eBay 2002 Annual Report Download - page 136

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (CONTINUED)
Fair value disclosures
We calculated the fair value of each option grant on the date of grant using the Black-Scholes option
pricing model. The following are the assumptions used for each respective period:
Year Ended December 31
2000 2001 2002
Risk-free interest rates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.3% 4.4% 3.0%
Expected lives (in years) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.0 3.0 3.0
Dividend yield ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0% 0% 0%
Expected volatilityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 115% 81% 68%
For options granted prior to our initial public oÅering, the fair value of option grants was determined
using the Black-Scholes option pricing model with a zero volatility assumption. For options granted
subsequent to our initial public oÅering, the fair value of option grants was determined using the Black-
Scholes option pricing model with volatility assumptions based on actual or expected Öuctuations in the
price of our common stock.
Non-stockholder approved stock option grants
Prior to our initial public oÅering in 1998, our Board of Directors approved three stock option grants
outside of formally approved stockholder plans to two independent directors upon their joining our Board
of Directors and to an executive oÇcer upon his hiring. All of such option grants vested over 25% one year
from the date of grant, with the remainder vesting at a rate of 2.08% per month thereafter and expire
10 years from the date of grant. The options granted to the independent directors were immediately
exercisable, subject to repurchase rights held by us, which lapse over the vesting period. The terms and
conditions of such grants are otherwise identical to nonqualiÑed option grants made under the stock option
plan in eÅect at that time. At the time of such grants, members of our Board of Directors (and their
aÇliates) beneÑcially owned in excess of 90% of our then outstanding voting interests. We have previously
disclosed such option grants in our Prospectus Ñled with the Securities and Exchange Commission on
September 25, 1998 in connection with our initial public oÅering under the headings ""Management Ì
Director Compensation'' and ""Management Ì Compensation Arrangements.'' Prior to 2002, one director
had exercised all options under such grant. During 2002, the executive oÇcer exercised all options
available to him in connection with his departure from the Company. At December 31, 2002, one grant
remained outstanding to one independent director, with 780,000 shares to be issued upon exercise of the
outstanding options at an average exercise price of $1.56. There were no shares remaining available under
these non-stockholder approved plans for future issuance as of December 31, 2002.
Note 16 Ì Income Taxes:
The components of income including minority interest in consolidated companies and equity interest
in partnership income before income taxes, for the years ended December 31, 2000, 2001 and 2002 are as
follows (in thousands):
Year Ended December 31,
2000 2001 2002
United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $80,872 $177,084 $266,152
International ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 147 (6,627) 129,685
$81,019 $170,457 $395,837
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