eBay 1998 Annual Report Download - page 54

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Item 13: Certain Relationships and Related Party Transactions
Since inception (May 13, 1996), there has not been, nor is there currently proposed, any transaction or series of
similar transactions to which the Company was or is to be a party in which the amount involved exceeds $60,000
and in which any director, executive officer or holder of more than 5% of the Common Stock of the Company had
or will have a direct or indirect interest other than (1) compensation arrangements, which are described where
required under “Management,” and (2) the transactions described below.
Common Stock at Formation. Pursuant to a Stock Purchase and Restriction Agreement dated May 20, 1996,
the Company sold an aggregate of 44,100,000 shares of Common Stock to Pierre M. Omidyar, the Company’ s
founder. Mr. Omidyar has served as a director of the Company since its inception and was the Company’ s Chief
Executive Officer from its inception until February 1998. In consideration for the shares issued, Mr. Omidyar
transferred to the Company cash of $10,167 and accounts receivable valued at $4,095. Of the 44,100,000 shares,
13,500,000 were subsequently exchanged for shares of the Company’ s Series A Preferred Stock as discussed below.
All of Mr. Omidyar’ s remaining 30,600,000 shares of Common Stock are subject to a Stock Restriction
Agreement dated December 12, 1996 between Mr. Omidyar and the Company (the “Stock Restriction Agreement”)
and a Stock Restriction and Co-Sale Agreement dated as of June 20, 1997 among Benchmark Capital Partners, L.P.
and Benchmark Founders’ Fund, L.P. (collectively, the “Investors”), Pierre Omidyar and Jeffrey Skoll (collectively,
the “Founders”) and the Company (the “Co-Sale Agreement”). Under the Stock Restriction Agreement, all of the
30,600,000 shares of Common Stock are subject to the Company’ s right to repurchase unvested shares if Mr.
Omidyar’ s employment terminates. The 30,600,000 shares vested as to 10,837,503 shares on February 1, 1997 and
vest as to 637,500 shares on the first day of each month thereafter through the close of business on September 1,
1999, at which time all of the shares will be vested. The vesting of shares accelerates such that any unvested shares
become fully vested in the event of a sale of the Company, which includes a sale, lease or disposition of
substantially all of the Company’ s assets, any merger or consolidation of the Company into another entity, or any
other corporate reorganization where the stockholders immediately prior to such event do not retain at least 50% of
the voting power of and interest in the successor entity or any transaction or series of related transactions in which
more than 50% of the Company’ s voting power is transferred (“Sale of the Company”). In addition to the foregoing,
under the Co-Sale Agreement, the vesting of shares will accelerate upon termination of employment, such that
immediately prior to such termination an additional 3,825,000 shares will become vested and not subject to
repurchase by the Company. See “Principal and Selling Stockholders.”
Series A Preferred Stock and Recapitalization. In December 1996, the Company created a class of Preferred
Stock and designated 1,500,000 shares of such Preferred Stock as Series A Preferred Stock, all of which stock the
Company issued to Mr. Omidyar in exchange for 13,500,000 shares of his Common Stock. In June 1997, pursuant to
an Anti-Dilution Agreement dated December 30, 1996 between the Company, Pierre Omidyar and Jeffrey Skoll, Mr.
Omidyar’ s Series A Preferred Stock holdings were increased to 1,676,475 shares. Upon completion of the
Company’ s initial public offering in September 1998, all of the Series A Preferred Stock was automatically
converted to 15,088,275 shares of Common Stock.
In December 1996, pursuant to a Restricted Stock Purchase Agreement dated December 12, 1996 between the
Company and Mr. Skoll (“Restricted Stock Agreement”), the Company sold 30,600,000 shares of its Common Stock
to Mr. Skoll at a purchase price of $0.0022 per share or an aggregate of $68,000, which price was determined by the
Board to be the fair market value of the Common Stock. Mr. Skoll, the first full-time employee of the Company and
its President from August 1996 to February 1998, has served as the Company’ s Vice President Strategic Planning
and Analysis since February 1998. Mr. Skoll acquired the shares of Common Stock with the proceeds from a full
recourse loan governed by a Loan and Pledge Agreement between Mr. Skoll and the Company. Under such
agreement, Mr. Skoll must repay the entire principal of the loan by December 31, 2002 and pay interest, which
accrues at the rate of 6% per year, simple interest, on the first anniversary of the exercise date and on each
subsequent anniversary until all principal and accrued interest are paid in full. Mr. Skoll paid off the full principal
and accrued interest on the loan, $75,411, on November 2, 1998.
All of Mr. Skoll’ s shares of Common Stock are subject to the Restricted Stock Agreement. Under the
Restricted Stock Agreement, Mr. Skoll’ s shares of Common Stock are subject to the Company’ s right to repurchase