shares are issued, except as provided in Section 11. 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.
B-5
B-6
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.
B-7
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF YAHOO! INC. FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 19, 2005
The undersigned stockholder of Yahoo! Inc. (the "Company"), a Delaware corporation, hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated April 4, 2005, and hereby appoints Michael J. Callahan and Susan L. Decker, and each or either of them, as proxies, with full power of substitution, on behalf and in the name of the undersigned to represent the undersigned at the 2005 Annual Meeting of Stockholders of the Company to be held on Thursday, May 19, 2005, at 10:00 a.m., local time, at the Santa Clara Convention Center, located at 5001 Great America Parkway, Santa Clara, California and at any postponement or adjournment thereof, and to vote all shares of Common Stock which the undersigned would be entitled to vote if personally present, on the reverse side.
ANY STOCKHOLDER 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 "FOR" SUCH PROPOSAL AT THE MEETING, OR, IN THE CASE OF ELECTION OF DIRECTORS, "FOR" EACH OF THE LISTED NOMINEES. IF A BOX IS CHECKED, YOUR SHARES SHALL BE VOTED IN ACCORDANCE WITH YOUR INSTRUCTIONS.
SEE REVERSE SIDE |
CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SEE REVERSE SIDE |
c/o
EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
Consider receiving future Yahoo! Inc. Annual Report and Proxy Materials in electronic form rather than in printed form. While we have not fully implemented electronic distribution of stockholder communications, your advance consent will assist us in preparing materials for electronic distribution in the future. While voting via the Internet, just click the box to give your consent.
Accessing Yahoo! Inc. Annual Report and Proxy Materials via the Internet may result in charges to you from your Internet service provider and/or telephone companies.
Your vote is important. Please vote immediately. |
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VOTE-by-INTERNET |
OR |
VOTE-by-TELEPHONE |
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Log on to the Internet and go to http://www.eproxyvote.com/yhoo |
Call toll-free 1-877-PRX-VOTE (1-877-779-8683) |
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If you vote over the Internet or by telephone, please do not mail your card. |
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DETACH HERE |
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| ý | Please mark votes as in this example. |
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The Company's Board of Directors recommends a vote FOR all of the nominees listed below and a vote FOR proposals 2, 3 and 4. |
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| 1. Election of Directors. Nominees: | ||||||||||||
| (01) Terry S. Semel, (02) Jerry Yang, (03) Roy J. Bostock, (04) Ronald W. Burkle, (05) Eric Hippeau, (06) Arthur H. Kern, (07) Robert A. Kotick, (08) Edward R. Kozel, (09) Gary L. Wilson. | ||||||||||||
FOR ALL NOMINEES o |
WITHHOLD AUTHORITY FROM ALL NOMINEES o |
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| o | |
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| For all nominees, except for numbers as written above. | ||||||||||||
2. Amendment of the 1995 Stock Plan. |
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
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FOR |
AGAINST |
ABSTAIN |
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| o | o | o | MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT o |
MARK HERE IF YOU PLAN TO ATTEND THE MEETING o |
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3. Amendment of the 1996 Directors' Stock Option Plan. |
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FOR |
AGAINST |
ABSTAIN |
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| o | o | o | ||||||||||
4. Ratification of appointment of Independent Registered Public Accountants. |
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FOR |
AGAINST |
ABSTAIN |
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| o | o | o | ||||||||||
Please sign exactly as your name(s) appear(s) hereon. All holders must sign. When signing in a fiduciary capacity, please indicate full title as such. If a corporation or partnership, please sign in full corporate or partnership name by authorized person. |
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| Signature: | |
Date: | |
Signature: | |
Date: | |
| This ‘DEF 14A’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 4/1/15 | ||||
| 5/16/13 | 8-K | |||
| 4/1/08 | ||||
| 12/31/06 | 10-K, 5 | |||
| 7/18/06 | 4, 8-K | |||
| 4/30/06 | ||||
| 4/19/06 | ||||
| 4/11/06 | ||||
| 3/20/06 | ||||
| 2/18/06 | ||||
| 12/31/05 | 10-K, 5 | |||
| 12/5/05 | 4 | |||
| For Period End: | 5/19/05 | 4, 8-K | ||
| 4/8/05 | ||||
| Filed on / Effective on: | 4/4/05 | 8-K | ||
| 4/1/05 | 4, 8-K | |||
| 3/23/05 | ||||
| 3/18/05 | ||||
| 2/14/05 | 5, SC 13G, SC 13G/A | |||
| 2/11/05 | ||||
| 1/21/05 | ||||
| 12/31/04 | 10-K, 5 | |||
| 10/18/04 | 4 | |||
| 8/2/04 | 4 | |||
| 5/21/04 | 4, DEF 14A | |||
| 5/19/04 | 4, 424B3 | |||
| 3/19/04 | ||||
| 2/13/04 | 4, SC 13G/A | |||
| 2/4/04 | 5 | |||
| 12/31/03 | 10-K, 5 | |||
| 12/31/02 | 10-K | |||
| 12/29/01 | ||||
| 11/13/01 | ||||
| 5/1/01 | ||||
| 12/31/00 | 10-K | |||
| 12/31/99 | 10-K | |||
| List all Filings | ||||