eBay 1998 Annual Report Download - page 78

Download and view the complete annual report

Please find page 78 of the 1998 eBay annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 79

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79

eBAY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
78
Contractual arrangements
On March 1, 1999, eBay commenced an insurance program for eBay users. The program provides coverage on
qualified transactions involving fraud that occurs when a winning bidder of an auction sends money to a seller, in
good faith, and does not receive the item or does not receive the item as described in the eBay auction. To qualify
for benefits under the program, the winning bidder must be an eBay buyer in “good standing” and the seller must be
“registered” with a Feedback Rating of zero (0) or above. eBay has entered into a contract with Lloyd’ s of London
to underwrite the program for an initial period of six months at a minimum cost of $525,000.
On March 2, 1999, eBay entered into a Co-branding and Advertising Agreement (the “Agreement”) with i-
Escrow, Inc. (“i-Escrow”). Under the terms of the Agreement, i-Escrow will develop co-branded website pages
which offer third party escrow services to eBay users. Upon request by an eBay user, i-Escrow will escrow a buyer’ s
money until the buyer confirms that the applicable item was physically delivered, at which time the buyer’ s money
will be released to the seller. eBay is committed to actively promoting these services to sellers and high bidders
upon successful completion of the auction, but does not have control over, or ownership of, the escrowed funds. The
co-branded website pages are expected to be launched in 1999.
In March 1999, the Company expanded the scope of its strategic relationship with AOL. Under their amended
agreement, eBay will be given a prominent presence featuring it as the preferred provider of person-to-person
trading services on AOL’ s proprietary services (both domestic and international), AOL.com, Digital Cities, ICQ,
CompuServe (both domestic and international) and Netscape. eBay will pay $75 million over the four-year term of
the contract. eBay will develop a co-branded version of its service for each AOL property which will prominently
feature each party’ s brand. AOL will be entitled to all advertising revenue from the co-branded site.
Contingencies
On March 23, 1999, the Company was sued by Network Engineering Software, Inc. in the U.S. District Court
for the Northern District of California for the Company’ s alleged willful and deliberate violation of a patent. The
suit seeks unspecified monetary damages as well as an injunction against the Company’ s operations. It also seeks
treble damages and attorneys’ fees and costs. The Company believes that it has meritorious defenses against this suit
and intends to vigorously defend itself. The Company could be forced to incur material expenses during this defense
and in the event it were to lose this suit, its business would be harmed.