eBay 2007 Annual Report Download - page 114

Our stock repurchase programs may be limited or terminated at any time without prior notice. Stock
repurchases under these programs may be made through a variety of open market and privately negotiated
transactions, including structured stock repurchase transactions or other derivative transactions, at times and in such
amounts as management deems appropriate and will be funded from the company’s working capital or other
financing alternatives. The timing and actual number of shares repurchased will depend on a variety of factors
including corporate and regulatory requirements, price and other market conditions. The programs are intended to
comply with the volume, timing and other limitations set forth in Rule 10b-18 under the Securities Exchange Act of
1934.
During 2007, we entered into a $200 million volume weighted average price share repurchase agreement. As a
result of this agreement, we repurchased approximately 5.8 million shares of our common stock at an effective price
per share of $34.24.
In addition to the above mentioned stock repurchases, shares of stock were returned to us as part of certain
agreements that we entered into with certain of Skype’s former shareholders. We did not pay any monetary
consideration for the return of these shares. We have also repurchased shares of stock from employees.
Note 12 — Benefit Plans:
Equity Incentive Plans
We have equity incentive plans for directors, officers and employees that consist of stock options, restricted
stock units, nonvested shares and performance based restricted stock units. At December 31, 2007, 614.8 million
shares were authorized under our equity incentive plans and 84.2 million shares were available for future grant.
All stock options granted under these plans generally vest 25% one year from the date of grant (or 12.5% six
months from the date of grant for grants to existing employees) and the remainder vest at a rate of 2.08% per month
thereafter, and generally expire seven to 10 years from the date of grant. The cost of stock options is determined
using the Black-Scholes option pricing model on the date of grant.
Restricted stock units and nonvested shares are granted to eligible employees under our equity incentive plans.
In general, restricted stock units and nonvested shares vest over one to five years, are subject to the employees’
continuing service to the company and do not have an expiration date. The cost of restricted stock units and
nonvested shares is determined using the fair value of our common stock on the date of grant.
In 2007, certain executives were eligible for performance based restricted stock units. The number of restricted
stock units ultimately received depends on our business performance against specified performance targets set by
the Compensation Committee. If the performance criteria are satisfied, the performance based restricted stock units
will be granted and one-half of the grant will vest in March following the end of the performance period and the
remaining half will vest one year later.
Employee Stock Purchase Plan
We have an employee stock purchase plan for all eligible employees. Under the plan, shares of our common
stock may be purchased over an offering period with a maximum duration of two years at 85% of the lower of the
fair market value on the first day of the applicable offering period or on the last day of the six-month purchase
period. Employees may purchase shares having a value not exceeding 10% of their gross compensation during an
offering period. During the years ended December 31, 2005, 2006, and 2007, employees purchased approximately
1.4 million, 1.6 million, and 2.0 million shares at average prices of $25.55, $27.32 and $26.84 per share,
respectively. At December 31, 2007, approximately 5.2 million shares of common stock were reserved for future
issuance. Our employee stock purchase plan contains an “evergreen” provision that automatically increases, on
each January 1, the number of shares reserved for issuance under the employee stock purchase plan by the number
of shares purchased under this plan in the preceding calendar year.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)