eBay 2015 Annual Report Download - page 38

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maintain applications and services on our open platforms on a timely basis or at all, and a number of factors
could cause such third-party developers to curtail or stop development for our platforms. In addition, our
business is subject to many regulatory restrictions. It is possible that merchants and third-party developers who
utilize our development platforms or tools could violate these regulatory restrictions and we may be held
responsible for such violations, which could harm our business.
The Distribution may not achieve some or all of the anticipated benefits and may adversely affect our
business.
We may not realize some or all of the anticipated benefits from the Distribution and the Distribution may in
fact adversely affect our business. As an independent, publicly traded company, we will be a smaller, less
diversified company with a narrower business focus and may be more vulnerable to changing market conditions,
which could materially and adversely affect our business, financial condition and results of operations.
Separating the businesses may also eliminate or reduce synergies or economies of scale that existed prior to the
Distribution, which could harm our business.
We could incur significant liability if the Distribution is determined to be a taxable transaction.
We have received an opinion from outside tax counsel to the effect that the Distribution qualifies as a
transaction that is described in Sections 355 and 368(a)(1)(D) of the Internal Revenue Code. The opinion relies
on certain facts, assumptions, representations and undertakings from PayPal and us regarding the past and future
conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions,
representations or undertakings are incorrect or not satisfied, our shareholders and we may not be able to rely on
the opinion of tax counsel and could be subject to significant tax liabilities. Notwithstanding the opinion of tax
counsel we have received, the IRS could determine on audit that the Distribution is taxable if it determines that
any of these facts, assumptions, representations or undertakings are not correct or have been violated or if it
disagrees with the conclusions in the opinion. If the Distribution is determined to be taxable for U.S. federal
income tax purposes, our shareholders that are subject to U.S. federal income tax and we could incur significant
U.S. federal income tax liabilities.
We may be exposed to claims and liabilities as a result of the Distribution.
We entered into a separation and distribution agreement and various other agreements with PayPal to govern
the Distribution and the relationship of the two companies going forward. These agreements provide for specific
indemnity and liability obligations and could lead to disputes between us and PayPal. The indemnity rights we
have against PayPal under the agreements may not be sufficient to protect us. In addition, our indemnity
obligations to PayPal may be significant and these risks could negatively affect our results of operations and
financial condition.
ITEM 1B: UNRESOLVED STAFF COMMENTS
Not applicable.
26