eBay 1998 Annual Report Download - page 74

eBAY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
74
Warrants for Series B Mandatorily Redeemable Convertible Preferred Stock
In connection with the issuance of Series B, the Company issued warrants to purchase 400,000 additional
shares of Series B with an exercise price of $5.00 per share. In May 1998, these warrants were exercised, resulting
in the issuance of 400,000 shares of Series B in exchange for cash proceeds totaling $2.0 million.
Note 9—Common Stock:
The Company’ s Certificate of Incorporation, as amended, authorizes the Company to issue 195,000,000 shares
of Common Stock. A portion of the shares outstanding are subject to repurchase by the Company over a four-year
period from the earlier of the issuance date or employee hire date, as applicable. At December 31, 1997 and 1998,
there were 33,150,000 and 32,212,617 shares, respectively, subject to repurchase rights at an average price of $0.01
and $0.04, respectively, per share.
In June 1998, in connection with the appointment of two outside directors, the Company sold an aggregate of
643,500 shares of Common Stock to two directors and realized net proceeds of $2.0 million. The Company
recognized the $429,000 excess of the estimated fair value of the stock over the price paid by the two directors as
general and administrative expense in 1998.
At December 31, 1998, the Company had reserved 23,497,986 and 900,000 shares of Common Stock for future
issuance for the exercise of options under the stock option plans and issuance of shares under the employee stock
purchase plan, respectively.
Note 10—Employee Benefit Plans:
401(k) Savings Plan
The Company has a savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the
Internal Revenue Code (the “401(k) Plan”). Under the Savings Plan, participating employees may defer a percentage
(not to exceed 25%) of their eligible pretax earnings up to the Internal Revenue Service’ s annual contribution limit.
All employees on the United States payroll of the Company age 21 years or older are eligible to participate in the
401(k) Plan. The Company is not required to contribute to the 401(k) Plan but in 1998 elected to match
contributions up to a maximum of $1,500 per employee. As a result, the Company contributed $97,479, which was
expensed in 1998. In 1998, the Company also committed to matching future employee contributions to a maximum
of $1,500 per employee per year.
Stock option plans
In December 1996, the Company’ s Board of Directors adopted the 1996 Stock Option Plan (the “1996 Plan”),
and in June 1997, adopted the 1997 Stock Option Plan (the “1997 Plan”) (collectively, the “Plans”). The Plans
provide for the granting of stock options to employees and consultants of the Company. Options granted under the
Plans may be either incentive stock options (“ISO”) or nonqualified stock options (“NSO”). ISOs may be granted
only to Company employees (including officers and directors who are also employees). NSOs may be granted to
Company employees and consultants.
In July 1998, the Board adopted, and in August 1998 the Company’ s stockholders approved, the 1998 Equity
Incentive Plan (the “1998 Plan”) and reserved 13,500,000 shares of Common Stock for issuance thereunder. The
1998 Plan authorized the award of options, restricted stock awards and stock bonuses (each an “Award”). No person
will be eligible to receive more than 3,000,000 shares in any calendar year pursuant to Awards under the 1998 Plan
other than a new employee of the Company who will be eligible to receive no more than 6,000,000 shares in the
calendar year in which such employee commences employment. Options granted under the 1998 Plan may be either
ISOs or NSOs. ISOs may be granted only to Company employees (including officers and directors who are also