EXHIBIT
4.2


 


YAHOO! INC.


1996 DIRECTORS’ STOCK
OPTION PLAN


(AS AMENDED MAY 1999,
NOVEMBER 2001, MARCH 2002 AND APRIL 2002)


(AS REFLECTING THE
FEBRUARY 2000 STOCK SPLIT)


 


1. PURPOSES OF THE PLAN. The purposes of this
Directors’ Stock Option Plan are to attract and retain the best available
personnel for service as Directors of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board. All options granted hereunder
shall be “nonstatutory stock options”.


 


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


 


(a) “BOARD” shall mean
the Board of Directors of the Company.


 


(b) “CODE” shall mean the Internal Revenue Code of
1986, as amended.


 


(c) “COMMON STOCK” shall mean the Common Stock of the
Company.


 


(d) “COMPANY” shall mean Yahoo! Inc., a California
corporation.


 


(e) “CONTINUOUS STATUS AS A DIRECTOR” shall mean the
absence of any interruption or termination of service as a Director.


 


(f) “DIRECTOR” shall mean a member of the Board.


 


(g) “EMPLOYEE” shall mean any person, including
officers and directors, employed by the Company or any Parent or Subsidiary of
the Company. The payment of a director’s fee by the Company shall not be
sufficient in and of itself to constitute “employment” by the Company.


 


(h) “EXCHANGE ACT” shall mean the Securities Exchange
Act of 1934, as amended.


 


(i) “OPTION” shall mean a stock option granted
pursuant to the Plan. All options shall be nonstatutory stock options (i.e.,
options that are not intended to qualify as incentive stock options under
Section 422 of the Code).


 


(j) “OPTIONED STOCK” shall mean the Common Stock
subject to an Option.


 


(k) “OPTIONEE” shall mean an Outside Director who
receives an Option.


 


(l) “OUTSIDE DIRECTOR” shall mean a Director who is
not an Employee.


 


 

















 


(m) “PARENT” shall mean a “parent corporation”,
whether now or hereafter existing, as defined in Section 424(e) of the Code.


 


(n) “PLAN” shall mean this 1996 Directors’ Stock
Option Plan.


 


(o) “SHARE” shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.


 


(p) “SUBSIDIARY” shall mean a “subsidiary
corporation”, whether now or hereafter existing, as defined in Section 424(f)
of the Code.


 


3. STOCK SUBJECT TO THE
PLAN. Subject to the provisions of Section 11 of the Plan, the maximum
aggregate number of Shares which may be optioned and sold under the Plan is
4,400,000 Shares (the “Pool”) of Common Stock (such number reflecting the
Company’s two-for-one stock split in February 2000). The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased Shares which were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan.
If Shares which were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not in any event be returned to the
Plan and shall not become available for future grant under the Plan.


 


4. ADMINISTRATION OF AND
GRANTS OF OPTIONS UNDER THE PLAN.


 


(a) ADMINISTRATOR.
Except as otherwise required herein, the Plan shall be administered by the
Board.


 


(b) PROCEDURE FOR
GRANTS. All grants of Options hereunder shall be automatic and nondiscretionary
and shall be made strictly in accordance with the following provisions:


 


(i) No person
shall have any discretion to select which Outside Directors shall be granted
Options or to determine the number of Shares to be covered by Options granted
to Outside Directors.


 


(ii) With respect
to each Outside Director who first becomes an Outside Director at any time
prior to November 13, 2001, he or she shall be automatically granted an Option
to purchase 50,000 Shares (the “First Option”) on the date on which such person
first becomes an Outside Director, whether through election by the shareholders
of the Company or appointment by the Board of Directors to fill a vacancy.  With respect to each Outside Director who
first becomes an Outside Director at any time on or after November 13, 2001, he
or she shall be automatically granted an Option to purchase 100,000 Shares (the
“First Option”) on the date on which such person first becomes an Outside
Director, whether through election by the shareholders of the Company or
appointment by the Board of Directors to fill a vacancy.


 


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(iii) Each Outside
Director shall be automatically granted an Option to purchase 30,000 Shares (a
“Subsequent Option”) on the date of each Annual Meeting of the Company’s
Shareholders (which Subsequent Option shall be decreased to 20,000 Shares
commencing with the grants made on the date of the Company’s 2000 Annual Meeting
and increasing to 50,000 Shares commencing with the grants made on the date of
the Company’s 2002 Annual Meeting) immediately following which such Outside
Director is serving on the Board, with the first such grant being made at the
1997 Annual Meeting, provided that, on such date, he or she shall have served
on the Board for at least six (6) months prior to the date of such Annual
Meeting.


 


(iv)
Notwithstanding the provisions of subsections (ii) and (iii) hereof, in the
event that a grant would cause the number of Shares subject to outstanding
Options plus the number of Shares previously purchased upon exercise of Options
to exceed the Pool, then each  such
automatic grant shall be for that number of Shares determined by dividing the
total number of Shares remaining available for grant by the number of Outside
Directors receiving an Option on such date on the automatic grant date. Any
further grants shall then be deferred until such time, if any, as additional
Shares become available for grant under the Plan through action of the
shareholders to increase the number of Shares which may be issued under the
Plan or through cancellation or expiration of Options previously granted
hereunder.


 


(v)
Notwithstanding the provisions of subsections (ii) and (iii) hereof, any grant
of an Option made before the Company has obtained shareholder approval of the
Plan in accordance with Section 17 hereof shall be conditioned upon obtaining
such shareholder approval of the Plan in accordance with Section 17 hereof.


 


(vi) The terms of
each First Option granted hereunder shall be as follows:


 


(1) the First
Option shall be exercisable only while the Outside Director remains a Director
of the Company, except as set forth in Section 9 hereof.


 


(2) the exercise
price per Share shall be 100% of the fair market value per Share on the date of
grant of the First Option, determined in accordance with Section 8 hereof.


 


(3) the First
Option shall become exercisable in installments cumulatively as to 1/48 of the
Shares subject to the First Option at the end of each month following the date
of grant of the Option.


 


(vii) The terms of
each Subsequent Option granted hereunder shall be as follows:


 


(1) the Subsequent
Option shall be exercisable only while the Outside Director remains a Director
of the Company, except as set forth in Section 9 hereof.


 


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(2) the exercise
price per Share shall be 100% of the fair market value per Share on the date of
grant of the Subsequent Option, determined in accordance with Section 8 hereof.


 


(3) the Subsequent
Option shall become exercisable as to twenty five percent (25%) of the Shares
subject to the Subsequent Option on the first anniversary of the date of grant
of the Subsequent Option and shall thereafter become exercisable in
installments cumulatively as to 1/48 of the Shares subject to the Subsequent
Option at the end of each month following such first anniversary; provided,
however, that Subsequent Options granted prior to the date of the Company’s 2000
Annual Meeting of Shareholders shall become exercisable as to 100% of the
Shares subject to the Subsequent Option on the four-year anniversary of the
date of grant of the Subsequent Option.


 


(c) POWERS OF THE
BOARD. Subject to the provisions and restrictions of the Plan, the Board shall
have the authority, in its discretion: (i) to determine, upon review of
relevant information and in accordance with Section 8(b) of the Plan, the fair
market value of the Common Stock; (ii) to determine the exercise price per
share of Options to be granted, which exercise price shall be determined in
accordance with Section 8(a) of the Plan; (iii) to interpret the Plan; (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan; (v) to
authorize any person to execute on behalf of the Company any instrument
required to effectuate the grant of an Option previously granted hereunder; and
(vi) to make all other determinations deemed necessary or advisable for the
administration of the Plan.


 


(d) EFFECT OF BOARD’S
DECISION. All decisions, determinations and interpretations of the Board shall
be final and binding on all Optionees and any other holders of any Options
granted under the Plan.


 


(e) SUSPENSION OR
TERMINATION OF OPTION. If the President or his or her designee reasonably
believes that an Optionee has committed an act of misconduct, the President may
suspend the Optionee’s right to exercise any option pending a determination by
the Board of Directors (excluding the Outside Director accused of such misconduct).
If the Board of Directors (excluding the Outside Director accused of such
misconduct) determines an Optionee has committed an act of embezzlement, fraud,
dishonesty, nonpayment of an obligation owed to the Company, breach of
fiduciary duty or deliberate disregard of the Company rules resulting in loss,
damage or injury to the Company, or if an Optionee makes an unauthorized
disclosure of any Company trade secret or confidential information, engages in
any conduct constituting unfair competition, induces any Company customer to
breach a contract with the Company or induces any principal for whom the
Company acts as agent to terminate such agency relationship, neither the
Optionee nor his or her estate shall be entitled to exercise any option whatsoever.
In making such determination, the Board of Directors (excluding the Outside
Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on Optionee’s behalf at
a hearing before the Board or a committee of the Board.


 


5. ELIGIBILITY. Options
may be granted only to Outside Directors. All Options shall be automatically
granted in accordance with the terms set forth in Section 4(b) hereof. An
Outside


 


 


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Director who has
been granted an Option may, if he or she is otherwise eligible, be granted an
additional Option or Options in accordance with such provisions. The Plan shall
not confer upon any Optionee any right with respect to continuation of service
as a Director or nomination to serve as a Director, nor shall it interfere in
any way with any rights which the Director or the Company may have to terminate
his or her directorship at any time.


 


6. TERM OF PLAN;
EFFECTIVE DATE. The Plan shall become effective on the effectiveness of the
registration statement under the Securities Act of 1933 relating to the
Company’s initial public offering of securities. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 13 of the
Plan.


 


7. TERM OF OPTIONS. The
term of each Option shall be ten (10) years from the date of grant thereof.


 


8. EXERCISE PRICE AND
CONSIDERATION.


 


(a) EXERCISE
PRICE. The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be 100% of the fair market value per Share on the
date of grant of the Option.


 


(b) FAIR MARKET
VALUE. The fair market value shall be determined by the Board; provided,
however, that where there is a public market for the Common Stock, the fair
market value per Share shall be the mean of the bid and asked prices of the
Common Stock in the over-the-counter market on the date of grant, as reported
in The Wall Street Journal (or, if not so reported, as otherwise reported by
the National Association of Securities Dealers Automated Quotation (“Nasdaq”)
System) or, in the event the Common Stock is traded on the Nasdaq National
Market or listed on a stock exchange, the fair market value per Share shall be
the closing price on such system or exchange on the date of grant of the
Option, as reported in The Wall Street Journal. With respect to any Options
granted hereunder concurrently with the initial effectiveness of the Plan, the
fair market value shall be the Price to Public as set forth in the final
prospectus relating to such initial public offering.


 


(c) FORM OF
CONSIDERATION. The consideration to be paid for the Shares to be issued upon
exercise of an Option shall consist entirely of cash, check, other Shares of
Common Stock having a fair market value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised (which, if acquired from the Company, shall have been held for at
least six months), or any combination of such methods of payment and/or any
other consideration or method of payment as shall be permitted under applicable
corporate law.


 


9. EXERCISE OF OPTION.


 


(a) PROCEDURE FOR
EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option granted hereunder shall be
exercisable at such times as are set forth in Section 4(b) hereof; provided,
however, that no Options shall be exercisable prior to shareholder approval of


 


 


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the Plan in
accordance with Section 17 hereof has been obtained. An Option may not be
exercised for a fraction of a Share. An Option shall be deemed to be exercised
when written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. A share certificate for the
number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the number of
Shares which thereafter may be available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.


 


(b) TERMINATION OF
STATUS AS A DIRECTOR. If an Outside Director ceases to serve as a Director, he
or she may, but only within ninety (90) days after the date he or she ceases to
be a Director of the Company, exercise his or her Option to the extent that he
or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after
its term set forth in Section 7 has expired. To the extent that such Outside
Director was not entitled to exercise an Option at the date of such
termination, or does not exercise such Option (which he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.


 


(c) DISABILITY OF
OPTIONEE. Notwithstanding Section 9(b) above, in the event a Director is unable
to continue his or her service as a Director with the Company as a result of
his or her total and permanent disability (as defined in Section 22(e)(3) of
the Internal Revenue Code), he or she may, but only within six (6) months (or
such other period of time not exceeding twelve (12) months as is determined by
the Board) from the date of such termination, exercise his or her Option to the
extent he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after
its term set forth in Section 7 has expired. To the extent that he or she was
not entitled to exercise the Option at the date of termination, or if he or she
does not exercise such Option (which he or she was entitled to exercise) within
the time specified herein, the Option shall terminate.


 


(d) DEATH OF
OPTIONEE. In the event of the death of an Optionee: (i) During the term of the
Option who is, at the time of his or her death, a Director of the Company and
who shall have been in Continuous Status as a Director since the date of grant
of the Option, the Option may be exercised, at any time within six (6) months
following the date of death, by the Optionee’s estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only
to the extent of the right to exercise that would have accrued had the Optionee
continued living and remained in Continuous Status as Director for six (6)
months (or such lesser period of time as is determined by the Board) after the
date of death. Notwithstanding


 


 


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the foregoing, in
no event may the Option be exercised after its term set forth in Section 7 has
expired. (ii) Within three (3) months after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within six (6)
months following the date of death, by the Optionee’s estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only
to the extent of the right to exercise that had accrued at the date of
termination. Notwithstanding the foregoing, in no event may the option be
exercised after its term set forth in Section 7 has expired.


 


10. NONTRANSFERABILITY OF
OPTIONS. The Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution or pursuant to a qualified domestic relations order (as
defined by the Code or the rules thereunder). The designation of a beneficiary
by an Optionee does not constitute a transfer. An Option may be exercised during
the lifetime of an Optionee only by the Optionee or a transferee permitted by
this Section.


 


11. ADJUSTMENTS UPON
CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.


 


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


 


(b) CORPORATE
TRANSACTIONS. In the event of (i) a dissolution or liquidation of the Company,
(ii) a sale of all or substantially all of the Company’s assets, (iii) a merger
or consolidation in which the Company is not the surviving corporation, or (iv)
any other capital reorganization in which more than fifty percent (50%) of the
shares of the Company entitled to vote are exchanged, the Company shall give to
the Eligible Director, at the time of adoption of the plan for liquidation,
dissolution, sale, merger, consolidation or reorganization, either a reasonable
time thereafter within which to exercise the Option, including Shares as to
which the Option would not be otherwise exercisable, prior to the effectiveness
of such liquidation, dissolution, sale, merger, consolidation or
reorganization, at the end of which time the Option shall terminate, or the
right to exercise the Option, including Shares as to which the


 


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Option would not
be otherwise exercisable (or receive a substitute option with comparable
terms), as to an equivalent number of shares of stock of the corporation
succeeding the Company or acquiring its business by reason of such liquidation,
dissolution, sale, merger, consolidation or reorganization.


 


12. TIME OF GRANTING
OPTIONS. The date of grant of an Option shall, for all purposes, be the date
determined in accordance with Section 4(b) hereof. Notice of the determination
shall be given to each Outside Director to whom an Option is so granted within
a reasonable time after the date of such grant.


 


13. AMENDMENT AND
TERMINATION OF THE PLAN.


 


(a) AMENDMENT AND
TERMINATION. The Board may amend or terminate the Plan from time to time in such
respects as the Board may deem advisable; provided that, to the extent
necessary and desirable to comply with Rule 16b-3 under the Exchange Act (or
any other applicable law or regulation), the Company shall obtain approval of
the shareholders of the Company to Plan amendments to the extent and in the
manner required by such law or regulation.


 


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


 


14. CONDITIONS UPON
ISSUANCE OF SHARES. Shares shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, state
securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance. As a condition to the
exercise of an Option, the Company may require the person exercising such
Option to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.


 


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


 


 


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16. OPTION AGREEMENT.
Options shall be evidenced by written option agreements in such form as the Board
shall approve.


 


17. SHAREHOLDER APPROVAL.
Continuance of the Plan shall be subject to approval by the shareholders of the
Company at or prior to the first annual meeting of shareholders held subsequent
to the granting of an Option hereunder. If such shareholder approval is
obtained at a duly held shareholders’ meeting, it may be obtained by the
affirmative vote of the holders of a majority of the outstanding shares of the
Company present or represented and entitled to vote thereon. If such shareholder
approval is obtained by written consent, it may be obtained by the written
consent of the holders of a majority of the outstanding shares of the Company.
Options may be granted, but not exercised, before such shareholder approval.


 


 


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