Exhibit 10.3

TAX MATTERS AGREEMENT

DATED AS OF JULY 17, 2015

BY AND BETWEEN

EBAY INC.

AND

PAYPAL HOLDINGS, INC.

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TABLE OF CONTENTS

 

                 Page  

Section 1.

 

Definition of Terms

     1   

Section 2.

 

Allocation of Tax Liabilities

     12     

Section 2.01      

 

General Rule

     12     

Section 2.02

 

Allocation of United States Federal Taxes

     12     

Section 2.03

 

Allocation of State Taxes

     13     

Section 2.04

 

Allocation of Foreign Taxes

     13     

Section 2.05

 

Certain Transaction and Other Taxes

     14   

Section 3.

 

Proration of Taxes for Straddle Periods

     16   

Section 4.

 

Preparation and Filing of Tax Returns

     16     

Section 4.01

 

General

     16     

Section 4.02

 

Tax Accounting Practices

     16     

Section 4.03

 

Consolidated or Combined Tax Returns

     17     

Section 4.04

 

Right to Review Tax Returns

     17     

Section 4.05

 

SpinCo Carryback Items and Claims for Refund

     19     

Section 4.06

 

Apportionment of Earnings and Profits and Tax Attributes

     19   

Section 5.

 

Tax Payments

     20     

Section 5.01

 

Payment of Taxes

     20     

Section 5.02

 

Indemnification Payments

     21   

Section 6.

 

Tax Benefits

     21     

Section 6.01

 

Tax Benefits

     21     

Section 6.02

 

eBay and SpinCo Income Tax Deductions in Respect of Certain Equity Awards and
Incentive Compensation

     23   

Section 7.

 

Tax-Free Status

     24     

Section 7.01

 

Representations

     24   

 

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Section 7.02

 

Restrictions on SpinCo

     24     

Section 7.03

 

Restrictions on eBay

     26     

Section 7.04

 

Procedures Regarding Opinions and Rulings

     26     

Section 7.05

 

Liability for Tax-Related Losses

     27     

Section 7.06

 

Section 336(e) Election

     29   

Section 8.

 

Assistance and Cooperation

     30     

Section 8.01

 

Assistance and Cooperation

     30     

Section 8.02

 

Income Tax Return Information

     30     

Section 8.03

 

Reliance by eBay

     30     

Section 8.04

 

Reliance by SpinCo

     31   

Section 9.

 

Tax Records

     31     

Section 9.01

 

Retention of Tax Records

     31     

Section 9.02

 

Access to Tax Records

     31   

Section 10.

 

Tax Contests

     31     

Section 10.01

 

Notice

     31     

Section 10.02

 

Control of Tax Contests

     32   

Section 11.

 

Effective Date; Termination of Prior Intercompany Tax Allocation Agreements

     34   

Section 12.

 

Survival of Obligations

     34   

Section 13.

 

Treatment of Payments; Tax Gross Up

     34     

Section 13.01

 

Treatment of Tax Indemnity and Tax Benefit Payments

     34     

Section 13.02

 

Tax Gross Up

     35     

Section 13.03    

 

Interest

     35   

Section 14.

 

Disagreements

     35   

Section 15.

 

Late Payments

     36   

Section 16.

 

Expenses

     36   

 

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Section 17.

 

General Provisions

     36     

Section 17.01

 

Addresses and Notices

     36     

Section 17.02

 

Assignability

     37     

Section 17.03

 

Waiver

     37     

Section 17.04

 

Severability

     37     

Section 17.05

 

Authority

     37     

Section 17.06

 

Further Action

     38     

Section 17.07

 

Integration

     38     

Section 17.08

 

Construction

     38     

Section 17.09

 

No Double Recovery

     38     

Section 17.10

 

Counterparts

     38     

Section 17.11

 

Governing Law

     39     

Section 17.12

 

Jurisdiction

     39     

Section 17.13

 

Amendment

     39     

Section 17.14

 

SpinCo Subsidiaries

     39     

Section 17.15

 

Successors

     39     

Section 17.16    

 

Injunctions

     39   

 

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TAX MATTERS AGREEMENT

This TAX MATTERS AGREEMENT (this “Agreement”) is entered into as of July 17,
2015, by and between eBay Inc., a Delaware corporation (“eBay”), and PayPal
Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of eBay
(“SpinCo”) (collectively, the “Companies” and each a “Company”).

RECITALS

WHEREAS, eBay and SpinCo have entered into a Separation and Distribution
Agreement, dated as of June 26, 2015 (the “Separation and Distribution
Agreement”), providing for the separation of the eBay Group from the SpinCo
Group;

WHEREAS, pursuant to the terms of the Separation and Distribution Agreement,
eBay will, among other things, (i) contribute the PayPal Assets to SpinCo and
its Subsidiaries, (ii) cause SpinCo and its Subsidiaries to assume the PayPal
Liabilities, and (iii) effect the Distribution;

WHEREAS, eBay and its Subsidiaries have engaged in the Internal Contribution and
Internal Distribution to facilitate the Distribution;

WHEREAS, for U.S. Federal Income Tax purposes, it is intended that each of the
Internal Distribution and the Distribution shall qualify as transactions that
are generally tax free pursuant to Sections 355(a) and 368(a)(1)(D) of the Code;

WHEREAS, as of the date hereof, eBay is the common parent of an affiliated group
of corporations, including SpinCo and PayPal, which has elected to file
consolidated U.S. federal income Tax Returns;

WHEREAS, as a result of the Distribution, SpinCo and its subsidiaries will cease
to be members of the affiliated group (as that term is defined in Section 1504
of the Code) of which eBay is the common parent (the “Deconsolidation”);

WHEREAS, the parties desire to provide for and agree upon the allocation between
the parties of liabilities for Taxes arising prior to, as a result of, and
subsequent to the Distribution, and to provide for and agree upon other matters
relating to Taxes;

NOW THEREFORE, in consideration of the mutual agreements contained herein, the
parties hereby agree as follows:

Section 1. Definition of Terms. For purposes of this Agreement (including the
recitals hereof), the following terms have the following meanings, and
capitalized terms used but not otherwise defined herein shall have the meaning
ascribed to them in the Separation and Distribution Agreement:

“3P Holdings” means PayPal Payment Holdings Pte. Ltd., a Singapore limited
company and a wholly owned subsidiary of eBay AG prior to the Internal
Distribution.

“3P Holdings Active Trade or Business” means the active conduct (as defined in
Section 355(b)(2) of the Code and the regulations thereunder) by 3P Holdings and
its “separate affiliated

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group” (as defined in Section 355(b)(3)(B) of the Code) of the PayPal Payments
Business and PayPal Credit Business as conducted by China 93, China 94, China
98, and China 311 and the Swedish marketplace business as conducted by AB
immediately prior to the Internal Distribution.

“AB” means Tradera Sweden AB, a limited liability company organized under the
laws of Sweden.

“Accounting Cutoff Date” means, with respect to SpinCo, any date as of the end
of which there is a closing of the financial accounting records for such entity.

“Adjustment Request” means any formal or informal claim or request filed with
any Tax Authority, or with any administrative agency or court, for the
adjustment, refund, or credit of Taxes, including (a) any amended Tax Return
claiming adjustment to the Taxes as reported on the Tax Return or, if
applicable, as previously adjusted, (b) any claim for equitable recoupment or
other offset, and (c) any claim for refund or credit of Taxes previously paid.

“Affiliate” means any entity that is directly or indirectly “controlled” by
either the person in question or an Affiliate of such person. “Control” means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through ownership
of voting securities, by contract or otherwise. The term Affiliate shall refer
to Affiliates of a person as determined immediately after the Distribution.

“Agreement” shall mean this Tax Matters Agreement.

“Business Day” has the meaning set forth in the Separation and Distribution
Agreement.

“CFC” means a controlled foreign corporation as defined in Section 957(a) of the
Code.

“CFO Certificate” shall have the meaning set forth in Section 7.02(e) of this
Agreement.

“China 93” means eBay Engineering & Research Center (Shanghai) Co. Ltd., a
limited liability company organized under the laws of China and a wholly owned
subsidiary of eBay AG.

“China 94” means eBay Commerce Technology Operations (Shanghai) Co. Ltd., a
limited liability company organized under the laws of China and a wholly owned
subsidiary of eBay AG.

“China 98” means eBay Management (Shanghai) Co. Ltd., a limited liability
company organized under the laws of China and a wholly owned subsidiary of eBay
AG.

“China 311” means Shanghai eBay Network Info. Service Co., Ltd., a limited
liability company organized under the laws of China and a subsidiary of eBay AG.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Companies” and “Company” shall have the meaning provided in the first sentence
of this Agreement.

 

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“Compensatory Equity Interests” shall have the meaning set forth in
Section 6.02(a) of this Agreement.

“Contribution” means the contribution of assets, including all of the shares of
capital stock of PayPal, by eBay to SpinCo pursuant to the Separation and
Distribution Agreement.

“Deconsolidation” shall have the meaning provided in the Recitals.

“Deconsolidation Date” means the last date on which SpinCo qualifies as a member
of the affiliated group (as defined in Section 1504 of the Code) of which eBay
is the common parent.

“DGCL” means the Delaware General Corporation Law.

“Distribution” shall mean the distribution by eBay of all the common stock of
SpinCo pro rata to holders of eBay common stock.

“Distribution Date” has the meaning set forth in the Separation and Distribution
Agreement.

“Distribution-Related Tax Contest” shall mean any Tax Contest in which the IRS,
another Tax Authority or any other party asserts a position that could
reasonably be expected to adversely affect the Tax-Free Status of the
Contribution and Distribution or the Internal Contribution and the Internal
Distribution.

“eBay” shall have the meaning provided in the first sentence of this Agreement.

“eBay Adjustment” means any proposed adjustment by a Tax Authority or claim for
refund asserted in a Tax Contest to the extent eBay would be exclusively liable
for any resulting Tax under this Agreement or exclusively entitled to receive
any resulting Tax Benefit under this Agreement.

“eBay Affiliated Group” shall have the meaning provided in the definition of
“eBay Federal Consolidated Income Tax Return.”

“eBay AG” means eBay International AG, a limited liability company organized
under the laws of Switzerland and a wholly owned subsidiary of eBay.

“eBay Federal Consolidated Income Tax Return” means any U.S. federal income Tax
Return for the affiliated group (as that term is defined in Section 1504 of the
Code and the regulations thereunder) of which eBay is the common parent (the
“eBay Affiliated Group”).

“eBay Foreign Combined Income Tax Return” means a consolidated, combined or
unitary or other similar Foreign Income Tax Return or any Foreign Income Tax
Return with respect to any profit and/or loss sharing group (e.g., UK group
relief), group payment or similar group or fiscal unity that actually includes,
by election or otherwise, one or more members of the eBay Group together with
one or more members of the SpinCo Group.

“eBay Group” means eBay and its Affiliates, excluding any entity that is a
member of the SpinCo Group.

 

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“eBay Group Employees” shall have the meaning provided in the Employee Matters
Agreement.

“eBay Separate Return” means any Separate Return of eBay or any member of the
eBay Group.

“eBay State Combined Income Tax Return” means a consolidated, combined or
unitary or other similar State Income Tax Return that actually includes, by
election or otherwise, one or more members of the eBay Group together with one
or more members of the SpinCo Group.

“eBay Subpart F Income Taxes” has the meaning set forth in Section 2.02(c).

“Employee Matters Agreement” means the Employee Matters Agreement, dated as of
July 17, 2015, by and between eBay and SpinCo.

“Escalation Committee” has the meaning set forth in the Separation and
Distribution Agreement.

“Federal Income Tax” means any Tax imposed by Subtitle A of the Code, and any
interest, penalties, additions to tax, or additional amounts in respect of the
foregoing.

“Federal Income Tax Return” means any Tax Return of (i) any member of the SpinCo
Group (including any consolidated, combined or unitary return), or (ii) any
member of the eBay Group (including any consolidated, combined or unitary
return), in each case, with respect to Federal Income Taxes, including any eBay
Federal Consolidated Income Tax Return and any SpinCo Federal Consolidated
Income Tax Return.

“Federal Other Tax” means any Tax imposed by the federal government of the
United States of America other than any Federal Income Taxes, and any interest,
penalties, additions to tax, or additional amounts in respect of the foregoing.

“Federal Tax” means any Federal Income Tax or Federal Other Tax.

“Federal Tax Return” means any Tax Return of (i) any member of the SpinCo Group
(including any consolidated, combined or unitary return), or (ii) any member of
the eBay Group (including any consolidated, combined or unitary return), in each
case, with respect to Federal Taxes.

“Fifty-Percent or Greater Interest” shall have the meaning ascribed to such term
for purposes of Sections 355(d) and (e) of the Code.

“Filing Date” shall have the meaning set forth in Section 7.05(d) of this
Agreement.

“Final Determination” means the final resolution of liability for any Tax, which
resolution may be for a specific issue or adjustment or for a Tax Period, (a) by
IRS Form 870 or 870-AD (or any successor forms thereto), on the date of
acceptance by or on behalf of the taxpayer, or by a comparable form under the
laws of a State, local, or foreign taxing jurisdiction, except that a Form 870
or 870-AD or comparable form shall not constitute a Final Determination to the
extent that it reserves (whether by its terms or by operation of law) the right
of the taxpayer to file a claim for refund or the right of the Tax Authority to
assert a further deficiency in respect of such issue or

 

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adjustment or for such Tax Period (as the case may be); (b) by a decision,
judgment, decree, or other order by a court of competent jurisdiction, which has
become final and unappealable; (c) by a closing agreement or accepted offer in
compromise under Section 7121 or 7122 of the Code, or a comparable agreement
under the laws of a State, local, or foreign taxing jurisdiction; (d) by any
allowance of a refund or credit in respect of an overpayment of Income Tax or
Other Tax, but only after the expiration of all periods during which such refund
may be recovered (including by way of offset) by the jurisdiction imposing such
Income Tax or Other Tax; or (e) by any other final disposition, including by
reason of the expiration of the applicable statute of limitations or by mutual
agreement of the parties.

“Foreign Income Tax” means any Tax imposed by any foreign country or any
possession of the United States, or by any political subdivision of any foreign
country or United States possession, which is an income tax as defined in
Treasury Regulations Section 1.901-2, and any interest, penalties, additions to
tax, or additional amounts in respect of the foregoing.

“Foreign Other Tax” means any Tax imposed by any foreign country or any
possession of the United States, or by any political subdivision of any foreign
country or United States possession, other than any Foreign Income Taxes, and
any interest, penalties, additions to tax, or additional amounts in respect of
the foregoing.

“Foreign Tax” means any Foreign Income Taxes or Foreign Other Taxes.

“Foreign Tax Return” means any Tax Return of (i) any member of the SpinCo Group
(including any consolidated, combined or unitary return), or (ii) any member of
the eBay Group (including any consolidated, combined or unitary return), in each
case, with respect to Foreign Taxes.

“Former eBay Group Employee” shall have the meaning provided in the Employee
Matters Agreement.

“Former PayPal Group Employee” shall have the meaning provided in the Employee
Matters Agreement.

“Group” means the eBay Group or the SpinCo Group, or both, as the context
requires.

“High-Level Dispute” means any dispute or disagreement (a) relating to liability
under Section 7.05 of this Agreement or (b) in which the amount of liability in
dispute exceeds $25 million.

“Income Tax” means any Federal Income Tax, State Income Tax or Foreign Income
Tax.

“Indemnitee” shall have the meaning set forth in Section 13.03 of this
Agreement.

“Indemnitor” shall have the meaning set forth in Section 13.03 of this
Agreement.

“Internal Contribution” means the contribution of specified assets, including
(i) the stock of AB, (ii) approximately $10,080,000 in cash, (iii) the stock of
PayPal International Treasury Centre Sarl, (iv) the stock of PayPal Network
Information Services (Shanghai) Co., Ltd., and (v) certain assets utilized in
various customer service, research and development, and administrative functions
performed by certain individuals employed by China 93, China 94, China 98, and
China 311 for the PayPal Payments Business in China, by eBay AG to 3P Holdings
pursuant to the Separation and Distribution Agreement.

 

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“Internal Distribution” shall mean the distribution by eBay AG of all the common
stock of 3P Holdings to eBay in a transaction intended to qualify as a
distribution that is generally tax free pursuant to Sections 355(a) and
368(a)(1)(D) of the Code.

“IRS” means the United States Internal Revenue Service.

“Joint Return” shall mean any Return of a member of the eBay Group or the SpinCo
Group that is not a Separate Return.

“Notified Action” shall have the meaning set forth in Section 7.04(a) of this
Agreement.

“Other Tax” means any Federal Other Tax, State Other Tax, or Foreign Other Tax.

“Past Practices” shall have the meaning set forth in Section 4.02(a) of this
Agreement.

“Payment Date” means (i) with respect to any eBay Federal Consolidated Income
Tax Return, the due date for any required installment of estimated taxes
determined under Section 6655 of the Code, the due date (determined without
regard to extensions) for filing the return determined under Section 6072 of the
Code, and the date the return is filed, and (ii) with respect to any other Tax
Return, the corresponding dates determined under the applicable Tax Law.

“Payor” shall have the meaning set forth in Section 5.02(a) of this Agreement.

“PayPal” means PayPal, Inc., a Delaware corporation, and a direct wholly owned
subsidiary of eBay prior to the Contribution.

“PayPal Credit Business” means PayPal’s domestic consumer and merchant credit
business, known as PayPal Credit, which is part of the PayPal Payments Business.

“PayPal Group Employees” shall have the meaning provided in the Employee Matters
Agreement.

“PayPal Payments Business” means PayPal’s business of providing a technology
platform that enables digital and mobile payments on behalf of consumers and
merchants.

“Person” means any individual, partnership, corporation, limited liability
company, association, joint stock company, trust, joint venture, unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof, without regard to whether any entity is treated as
disregarded for U.S. Federal Income Tax purposes.

“Post-Deconsolidation Period” means any Tax Period beginning after the
Deconsolidation Date, and, in the case of any Straddle Period, the portion of
such Straddle Period beginning the day after the Deconsolidation Date.

 

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“Pre-Deconsolidation Period” means any Tax Period ending on or before the
Deconsolidation Date, and, in the case of any Straddle Period, the portion of
such Straddle Period ending on the Deconsolidation Date.

“Prime Rate” has the meaning set forth in the Separation and Distribution
Agreement.

“Privilege” means any privilege that may be asserted under applicable law,
including, any privilege arising under or relating to the attorney-client
relationship (including the attorney-client and work product privileges), the
accountant-client privilege and any privilege relating to internal evaluation
processes.

“Proposed Acquisition Transaction” means a transaction or series of transactions
(or any agreement, understanding or arrangement, within the meaning of
Section 355(e) of the Code and Treasury Regulations Section 1.355-7, or any
other regulations promulgated thereunder, to enter into a transaction or series
of transactions), whether such transaction is supported by SpinCo management or
shareholders, is a hostile acquisition, or otherwise, as a result of which
SpinCo would merge or consolidate with any other Person or as a result of which
any Person or Persons would (directly or indirectly) acquire, or have the right
to acquire, from SpinCo and/or one or more holders of outstanding shares of
SpinCo Capital Stock, a number of shares of SpinCo Capital Stock that would,
when combined with any other changes in ownership of SpinCo Capital Stock
pertinent for purposes of Section 355(e) of the Code, comprise 40% or more of
(A) the value of all outstanding shares of stock of SpinCo as of the date of
such transaction, or in the case of a series of transactions, the date of the
last transaction of such series, or (B) the total combined voting power of all
outstanding shares of voting stock of SpinCo as of the date of such transaction,
or in the case of a series of transactions, the date of the last transaction of
such series. Notwithstanding the foregoing, a Proposed Acquisition Transaction
shall not include (A) the adoption by SpinCo of a shareholder rights plan or
(B) issuances by SpinCo that satisfy Safe Harbor VIII (relating to acquisitions
in connection with a person’s performance of services) or Safe Harbor IX
(relating to acquisitions by a retirement plan of an employer) of Treasury
Regulations Section 1.355-7(d). For purposes of determining whether a
transaction constitutes an indirect acquisition, any recapitalization resulting
in a shift of voting power or any redemption of shares of stock shall be treated
as an indirect acquisition of shares of stock by the non-exchanging
shareholders. This definition and the application thereof is intended to monitor
compliance with Section 355(e) of the Code and shall be interpreted accordingly.
Any clarification of, or change in, the statute or regulations promulgated under
Section 355(e) of the Code shall be incorporated into this definition and its
interpretation.

“PTI” means any earnings and profits of a foreign corporation that would be
excluded from gross income pursuant to Section 959 of the Code.

“Recipient” means, with respect to the transfers occurring pursuant to the
Transactions, the Party receiving assets and/or liabilities.

“Representation Letters” means the representation letters and any other
materials delivered by, or on behalf of, eBay, SpinCo or others to a Tax Advisor
in connection with the issuance by such Tax Advisor of a Tax Opinion.

“Required Party” shall have the meaning set forth in Section 5.02(a) of this
Agreement.

 

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“Reserve” shall mean a financial statement reserve, in accordance with generally
accepted accounting principles, pursuant to FASB Interpretation No. 48,
excluding, for the avoidance of doubt, any reserve related to Taxes imposed with
respect to the Transactions.

“Responsible Company” means, with respect to any Tax Return, the Company having
responsibility for preparing and filing such Tax Return under this Agreement.

“Restriction Period” shall mean the period beginning on the date hereof and
ending on (and including) the two-year anniversary of the Distribution Date.

“Retention Date” shall have the meaning set forth in Section 9.01 of this
Agreement.

“Section 336(e) Election” has the meaning set forth in Section 7.06.

“Section 7.02(e) Acquisition Transaction” means any transaction or series of
transactions that is not a Proposed Acquisition Transaction but would be a
Proposed Acquisition Transaction if the percentage reflected in the definition
of Proposed Acquisition Transaction were 30% instead of 40%.

“Separate Return” means (a) in the case of any Tax Return of any member of the
SpinCo Group (including any consolidated, combined or unitary return), any such
Tax Return that does not include any member of the eBay Group and (b) in the
case of any Tax Return of any member of the eBay Group (including any
consolidated, combined or unitary return), any such Tax Return that does not
include any member of the SpinCo Group.

“Separation and Distribution Agreement” shall have the meaning set forth in the
recitals of this Agreement.

“SpinCo” shall have the meaning provided in the first sentence of this
Agreement, and references herein to SpinCo shall include any entity treated as a
successor to SpinCo.

“SpinCo Active Trade or Business” means the active conduct (as defined in
Section 355(b)(2) of the Code and the regulations thereunder) by SpinCo and its
“separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code) of
the PayPal Payments Business and PayPal Credit Business as conducted by PayPal,
PayPal (Europe) S.a.r.l. et Cie, S.C.A., and PayPal Pte. Ltd. immediately prior
to the Distribution.

“SpinCo Capital Stock” means all classes or series of capital stock of SpinCo,
including (i) the SpinCo Common Stock, (ii) all options, warrants and other
rights to acquire such capital stock and (iii) all instruments properly treated
as stock in SpinCo for U.S. federal income tax purposes.

“SpinCo Carryback Item” means any net operating loss, net capital loss, excess
tax credit, or other similar Tax item of any member of the SpinCo Group which
may or must be carried from one Tax Period to another prior Tax Period under the
Code or other applicable Tax Law.

“SpinCo Common Stock” has the meaning ascribed to the term “PayPal Shares” in
the Separation and Distribution Agreement.

 

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“SpinCo Federal Consolidated Income Tax Return” shall mean any U.S. federal
income Tax Return for the affiliated group (as that term is defined in
Section 1504 of the Code) of which SpinCo is the common parent.

“SpinCo Group” means SpinCo and its Affiliates, as determined immediately after
the Distribution.

“SpinCo Retained Other Taxes” means Other Taxes incurred in the ordinary course
of business that have been accrued on the financial statements of any member of
the SpinCo Group as of the Distribution Date, excluding, for the avoidance of
doubt, Other Taxes imposed with respect to the Transactions.

“SpinCo Separate Return” means any Separate Return of SpinCo or any member of
the SpinCo Group.

“SpinCo Subpart F Income Taxes” has the meaning set forth in Section 2.02(c).

“State Income Tax” means any Tax imposed by any State of the United States or by
any political subdivision of any such State or the District of Columbia, which
is imposed on or measured by net income, including state and local franchise or
similar Taxes measured by net income, and any interest, penalties, additions to
tax, or additional amounts in respect of the foregoing.

“State Other Tax” means any Tax imposed by any State of the United States or by
any political subdivision of any such State or the District of Columbia, other
than any State Income Taxes, and any interest, penalties, additions to tax, or
additional amounts in respect of the foregoing.

“State Tax” means any State Income Taxes or State Other Taxes.

“State Tax Return” means any Tax Return of (i) any member of the SpinCo Group
(including any consolidated, combined or unitary return), or (ii) any member of
the eBay Group (including any consolidated, combined or unitary return), in each
case, with respect to State Taxes.

“Straddle Period” means any Tax Period that begins on or before and ends after
the Deconsolidation Date.

“Subpart F Income” means, collectively, (i) “subpart F income,” as defined in
Section 952 of the Code and (ii) any investment in “United States property,” as
defined in Section 956 of the Code.

“Tax” or “Taxes” means any income, gross income, gross receipts, profits,
capital stock, franchise, withholding, property, ad valorem, stamp, excise,
severance, occupation, service, sales, use, license, lease, transfer, import,
export, value added, alternative minimum, estimated or other similar tax
(including any fee, assessment, or other charge in the nature of or in lieu of
any tax) imposed by any governmental entity or political subdivision thereof,
and any interest, penalties, additions to tax, or additional amounts in respect
of the foregoing.

“Tax Advisor” means a United States tax counsel or accountant of recognized
national standing.

“Tax Advisor Dispute” shall have the meaning set forth in Section 14 of this
Agreement.

 

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“Tax Allocation Agreement” means the Tax Allocation Agreement, by and among eBay
and certain of its Subsidiaries, dated as of January 1, 2003.

“Tax Attribute” or “Attribute” shall mean a net operating loss, net capital
loss, unused investment credit, unused foreign tax credit, excess charitable
contribution, general business credit or any other Tax Item that could reduce a
Tax.

“Tax Authority” means, with respect to any Tax, the governmental entity or
political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Tax for such entity or subdivision.

“Tax Benefit” means any loss, deduction, refund, credit, or other item reducing
Taxes otherwise payable (including, for the avoidance of doubt, the receipt of
any distribution from a CFC, to the extent such distribution is treated as being
made out of PTI).

“Tax Contest” means an audit, review, examination, or any other administrative
or judicial proceeding with the purpose or effect of redetermining Taxes
(including any administrative or judicial review of any claim for refund).

“Tax-Free Status” means, with respect to each of (i) the Contribution and
Distribution, taken together, and (ii) the Internal Contribution and the
Internal Distribution, taken together, the qualification thereof (a) as a
transaction described in Sections 355 and 368(a)(1)(D) of the Code, (b) as a
transaction in which the stock distributed thereby is “qualified property” for
purposes of Sections 355(c)(2) and 361(c)(2) of the Code and (c) as a
transaction in which eBay, SpinCo and the members of their respective Groups
recognize no income or gain for U.S. federal income tax purposes pursuant to
Sections 355, 361 and 1032 of the Code, other than (x) income or gain recognized
pursuant to Sections 367(a), 367(b) and/or 1248 and the Treasury Regulations
promulgated under such provisions with respect to the Internal Contribution and
the Internal Distribution or (y) intercompany items or excess loss accounts
taken into account pursuant to the Treasury Regulations promulgated pursuant to
Section 1502 of the Code.

“Tax Item” means, with respect to any Income Tax, any item of income, gain,
loss, deduction, or credit.

“Tax Law” means the law of any governmental entity or political subdivision
thereof relating to any Tax.

“Tax Opinion” means each opinion of a Tax Advisor delivered to eBay in
connection with and regarding the Federal Income Tax treatment of, (i) the
Contribution and the Distribution or (ii) the Internal Contribution and the
Internal Distribution.

“Tax Period” means, with respect to any Tax, the period for which the Tax is
reported as provided under the Code or other applicable Tax Law.

“Tax Records” means any Tax Returns, Tax Return workpapers, documentation
relating to any Tax Contests, and any other books of account or records (whether
or not in written, electronic or other tangible or intangible forms and whether
or not stored on electronic or any other medium) required to be maintained under
the Code or other applicable Tax Laws or under any record retention agreement
with any Tax Authority.

 

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“Tax-Related Losses” means (i) all federal, state, local and foreign Taxes
(including interest and penalties thereon) imposed pursuant to any settlement,
Final Determination, judgment or otherwise; (ii) all reasonable accounting,
legal and other professional fees, and court costs incurred in connection with
such Taxes; and (iii) all reasonable costs and expenses and any damages
associated with stockholder litigation or controversies and any amount required
to be paid by eBay (or any eBay Affiliate) or SpinCo (or any SpinCo Affiliate)
in respect of the liability of shareholders, whether paid to shareholders or to
the IRS or any other Tax Authority, in each case, resulting from the failure of
the Contribution and the Distribution or the Internal Contribution and the
Internal Distribution to have Tax-Free Status; provided, that amounts shall be
treated as having been required to be paid for purposes of clause (iii) of this
definition to the extent they are paid in a good faith compromise of an asserted
claim.

“Tax Return” or “Return” means any report of Taxes due, any claim for refund of
Taxes paid, any information return with respect to Taxes, or any other similar
report, statement, declaration, or document filed or required to be filed under
the Code or other Tax Law, including any attachments, exhibits, or other
materials submitted with any of the foregoing, and including any amendments or
supplements to any of the foregoing.

“Transaction Taxes” has the meaning set forth in Section 2.05(a).

“Transactions” means the Contribution, the Distribution and the other
transactions contemplated by the Separation and Distribution Agreement
(including the Internal Contribution and the Internal Distribution).

“Transferor” means, with respect to the transfers occurring pursuant to the
Transactions, the Party transferring assets and/or liabilities.

“Treasury Regulations” means the regulations promulgated from time to time under
the Code as in effect for the relevant Tax Period.

“Unqualified Tax Opinion” means an unqualified opinion of a Tax Advisor on which
eBay may rely to the effect that (i) a transaction will not affect the Tax-Free
Status of the Contribution and the Distribution or the Internal Contribution and
the Internal Distribution, and (ii) will not adversely affect any of the
conclusions set forth in any Tax Opinion regarding the Tax-Free Status of the
Contribution and the Distribution or the Internal Contribution and the Internal
Distribution; provided, that any tax opinion obtained in connection with a
proposed acquisition of SpinCo Capital Stock entered into during the Restriction
Period shall not qualify as an Unqualified Tax Opinion unless such tax opinion
concludes that such proposed acquisition will not be treated as “part of a plan
(or series of related transactions),” within the meaning of Section 355(e) of
the Code and the Treasury Regulations promulgated thereunder, that includes the
Distribution or the Internal Distribution. Any such opinion must assume that the
Contribution and Distribution and the Internal Contribution and the Internal
Distribution would have qualified for Tax-Free Status if the transaction in
question did not occur.

 

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Section 2. Allocation of Tax Liabilities.

Section 2.01 General Rule.

(a) eBay Liability. eBay shall be liable for, and shall indemnify and hold
harmless the SpinCo Group from and against any liability for, Taxes which are
allocated to eBay under this Section 2.

(b) SpinCo Liability. SpinCo shall be liable for, and shall indemnify and hold
harmless the eBay Group from and against any liability for, Taxes which are
allocated to SpinCo under this Section 2.

Section 2.02 Allocation of United States Federal Taxes. Except as otherwise
provided in Section 2.05(b) or (c), Federal Taxes shall be allocated as follows:

(a) Allocation of Tax Relating to Federal Tax Returns. eBay shall be responsible
for any and all Federal Taxes due with respect to or required to be reported on
any Federal Tax Return required to be filed by a member of the eBay Group with
respect to any Tax Period (or portion thereof) ending on or prior to the
Distribution Date (including any eBay Federal Consolidated Income Tax Return)
(including any increase in such Tax as a result of a Final Determination);
provided, however that SpinCo shall be responsible for any such Tax (including
any increase in such Tax as a result of a Final Determination) to the extent
such Tax is imposed with respect to any matter for which any member of the
SpinCo Group reflected a Reserve in its financial statements on the Distribution
Date; provided, further, that SpinCo shall be responsible for any Federal Other
Taxes that are SpinCo Retained Other Taxes (including any increase in such Tax
as a result of a Final Determination). For the avoidance of doubt, the amount of
any such Reserve (or, in the case of SpinCo Retained Other Taxes, the amount of
any such accrual) shall not be treated as a minimum amount of, or a limitation
on, SpinCo’s responsibility pursuant to Sections 2.02(a), 2.03(a), or 2.04(a).

(b) Certain Post-Distribution Matters. Subject to SpinCo’s compliance with
Section 4.02(c), eBay shall be responsible for any and all Federal Income Taxes
imposed on the SpinCo Group with respect to any Tax Period (or portion thereof)
ending on or prior to December 31, 2016 arising solely from the purchase of
certain credit receivables prior to the Distribution Date or the SpinCo Group
continuing to purchase or own such credit receivables until the date that is one
day before the one-year anniversary of the Distribution Date. eBay shall not be
responsible for any Taxes imposed on the SpinCo Group arising from the purchase,
ownership or disposition of credit receivables on or after the one-year
anniversary of the Distribution Date.

(c) Allocation of Certain Subpart F Income Taxes. Except to the extent otherwise
provided in Section 2.02(b), and notwithstanding anything to the contrary in the
Tax Allocation Agreement, Federal Income Taxes due with respect to any Subpart F
Income required to be included in income by the SpinCo Group under
Section 951(a)(1) of the Code with respect to any Straddle Period of any CFC
that is a member of the SpinCo Group and was transferred to SpinCo pursuant to
the Contribution shall be allocated as follows: (i) eBay shall be responsible
for any such Taxes imposed with respect to Subpart F Income allocable to the
portion of such Straddle Period that is a Pre-Deconsolidation Period (including
any increase in such Tax as a result of a Final Determination) (“eBay Subpart F
Income Taxes”), and (ii) SpinCo shall be responsible

 

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for any such Taxes imposed with respect to Subpart F Income allocable to the
portion of such Straddle Period that is a Post-Deconsolidation Period (including
any increase in such Tax as a result of a Final Determination) (“SpinCo Subpart
F Income Taxes”). For this purpose, Subpart F Income shall be allocated between
the Pre-Deconsolidation Period and the Post-Deconsolidation Period based on a
hypothetical “closing of the books” at the end of the Distribution Date.

Section 2.03 Allocation of State Taxes. Except as otherwise provided in
Section 2.05(b) or (c), State Taxes shall be allocated as follows:

(a) Allocation of Tax Relating to State Tax Returns. eBay shall be responsible
for any and all State Taxes due with respect to or required to be reported on
any State Tax Return with respect to any Tax Period (or portion thereof) ending
on or prior to the Distribution Date (including any increase in such Tax as a
result of a Final Determination) and, for the avoidance of doubt, eBay shall be
responsible for any and all State Other Taxes imposed with respect to the
Transactions except to the extent SpinCo is otherwise liable for such State
Other Taxes pursuant to Section 7.05; provided, however that SpinCo shall be
responsible for any such Tax (including any increase in such Tax as a result of
a Final Determination) to the extent such Tax is imposed with respect to any
matter for which any member of the SpinCo Group reflected a Reserve in its
financial statements on the Distribution Date; provided, further, that SpinCo
shall be responsible for any State Other Taxes that are SpinCo Retained Other
Taxes (including any increase in such Tax as a result of a Final Determination).

(b) Certain Post-Distribution Matters. Subject to SpinCo’s compliance with
Section 4.02(c), eBay shall be responsible for any and all State Income Taxes
imposed on the SpinCo Group with respect to any Tax Period (or portion thereof)
ending on or prior to December 31, 2016 arising solely from the purchase of
certain credit receivables prior to the Distribution Date or the SpinCo Group
continuing to purchase or own such credit receivables until the date that is one
day before the one-year anniversary of the Distribution Date. eBay shall not be
responsible for any Taxes imposed on the SpinCo Group arising from the purchase,
ownership or disposition of credit receivables on or after the one-year
anniversary of the Distribution Date.

Section 2.04 Allocation of Foreign Taxes. Except as otherwise provided in
Section 2.05(b) or (c), Foreign Taxes shall be allocated as follows:

(a) Allocation of Tax Relating to Foreign Tax Returns. eBay shall be responsible
for any and all Foreign Taxes due with respect to or required to be reported on
any Foreign Tax Return with respect to any Tax Period (or portion thereof)
ending on or prior to the Distribution Date (including any increase in such Tax
as a result of a Final Determination) and, for the avoidance of doubt, eBay
shall be responsible for any and all Foreign Other Taxes imposed with respect to
the Transactions except to the extent SpinCo is otherwise liable for such
Foreign Other Taxes pursuant to Section 7.05; provided, however that SpinCo
shall be responsible for any such Tax (including any increase in such Tax as a
result of a Final Determination) to the extent such Tax is imposed with respect
to any matter for which any member of the SpinCo Group reflected a Reserve in
its financial statements on the Distribution Date; provided, further, that
SpinCo shall be responsible for any Foreign Other Taxes that are SpinCo Retained
Other Taxes (including any increase in such Tax as a result of a Final
Determination).

(b) Certain Post-Distribution Matters. Subject to SpinCo’s compliance with
Section 4.02(c), eBay shall be responsible for any and all Foreign Income Taxes
imposed on the SpinCo Group with respect to any Tax Period (or portion thereof)
ending on or prior to December 31, 2016 arising solely from the purchase of
certain credit receivables prior to the Distribution Date or the SpinCo Group
continuing to purchase or own such credit receivables until the date that is one
day before the one-year anniversary of the Distribution Date. eBay shall not be
responsible for any Taxes imposed on the SpinCo Group arising from the purchase,
ownership or disposition of credit receivables on or after the one-year
anniversary of the Distribution Date.

 

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Section 2.05 Certain Transaction and Other Taxes.

(a) Transaction Taxes.

(i) All charges for goods or services in respect of the transfers occurring
pursuant to the Transactions, and related transaction costs, shall be exclusive
of any value added, goods and services, sales, use, consumption, excise,
service, transfer, stamp, documentary, filing, recordation taxes or similar
taxes (“Transaction Taxes”). Without limiting any provision of this Agreement,
the Recipient shall be responsible for all Transaction Taxes imposed on or
assessed with respect to the provision of goods or services by the Transferor.
The Transferor shall issue proper invoices usable by the Recipient to recover
(by way of credit or refund) Transaction Taxes in jurisdictions where they are
recoverable. The Transferor and the Recipient shall cooperate to minimize any
Transaction Taxes and in obtaining any refund, return, or rebate, or applying an
exemption or zero-rating for goods or services giving rise to any Transaction
Taxes, including by filing any exemption or other similar forms or providing
valid tax identification numbers or other relevant registration numbers,
certificates, or other documents. The Recipient and the Transferor shall
cooperate regarding any requests for information, audits, or similar requests by
any Tax Authority concerning Transaction Taxes payable with respect to the
transfers occurring pursuant to the Transactions. If, within twelve (12) months
following the date any Transaction Taxes are paid pursuant to this
Section 2.05(a)(i) by SpinCo or a member of the SpinCo Group to any Taxing
Authority, eBay or a member of the eBay Group in respect of the transfers
occurring pursuant to the Transactions, the SpinCo Group is unable, using
commercially reasonable efforts, to fully recover (by way of credit or refund)
any such Transaction Taxes, SpinCo may seek reimbursement of such unrecoverable
Transaction Taxes from eBay. SpinCo’s request for reimbursement of such
nonrecoverable Transaction Taxes from eBay shall include documentation of the
nonrecoverable Transaction Taxes and substantiation that a refund or credit is
not permitted. eBay shall pay any amounts under this Section 2.05(a)(i) to
SpinCo within ninety (90) days following the receipt of a substantiated request
for reimbursement from SpinCo. To the extent that, after receiving reimbursement
of any such nonrecoverable Transaction Taxes from eBay pursuant to this
Section 2.05(a)(i), a member of the SpinCo Group recovers (by way of credit or
refund) all or a portion of such Transaction Taxes, SpinCo shall repay such
recovered Transaction Taxes to eBay.

(ii) The Recipient shall be entitled to deduct and withhold Tax required by
applicable law to be withheld on payments made to the Transferor pursuant to the
Transactions. To the extent any amounts are so withheld, the Recipient shall
timely remit such deducted and withheld amounts to the relevant Tax Authority
and promptly provide the

 

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Transferor with evidence of such payment. The Transferor agrees to complete and
provide to the Recipient or, if required, to the relevant Tax Authority, at
least ten (10) days prior to the payment due date, such forms, certifications,
or other documents as may be reasonably requested by the Recipient, in order to
reduce or exempt the withholding of any Tax with respect to payments made to the
Transferor when and where applicable by Law. The Recipient and the Transferor
shall cooperate regarding any requests for information, audits, or similar
requests by any Tax Authority concerning the withholding of any Tax payable with
respect to the Transactions. If, within twelve (12) months following the date
any Taxes are withheld by eBay or a member of the eBay Group in respect of
payments or other transfers to SpinCo or a member of the SpinCo Group
occurring pursuant to the Transactions, the SpinCo Group is not able to apply or
credit any such withheld Taxes against Taxes otherwise payable by the SpinCo
Group, SpinCo may seek reimbursement of the amount of such withheld Taxes that
cannot be so applied or credited from eBay. SpinCo’s request for such
reimbursement of such withheld Taxes from eBay shall include documentation of
the Taxes withheld and substantiation that a credit or other relief is not
permitted. eBay shall pay any amounts under this Section 2.05(a)(ii) to SpinCo
within ninety (90) days following the receipt of a substantiated request for
reimbursement from SpinCo. To the extent that, after receiving reimbursement of
any such withheld Taxes from eBay pursuant to this Section 2.05(a)(ii), the
SpinCo Group obtains a credit or other relief with respect to all or a portion
of such withheld Taxes, SpinCo shall repay such credited Taxes (or, to the
extent any such other relief is obtained, an amount equal to the corresponding
reduction in Taxes otherwise payable by the SpinCo Group) to eBay.

(iii) Any penalties or interest imposed on any Transaction Taxes described in
Section 2.05(a)(i) or Tax described in Section 2.05(a)(ii) shall be the
responsibility of the Recipient unless such penalties or interest are the result
of an action or failure to act by the Transferor. The amounts for which the
Recipient or Transferor is liable pursuant to this Section 2.05(a) shall include
all reasonable accounting, legal and other professional fees, and court costs
incurred in connection with the relevant Taxes.

(b) SpinCo Liability. SpinCo shall be liable for, and shall indemnify and hold
harmless the eBay Group from and against any liability for:

(i) any Tax resulting from a breach by SpinCo of any representation or covenant
in this Agreement, the Separation and Distribution Agreement or any Ancillary
Agreement; and

(ii) any Tax-Related Losses for which SpinCo is responsible pursuant to
Section 7.05 of this Agreement.

The amounts for which SpinCo is liable pursuant to Section 2.05(b)(i) shall
include all accounting, legal and other professional fees, and court costs
incurred in connection with the relevant Taxes.

 

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(c) eBay Liability. eBay shall be liable for, and shall indemnify and hold
harmless the SpinCo Group from and against any liability for:

(i) any Tax resulting from a breach by eBay of any representation or covenant in
this Agreement, the Separation and Distribution Agreement or any Ancillary
Agreement; and

(ii) any Tax-Related Losses for which eBay is responsible pursuant to
Section 7.05 of this Agreement.

The amounts for which eBay is liable pursuant to Section 2.05(c)(i) shall
include all accounting, legal and other professional fees, and court costs
incurred in connection with the relevant Taxes.

Section 3. Proration of Taxes for Straddle Periods.

(a) General Method of Proration. In the case of any Straddle Period, Tax Items
shall be apportioned between Pre-Deconsolidation Periods and
Post-Deconsolidation Periods in accordance with the principles of Treasury
Regulations Section 1.1502-76(b) as reasonably interpreted and applied by the
Companies. With respect to the eBay Federal Consolidated Income Tax Return for
the taxable year that includes the Distribution, no election shall be made under
Treasury Regulation Section 1.1502-76(b)(2)(ii). If the Deconsolidation Date is
not an Accounting Cutoff Date, the provisions of Treasury Regulation
Section 1.1502-76(b)(2)(iii) will be applied to ratably allocate the items
(other than extraordinary items) for the month which includes the
Deconsolidation Date.

(b) Transactions Treated as Extraordinary Item. In determining the apportionment
of Tax Items between Pre-Deconsolidation Periods and Post-Deconsolidation
Periods, any Tax Items relating to the Transactions shall be treated as
extraordinary items described in Treasury Regulation
Section 1.1502-76(b)(2)(ii)(C) and shall (to the extent occurring on or prior to
the Deconsolidation Date) be allocated to Pre-Deconsolidation Periods, and any
Taxes related to such items shall be treated under Treasury Regulations
Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall (to
the extent occurring on or prior to the Deconsolidation Date) be allocated to
Pre-Deconsolidation Periods.

Section 4. Preparation and Filing of Tax Returns.

Section 4.01 General. Except as otherwise provided in this Section 4, Tax
Returns shall be prepared and filed when due (taking into account extensions) by
the Person obligated to file such Tax Returns under the Code or applicable Tax
Law. The Companies shall provide, and shall cause their Affiliates to provide,
assistance and cooperation to one another in accordance with Section 8 with
respect to the preparation and filing of Tax Returns, including by providing
information required to be provided pursuant to Section 8.

Section 4.02 Tax Accounting Practices.

(a) General Rule. Except as otherwise provided in Section 4.02(b) and (c), with
respect to any Tax Return that SpinCo has the obligation and right to prepare
and file, or cause to be prepared and filed, for any Straddle Period (or any Tax
Period beginning after the Deconsolidation Date to the extent items reported on
such Tax Return could reasonably be expected to affect items reported on any Tax
Return that eBay has the obligation or right to prepare and file for any
Pre-Deconsolidation Period or any Straddle Period), such Tax Return shall be
prepared in

 

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accordance with past practices, accounting methods, elections or conventions
(“Past Practices”) used with respect to the Tax Returns in question except to
the extent otherwise required by applicable law. Except as otherwise provided in
Section 4.02(b), eBay shall prepare any Tax Return which it has the obligation
and right to prepare and file, or cause to be prepared and filed, under
Section 4.01, in accordance with reasonable Tax accounting practices selected by
eBay.

(b) Reporting of Transactions. Except to the extent otherwise required by
applicable law or as a result of a Final Determination, (A) neither eBay nor
SpinCo shall, and shall not permit or cause any member of its respective Group
to, take any position that is either inconsistent with the treatment of each of
(i) the Contribution and Distribution, taken together, or (ii) the Internal
Contribution and the Internal Distribution, taken together, in each case, as
having Tax-Free Status (or analogous status under state or local law) and,
(B) SpinCo shall not, and shall not permit or cause any member of the SpinCo
Group to, take any position with respect to an item of income, deduction, gain,
loss, or credit on a Tax Return, or otherwise treat such item in a manner which
is inconsistent with the manner such item is reported on a Tax Return required
to be prepared or filed by eBay pursuant to Section 4.01 hereof (including,
without limitation, the claiming of a deduction previously claimed on any such
Tax Return).

(c) Reporting of Credit Receivables Purchases. Except to the extent otherwise
required by (i) a change in applicable law on or before the one-year anniversary
of the Distribution Date, (ii) applicable law after the one-year anniversary of
the Distribution Date, or (iii) as a result of a Final Determination, neither
SpinCo nor eBay shall, and neither shall permit or cause any member of its
respective Group to, take any position with respect to the purchase, ownership,
or disposition of credit receivables that is inconsistent with the Past
Practices of eBay and its subsidiaries with respect to the Tax reporting thereof
referred to in Sections 2.02(b), 2.03(b), and 2.04(b). In the event SpinCo
determines that it is required to take such an inconsistent position, it shall
promptly notify eBay in writing, and the parties shall cooperate to minimize the
amount of Taxes for which eBay may be liable pursuant to Sections 2.02(b),
2.03(b), and 2.04(b).

Section 4.03 Consolidated or Combined Tax Returns. SpinCo will elect and join,
and will cause its respective Affiliates to elect and join, in filing any eBay
State Combined Income Tax Returns, eBay Foreign Combined Income Tax Returns and
any other Joint Returns that eBay reasonably determines are required to be filed
(or that eBay chooses to file) by the Companies or any of their Affiliates for
Tax Periods ending on, before or after the Deconsolidation Date. With respect to
any SpinCo Separate Returns relating to any Tax Period (or portion thereof)
ending on or prior to the Distribution Date, SpinCo will elect and join, and
will cause its respective Affiliates to elect and join, in filing consolidated,
unitary, combined, or other similar joint Tax Returns, to the extent each entity
is eligible to join in such Tax Returns, if eBay reasonably determines that the
filing of such Tax Returns is consistent with past reporting practices, or, in
the absence of applicable past practices, will result in the minimization of the
net present value of the aggregate Tax to the entities eligible to join in such
Tax Returns.

Section 4.04 Right to Review Tax Returns.

(a) General. The Responsible Company with respect to any material Tax Return
shall make such Tax Return (or the relevant portions thereof), related
workpapers and other supporting documents available for review by the other
Company, to the extent (i) such Tax Return

 

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relates to Taxes for which such other Company is or would reasonably be expected
to be liable, (ii) such other Company is or would reasonably be expected to be
liable in whole or in part for any additional Taxes owing as a result of
adjustments to the amount of Taxes reported on such Tax Return, (iii) such Tax
Return relates to Taxes for which the other party would reasonably be expected
to have a claim for Tax Benefits under this Agreement, or (iv) reasonably
necessary for the other party to confirm compliance with the terms of this
Agreement. The Responsible Company shall use reasonable efforts to make such Tax
Return, workpapers and other supporting documents available for review as
required under this paragraph promptly once such Tax Return is materially
complete, but in any event no later than three (3) weeks in advance of the due
date for filing of such Tax Return, such that the other party has a meaningful
opportunity to review and comment on such Tax Return, and shall use reasonable
efforts to have such Tax Return modified before filing, taking into account the
person responsible for payment of the Tax (if any) reported on such Tax Return.
The Companies shall attempt in good faith to resolve any disagreement arising
out of the review of such Tax Return and, failing such resolution, any
disagreement shall be resolved in accordance with the disagreement resolution
provisions of Section 14 as promptly as practicable.

(b) Execution of Returns Prepared by Other Party. In the case of any Tax Return
which is required to be prepared and filed by one Company under this Agreement
and which is required by law to be signed by the other Company (or by its
authorized representative), the Company which is legally required to sign such
Tax Return shall not be required to sign such Tax Return under this Agreement
unless there is at least a greater than 50% likelihood of prevailing on the
merits for the Tax treatment of each material item reported on the Tax Return.

 

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Section 4.05 SpinCo Carryback Items and Claims for Refund. SpinCo hereby agrees
that, unless eBay consents in writing (which consent shall not be unreasonably
withheld), (i) no Adjustment Request with respect to any Tax Return with respect
to which eBay is the Responsible Company (including any Joint Return) or any
other Tax Return reflecting Taxes for which eBay is responsible under Section 2
shall be filed, and (ii) any available elections to waive the right to claim in
any Pre-Deconsolidation Period with respect to any Tax Return with respect to
which eBay is the Responsible Company (including any Joint Return) or any Tax
Return reflecting both Taxes for which eBay is responsible under Section 2 and
Taxes for which SpinCo is responsible under Section 2 any SpinCo Carryback Item
arising in a Post-Deconsolidation Period shall be made, and no affirmative
election shall be made to claim any such SpinCo Carryback Item; provided,
however, that the parties agree that any such Adjustment Request shall be made
with respect to any SpinCo Carryback Item related to U.S. federal or State
Income Taxes, upon the reasonable request of SpinCo, if such SpinCo Carryback
Item is necessary to prevent the loss of the federal and/or State Income Tax
Benefit of such SpinCo Carryback Item (including, but not limited to, an
Adjustment Request with respect to a SpinCo Carryback Item of a federal or State
capital loss arising in a Post-Deconsolidation Period to a Pre-Deconsolidation
Period) and such Adjustment Request, based on eBay’s sole, reasonable
determination, will cause no Tax detriment to eBay, the eBay Group or any member
of the eBay Group. Any Adjustment Request which eBay consents to make under this
Section 4.05 shall be prepared and filed by the Responsible Company for the Tax
Return to be adjusted; provided, however, that, prior to the filing of any such
Adjustment Request, the other Party shall have the right to review such
Adjustment Request together with any related workpapers and other supporting
documentation.

Section 4.06 Apportionment of Earnings and Profits and Tax Attributes.

(a) If the eBay Affiliated Group has a Tax Attribute, the portion, if any, of
such Tax Attribute apportioned to SpinCo or the members of the SpinCo Group and
treated as a carryover to the first Post-Deconsolidation Period of SpinCo (or
such member) shall be determined by eBay in accordance with Treasury Regulations
Sections 1.1502-21, 1.1502-21T, 1.1502-22, 1.1502-79 and, if applicable,
1.1502-79A.

(b) No Tax Attribute with respect to consolidated Federal Income Tax of the eBay
Affiliated Group, other than those described in Section 4.06(a), and no Tax
Attribute with respect to consolidated, combined or unitary state, local, or
foreign Income Tax, in each case, arising in respect of a Joint Return shall be
apportioned to SpinCo or any member of the SpinCo Group, except as eBay (or such
member of the eBay Group as eBay shall designate) determines is otherwise
required under applicable law. SpinCo and eBay agree that the California R&D
credit shall not be considered a Tax Attribute to which this Section 4.06
applies.

(c) eBay (or its designee) shall determine the portion, if any, of any Tax
Attribute which must (absent a Final Determination to the contrary) be
apportioned to SpinCo or any member of the SpinCo Group in accordance with this
Section 4.06 and applicable law and the amount of tax basis, earnings and
profits (including, for the avoidance of doubt, PTI), and “tax pools” to be
apportioned to SpinCo or any member of the SpinCo Group in accordance with this
Section 4.06 and applicable law, and shall provide written supporting
documentation of the calculation thereof to SpinCo as soon as reasonably
practicable after the information necessary to make such calculation becomes
available to eBay. For the absence of doubt, eBay shall not be liable to SpinCo
or any member of the SpinCo Group for any failure of any determination

 

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under this Section 4.06 to be accurate under applicable law. The parties intend
that, to the extent such PTI is subject to allocation under Treasury Regulations
Section 1.312-10 and related rules and to the extent permitted by applicable
law, any PTI attributable to income inclusions with respect to which eBay is
responsible for Federal Income Taxes pursuant to Section 2.02(b) or (c) shall be
allocated to eBay or a member of the eBay Group.

(d) The written documentation delivered by eBay pursuant to Section 4.06(c)
shall be binding on SpinCo and each member of the SpinCo Group and shall not be
subject to dispute resolution. Except to the extent otherwise required by
applicable law or pursuant to a Final Determination, SpinCo shall not take any
position (whether on a Tax Return or otherwise) that is inconsistent with the
information contained in such written documentation.

Section 5. Tax Payments.

Section 5.01 Payment of Taxes. In the case of any Tax Return reflecting both
Taxes for which eBay is responsible under Section 2 and Taxes for which SpinCo
is responsible under Section 2:

(a) Computation and Payment of Tax Due. With respect to any such Tax Return, the
Responsible Company shall pay any Tax required to be paid to the applicable Tax
Authority on or before the relevant Payment Date (and provide notice and proof
of payment to the other Company).

(b) Computation and Payment of Liability with Respect to Tax Due. Within 90 days
following the earlier of (i) the due date (taking into account extensions) for
filing any such Tax Return (excluding any Tax Return with respect to payment of
estimated Taxes or Taxes due with a request for extension of time to file) or
(ii) the date on which such Tax Return is filed, if eBay is the Responsible
Company, then SpinCo shall pay to eBay the amount, if any, allocable to the
SpinCo Group under the provisions of Section 2, and if SpinCo is the Responsible
Company, then eBay shall pay to SpinCo the amount allocable to the eBay Group
under the provisions of Section 2, in each case, plus interest computed at the
Prime Rate on the amount of the payment based on the number of days from the
earlier of (i) the due date of the Tax Return (including extensions) or (ii) the
date on which such Tax Return is filed, to the date of payment.

(c) Adjustments Resulting in Underpayments. In the case of any adjustment
pursuant to a Final Determination with respect to any such Tax Return, the
Responsible Company shall pay to the applicable Tax Authority when due any
additional Tax due with respect to such Return required to be paid as a result
of such adjustment pursuant to a Final Determination. The Responsible Company
shall compute the amount attributable to the SpinCo Group in accordance with
Section 2 and SpinCo shall pay to eBay any amount due eBay (or eBay shall pay
SpinCo any amount due SpinCo) under Section 2 within 90 days from the later of
(i) the date the additional Tax was paid by the Responsible Company or (ii) the
date of receipt of a written notice and demand from the Responsible Company for
payment of the amount due, accompanied by evidence of payment and a statement
detailing the Taxes paid and describing in reasonable detail the particulars
relating thereto. Any payments required under this Section 5.02(c) shall include
interest computed at the Prime Rate based on the number of days from the date
the additional Tax was paid by the Responsible Company to the date of the
payment under this Section 5.01(c).

(d) Notwithstanding anything to the contrary herein, if the amount to be paid
pursuant to Section 5.01(b) or (c) (in each case, excluding interest) is in
excess of $25 million, then, no later than the later of (i) five Business Days
after the date of receipt of a written notice and demand from the Responsible
Company for payment of the amount due, sent by Federal Express or the equivalent
with tracking receipt, accompanied by a statement detailing the Taxes required
to be paid and (ii) three Business Days prior to the due date for the payment of
such Tax, SpinCo shall pay to eBay any amount due eBay (or eBay shall pay SpinCo
any amount due SpinCo) under Section 2.

 

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Section 5.02 Indemnification Payments.

(a) If any Company (the “Payor”) is required under applicable Tax Law to pay to
a Tax Authority a Tax that another Company (the “Required Party”) is liable for
under this Agreement, the Required Party shall reimburse the Payor within 90
days of delivery by the Payor to the Required Party of an invoice for the amount
due, accompanied by evidence of payment and a statement detailing the Taxes paid
and describing in reasonable detail the particulars relating thereto. The
reimbursement shall include interest on the Tax payment computed at the Prime
Rate based on the number of days from the date of the payment to the Tax
Authority to the date of reimbursement under this Section 5.02. Notwithstanding
anything to the contrary herein, if the amount to be paid pursuant to this
Section 5.02 excluding interest is in excess of $25 million, then, no later than
the later of (i) five Business Days after delivery by the Payor to the Required
Party of an invoice for the amount due, sent by Federal Express or the
equivalent with tracking receipt, accompanied by a statement detailing the Taxes
required to be paid and describing in reasonable detail the particulars relating
thereto, and (ii) three Business Days prior to the due date for the payment of
such Tax, the Required Party shall pay the Payor.

(b) All indemnification payments under this Agreement shall be made by eBay
directly to SpinCo and by SpinCo directly to eBay; provided, however, that if
the Companies mutually agree with respect to any such indemnification payment,
any member of the eBay Group, on the one hand, may make such indemnification
payment to any member of the SpinCo Group, on the other hand, and vice versa.

Section 6. Tax Benefits.

Section 6.01 Tax Benefits.

(a) Except as set forth below, eBay shall be entitled to any refund (and any
interest thereon received from the applicable Tax Authority) of Income Taxes and
Other Taxes for which eBay is liable hereunder, SpinCo shall be entitled to any
refund (and any interest thereon received from the applicable Tax Authority) of
Income Taxes and Other Taxes for which SpinCo is liable hereunder and a Company
receiving a refund to which another Company is entitled hereunder in whole or in
part shall pay over such refund (or portion thereof) to such other Company
within 90 days after such refund is received (together with interest computed at
the Prime Rate based on the number of days from the date the refund was received
to the date the refund was paid over).

(b) If (i) a member of the SpinCo Group actually realizes in cash any Tax
Benefit as a result of (A) an adjustment pursuant to a Final Determination or
reporting required by Section 4.02(b)

 

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or (c) that increases Taxes for which a member of the eBay Group is liable
hereunder (or reduces any Tax Attribute of a member of the eBay Group), or
(B) any income inclusion by the SpinCo Group with respect to which eBay is
responsible for Federal Income Taxes pursuant to Section 2.02(b) or (c), and, in
each case, such Tax Benefit would not have arisen but for such adjustment,
reporting or income inclusion (determined on a “with and without” basis), or
(ii) if a member of the eBay Group actually realizes in cash any Tax Benefit as
a result of an adjustment pursuant to a Final Determination or reporting
required by Section 4.02(b) or (c) that increases Taxes for which a member of
the SpinCo Group is liable hereunder (or reduces any Tax Attribute of a member
of the SpinCo Group) and such Tax Benefit would not have arisen but for such
adjustment or reporting (determined on a “with and without” basis), SpinCo or
eBay, as the case may be, shall make a payment to either eBay or SpinCo, as
appropriate, within 90 days following such actual realization of the Tax
Benefit, in an amount equal to such Tax Benefit actually realized in cash
(including any Tax Benefit actually realized as a result of the payment), plus
interest on such amount computed at the Prime Rate based on the number of days
from the date of such actual realization of the Tax Benefit to the date of
payment of such amount under this Section 6.01(b).

(c) No later than 90 days after a Tax Benefit described in Section 6.01(b) is
actually realized in cash by a member of the eBay Group or a member of the
SpinCo Group, eBay (if a member of the eBay Group actually realizes such Tax
Benefit) or SpinCo (if a member of the SpinCo Group actually realizes such Tax
Benefit) shall provide the other Company with a written calculation of the
amount payable to such other Company by eBay or SpinCo pursuant to this
Section 6. In the event that eBay or SpinCo disagrees with any such calculation
described in this Section 6.01(c), eBay or SpinCo shall so notify the other
Company in writing within 90 days of receiving the written calculation set forth
above in this Section 6.01(c). eBay and SpinCo shall endeavor in good faith to
resolve such disagreement, and, failing that, the amount payable under this
Section 6 shall be determined in accordance with the disagreement resolution
provisions of Section 14 as promptly as practicable.

(d) SpinCo shall be entitled to any refund that is attributable to, and would
not have arisen but for, a SpinCo Carryback Item pursuant to the proviso set
forth in Section 4.05; provided, however, SpinCo shall indemnify and hold the
members of the eBay Group harmless from and against any and all collateral Tax
consequences resulting from or caused by any such Carryback, including (but not
limited to) the loss or postponement of any benefit from the use of Tax
Attributes generated by a member of the eBay Group or an Affiliate thereof if
(x) such Tax Attributes expire unutilized, but would have been utilized but for
such Carryback, or (y) the use of such Tax Attributes is postponed to a later
Tax Period than the Tax Period in which such Tax Attributes would have been
utilized but for such Carryback. Any such payment of such refund made by eBay to
SpinCo pursuant to this Section 6.01(d) shall be recalculated in light of any
Final Determination (or any other facts that may arise or come to light after
such payment is made, such as a carryback of an eBay Group Tax Attribute to a
Tax Period in respect of which such refund is received) that would affect the
amount to which SpinCo is entitled, and an appropriate adjusting payment shall
be made by SpinCo to eBay such that the aggregate amount paid pursuant to this
Section 6.01(d) equals such recalculated amount (with interest computed at the
Prime Rate).

 

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Section 6.02 eBay and SpinCo Income Tax Deductions in Respect of Certain Equity
Awards and Incentive Compensation.

(a) Allocation of Deductions.

(i) Except as provided in Section 6.02(a)(ii), to the extent permitted by
applicable law, Income Tax deductions arising by reason of exercises of options
to acquire eBay or SpinCo stock, vesting of “restricted” eBay stock or SpinCo
stock, or settlement of restricted stock awards, restricted stock units,
performance-based restricted stock units, performance share units, or deferred
stock units, in each case, following the Distribution, with respect to eBay
stock or SpinCo stock (such options, restricted stock, restricted stock units,
performance share units, and deferred stock units, collectively, “Compensatory
Equity Interests”) held by any Person shall be claimed (i) in the case of an
eBay Group Employee or Former eBay Group Employee, solely by the eBay Group, and
(ii) in the case of a PayPal Group Employee or Former PayPal Group Employee,
solely by the SpinCo Group. To the extent permitted by applicable law, Income
Tax deductions with respect to shares issued under the eBay ESPP or the PayPal
ESPP (each as defined in the Employee Matters Agreement) shall be claimed (i) in
the case of eBay shares issued (or SpinCo shares received in respect of eBay
shares issued) under the eBay ESPP, solely by the eBay Group, and (ii) in the
case of SpinCo shares issued under the PayPal ESPP, solely by the SpinCo Group.

(ii) To the extent permitted by applicable law, Income Tax deductions arising by
reason of exercises of stock options to acquire eBay or SpinCo stock, following
the Distribution, held by any Transferring Director, Continuing eBay Director or
Transitioning eBay Group Employee (each as defined in the Employee Matters
Agreement) shall be claimed by the issuing corporation. To the extent permitted
by applicable law, Income Tax deductions arising by reason of vesting of
“restricted” eBay stock or SpinCo stock, or settlement of restricted stock
units, performance-based restricted stock units or performance share units, in
each case, following the Distribution, with respect to eBay stock or SpinCo
stock held by any Transitioning eBay Group Employee shall be claimed solely by
the eBay Group. To the extent permitted by applicable law, Income Tax deductions
arising by reason of settlement of deferred stock units with respect to eBay
stock or SpinCo stock, following the Distribution, held by any Transferring
Director or Continuing eBay Director shall be claimed by the issuing
corporation.

(b) Withholding and Reporting. Tax reporting and withholding with respect to
Compensatory Equity Interests shall be governed by Section 4.02(i) of the
Employee Matters Agreement. The party that is entitled to claim the Tax
deductions described in Section 6.02(a)(i) with respect to shares issued under
the eBay ESPP or PayPal ESPP shall be responsible for all applicable Taxes
(including, but not limited to, withholding and excise taxes) and shall satisfy,
or shall cause to be satisfied, all applicable Tax reporting obligations with
respect thereto.

 

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Section 7. Tax-Free Status.

Section 7.01 Representations.

(a) Each of eBay and SpinCo hereby represents and warrants that (A) it has
reviewed the Representation Letters and (B) subject to any qualifications
therein, all information, representations and covenants contained in such
Representation Letters that relate to such Company or any member of its Group
are true, correct and complete.

(b) SpinCo hereby represents and warrants that it has no plan or intention of
taking any action, or failing to take any action (or causing or permitting any
member of its Group to take or fail to take any action), in each case, from and
after the Distribution Date that could reasonably be expected to cause any
representation or factual statement made in this Agreement, the Separation and
Distribution Agreement, the Representation Letters or any of the Ancillary
Agreements to be untrue.

(c) SpinCo hereby represents and warrants that, during the two-year period
ending on the Distribution Date, there was no “agreement, understanding,
arrangement, substantial negotiations or discussions” (as such terms are defined
in Treasury Regulations Section 1.355-7(h)) by any one or more officers or
directors of any member of the SpinCo Group or by any other person or persons
with the implicit or explicit permission of one or more of such officers or
directors regarding an acquisition of all or a significant portion of the SpinCo
Capital Stock (or any predecessor); provided, however, that no representation is
made regarding any such “agreement, understanding, arrangement, substantial
negotiations or discussions” (as such terms are defined in Treasury Regulations
Section 1.355-7(h)) by any one or more officers, directors, or controlling
shareholders of any member of the eBay Group (or another person with the
implicit or explicit permission of one or more of such persons).

Section 7.02 Restrictions on SpinCo.

(a) SpinCo agrees that it will not take or fail to take, or cause or permit any
SpinCo Affiliate to take or fail to take, any action where such action or
failure to act would be inconsistent with or cause to be untrue any material
information, covenant or representation in this Agreement, the Separation and
Distribution Agreement, any of the Ancillary Agreements or any Representation
Letter. SpinCo agrees that it will not take or fail to take, or permit any
SpinCo Affiliate to take or fail to take, any action which prevents or could
reasonably be expected to prevent Tax-Free Status.

(b) Reserved.

(c) SpinCo agrees that, from the date hereof until the first day after the
Restriction Period, it will (i) maintain its status as a company engaged in the
SpinCo Active Trade or Business for purposes of Section 355(b)(2) of the Code
and (ii) not engage in any transaction that would result in it ceasing to be a
company engaged in the SpinCo Active Trade or Business for purposes of
Section 355(b)(2) of the Code. SpinCo further agrees that, from the date hereof
until the first day after the Restriction Period, it will cause 3P Holdings to
(i) maintain its status as a company engaged in the 3P Holdings Active Trade or
Business for purposes of Section 355(b)(2) of the Code and (ii) not engage in
any transaction that would result in it ceasing to be a company engaged in the
3P Holdings Active Trade or Business for purposes of Section 355(b)(2) of the
Code.

 

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(d) SpinCo agrees that, from the date hereof until the first day after the
Restriction Period, it will not (i) enter into any Proposed Acquisition
Transaction or, to the extent SpinCo has the right to prohibit any Proposed
Acquisition Transaction, permit any Proposed Acquisition Transaction to occur
(whether by (a) redeeming rights under a shareholder rights plan, (b) finding a
tender offer to be a “permitted offer” under any such plan or otherwise causing
any such plan to be inapplicable or neutralized with respect to any Proposed
Acquisition Transaction, or (c) approving any Proposed Acquisition Transaction,
whether for purposes of Section 203 of the DGCL or any similar corporate
statute, any “fair price” or other provision of SpinCo’s charter or bylaws or
otherwise), (ii) merge or consolidate with any other Person or liquidate or
partially liquidate, (iii) in a single transaction or series of transactions
sell or transfer (other than sales or transfers of inventory in the ordinary
course of business) all or substantially all of the assets that were transferred
to SpinCo pursuant to the Contribution or sell or transfer 50% or more of the
gross assets of the SpinCo Active Trade or Business or 30% or more of the
consolidated gross assets of SpinCo and its Affiliates (such percentages to be
measured based on fair market value as of the Distribution Date), (iv) redeem or
otherwise repurchase (directly or through a SpinCo Affiliate) any SpinCo stock,
or rights to acquire stock, except to the extent such repurchases satisfy
Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to the
amendment by Revenue Procedure 2003-48), (v) amend its certificate of
incorporation (or other organizational documents), or take any other action,
whether through a stockholder vote or otherwise, affecting the voting rights of
SpinCo Capital Stock (including, without limitation, through the conversion of
one class of SpinCo Capital Stock into another class of SpinCo Capital Stock),
(vi) take any other action or actions (including any action or transaction that
would be reasonably likely to be inconsistent with any representation or
covenant made in the Representation Letters) which in the aggregate (and taking
into account any other transactions described in this subparagraph (d)) would be
reasonably likely to have the effect of causing or permitting one or more
persons to acquire, directly or indirectly, stock representing a Fifty-Percent
or Greater Interest in SpinCo or otherwise jeopardize the Tax-Free Status of the
Distribution or Internal Distribution, or (vii) cause or permit 3P Holdings to
take any action or enter into any transaction described in the preceding clauses
(ii) through (vi) (substituting references to “SpinCo,” the “Contribution,” the
“SpinCo Active Trade or Business” and “SpinCo Capital Stock” with references to
3P Holdings, the Internal Contribution, 3P Holdings Active Trade or Business,
and 3P Holdings stock) unless, in each case, prior to taking any such action set
forth in the foregoing clauses (i) through (vii), (A) SpinCo shall have
requested that eBay obtain a private letter ruling (or, if applicable, a
supplemental private letter ruling) from the IRS and/or any other applicable Tax
Authority in accordance with Section 7.04(b) and (d) of this Agreement to the
effect that such transaction will not affect the Tax-Free Status and eBay shall
have received such a private letter ruling in form and substance satisfactory to
eBay in its reasonable discretion (and in determining whether a private letter
ruling is satisfactory, eBay may consider, among other factors, the
appropriateness of any underlying assumptions and management’s representations
made in connection with such private letter ruling), or (B) SpinCo shall provide
eBay with an Unqualified Tax Opinion in form and substance reasonably
satisfactory to eBay (and in determining whether an opinion is satisfactory,
eBay may consider, among other factors, the appropriateness of any underlying
assumptions and management’s representations if used as a basis for the opinion
and eBay may determine that no opinion would be acceptable to eBay) or (C) eBay
shall have waived the requirement to obtain such private letter ruling or
Unqualified Tax Opinion.

(e) Certain Issuances of SpinCo Capital Stock. If SpinCo proposes to enter into
any Section 7.02(e) Acquisition Transaction or, to the extent SpinCo has the
right to prohibit any Section 7.02(e) Acquisition Transaction, proposes to
permit any Section 7.02(e) Acquisition Transaction to occur, in each case,
during the period from the date hereof until the first day after the Restriction
Period, SpinCo shall provide eBay, no later than ten days following the signing
of any written agreement with respect to the Section 7.02(e) Acquisition
Transaction, with a written description of such transaction (including the type
and amount of SpinCo Capital Stock to be issued in such transaction) and a
certificate of the Chief Financial Officer of SpinCo to the effect that the
Section 7.02(e) Acquisition Transaction is not a Proposed Acquisition
Transaction or any other transaction to which the requirements of
Section 7.02(d) apply (a “CFO Certificate”).

 

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Section 7.03 Restrictions on eBay. eBay agrees that it will not take or fail to
take, or cause or permit any member of the eBay Group to take or fail to take,
any action where such action or failure to act would be inconsistent with or
cause to be untrue any material information, covenant or representation in this
Agreement, the Separation and Distribution Agreement, any of the Ancillary
Agreements or any Representation Letters. eBay agrees that it will not take or
fail to take, or cause or permit any member of the eBay Group to take or fail to
take, any action which prevents or could reasonably be expected to prevent
Tax-Free Status.

Section 7.04 Procedures Regarding Opinions and Rulings.

(a) If SpinCo notifies eBay that it desires to take one of the actions described
in clauses (i) through (vii) of Section 7.02(d) (a “Notified Action”), eBay and
SpinCo shall reasonably cooperate to attempt to obtain the private letter ruling
or Unqualified Tax Opinion referred to in Section 7.02(d), unless eBay shall
have waived the requirement to obtain such private letter ruling or Unqualified
Tax Opinion.

(b) Rulings or Unqualified Tax Opinions at SpinCo’s Request. At the reasonable
request of SpinCo pursuant to Section 7.02(d), eBay shall cooperate with SpinCo
and use its reasonable best efforts to seek to obtain, as expeditiously as
possible, a private letter ruling from the IRS (and/or any other applicable Tax
Authority, or if applicable, a supplemental private letter ruling) or an
Unqualified Tax Opinion for the purpose of permitting SpinCo to take the
Notified Action. Further, in no event shall eBay be required to file any request
for a private letter ruling under this Section 7.04(b) unless SpinCo represents
that (A) it has reviewed the request for such private letter ruling, and (B) all
information and representations, if any, relating to any member of the SpinCo
Group, contained in the related private letter ruling documents are (subject to
any qualifications therein) true, correct and complete. SpinCo shall reimburse
eBay for all reasonable costs and expenses incurred by the eBay Group in
obtaining a private letter ruling or Unqualified Tax Opinion requested by SpinCo
within ten Business Days after receiving an invoice from eBay therefor.

(c) Rulings or Unqualified Tax Opinions at eBay’s Request. eBay shall have the
right to obtain a private letter ruling (or, if applicable, a supplemental
private letter ruling) from the IRS and/or any other applicable Tax Authority)
or an Unqualified Tax Opinion at any time in its sole and absolute discretion.
If eBay determines to obtain a private letter ruling or an Unqualified Tax
Opinion, SpinCo shall (and shall cause each Affiliate of SpinCo to) cooperate
with eBay and take any and all actions reasonably requested by eBay in
connection with

 

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obtaining the private letter ruling or Unqualified Tax Opinion (including,
without limitation, by making any representation or covenant or providing any
materials or information requested by the IRS, or other applicable Tax
Authority, or Tax Advisor; provided that SpinCo shall not be required to make
(or cause any Affiliate of SpinCo to make) any representation or covenant that
is inconsistent with historical facts or as to future matters or events over
which it has no control). eBay and SpinCo shall each bear its own costs and
expenses in obtaining a private letter ruling or an Unqualified Tax Opinion
requested by eBay.

(d) SpinCo hereby agrees that eBay shall have sole and exclusive control over
the process of obtaining any private letter ruling pursuant to Section 7.04(b)
or (c), and that only eBay shall apply for such a private letter ruling. In
connection with obtaining a private letter ruling pursuant to Section 7.04(b),
(A) eBay shall keep SpinCo informed in a timely manner of all material actions
taken or proposed to be taken by eBay in connection therewith; (B) eBay shall
(1) reasonably in advance of the submission of any related private letter ruling
documents provide SpinCo with a draft copy thereof, (2) reasonably consider
SpinCo’s comments on such draft copy, and (3) provide SpinCo with a final copy;
and (C) eBay shall provide SpinCo with notice reasonably in advance of, and
SpinCo shall have the right to attend, any meetings with the IRS or other
applicable Tax Authority (subject to the approval of the IRS or other applicable
Tax Authority) that relate to such private letter ruling. Neither SpinCo nor any
SpinCo Affiliate directly or indirectly controlled by SpinCo shall seek any
guidance from the IRS or any other Tax Authority (whether written, verbal or
otherwise) at any time concerning the Contribution or the Distribution or the
Internal Contribution and the Internal Distribution (including the impact of any
transaction on the Contribution, Distribution, Internal Contribution, or
Internal Distribution, as applicable). In addition, SpinCo’s applicable
officers, employees, and/or representative shall also be listed on the power of
attorney (IRS Form 2848 or comparable form) provided to the IRS or other
applicable Tax Authority in connection with any such private letter ruling
request.

Section 7.05 Liability for Tax-Related Losses.

(a) Notwithstanding anything in this Agreement or the Separation and
Distribution Agreement to the contrary, subject to Section 7.05(c), SpinCo shall
be responsible for, and shall indemnify and hold harmless eBay and its
Affiliates and each of their respective officers, directors and employees from
and against, one hundred percent (100%) of any Tax-Related Losses that are
attributable to or result from any one or more of the following: (A) the
acquisition (other than pursuant to the Contribution or the Distribution) of all
or a portion of SpinCo’s Capital Stock and/or its or its subsidiaries’ assets
(including any capital stock of 3P Holdings) by any means whatsoever by any
Person, (B) any action or failure to act by SpinCo after the Distribution
(including, without limitation, any amendment to SpinCo’s certificate of
incorporation (or other organizational documents), whether through a stockholder
vote or otherwise) affecting the voting rights of SpinCo stock (including,
without limitation, through the conversion of one class of SpinCo Capital Stock
into another class of SpinCo Capital Stock), (C) any act or failure to act by
SpinCo or any SpinCo Affiliate described in Section 7.02 (regardless whether
such act or failure to act is covered by a private letter ruling, Unqualified
Tax Opinion or waiver described in clause (A), (B) or (C) of Section 7.02(d), or
a CFO Certificate described in Section 7.02(e)) or (D) any breach by SpinCo of
its agreement and representations set forth in Section 7.01.

 

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(b) Notwithstanding anything in this Agreement or the Separation and
Distribution Agreement to the contrary, subject to Section 7.05(c), eBay shall
be responsible for, and shall indemnify and hold harmless SpinCo and its
Affiliates and each of their respective officers, directors and employees from
and against, one hundred percent (100%) of any Tax-Related Losses that are
attributable to, or result from any one or more of the following: (A) the
acquisition (other than pursuant to the Contribution or the Distribution) of all
or a portion of eBay’s stock and/or its or its subsidiaries’ assets (including
any capital stock of eBay AG) by any means whatsoever by any Person, (B) any act
or failure to act by eBay or a member of the eBay Group described in
Section 7.03 or (C) any breach by eBay of its agreements and representations set
forth in Section 7.01(a).

(c) Miscellaneous.

(i) To the extent that any Tax-Related Loss is subject to indemnity under both
Sections 7.05(a) and (b), responsibility for such Tax-Related Loss shall be
shared by eBay and SpinCo according to relative fault.

(ii) Notwithstanding anything in Section 7.05(b) or (c)(i) or any other
provision of this Agreement or the Separation and Distribution Agreement to the
contrary:

(A) with respect to (I) any Tax-Related Loss resulting from the application of
Section 355(e) or Section 355(f) of the Code (other than as a result of an
acquisition of a Fifty-Percent or Greater Interest in eBay or eBay AG) and (II)
any other Tax-Related Loss resulting, in whole or in part, from an acquisition
after the Distribution of any stock or assets of SpinCo (or any SpinCo
Affiliate) by any means whatsoever by any Person or any action or failure to act
by SpinCo affecting the voting rights of SpinCo or 3P Holdings stock, SpinCo
shall be responsible for, and shall indemnify and hold harmless eBay and its
Affiliates and each of their respective officers, directors and employees from
and against, one hundred percent (100%) of such Tax-Related Loss; and

(B) for purposes of calculating the amount and timing of any Tax-Related Loss
for which SpinCo is responsible under this Section 7.05, Tax-Related Losses
shall be calculated by assuming that eBay, the eBay Affiliated Group and each
member of the eBay Group (I) pay Tax at the highest marginal corporate Tax rates
in effect in each relevant taxable year and (II) have no Tax Attributes in any
relevant taxable year.

(iii) Notwithstanding anything in Section 7.05(a) or (c)(i) or any other
provision of this Agreement or the Separation and Distribution Agreement to the
contrary:

(A) with respect to (I) any Tax-Related Loss resulting from the application of
Section 355(e) or Section 355(f) of the Code (other than as a result of an
acquisition of a Fifty-Percent or Greater Interest in SpinCo or 3P Holdings) and
(II) any other Tax-Related Loss resulting, in whole or in part, from an
acquisition after the Distribution of any stock or assets of eBay (or any eBay
Affiliate) by any

 

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means whatsoever by any Person, eBay shall be responsible for, and shall
indemnify and hold harmless SpinCo and its Affiliates and each of their
respective officers, directors and employees from and against, one hundred
percent (100%) of such Tax-Related Loss; and

(B) for purposes of calculating the amount and timing of any Tax-Related Loss
for which Bay is responsible under this Section 7.05, Tax-Related Losses shall
be calculated by assuming that SpinCo, the SpinCo Group and each member of the
SpinCo Group (I) pay Tax at the highest marginal corporate Tax rates in effect
in each relevant taxable year and (II) have no Tax Attributes in any relevant
taxable year.

(d) SpinCo shall pay eBay the amount of any Tax-Related Losses for which SpinCo
is responsible under this Section 7.05: (A) in the case of Tax-Related Losses
described in clause (i) of the definition of Tax-Related Losses no later than
two Business Days prior to the date eBay files, or causes to be filed, the
applicable Tax Return for the year of the Contribution or Distribution, as
applicable (the “Filing Date”) (provided that if such Tax-Related Losses arise
pursuant to a Final Determination described in clause (a), (b) or (c) of the
definition of “Final Determination,” then SpinCo shall pay eBay no later than
two Business Days prior to the due date for making payment with respect to such
Final Determination) and (B) in the case of Tax-Related Losses described in
clause (ii) or (iii) of the definition of Tax-Related Losses, no later than two
Business Days after the date eBay pays such Tax-Related Losses. eBay shall pay
SpinCo the amount of any Tax-Related Losses (described in clause (ii) or
(iii) of the definition of Tax-Related Loss) for which eBay is responsible under
this Section 7.05 no later than two Business Days after the date SpinCo pays
such Tax-Related Losses. Each Party shall have the right to review the
calculation of any Tax-Related Losses prepared by the other Party, including any
related workpapers and other supporting documentation.

Section 7.06 Section 336(e) Election. If eBay determines, in its sole
discretion, that a protective election under Section 336(e) of the Code (a
“Section 336(e) Election”) shall be made with respect to the Distribution,
SpinCo shall (and shall cause the relevant member of the SpinCo Group to) join
with eBay or the relevant member of the eBay Group in the making of such
election and shall take any action reasonably requested by eBay or that is
otherwise necessary to give effect to such election (including making any other
related election). If a Section 336(e) Election is made with respect to the
Distribution, then this Agreement shall be amended in such a manner as is
determined by eBay in good faith to take into account such Section 336(e)
Election (including by requiring that, in the event the Contribution and
Distribution fail to have Tax-Free Status and eBay is not entitled to
indemnification for the Tax-Related Losses arising from such failure, SpinCo
shall pay over to eBay any Tax Benefits actually realized in cash by the SpinCo
Group or any member of the SpinCo Group arising from the step-up in Tax basis
resulting from the Section 336(e) Election); provided, such amounts payable
shall be reduced by all reasonable costs incurred by SpinCo to amend any Tax
Returns or other governmental filings related to such Section 336(e) Election.

 

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Section 8. Assistance and Cooperation.

Section 8.01 Assistance and Cooperation.

(a) Each of the Companies shall provide (and cause its Affiliates to provide)
the other and its agents, including accounting firms and legal counsel, with
such cooperation or information as such other Company reasonably requests in
connection with (i) preparing and filing Tax Returns, (ii) determining the
liability for and amount of any Taxes due (including estimated Taxes) or the
right to and amount of any refund of Taxes, (iii) examinations of Tax Returns,
and (iv) any administrative or judicial proceeding in respect of Taxes assessed
or proposed to be assessed. Such cooperation shall include making available,
upon reasonable notice, all information and documents in their possession
relating to the other Company and its Affiliates as provided in Section 9. Each
of the Companies shall also make available to the other, as reasonably requested
and available, personnel (including employees and agents of the Companies or
their respective Affiliates) responsible for preparing, maintaining, and
interpreting information and documents relevant to Taxes.

(b) Any information or documents provided under this Section 8 or Section 9
shall be kept confidential by the Company receiving the information or
documents, except as may otherwise be necessary in connection with the filing of
Tax Returns or in connection with any administrative or judicial proceedings
relating to Taxes. In no event shall either of the Companies or any of its
respective Affiliates be required to provide the other Company or any of its
respective Affiliates or any other Person access to or copies of any information
if such action could reasonably be expected to result in the waiver of any
Privilege. In addition, in the event that either Company determines that the
provision of any information to the other Company or its Affiliates could be
commercially detrimental, violate any law or agreement or waive any Privilege,
the parties shall use reasonable best efforts to permit compliance with its
obligations under this Section 8 or Section 9 in a manner that avoids any such
harm or consequence.

Section 8.02 Income Tax Return Information. SpinCo and eBay acknowledge that
time is of the essence in relation to any request for information, assistance or
cooperation made by eBay or SpinCo pursuant to Section 8.01 or this
Section 8.02. SpinCo and eBay acknowledge that failure to conform to the
deadlines set forth herein or reasonable deadlines otherwise set by eBay or
SpinCo could cause irreparable harm. Each Company shall provide to the other
Company information and documents relating to its Group required by the other
Company to prepare Tax Returns. Any information or documents the Responsible
Company requires to prepare such Tax Returns shall be provided in such form as
the Responsible Company reasonably requests and in sufficient time for the
Responsible Company to file such Tax Returns on a timely basis.

Section 8.03 Reliance by eBay. If any member of the SpinCo Group supplies
information to a member of the eBay Group in connection with a Tax liability and
an officer of a member of the eBay Group signs a statement or other document
under penalties of perjury in reliance upon the accuracy of such information,
then upon the written request of such member of the eBay Group identifying the
information being so relied upon, the chief financial officer of SpinCo (or any
officer of SpinCo as designated by the chief financial officer of SpinCo) shall
certify in writing that to his or her knowledge (based upon consultation with
appropriate employees) the information so supplied is accurate and complete.
SpinCo agrees to indemnify and hold harmless each member of the eBay Group and
its directors, officers and employees from and against any fine, penalty, or
other cost or expense of any kind attributable to a member of the SpinCo Group
having supplied, pursuant to this Section 8, a member of the eBay Group with
inaccurate or incomplete information in connection with a Tax liability.

 

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Section 8.04 Reliance by SpinCo. If any member of the eBay Group supplies
information to a member of the SpinCo Group in connection with a Tax liability
and an officer of a member of the SpinCo Group signs a statement or other
document under penalties of perjury in reliance upon the accuracy of such
information, then upon the written request of such member of the SpinCo Group
identifying the information being so relied upon, the chief financial officer of
eBay (or any officer of eBay as designated by the chief financial officer of
eBay) shall certify in writing that to his or her knowledge (based upon
consultation with appropriate employees) the information so supplied is accurate
and complete. eBay agrees to indemnify and hold harmless each member of the
SpinCo Group and its directors, officers and employees from and against any
fine, penalty, or other cost or expense of any kind attributable to a member of
the eBay Group having supplied, pursuant to this Section 8, a member of the
SpinCo Group with inaccurate or incomplete information in connection with a Tax
liability.

Section 9. Tax Records.

Section 9.01 Retention of Tax Records. Each Company shall preserve and keep all
Tax Records (including emails and other digitally stored materials) exclusively
relating to the assets and activities of its Group for Pre-Deconsolidation
Periods and shall preserve and keep all other Tax Records relating to Taxes of
the Groups for Pre-Deconsolidation Tax Periods, for so long as the contents
thereof may become material in the administration of any matter under the Code
or other applicable Tax Law, but in any event until the later of (i) the
expiration of any applicable statutes of limitations, or (ii) seven years after
the Deconsolidation Date (such later date, the “Retention Date”). After the
Retention Date, each Company may dispose of such Tax Records upon 90 days’ prior
written notice to the other Company. If, prior to the Retention Date, a Company
reasonably determines that any Tax Records which it would otherwise be required
to preserve and keep under this Section 9 are no longer material in the
administration of any matter under the Code or other applicable Tax Law and the
other Company agrees, then such first Company may dispose of such Tax Records
upon 90 days’ prior notice to the other Company. Any notice of an intent to
dispose given pursuant to this Section 9.01 shall include a list of the Tax
Records to be disposed of describing in reasonable detail each file, book, or
other record accumulation being disposed. The notified Company shall have the
opportunity, at its cost and expense, to copy or remove, within such 90-day
period, all or any part of such Tax Records, and the other Party will then
dispose of the same Tax Records.

Section 9.02 Access to Tax Records. The Companies and their respective
Affiliates shall make available to each other for inspection and copying during
normal business hours upon reasonable notice all Tax Records to the extent
reasonably required by the other Company in connection with the preparation of
financial accounting statements, audits, litigation, the preparation of Tax
Returns, or the resolution of items under this Agreement.

Section 10. Tax Contests.

Section 10.01 Notice. Each of the Companies shall provide prompt notice, within
five business days, by Federal Express or the equivalent with tracking receipt,
to the other of any communication from a Tax Authority regarding any pending or
threatened Tax audit, assessment

 

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or proceeding or other Tax Contest for which it may be entitled to
indemnification by the other Company hereunder. Such notice shall include copies
of the pertinent portion of any written communication from a Tax Authority and
contain factual information (to the extent known) describing any asserted Tax
liability in reasonable detail. The failure of one Company to notify the other
of such communication in accordance with the immediately preceding sentences
shall not relieve such other Company of any liability or obligation to pay such
Tax or make indemnification payments under this Agreement, except to the extent
that the failure timely to provide such notification actually prejudices the
ability of such other Company to contest such Tax liability or increases the
amount of such Tax liability.

Section 10.02 Control of Tax Contests.

(a) Separate Company Tax Returns.

(i) Pre-Deconsolidation Date and Straddle Period Separate Returns. In the case
of any Tax Contest with respect to any Separate Return (including any Separate
Return with respect to Other Taxes) for any Tax Period ending on or prior to the
Distribution Date or any Straddle Period, eBay (in the case of any such Separate
Return filed with respect to any Person that, following the Distribution, is a
member of the eBay Group) or SpinCo (in the case of any such Separate Return
filed with respect to any Person that, following the Distribution, is a member
of the SpinCo group), as applicable, shall have exclusive control over the Tax
Contest, including exclusive authority with respect to any settlement of such
Tax liability, subject to Sections 10.02(d), 10.02(e), and 10.02(f)(ii) below.

(ii) Post-Deconsolidation Date Separate Returns. In the case of any Tax Contest
with respect to any Separate Return (including any Separate Return with respect
to Other Taxes) for any Tax Period beginning after the Distribution Date, the
Responsible Company shall have exclusive control over the Tax Contest, including
exclusive authority with respect to any settlement of such Tax liability,
subject to Section 10.02(e) below.

(b) eBay Federal Consolidated Income Tax Returns. In the case of any Tax Contest
with respect to any eBay Federal Consolidated Income Tax Return, eBay shall have
exclusive control over the Tax Contest, including exclusive authority with
respect to any settlement of such Tax liability, subject to Sections 10.02(d)
and 10.02(f)(i) below.

(c) eBay State Combined Income Tax Returns, eBay Foreign Combined Income Tax
Returns, and Other Joint Returns. In the case of any Tax Contest with respect to
any eBay State Combined Income Tax Return, any eBay Foreign Combined Income Tax
Return or any Tax Return with respect to Other Taxes that is not described in
Section 10.02(a), eBay shall have exclusive control over the Tax Contest,
including exclusive authority with respect to any settlement of such Tax
liability, subject to Section 10.02(d) below.

(d) SpinCo Rights. In the case of any Tax Contest with respect to any Tax Return
described in Section 10.02(a), (b), or (c) (other than any Separate Return
described in Section 10.02(a)(ii)), if (x) as a result of such Tax Contest,
SpinCo could reasonably be expected to become liable for an amount of Tax in
excess of $1 million and (y) eBay has control of such Tax Contest pursuant to
Section 10.02(a), (b), or (c), as applicable, then (i) eBay shall consult with

 

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SpinCo reasonably in advance of taking any significant action in connection with
such Tax Contest, (ii) eBay shall consult with SpinCo and offer SpinCo a
reasonable opportunity to comment before submitting any written materials
prepared or furnished in connection with such Tax Contest, (iii) eBay shall
defend such Tax Contest diligently and in good faith as if it were the only
party in interest in connection with such Tax Contest, (iv) SpinCo shall be
entitled to participate in such Tax Contest and receive copies of any written
materials relating to such Tax Contest received from the relevant Tax Authority,
and (v) eBay shall not settle, compromise or abandon any such Tax Contest
without obtaining the prior written consent of SpinCo, which consent shall not
be unreasonably withheld.

(e) eBay Rights. In the case of any Tax Contest with respect to any Tax Return
described in Section 10.02(a), if (x) as a result of such Tax Contest, eBay
could reasonably be expected to become liable for an amount of Tax in excess of
$1 million and (y) SpinCo has the right to control such Tax Contest pursuant to
Section 10.02(a), then (i) SpinCo shall consult with eBay reasonably in advance
of taking any significant action in connection with such Tax Contest,
(ii) SpinCo shall consult with eBay and offer eBay a reasonable opportunity to
comment before submitting any written materials prepared or furnished in
connection with such Tax Contest, (iii) SpinCo shall defend such Tax Contest
diligently and in good faith as if it were the only party in interest in
connection with such Tax Contest, (iv) eBay shall be entitled to participate in
such Tax Contest and receive copies of any written materials relating to such
Tax Contest received from the relevant Tax Authority, and (v) SpinCo shall not
settle, compromise or abandon any such Tax Contest without obtaining the prior
written consent of eBay, which consent shall not be unreasonably withheld. For
the avoidance of doubt, this Section 10.02(e) shall apply to any Tax Contest
with respect to a SpinCo Federal Consolidated Income Tax Return if, as a result
of such Tax Contest, eBay could reasonably be expected to become liable for
Taxes pursuant to Section 2.02(b) or (c).

(f) Distribution-Related Tax Contests.

(i) In the event of any Distribution-Related Tax Contest as a result of which
SpinCo could reasonably be expected to become liable for any Tax or Tax-Related
Losses and which eBay has the right to administer and control pursuant to
Section 10.02(b) above, (A) eBay shall consult with SpinCo reasonably in advance
of taking any significant action in connection with such Tax Contest, (B) eBay
shall offer SpinCo a reasonable opportunity to comment before submitting any
written materials prepared or furnished in connection with such Tax Contest,
(C) eBay shall defend such Tax Contest diligently and in good faith as if it
were the only party in interest in connection with such Tax Contest, and
(D) eBay shall provide SpinCo copies of any written materials relating to such
Tax Contest received from the relevant Tax Authority. Notwithstanding anything
in the preceding sentence to the contrary, the final determination of the
positions taken, including with respect to settlement or other disposition, in
any Distribution-Related Tax Contest shall be made in the sole discretion of
eBay and shall be final and not subject to the dispute resolution provisions of
Article VII of the Separation and Distribution Agreement.

(ii) In the event of any Distribution-Related Tax Contest with respect to any
SpinCo Separate Return, (A) SpinCo shall consult with eBay reasonably in advance
of taking any significant action in connection with such Tax Contest, (B) SpinCo
shall

 

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consult with eBay and offer eBay a reasonable opportunity to comment before
submitting any written materials prepared or furnished in connection with such
Tax Contest, (C) SpinCo shall defend such Tax Contest diligently and in good
faith as if it were the only party in interest in connection with such Tax
Contest, (D) eBay shall be entitled to participate in such Tax Contest and
receive copies of any written materials relating to such Tax Contest received
from the relevant Tax Authority, and (E) SpinCo shall not settle, compromise or
abandon any such Tax Contest without obtaining the prior written consent of
eBay, which consent shall not be unreasonably withheld.

(g) Power of Attorney.

(i) Each member of the SpinCo Group shall execute and deliver to eBay (or such
member of the eBay Group as eBay shall designate) any power of attorney or other
similar document reasonably requested by eBay (or such designee) in connection
with any Tax Contest (as to which eBay is the Controlling Party) described in
this Section 10.

(ii) Each member of the eBay Group shall execute and deliver to SpinCo (or such
member of the SpinCo Group as SpinCo shall designate) any power of attorney or
other similar document reasonably requested by SpinCo (or such designee) in
connection with any Tax Contest (as to which SpinCo is the Controlling Party)
described in this Section 10.

Section 11. Effective Date; Termination of Prior Intercompany Tax Allocation
Agreements. This Agreement shall be effective as of the Effective Time. As of
the Effective Time, (i) all prior intercompany Tax allocation agreements or
arrangements solely between or among eBay and/or any of its Subsidiaries, on the
one hand, and SpinCo and/or any of its Subsidiaries, on the other hand
(including, for the avoidance of doubt, the Tax Allocation Agreement, by and
among eBay and certain of its Subsidiaries, dated as of January 1, 2003), shall
be terminated, and (ii) amounts due under such agreements as of the date on
which the Effective Time occurs shall be settled. Upon such termination and
settlement, no further payments by or to eBay or any of its Subsidiaries or by
or to SpinCo or any of its Subsidiaries, with respect to such agreements shall
be made, and all other rights and obligations resulting from such agreements
between the Companies and their Affiliates shall cease at such time. Any
payments pursuant to such agreements shall be disregarded for purposes of
computing amounts due under this Agreement; provided that to the extent
appropriate, payments made pursuant to such agreements shall be credited to
SpinCo or eBay, respectively, in computing their respective obligations pursuant
to this Agreement, in the event that such payments relate to a Tax liability
that is the subject matter of this Agreement for a Tax Period that is the
subject matter of this Agreement.

Section 12. Survival of Obligations. The representations, warranties, covenants
and agreements set forth in this Agreement shall be unconditional and absolute
and shall remain in effect without limitation as to time.

Section 13. Treatment of Payments; Tax Gross Up.

Section 13.01 Treatment of Tax Indemnity and Tax Benefit Payments. In the
absence of any change in Tax treatment under the Code or other applicable Tax
Law, for all Income Tax

 

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purposes, the Companies agree to treat, and to cause their respective Affiliates
to treat, (i) any indemnity payment required by this Agreement or by the
Separation and Distribution Agreement as either a contribution by eBay to SpinCo
or a distribution by SpinCo to eBay, as the case may be, occurring immediately
prior to the Distribution; and (ii) any payment of interest or State Income
Taxes by or to a Tax Authority, as taxable or deductible, as the case may be, to
the Company entitled under this Agreement to retain such payment or required
under this Agreement to make such payment.

Section 13.02 Tax Gross Up. If notwithstanding the manner in which payments
described in Section 13.01(i) were reported, there is an adjustment to the Tax
liability of a Company as a result of its receipt of a payment pursuant to this
Agreement or the Separation and Distribution Agreement, such payment shall be
appropriately adjusted so that the amount of such payment, reduced by the amount
of all Income Taxes payable with respect to the receipt thereof (but taking into
account all correlative Tax Benefits resulting from the payment of such Income
Taxes), shall equal the amount of the payment which the Company receiving such
payment would otherwise be entitled to receive.

Section 13.03 Interest. Anything herein to the contrary notwithstanding, to the
extent one Company (“Indemnitor”) makes a payment of interest to another Company
(“Indemnitee”) under this Agreement with respect to the period from the date
that the Indemnitee made a payment of Tax to a Tax Authority to the date that
the Indemnitor reimbursed the Indemnitee for such Tax payment, the interest
payment shall be treated as interest expense to the Indemnitor (deductible to
the extent provided by law) and as interest income by the Indemnitee (includible
in income to the extent provided by law). The amount of the payment shall not be
adjusted to take into account any associated Tax Benefit to the Indemnitor or
increase in Tax to the Indemnitee.

Section 14. Disagreements. The Companies desire that collaboration will continue
between them. Accordingly, they will try, and they will cause their respective
Group members to try, to resolve in good faith all disagreements regarding their
respective rights and obligations under this Agreement, including any amendments
hereto. In furtherance thereof, in the event of any dispute or disagreement
(other than a High-Level Dispute) (a “Tax Advisor Dispute”) between any member
of the eBay Group and any member of the SpinCo Group as to the interpretation of
any provision of this Agreement or the performance of obligations hereunder, the
Tax departments of the Companies shall negotiate in good faith to resolve the
Tax Advisor Dispute. If such good faith negotiations do not resolve the Tax
Advisor Dispute, then the matter, upon written request of either Company, will
be referred for resolution to the Escalation Committee, which will make a good
faith effort to resolve the Tax Advisor Dispute pursuant to the procedures set
forth in Article VII of the Separation and Distribution Agreement. If the
Escalation Committee does not agree to a resolution of a Tax Advisor Dispute
within thirty (30) days after the reference of the Tax Advisor Dispute to it,
then the matter will be referred to a Tax Advisor acceptable to each of the
Companies. The Tax Advisor may, in its discretion, obtain the services of any
third-party appraiser, accounting firm or consultant that the Tax Advisor deems
necessary to assist it in resolving such disagreement. The Tax Advisor shall
furnish written notice to the Companies of its resolution of any such Tax
Advisor Dispute as soon as practical, but in any event no later than 45 days
after its acceptance of the matter for resolution. Any such resolution by the
Tax Advisor will be conclusive and binding on the Companies. Following receipt

 

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of the Tax Advisor’s written notice to the Companies of its resolution of the
Tax Advisor Dispute, the Companies shall each take or cause to be taken any
action necessary to implement such resolution of the Tax Advisor. In accordance
with Section 16, each Company shall pay its own fees and expenses (including the
fees and expenses of its representatives) incurred in connection with the
referral of the matter to the Tax Advisor. All fees and expenses of the Tax
Advisor in connection with such referral shall be shared equally by the
Companies. Any High-Level Dispute shall be resolved pursuant to the procedures
set forth in Article VII of the Separation and Distribution Agreement. Nothing
in this Section 14 will prevent either Company from seeking injunctive relief if
any delay resulting from the efforts to resolve the Tax Advisor Dispute through
the Escalation Committee and the Tax Advisor (or any delay resulting from the
efforts to resolve any High-Level Dispute through the procedures set forth in
Article VII of the Separation and Distribution Agreement) could result in
serious and irreparable injury to either Company. Notwithstanding anything to
the contrary in this Agreement, the Separation and Distribution Agreement or any
Ancillary Agreement, eBay and SpinCo are the only members of their respective
Group entitled to commence a dispute resolution procedure under this Agreement,
and each of eBay and SpinCo will cause its respective Group members not to
commence any dispute resolution procedure other than through such party as
provided in this Section 14.

Section 15. Late Payments. Any amount owed by one party to another party under
this Agreement which is not paid when due shall bear interest at the Prime Rate
plus two percent, compounded semiannually, from the due date of the payment to
the date paid. To the extent interest required to be paid under this Section 15
duplicates interest required to be paid under any other provision of this
Agreement, interest shall be computed at the higher of the interest rate
provided under this Section 15 or the interest rate provided under such other
provision.

Section 16. Expenses. Except as otherwise provided in this Agreement, each party
and its Affiliates shall bear their own expenses incurred in connection with
preparation of Tax Returns, Tax Contests, and other matters related to Taxes
under the provisions of this Agreement.

Section 17. General Provisions.

Section 17.01 Addresses and Notices. All notices, requests, claims, demands or
other communications under this Agreement shall be in writing, together with a
copy by electronic mail (which shall not constitute notice), and shall be given
or made (and shall be deemed to have been duly given or made upon acknowledgment
of receipt) by delivery in person, by overnight courier service, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective Parties at the following addresses (or at such other address for a
Party as shall be specified in a notice given in accordance with this
Section 17.01):

If to eBay:

eBay Inc.

2065 Hamilton Avenue

San Jose, California 95125

Attention: General counsel

Email: mhuber@ebay.com

 

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If to SpinCo:

PayPal Holdings, Inc.

2211 North First Street

San Jose, California 95131

Attention: General Counsel

Email: apentland@paypal.com

A Party may, by notice to the other Party, change the address to which such
notices are to be given.

Section 17.02 Assignability. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and permitted assigns;
provided, that neither Party nor any such party thereto may assign its rights or
delegate its obligations under this Agreement without the express prior written
consent of the other Party hereto. Notwithstanding the foregoing, no such
consent shall be required for the assignment of a party’s rights and obligations
under this Agreement and the Ancillary Agreements (except as may be otherwise
provided in any such Ancillary Agreement) in whole (i.e., the assignment of a
party’s rights and obligations under this Agreement and all Ancillary Agreements
all at the same time) in connection with a change of control of a Party so long
as the resulting, surviving or transferee Person assumes all the obligations of
the relevant party thereto by operation of Law or pursuant to an agreement in
form and substance reasonably satisfactory to the other Party.

Section 17.03 Waiver. Waiver by a Party of any default by the other Party of any
provision of this Agreement shall not be deemed a waiver by the waiving Party of
any subsequent or other default, nor shall it prejudice the rights of the other
Party. No failure or delay by a Party in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall a
single or partial exercise thereof prejudice any other or further exercise
thereof or the exercise of any other right, power or privilege.

Section 17.04 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances or in jurisdictions other than those as to which it has been held
invalid or unenforceable, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby. Upon such determination, the
Parties shall negotiate in good faith in an effort to agree upon such a suitable
and equitable provision to effect the original intent of the Parties.

Section 17.05 Authority. eBay represents on behalf of itself and each other
member of the eBay Group, and SpinCo represents on behalf of itself and each
other member of the SpinCo Group, as follows: (i) each such Person has the
requisite corporate or other power and authority and has taken all corporate or
other action necessary in order to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby; and (ii) this Agreement
has been duly executed and delivered by it and constitutes a valid and binding
agreement of it enforceable in accordance with the terms thereof.

 

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Section 17.06 Further Action. The parties shall execute and deliver all
documents, provide all information, and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this Agreement,
including the execution and delivery to the other parties and their Affiliates
and representatives of such powers of attorney or other authorizing
documentation as is reasonably necessary or appropriate in connection with Tax
Contests (or portions thereof) under the control of such other parties in
accordance with Section 10.

Section 17.07 Integration. This Agreement, the Ancillary Agreements and the
Exhibits, Schedules and appendices hereto and thereto contain the entire
agreement between the Parties with respect to the subject matter hereof,
supersede all previous agreements, negotiations, discussions, writings,
understandings, commitments and conversations with respect to such subject
matter, and there are no agreements or understandings between the Parties other
than those set forth or referred to herein or therein. In the event of any
inconsistency between this Agreement, the Separation and Distribution Agreement,
any other agreements relating to the transactions contemplated by the Separation
and Distribution Agreement, or the Tax Allocation Agreement, with respect to
matters addressed herein, the provisions of this Agreement shall control.

Section 17.08 Construction. The language in all parts of this Agreement shall in
all cases be construed according to its fair meaning and shall not be strictly
construed for or against any party. The captions, titles and headings included
in this Agreement are for convenience only, and do not affect this Agreement’s
construction or interpretation. Unless otherwise indicated, all “Section”
references in this Agreement are to sections of this Agreement.

Section 17.09 No Double Recovery. No provision of this Agreement shall be
construed to provide an indemnity or other recovery for any costs, damages, or
other amounts for which the damaged party has been fully compensated under any
other provision of this Agreement or under any other agreement or action at law
or equity. Unless expressly required in this Agreement, a party shall not be
required to exhaust all remedies available under other agreements or at law or
equity before recovering under the remedies provided in this Agreement.

Section 17.10 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the Parties and delivered to the other Party. Each Party acknowledges that it
and each other Party is executing certain of the Ancillary Agreements by
facsimile, stamp or mechanical signature, and that delivery of an executed
counterpart of a signature page to this Agreement (whether executed by manual,
stamp or mechanical signature) by facsimile or by email in portable document
format (PDF) shall be effective as delivery of such executed counterpart of this
Agreement. Each Party expressly adopts and confirms each such facsimile, stamp
or mechanical signature (regardless of whether delivered in person, by mail, by
courier, by facsimile or by email in portable document format (PDF)) made in its
respective name as if it were a manual signature delivered in person, agrees
that it will not assert that any such signature or delivery is not adequate to
bind such Party to the same extent as if it were signed manually and delivered
in person and agrees that, at the reasonable request of the other Party at any
time, it will as promptly as reasonably practicable cause this Agreement to be
manually executed (such execution to be as of the date of the initial date
thereof) and delivered in person, by mail or by courier.

 

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Section 17.11 Governing Law. This Agreement (and any claims or disputes arising
out of or related hereto or to the transactions contemplated hereby or to the
inducement of any party to enter herein, whether for breach of contract,
tortious conduct or otherwise and whether predicated on common law, statute or
otherwise) shall be governed by and construed and interpreted in accordance with
the Laws of the State of Delaware irrespective of the choice of laws principles
of the State of Delaware including all matters of validity, construction,
effect, enforceability, performance and remedies.

Section 17.12 Jurisdiction. If any dispute arises out of or in connection with
this Agreement, except as expressly contemplated by another provision of this
Agreement, the parties irrevocably (and the parties will cause each other member
of their respective Group to irrevocably) (a) consent and submit to the
exclusive jurisdiction of federal and state courts located in Delaware,
(b) waive any objection to that choice of forum based on venue or to the effect
that the forum is not convenient, and (c) WAIVE TO THE FULLEST EXTENT PERMITTED
BY LAW ANY RIGHT TO TRIAL OR ADJUDICATION BY JURY.

Section 17.13 Amendment. No provisions of this Agreement shall be deemed waived,
amended, supplemented or modified by a Party, unless such waiver, amendment,
supplement or modification is in writing and signed by the authorized
representative of the Party against whom it is sought to enforce such waiver,
amendment, supplement or modification.

Section 17.14 SpinCo Subsidiaries. If, at any time, SpinCo acquires or creates
one or more subsidiaries that are includable in the SpinCo Group, they shall be
subject to this Agreement and all references to the SpinCo Group herein shall
thereafter include a reference to such subsidiaries.

Section 17.15 Successors. This Agreement shall be binding on and inure to the
benefit of any successor by merger, acquisition of assets, or otherwise, to any
of the parties hereto (including but not limited to any successor of eBay,
SpinCo or PayPal succeeding to the Tax attributes of either under Section 381 of
the Code), to the same extent as if such successor had been an original party to
this Agreement.

Section 17.16 Injunctions. The parties acknowledge that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. The
parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof in any court having jurisdiction, such remedy being
in addition to any other remedy to which they may be entitled at law or in
equity.

 

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IN WITNESS WHEREOF, each party has caused this Agreement to be executed on its
behalf by a duly authorized officer on the date first set forth above.

 

EBAY INC. By:  

/s/ John J. Donahoe

Name:  

John J. Donahoe

Title:  

President and Chief Executive Officer

PAYPAL HOLDINGS, INC. By:  

/s/ Daniel H. Schulman

Name:  

Daniel H. Shulman

Title:  

President and CEO-Designee

[Signature Page to Tax Matters Agreement]

 

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