eBay 2007 Annual Report Download - page 115

Employee Savings Plans
We have a savings plan, which qualifies under Section 401(k) of the Internal Revenue Code. Participating
employees may contribute up to 25% of their annual salary, but not more than statutory limits. In 2005 and 2006, we
contributed one dollar for each dollar a participant contributed, with a maximum contribution of $1,500 per
employee. In 2007, we contributed one dollar for each dollar a participant contributed, with a maximum
contribution of $2,000 per employee. Our non-U.S. employees are covered by various other savings plans. Our
expenses for these plans were $8.6 million in 2005, $14.9 million in 2006 and $20.4 million in 2007.
Deferred Stock Unit Plan
We have a deferred stock unit plan under which deferred stock units have to date, been granted non-employee
directors elected to our Board of Directors after December 31, 2002. Under this plan, each new director receives a
one-time grant of deferred stock units equal to the result of dividing $150,000 by the fair market value of our
common stock on the date of grant. Each deferred stock unit constitutes an unfunded and unsecured promise by us to
deliver one share of our common stock (or the equivalent value thereof in cash or property at our election). Each
deferred stock unit award granted to a new non-employee director upon election to the Board vests 25% one year
from the date of grant, and at a rate of 2.08% per month thereafter. If the services of the director are terminated at
any time, all rights to the unvested deferred stock units shall also terminate. In addition, directors may elect to
receive, in lieu of annual retainer and committee chair fees and at the time these fees would otherwise be payable
(i.e., on a quarterly basis in arrears for services provided), fully vested deferred stock units with an initial value
equal to the amount based on the fair market value of common stock at the date of grant. Deferred stock units are
payable following the termination of a director’s tenure as a director. All eBay officers, directors and employees are
eligible to receive awards under the plan, although, to date, awards have been made only to new non-employee
directors. As of December 31, 2007, 47,481 units have been awarded under this plan.
Valuation Assumptions
We calculated the fair value of each option award on the date of grant using the Black-Scholes option pricing
model. The following weighted-average assumptions were used for each respective period:
2005 2006 2007
Year Ended December 31,
Risk-free interest rates .................................. 3.8% 4.7% 4.5%
Expected life ......................................... 3years 3 years 3.5 years
Dividend yield ........................................ 0% 0% 0%
Expected volatility ..................................... 36% 36% 37%
Our computation of expected volatility for 2006 and 2007 was based on a combination of historical and
market-based implied volatility from traded options on our stock. Prior to 2006, our computation of expected
volatility was based on historical volatility. Our computation of expected life was determined based on historical
experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting
schedules and expectations of future employee behavior. The interest rate for periods within the contractual life of
the award is based on the U.S. Treasury yield curve in effect at the time of grant.
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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)