Yahoo 2006 Annual Report Download - page 99

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on continued service as a director, in equal quarterly installments over one year. Such options generally expire
seven years after the grant date.
Restricted stock units granted under the Directors’ Plan vest in equal quarterly installments over a one year period
following the date of grant and, once vested, are payable in an equal number of shares of the Company’s common
stock on the earlier of the third anniversary of the grant date or the date the director ceases to be a member of the
board.
Non-employee directors are also permitted to elect an award of restricted stock units or a stock option under the
Directors’ Plan in lieu of a cash payment of fees for serving as chairperson of a board committee. Such stock
options or restricted stock unit awards granted in lieu of cash for chairperson fees are fully vested on the grant date.
Employee Stock Purchase Plan. The Company’s 1996 Employee Stock Purchase Plan (the “Purchase Plan”)
allows employees to purchase shares of the Company’s common stock through payroll deductions of up to
15 percent of their annual compensation subject to certain Internal Revenue Code limitations. The price of common
stock purchased under the Purchase Plan is equal to 85 percent of the lower of the fair market value of the common
stock on the commencement date of each 24-month offering period or the specified purchase date. The Purchase
Plan provides for the issuance of a maximum of 30 million shares of common stock of which 12 million shares were
available as at December 31, 2006. For the year ended December 31, 2006, the stock-based compensation expense
related to the activity under the Purchase Plan was $55 million. As of December 31, 2006, there was $53 million of
unamortized stock-based compensation cost related to the Purchase Plan which will be recognized over a weighted
average period of 1.2 years.
Executive Retention Compensation Agreement. During 2006, the Compensation Committee of the Company’s
Board of Directors, approved a three year performance and retention compensation arrangement with the
Company’s Chief Executive Officer (“CEO”). For each of the years 2006 to 2008, the CEO will be eligible to
receive a discretionary annual bonus payable in the form of a fully vested non-qualified stock option for up to
1 million shares with an exercise price equal to the closing trading price of the Company’s common stock on the
date of the grant. The Company recognized compensation expense of $8 million related to this potential 2006
performance based award during the year ended December 31, 2006.
89
Yahoo! Inc.
Notes to Consolidated Financial Statements — (Continued)