eBay 2000 Annual Report Download - page 23

regulations will be adopted with respect to the Internet or online services. These laws and regulations could
cover issues such as user privacy, freedom of expression, pricing, fraud, content and quality of products and
services, taxation, advertising, intellectual property rights and information security. Applicability to the
Internet of existing laws governing issues such as property ownership, copyrights and other intellectual
property issues, taxation, libel, obscenity and personal privacy is uncertain. The vast majority of these laws
were adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate
or address the unique issues of the Internet and related technologies. Those laws that do reference the
Internet, such as the Digital Millennium Copyright Act, are only beginning to be interpreted by the courts and
their applicability and reach are therefore uncertain. In addition, numerous states, including the State of
California, where our headquarters is located, have regulations regarding how ""auctions'' may be conducted
and the liability of ""auctioneers'' in conducting such auctions. No Ñnal legal determination has been made
with respect to the applicability of the California regulations to its business to date and little precedent exists
in this area. Several states are considering imposing these regulations upon us or our users, which could harm
our business. In addition, as the nature of the products listed by our users change, we may become subject to
new regulatory restrictions.
Several states have proposed legislation that would limit the uses of personal user information gathered
online or require online services to establish privacy policies. The Federal Trade Commission has also settled
several proceedings regarding the manner in which personal information is collected from users and provided
to third parties. Changes to existing laws or the passage of new laws intended to address these issues could
directly aÅect the way we do business or could create uncertainty on the Internet. This could reduce demand
for its services, increase the cost of doing business as a result of litigation costs or increased service delivery
costs, or otherwise harm our business. In addition, because our services are accessible worldwide, and we
facilitate sales of goods to users worldwide, foreign jurisdictions may claim that we are required to comply with
their laws. For example, a French court has recently ruled that a U.S. website must comply with French laws
regarding content. As we have expanded our international activities, we have become obligated to comply with
the laws of the countries in which we operate. Laws regulating Internet companies outside of the United
States are in many ways less favorable then those in the United States, giving greater rights to consumers,
content owners and users or placing more extensive restrictions on our operations than exist in the U.S.
Compliance may be more costly or may require us to change our business practices or restrict its service
oÅerings relative to those in the United States. Our failure to comply with foreign laws could subject eBay to
penalties ranging from Ñnes to bans on our ability to oÅer our services. See ""Risk Factors Ì There are many
risks associated with our international operations.''
Item 2: Properties
On March 1, 2000, eBay entered into a Ñve-year lease for approximately 460,000 square feet of which the
online segment occupies approximately 190,000 square feet of general oÇce facilities located in San Jose,
California. Payments under this lease, which commenced during 2000, are based on a spread over the London
Interbank OÅering Rate (""LIBOR'') applied to the $126.4 million cost of the facility funded by the lessor.
eBay has an option to renew the lease for up to two Ñve-year extensions subject to speciÑc conditions. Under
the terms of the lease agreement, eBay was required to place $126.4 million of cash and investment securities
as collateral for the term of the lease. The cash and investment securities are restricted as to their withdrawal
from the third party trustee and are classiÑed as long-term restricted cash and investments in the
accompanying balance sheet.
eBay entered into two interest rate swaps on June 19 and July 20, 2000, totaling $95 million, to reduce the
impact of changes in interest rates on a portion of the Öoating rate operating lease for our facilities. The
interest rate swaps allow eBay to receive Öoating rate receipts based on LIBOR in exchange for making Ñxed
rate payments which eÅectively changes the interest rate exposure on our operating lease from a Öoating rate
to a Ñxed rate on $95 million of the total $126.4 million operating lease.
The online segment leases an additional 140,000 square feet of oÇce space. This oÇce space is primarily
for eBay's customer call center in Utah and Half.com's administrative oÇces in Pennsylvania. OÇce space for
18