eBay 2000 Annual Report Download - page 78

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On December 10, 1999, eBay sued Bidder's Edge, Inc. in the United States District Court for the
Northern District of California alleging trespass, unfair competition, violation of the computer fraud and abuse
act, misappropriation, false advertising, trademark dilution, injury to business reputation, interference with
prospective economic advantage, and unjust enrichment. On February 7, 2000, Bidder's Edge denied these
claims and counterclaimed against eBay alleging that eBay violated the antitrust laws by monopolizing or
attempting to monopolize a market, that competed unfairly, and interfered with Bidder's Edge's contract with
eBay magazine. Bidder's Edge sought treble damages, an injunction and its fees and costs. On May 24, 2000,
the court granted us a preliminary injunction against the use by Bidder's Edge of robotic means to copy eBay's
site. See Subsequent Events Ì Note 16.
On April 25, 2000, eBay was served with a lawsuit, Gentry et. al. v. eBay, Inc. et. al, Ñled in Superior
Court in San Diego, California. The lawsuit was Ñled on behalf of a purported class of eBay users who
purchased allegedly forged autographed sports memorabilia on eBay. The lawsuit claims eBay was negligent in
permitting certain named (and other unnamed) defendants to sell allegedly forged autographed sports
memorabilia on eBay. In addition, the lawsuit claims eBay violated Section 17200 and a section of the
California Civil Code which prohibits ""dealers'' from selling sports memorabilia without a ""CertiÑcate of
Authenticity.'' See Subsequent Events Ì Note 16.
From time to time, eBay is involved in disputes which have arisen in the ordinary course of business.
Management believes that the ultimate resolution of these disputes will not have a material adverse impact on
eBay's consolidated Ñnancial positions, results of operations or cash Öows.
Lease arrangement
On March 1, 2000, eBay entered into a Ñve-year lease for general oÇce facilities located in San Jose,
California. Payments under this lease are based on a spread over the London Interbank OÅering Rate
(""LIBOR'') applied to the $126.4 million cost of the facility funded by the lessor. eBay has an option to renew
the lease for up to two Ñve-year extensions subject to speciÑc conditions. Under the terms of the lease
agreement, eBay was required to place $126.4 million of cash and investment securities as collateral for the
term of the lease. The cash and investment securities are restricted as to their withdrawal from the third party
trustee and are classiÑed as long-term restricted cash and investments in the accompanying balance sheet.
eBay entered into two interest rate swaps on June 19 and July 20, 2000 totaling $95 million to reduce the
impact of changes in interest rates on a portion of the Öoating rate operating lease for our facilities. The
interest rate swaps allow eBay to receive Öoating rate receipts based on LIBOR in exchange for making Ñxed
rate payments which eÅectively amends the interest rate exposure on our operating lease from a Öoating rate
to a Ñxed rate on $95 million of the total $126.4 million operating lease. The interest rate swaps have been
accounted for under the accrual method of accounting. The fair value of the interest rate swaps on
December 31, 2000 was a $4.4 million loss based on discounted cash Öows.
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