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This excerpt taken from the EBAY DEF 14A filed Mar 19, 2009. Reasons
for the Option Exchange
We believe that to be successful, our employees need to think
like owners. Consistent with this philosophy, our equity program
continues to be broad-based. This broad-based equity program
provides us with a competitive advantage, particularly in our
efforts to hire and retain top talent in technology-related
fields.
Due to the significant decline of our stock price during the
last year, many of our employees now hold stock options with
exercise prices significantly higher than the current market
price of our common stock. For example, the closing price of our
common stock on the Nasdaq Global Select Market on March 3,
2009 was $10.42, whereas the weighted average exercise price of
all outstanding options held by our employees on that date was
$28.77. As of February 17, 2009, assuming the per share
trading price of our common stock was $12.00, approximately 96%
of outstanding stock options held by our employees were
underwater. Although we continue to believe that equity awards
are an important component of our employees’ total
incentive benefits and provide us with a competitive advantage,
we also believe that many of our employees view their existing
options as having little or no value due to the significant
difference between the exercise prices and the current market
price of our common stock. In addition,
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the market for key employees remains extremely competitive,
notwithstanding the current economic turmoil. As a result, for
many employees, we believe that those stock options that are
significantly underwater are no longer effective at providing
the incentives that our Board and Compensation Committee believe
are necessary to motivate and retain our employees.
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