eBay 2006 Annual Report Download - page 102

number of agreements, we have provided an indemnity for other types of third-party claims, substantially all of
which are indemnities related to copyrights, trademarks, and patents. In our PayPal business, we have provided an
indemnity to our payment processors in the event of certain third-party claims or card association fines against the
processor arising out of conduct by PayPal. It is not possible to determine the maximum potential loss under these
indemnification provisions due to our limited history of prior indemnification claims and unique facts and
circumstances involved in each particular provision. To date, no significant costs have been incurred, either
individually or collectively, in connection with our indemnification provisions.
Note 9 — Related Party Transactions:
We have entered into indemnification agreements with each of our directors, executive officers and certain
other officers. These agreements require us to indemnify such individuals, to the fullest extent permitted by
Delaware law, for certain liabilities to which they may become subject as a result of their affiliation with us.
All contracts with related parties are at rates and terms that we believe are comparable with those entered into
with independent third parties. There were no material related party transactions in 2004, 2005 and 2006. As of
December 31, 2006, there were no significant amounts payable or amounts receivable from related parties.
Note 10 — Preferred Stock:
We are authorized, subject to limitations prescribed by Delaware law: to issue Preferred Stock in one or more
series; to establish the number of shares included within each series; to fix the rights, preferences and privileges of
the shares of each wholly unissued series and any related qualifications, limitations or restrictions; and to increase or
decrease the number of shares of any series (but not below the number of shares of a series then outstanding) without
any further vote or action by the stockholders. At December 31, 2005 and 2006, there were 10 million shares of
$0.001 par value Preferred Stock authorized for issuance, and no shares issued or outstanding.
Note 11 — Common Stock:
Our Certificate of Incorporation, as amended, authorizes us to issue 3,580 million shares of common stock. A
portion of the shares outstanding are subject to repurchase or forfeiture over a four-year period from the earlier of
the issuance date or employee hire date, as applicable. At December 31, 2005 and 2006 there were 40,000 and
551,676 shares subject to repurchase rights or forfeiture, respectively.
At December 31, 2006, we had reserved 235.7 million shares of common stock available for future issuance
under our stock option plans, including 137.1 million shares related to outstanding stock options. In addition, as of
December 31, 2006, we had reserved approximately 4.0 million shares of common stock available for future
issuance under our deferred stock unit plan, and approximately 5.6 million shares of common stock available for
future issuance under our employee stock purchase plan.
Treasury Stock
In July 2006, our Board of Directors authorized the repurchase of up to $2.0 billion of the company’s common
stock within two years from the date of authorization. The stock repurchase program was announced in July 2006.
During 2006, we repurchased 54.5 million shares of our common stock at an average price of $30.56 per share for an
aggregate purchase price of $1.7 billion. As of December 31, 2006, $0.3 billion remained available for further
purchases under the July 2006 program. During 2006, we also repurchased approximately 88,000 shares from
employees.
These repurchased shares are recorded as treasury stock and are accounted for under the cost method. No
repurchased shares have been retired.
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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)