eBay 2009 Annual Report Download - page 122

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 17 — 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, 2009, 661.5 million
shares were authorized under our equity incentive plans and 89.7 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 cliff 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, 2008 and 2009, 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.
Stock Option Exchange Program
On August 10, 2009, the Company launched a one-time stock option exchange program (the “Program”)
pursuant to which eligible employees were able to exchange certain outstanding stock options with an exercise
price greater than or equal to $27.01 per share, a grant date on or before August 10, 2008 and an expiration date
after September 11, 2010, for a lesser amount of new restricted stock units (“RSUs”) or, under certain
circumstances, for new stock options or a cash payment. Our named executive officers and members of our
Board of Directors were not eligible to participate in the Program. The Program expired on September 11, 2009.
As a result of the Program, options to purchase 42.6 million shares of our common stock were accepted for
exchange (representing approximately 75% of the total options eligible for exchange). All surrendered options
were cancelled effective as of the expiration of the Program, and in exchange for those options, we issued a total
of approximately 5.0 million new RSUs. The number of new stock options granted, and the amount of cash
payments issued, in exchange for outstanding stock options were insignificant. In general, the new RSUs have a
vesting period that is at least one year longer than the original vesting period for the corresponding exchanged
option grant. The Program did not result in any significant incremental stock-based compensation expense.
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, 2007, 2008, and 2009, employees purchased
approximately 2.0 million, 3.5 million and 4.4 million shares at average prices of $26.84, $17.78 and $12.82 per
share, respectively. At December 31, 2009, approximately 2.8 million shares of common stock were reserved for
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