PayPal Holdings
PayPal Holdings, Inc. (Form: 10-12B/A, Received: 05/14/2015 17:21:21)

As filed with the Securities and Exchange Commission on May 14, 2015

Registration No. 001-36859

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 2 to

FORM 10

 

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

 

 

PayPal Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   47-2989869

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

2211 North First Street

San Jose, California

  95131
(Address of Principal Executive Offices)   (Zip Code)

[ ]

(Registrant’s telephone number, including area code)

 

 

Securities to be registered pursuant to Section 12(b) of the Act:

 

Title of each class

to be so registered

 

Name of each exchange on which

each class is to be registered

Common Stock  

The Nasdaq Global Select Market

Securities to be registered pursuant to Section 12(g) of the Act:

None

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   x   (Do not check if a smaller reporting company)    Smaller reporting company   ¨

 

 

 


PayPal Holdings, Inc.

INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT

AND ITEMS OF FORM 10

Certain information required to be included herein is incorporated by reference to specifically identified portions of the body of the information statement filed herewith as Exhibit 99.1. None of the information contained in the information statement shall be incorporated by reference herein or deemed to be a part hereof unless such information is specifically incorporated by reference.

 

Item 1. Business .

The information required by this item is contained under the sections of the information statement entitled “Information Statement Summary,” “Risk Factors,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Certain Relationships and Related Party Transactions,” and “Where You Can Find More Information.” Those sections are incorporated herein by reference.

 

Item 1A. Risk Factors .

The information required by this item is contained under the section of the information statement entitled “Risk Factors.” That section is incorporated herein by reference.

 

Item 2. Financial Information .

The information required by this item is contained under the sections of the information statement entitled “Unaudited Pro Forma Condensed Combined Financial Statements,” “Selected Historical Combined Financial Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Those sections are incorporated herein by reference.

 

Item 3. Properties .

The information required by this item is contained under the section of the information statement entitled “Business.” That section is incorporated herein by reference.

 

Item 4. Security Ownership of Certain Beneficial Owners and Management .

The information required by this item is contained under the section of the information statement entitled “Security Ownership of Certain Beneficial Owners and Management.” That section is incorporated herein by reference.

 

Item 5. Directors and Executive Officers .

The information required by this item is contained under the sections of the information statement entitled “Directors” and “Management.” Those sections are incorporated herein by reference.

 

Item 6. Executive Compensation .

The information required by this item is contained under the sections of the information statement entitled “Compensation Discussion and Analysis” and “Executive Compensation.” Those sections are incorporated herein by reference.

 

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Item 7. Certain Relationships and Related Transactions .

The information required by this item is contained under the sections of the information statement entitled “Management” and “Certain Relationships and Related Party Transactions.” Those sections are incorporated herein by reference.

 

Item 8. Legal Proceedings .

The information required by this item is contained under the section of the information statement entitled “Business—Legal and Regulatory Proceedings.” That section is incorporated herein by reference.

 

Item 9. Market Price of, and Dividends on, the Registrant’s Common Equity and Related Stockholder Matters .

The information required by this item is contained under the sections of the information statement entitled “Dividend Policy,” “Capitalization,” “The Separation and Distribution,” and “Description of PayPal’s Capital Stock.” Those sections are incorporated herein by reference.

 

Item 10. Recent Sales of Unregistered Securities .

The information required by this item is contained under the sections of the information statement entitled “Description of Material Indebtedness” and “Description of PayPal’s Capital Stock—Sale of Unregistered Securities.” Those sections are incorporated herein by reference.

 

Item 11. Description of Registrant’s Securities to be Registered .

The information required by this item is contained under the sections of the information statement entitled “Dividend Policy,” “The Separation and Distribution,” and “Description of PayPal’s Capital Stock.” Those sections are incorporated herein by reference.

 

Item 12. Indemnification of Directors and Officers .

The information required by this item is contained under the section of the information statement entitled “Description of PayPal’s Capital Stock—Limitations on Liability, Indemnification of Officers and Directors and Insurance.” That section is incorporated herein by reference.

 

Item 13. Financial Statements and Supplementary Data .

The information required by this item is contained under the section of the information statement entitled “Index to Financial Statements” and the financial statements referenced therein. That section is incorporated herein by reference.

 

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .

None.

 

Item 15. Financial Statements and Exhibits .

 

(a) Financial Statements

The information required by this item is contained under the section of the information statement entitled “Index to Financial Statements” and the financial statements referenced therein. That section is incorporated herein by reference.

 

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(b) Exhibits

The following documents are filed as exhibits hereto:

 

Exhibit
Number

  

Exhibit Description

  2.1    Form of Separation and Distribution Agreement by and between eBay Inc. and PayPal Holdings, Inc.**
  3.1    Form of Amended and Restated Certificate of Incorporation of PayPal Holdings, Inc.**
  3.2    Form of Amended and Restated Bylaws of PayPal Holdings, Inc.**
10.1    Form of Operating Agreement by and between eBay Inc. and PayPal Holdings, Inc.**
10.2    Form of Transition Services Agreement by and between eBay Inc. and PayPal Holdings, Inc.**
10.3    Form of Tax Matters Agreement by and between eBay Inc. and PayPal Holdings, Inc.*
10.4    Form of Employee Matters Agreement by and between eBay Inc. and PayPal Holdings, Inc.**
10.5    Form of Intellectual Property Matters Agreement between eBay Inc. and PayPal Holdings, Inc.**
10.6    Form of Colocation Services Agreement between eBay Inc. and PayPal Holdings, Inc.**
10.7    Form of Indemnity Agreement between PayPal Holdings, Inc. and individual directors and officers**
10.8    Form of PayPal Employee Incentive Plan**
10.9    Form of PayPal Holdings, Inc. 2015 Equity Incentive Award Plan**
10.10    Form of Global Restricted Stock Unit Agreement (and Performance-Based Restricted Stock Unit Agreement) under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan**
10.11    Form of Global Stock Option Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan**
10.12    Form of Director Annual Award Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan**
10.13    Form of Electing Director Quarterly Award Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan**
10.14    Form of PayPal Holdings, Inc. Employee Stock Purchase Plan**
10.15    Form of PayPal Holdings, Inc. Deferred Compensation Plan**
10.16    Offer Letter dated September 29, 2014 between eBay Inc. and Daniel Schulman**
10.17    Amendment dated December 31, 2014 to Offer Letter between eBay Inc. and Daniel Schulman**
21.1    List of subsidiaries*
99.1    Information Statement of PayPal Holdings, Inc., preliminary and subject to completion, dated May 14 , 2015**

 

* To be filed by amendment.
** Filed herewith.

 

4


SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

PayPal Holdings, Inc.
By:    

/s/ Daniel H. Schulman

Name: Daniel H. Schulman

Title:   President and CEO-Designee

Date: May 14, 2015

 

5

Exhibit 2.1

FORM OF

SEPARATION AND DISTRIBUTION AGREEMENT

BY AND BETWEEN

EBAY INC.

AND

PAYPAL HOLDINGS, INC.

DATED AS OF [•], 201[•]


TABLE OF CONTENTS

 

         Page  

ARTICLE I DEFINITIONS

     2   

ARTICLE II THE SEPARATION

     16   

2.1

  Transfer of Assets and Assumption of Liabilities      16   

2.2

  PayPal Assets; eBay Assets      18   

2.3

  PayPal Liabilities; eBay Liabilities      21   

2.4

  Approvals and Notifications      23   

2.5

  Novation of Liabilities      26   

2.6

  Release of Guarantees      27   

2.7

  Termination of Agreements      28   

2.8

  Treatment of Shared Contracts      29   

2.9

  Bank Accounts; Cash Balances      30   

2.10

  Ancillary Agreements      31   

2.11

  Disclaimer of Representations and Warranties      31   

2.12

  Cash Transfer      32   

2.13

  Financial Information Certifications      32   

2.14    

  Transition Committee      32   

ARTICLE III THE DISTRIBUTION

     33   

3.1

  Sole and Absolute Discretion; Cooperation      33   

3.2

  Actions Prior to the Distribution      33   

3.3

  Conditions to the Distribution      34   

3.4

  The Distribution      36   

ARTICLE IV MUTUAL RELEASES; INDEMNIFICATION

     37   

4.1

  Release of Pre-Distribution Claims      37   

4.2

  Indemnification by PayPal      39   

4.3

  Indemnification by eBay      40   

4.4

  Indemnification Obligations Net of Insurance Proceeds and Other Amounts      41   

4.5

  Procedures for Indemnification of Third-Party Claims      42   

4.6

  Additional Matters      45   

4.7

  Right of Contribution      46   

4.8

  Covenant Not to Sue      47   

4.9

  Remedies Cumulative      47   

4.10

  Survival of Indemnities      47   

4.11

  Coordination with Ancillary Agreements      47   

ARTICLE V CERTAIN OTHER MATTERS

     48   

5.1

  Insurance Matters      48   

5.2

  Directors and Officers Insurance      51   

5.3

  Late Payments      51   

5.4

  Inducement      51   

 

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5.5

Post-Effective Time Conduct   52   

5.6

Conduct of Certain Intellectual Property Matters   52   

ARTICLE VI EXCHANGE OF INFORMATION; CONFIDENTIALITY

  52   

6.1

Agreement for Exchange of Information   52   

6.2

Ownership of Information   53   

6.3

Compensation for Providing Information   53   

6.4

Record Retention   54   

6.5

Limitations of Liability   54   

6.6

Other Agreements Providing for Exchange of Information   54   

6.7

Production of Witnesses; Records; Cooperation   55   

6.8

Privileged Matters   55   

6.9

Confidentiality   58   

6.10

Protective Arrangements   59   

ARTICLE VII DISPUTE RESOLUTION

  60   

7.1

Good-Faith Negotiation   60   

7.2

Escalation Committee   60   

7.3

Non-Binding Mediation   61   

7.4

Arbitration; Litigation   61   

7.5

Litigation and Unilateral Commencement of Arbitration   63   

7.6

Conduct During Dispute Resolution Process   63   

ARTICLE VIII FURTHER ASSURANCES AND ADDITIONAL COVENANTS

  63   

8.1

Further Assurances   63   

ARTICLE IX TERMINATION

  64   

9.1

Termination   64   

9.2

Effect of Termination   64   

ARTICLE X MISCELLANEOUS

  64   

10.1

Counterparts; Entire Agreement; Corporate Power   64   

10.2

Governing Law   65   

10.3

Assignability   65   

10.4

Third-Party Beneficiaries   66   

10.5

Notices   66   

10.6

Severability   66   

10.7

Force Majeure   67   

10.8

No Set-Off   67   

10.9

Publicity   67   

10.10

Expenses   67   

10.11

Headings   67   

10.12

Survival of Covenants   67   

10.13

Waivers of Default   68   

10.14

Specific Performance   68   

10.15

Amendments   68   

10.16

Interpretation   68   

10.17

Limitations of Liability   69   

10.18

Performance   69   

10.19    

Mutual Drafting   69   

 

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SCHEDULES

 

Schedule 1.1 Commercial Agreements
Schedule 1.2(b) eBay Discontinued or Divested Businesses
Schedule 1.3 eBay GPI Software
Schedule 1.4 eBay Patents
Schedule 1.5 eBay Proceedings
Schedule 1.6 eBay Specified Actions
Schedule 1.7 eBay Specified Persons
Schedule 1.8 Joint Proceedings
Schedule 1.9(a) Licensed eBay Software
Schedule 1.10(a) Licensed PayPal Software
Schedule 1.11(b) PayPal Discontinued or Divested Businesses
Schedule 1.12(k) PayPal Contracts (Other)
Schedule 1.13 PayPal GPI Software
Schedule 1.14(a) PayPal Information Technology
Schedule 1.15(c) PayPal Registered IP
Schedule 1.15(d) PayPal Other IP
Schedule 1.16 PayPal Patents
Schedule 1.17 PayPal Proceedings
Schedule 1.18(a) PayPal Real Property (Owned)
Schedule 1.18(b) PayPal Real Property Leases
Schedule 1.19 PayPal Specified Actions
Schedule 1.20 PayPal Specified Persons
Schedule 1.21(d) Shared Contingent Liabilities (Other)
Schedule 1.22 Specified eBay Patents
Schedule 1.23 Specified PayPal Patents
Schedule 1.24 Transferred Entities
Schedule 2.1(a) Plan of Reorganization
Schedule 2.2(a)(xv) PayPal Assets (Other)
Schedule 2.2(b)(iii) eBay Intellectual Property
Schedule 2.2(b)(vii) eBay Assets (Other)
Schedule 2.3(a)(vii) PayPal Liabilities (Other)
Schedule 2.3(b)(vi) eBay Liabilities (Other)
Schedule 2.7(b)(ii) Intercompany Agreements
Schedule 2.8(a) Three-Party Contracts
Schedule 4.2(d) Certain Ancillary Agreements
Schedule 4.3(f) Specified eBay Information
Schedule 5.6 Conduct of Certain Intellectual Property Matters

EXHIBITS

 

Exhibit A Amended and Restated Certificate of Incorporation of PayPal Holdings, Inc.
Exhibit B Amended and Restated Bylaws of PayPal Holdings, Inc.

 

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SEPARATION AND DISTRIBUTION AGREEMENT

This SEPARATION AND DISTRIBUTION AGREEMENT, dated as of [•], 201[•] (this “ Agreement ”), is by and between eBay Inc., a Delaware corporation (“ eBay ”), and PayPal Holdings, Inc., a Delaware corporation (“ PayPal ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I .

R E C I T A L S

WHEREAS, the board of directors of eBay (the “ eBay Board ”) has determined that it is in the best interests of eBay and its stockholders to create a new publicly traded company that shall operate the PayPal Business;

WHEREAS, in furtherance of the foregoing, the eBay Board has determined that it is appropriate and desirable to separate the PayPal Business from the eBay Business (the “ Separation ”) and, following the Separation, make a distribution, on a pro rata basis, to holders of eBay Shares on the Record Date of all of the outstanding PayPal Shares owned by eBay (the “ Distribution ”);

WHEREAS, PayPal has been incorporated solely for these purposes and has not engaged in activities except in preparation for the Separation and the Distribution;

WHEREAS, the transfer by eBay of the PayPal Assets and the PayPal Liabilities to PayPal (the “ Contribution ”) and the Distribution, taken together, are intended to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Section 355 and 368(a)(1)(D) of the Code;

WHEREAS, eBay expects to receive an opinion of outside legal counsel regarding the qualification of the Contribution and the Distribution, taken together, as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code (the “ Tax Opinion ”);

WHEREAS, PayPal and eBay have prepared, and PayPal has filed with the SEC, the Form 10, which includes the Information Statement, and which sets forth disclosure concerning PayPal, the Separation and the Distribution; and

WHEREAS, each of eBay and PayPal has determined that it is appropriate and desirable to set forth the principal corporate transactions required to effect the Separation and the Distribution and certain other agreements that will govern certain matters relating to the Separation and the Distribution and the relationship of eBay, PayPal and the members of their respective Groups following the Distribution.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:


ARTICLE I

DEFINITIONS

For the purpose of this Agreement, the following terms shall have the following meanings:

Action ” shall mean any demand, action, claim, counterclaim, dispute, suit, countersuit, arbitration, hearing, inquiry, subpoena, proceeding, examination or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial, appellate or otherwise) by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.

Affiliate ” shall mean, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, “ control ” (including with correlative meanings, “ controlled by ” and “ under common control with ”), when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract or otherwise. It is expressly agreed that, prior to, at and after the Effective Time, for purposes of this Agreement and the Ancillary Agreements, (a) no member of the PayPal Group shall be deemed to be an Affiliate of any member of the eBay Group and (b) no member of the eBay Group shall be deemed to be an Affiliate of any member of the PayPal Group.

Agent ” shall mean the trust company or bank duly appointed by eBay to act as distribution agent, transfer agent and registrar for the PayPal Shares in connection with the Distribution.

Agreement ” shall have the meaning set forth in the Preamble.

Ancillary Agreement ” shall mean any agreements (other than this Agreement) entered into by the Parties or the members of their respective Groups (but as to which no Third Party is a party) in connection with the Separation, the Distribution, and the other transactions contemplated by this Agreement, including the Operating Agreement, the Transition Services Agreement, the Tax Matters Agreement, the Employee Matters Agreement, the Intellectual Property Matters Agreement, the Colocation Services Agreements, the Product Development Agreement, the Data Sharing Addendum and the Transfer Documents; provided , that no Commercial Agreement shall be an Ancillary Agreement.

Approvals or Notifications ” shall mean any consents, waivers, approvals, permits or authorizations to be obtained from, notices, registrations or reports to be submitted to, or other filings to be made with, any third Person, including any Governmental Authority.

Arbitration Request ” shall have the meaning set forth in Section 7.4(a) .

Arbitration Rules ” shall have the meaning set forth in Section 7.4(a) .

 

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Assets ” shall mean, with respect to any Person, the assets, properties, claims and rights (including goodwill) of such Person, wherever located (including in the possession of vendors or other third Persons or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of such Person, including rights and benefits pursuant to any contract, license, permit, indenture, note, bond, mortgage, agreement, concession, franchise, instrument, undertaking, commitment, understanding or other arrangement.

Cash Amounts ” shall have the meaning set forth in Section 2.12 .

Code ” shall mean the Internal Revenue Code of 1986, as amended.

Colocation Services Agreements ” shall mean the Colocation Services Agreements to be entered into by and between eBay and PayPal or the members of their respective Groups in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement.

Commercial Agreements ” shall mean the agreements entered into by the Parties or the members of their respective Groups (but as to which no Third Party is a party) set forth on Schedule 1.1 .

Contribution ” shall have the meaning set forth in the Recitals.

Data Sharing Addendum ” shall mean the Data Sharing Addendum to be entered into by and between eBay and PayPal or the members of their respective Groups pursuant to the Operating Agreement and in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement.

Delayed eBay Asset ” shall have the meaning set forth in Section 2.4(h) .

Delayed eBay Liability ” shall have the meaning set forth in Section 2.4(h) .

Delayed PayPal Asset ” shall have the meaning set forth in Section 2.4(c) .

Delayed PayPal Liability ” shall have the meaning set forth in Section 2.4(c) .

Disclosure Document ” shall mean any registration statement (including the Form 10) filed with the SEC by or on behalf of any Party or any member of its Group, and also includes any information statement (including the Information Statement), prospectus, offering memorandum, offering circular, periodic report or similar disclosure document, whether or not filed with the SEC or any other Governmental Authority, in each case which describes the Separation or the Distribution or the PayPal Group or primarily relates to the transactions contemplated hereby.

Dispute ” shall have the meaning set forth in Section 7.1 .

Distribution ” shall have the meaning set forth in the Recitals.

 

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Distribution Date ” shall mean the date of the consummation of the Distribution, which shall be determined by the eBay Board in its sole and absolute discretion.

Distribution Ratio ” shall mean a number equal to [•].

eBay ” shall have the meaning set forth in the Preamble.

eBay Accounts ” shall have the meaning set forth in Section 2.9(a) .

eBay Assets ” shall have the meaning set forth in Section 2.2(b) .

eBay Board ” shall have the meaning set forth in the Recitals.

eBay Business ” shall mean (a) the business, operations, products, platforms, services and activities of the Marketplaces segment of eBay conducted at any time prior to the Effective Time by either Party or any member of its Group, (b) any terminated, divested or discontinued businesses, operations and activities that, at the time of termination, divestiture or discontinuation, primarily related to the business, operations or activities described in clause (a) as then conducted, including those set forth on Schedule 1.2(b) , and (c) the Enterprise Business.

eBay Data Center Infrastructure ” shall mean all: (a) eBay GPI Software; and (b) Information Technology that is (i) located as of the Effective Time at the data centers operated by eBay or any of its Subsidiaries located in: Denver, Colorado; Las Vegas, Nevada; Phoenix, Arizona; Reno, Nevada; and Salt Lake City, Utah and (ii) necessary to operate such data centers (which shall not, for clarity, be deemed to include any proprietary Technology of PayPal or any PayPal Group member).

eBay GPI Software ” shall mean the Software set forth on Schedule 1.3 .

eBay Group ” shall mean eBay and each Person that is a Subsidiary of eBay (other than PayPal and any other member of the PayPal Group).

eBay Indemnified Parties ” shall have the meaning set forth in Section 4.2 .

eBay Liabilities ” shall have the meaning set forth in Section 2.3(b) .

eBay Name and eBay Marks ” shall mean the names, marks, trade dress, logos, monograms, domain names and other source or business identifiers of either Party or any member of its Group using or containing “eBay”, either alone or in combination with other words or elements, and all names, marks, trade dress, logos, domain names and other source or business identifiers confusingly similar to or embodying any of the foregoing either alone or in combination with other words or elements, together with the goodwill associated with any of the foregoing.

eBay Patents ” shall mean: (a) the issued patents set forth on Schedule 1.4 ; (b) any patent issuing on any patent application set forth on Schedule 1.4 ; (c) any patent claims issuing on any patent application that claims priority from, and that cover exclusively subject matter that is entitled to priority to, any patent or patent application set forth on Schedule 1.4

 

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(including any divisional, continuation, continuation-in-part, reissue, reexamination, or extension) with a priority date that is on or before the Distribution Date; and (d) any foreign counterpart of any of the foregoing patents and patent applications with a priority date that is on or before the Distribution Date.

eBay Proceedings ” shall mean the proceedings set forth in Schedule 1.5 .

eBay Shares ” shall mean the shares of common stock, par value $0.001 par per share, of eBay.

eBay Specified Actions ” shall mean those Actions set forth on Schedule 1.6 .

eBay Specified Persons ” shall mean the Persons set forth on Schedule 1.7 .

eBay Stock Exchange ” shall mean The NASDAQ Stock Market.

Effective Time ” shall mean 11:59:59 p.m., New York City time, on the Distribution Date.

Employee Matters Agreement ” shall mean the Employee Matters Agreement to be entered into by and between eBay and PayPal or the members of their respective Groups in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement.

Enterprise Business ” shall mean all businesses, operations, products, platforms, services and activities (whether or not such businesses, operations or activities are or have been terminated, divested or discontinued) of the Enterprise segment of eBay conducted at any time prior to the Effective Time by either Party or any member of its Group.

Escalation Committee ” shall have the meaning as set forth in Section 7.2 .

Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

Executable Code ” shall mean the fully compiled version of a computer program that can be executed by a computer and used by an end user without further compilation.

Force Majeure ” shall mean, with respect to a Party, an event beyond the control of such Party (or any Person acting on its behalf), which event (a) does not arise or result from the fault or negligence of such Party (or any Person acting on its behalf) and (b) by its nature would not reasonably have been foreseen by such Party (or such Person), or, if it would reasonably have been foreseen, was unavoidable, and includes acts of God, acts of civil or military authority, embargoes, epidemics, pandemics, war, riots, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts. Notwithstanding the foregoing, the receipt by a Party of an unsolicited takeover offer or other acquisition proposal, even if unforeseen or unavoidable, and such Party’s response thereto shall not be deemed an event of Force Majeure .

 

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Form 10 ” shall mean the registration statement on Form 10 filed by PayPal with the SEC to effect the registration of PayPal Shares pursuant to the Exchange Act in connection with the Distribution, as such registration statement may be amended or supplemented from time to time prior to the Distribution.

Governmental Approvals ” shall mean any Approvals or Notifications to be made to, or obtained from, any Governmental Authority.

Governmental Authority ” shall mean any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, provincial, local, domestic, foreign, supranational or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any executive official thereof, including The NASDAQ Stock Market and any similar self-regulatory body under applicable securities Laws.

Group ” shall mean either the PayPal Group or the eBay Group, as the context requires.

Indemnifying Party ” shall have the meaning set forth in Section 4.5(a) .

Indemnified Party ” shall have the meaning set forth in Section 4.5(a) .

Indemnity Payment ” shall have the meaning set forth in Section 4.5(a) .

Information ” shall mean information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names and records, supplier names and records, customer and supplier lists, customer and vendor data or correspondence, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data, files, papers, tapes, keys, correspondence, plans, invoices, forms, product data and literature, promotional and advertising materials, technical data, operating manuals, instructional documents, quality records and regulatory and compliance records; provided , that “Information” shall not include Registered IP.

Information Statement ” shall mean the information statement to be made available to the holders of eBay Shares in connection with the Distribution, as such information statement may be amended or supplemented from time to time prior to the Distribution.

Information Technology ” shall mean all technology, hardware, computers, servers, workstations, routers, hubs, switches, data communication lines, network and telecommunications equipment, Internet-related information technology infrastructure and other information technology equipment, in each case, other than Software.

 

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Initial Notice ” shall have the meaning set forth in Section 7.1 .

Insurance Administration ” shall mean, with respect to each insurance policy maintained by eBay or any member of the eBay Group, the accounting for premiums, retrospectively-rated premiums, defense costs, indemnity payments, deductibles and retentions, as appropriate, under the terms and conditions of each such policy; discussions or negotiations with insurers and the control of any Actions relating to any such policy; the reporting to excess insurance carriers of any losses or claims which may cause the per-occurrence, per claim or aggregate limits of any such policy to be exceeded; and the distribution of Insurance Proceeds as contemplated by this Agreement.

Insurance Proceeds ” shall mean those monies:

(a) received by an insured from an insurance carrier; or

(b) paid by an insurance carrier on behalf of the insured;

in any such case net of any costs or expenses incurred in the collection thereof to the extent such adjustment is demonstrably related to such proceeds and net of any applicable premium adjustments, including reserves and retrospectively rated premium adjustments (it being understood that Insurance Proceeds shall include amounts received under a captive insurance arrangement).

Intellectual Property Matters Agreement ” shall mean the Intellectual Property Matters Agreement to be entered into by and between eBay and PayPal or any members of their respective Groups in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement.

Intellectual Property Rights ” shall have the meaning set forth in the Intellectual Property Matters Agreement.

Joint Proceedings ” shall mean the proceedings set forth in Schedule 1.8 .

Law ” shall mean any national, supranational, international, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any Tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.

LHO ” shall have the meaning as set forth in Section 4.5(f) .

Liabilities ” shall mean all debts, guarantees, assurances, commitments, liabilities, responsibilities, Losses, remediation, deficiencies, damages, fines, penalties, settlements, sanctions, costs, expenses, interest and obligations of any nature or kind, whether accrued or fixed, absolute or contingent, matured or unmatured, accrued or not accrued, asserted or unasserted, liquidated or unliquidated, foreseen or unforeseen, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, claim (including any Third-Party Claim), demand, Action, or order, writ, judgment, injunction, decree,

 

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stipulation, determination or award entered by or with any Governmental Authority or arbitration tribunal, and those arising under any contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment undertaking or terms of employment, whether imposed or sought to be imposed by a Governmental Authority, another third Person, or a Party, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise, in each case including all costs, expenses, interest, attorneys’ fees, disbursements and expenses of counsel, expert and consulting fees and costs related thereto or to the investigation or defense thereof and any equitable relief that is imposed in connection therewith.

Licensed eBay Software ” shall mean: (a) solely those software programs listed in Schedule 1.9(a) , in both Executable Code and Source Code form, in the form such software programs exist as of the Effective Time; and (b) all documentation relating thereto, if any, provided by eBay to PayPal.

Licensed PayPal Software ” shall mean: (a) solely those software programs listed in Schedule 1.10(a) , in both Executable Code and Source Code form, in the form such software programs exist as of the Effective Time; and (b) and all documentation relating thereto, if any, provided by PayPal to eBay.

Linked ” shall have the meaning set forth in Section 2.9(a) .

Losses ” shall mean actual losses, costs, damages, penalties and expenses (including legal and accounting fees and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.

Mediation Request ” shall have the meaning set forth in Section 7.3 .

Mediation Rules ” shall have the meaning set forth in Section 7.3 .

Operating Agreement ” shall mean the Operating Agreement to be entered into by and between eBay and PayPal or the members of their respective Groups in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement.

Other Board Members ” shall have the meaning as set forth in Section 7.2 .

Other IP ” shall mean all Technology, other than Registered IP, that is owned by either Party or any member of its Group as of the Effective Time.

Parties ” shall mean the parties to this Agreement.

PayPal ” shall have the meaning set forth in the Preamble.

PayPal, Inc. Contract ” shall mean any contract or agreement to which PayPal, Inc. or any of its Subsidiaries entered into prior to the Effective Time and to which eBay and the other members of the eBay Group are not parties.

PayPal Accounts ” shall have the meaning set forth in Section 2.9(a) .

 

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PayPal Assets ” shall have the meaning set forth in Section 2.2(a) .

PayPal Balance Sheet ” shall mean the pro forma combined balance sheet of the PayPal Business, including any notes and subledgers thereto, as of [•], 201[•], as presented in the Information Statement made available to the Record Holders.

PayPal Business ” shall mean (a) the business, operations, products, platforms, services and activities of the Payments segment of eBay conducted at any time prior to the Effective Time by either Party or any of their current or former Subsidiaries and (b) any terminated, divested or discontinued businesses, operations and activities that, at the time of termination, divestiture or discontinuation, primarily related to the business, operations or activities described in clause (a) as then conducted, including those set forth on Schedule 1.11(b) .

PayPal Bylaws ” shall mean the Amended and Restated Bylaws of PayPal, substantially in the form of Exhibit B .

PayPal Certificate of Incorporation ” shall mean the Amended and Restated Certificate of Incorporation of PayPal, substantially in the form of Exhibit A .

PayPal Contracts ” shall mean the following contracts and agreements to which either Party or any member of its Group is a party or by which it or any member of its Group or any of their respective Assets is bound, whether or not in writing; provided , that PayPal Contracts shall not include any contract or agreement that is contemplated to be retained by eBay or any member of the eBay Group from and after the Effective Time pursuant to any provision of this Agreement or any Ancillary Agreement:

(a) (i) any marketing, merchant, reseller, distributor, development, supply or vendor contract or agreement entered into prior to the Effective Time exclusively related to the PayPal Business and (ii) with respect to any marketing, merchant, supply or vendor contract or agreement entered into prior to the Effective Time that relates to the PayPal Business but is not exclusively related to the PayPal Business, that portion of any such customer, distribution, supply or vendor contract or agreement that relates to the PayPal Business;

(b) (i) any license agreement or other agreement conferring Intellectual Property Rights entered into prior to the Effective Time exclusively related to the PayPal Business and (ii) with respect to any license agreement entered into prior to the Effective Time that relates to the PayPal Business but is not exclusively related to the PayPal Business, that portion of any such license agreement that relates to the PayPal Business;

(c) (i) any contract or agreement with a Third Party pursuant to which such Third Party provides colocation or disaster recovery services entered into prior to the Effective Time exclusively related to the PayPal Information Technology and (ii) with respect to any contract or agreement with a Third Party pursuant to which such Third Party provides colocation or disaster recovery services entered into prior to the Effective Time that relates to the PayPal Information Technology but is not exclusively related to the PayPal Information Technology, that portion of any such contract or agreement that relates to the PayPal Information Technology;

 

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(d) any customer or user contract or agreement primarily used or held primarily for use in the PayPal Business as of the Effective Time;

(e) any joint venture or partnership contract or agreement that relates primarily to the PayPal Business as of the Effective Time;

(f) any guarantee, indemnity, representation, covenant, warranty or other Liability of either Party or any member of its Group in respect of any other PayPal Contract, any PayPal Liability or the PayPal Business;

(g) (i) any employment, change of control, retention, consulting, indemnification, termination, severance or other similar agreement with any current or former PayPal Group employee or current or former consultant of the PayPal Group entered into prior to the Effective Time and (ii) any proprietary information and inventions agreement or similar Intellectual Property Rights assignment or license agreement with any current or former PayPal Group employee, eBay Group employee, consultant of the PayPal Group or consultant of the eBay Group, in each case entered into prior to the Effective Time, to the extent such agreement relates to the PayPal Business;

(h) any contract or agreement that is otherwise expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be assigned to PayPal or any member of the PayPal Group;

(i) any interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements related exclusively to the PayPal Business or entered into by or on behalf of any division, business unit or member of the PayPal Group;

(j) (i) any PayPal, Inc. Contract that is exclusively related to the PayPal Business and (ii) with respect to any PayPal, Inc. Contract that relates to the PayPal Business but is not exclusively related to the PayPal Business, that portion of any such PayPal, Inc. Contract that relates to the PayPal Business; and

(k) any contracts, agreements or settlements listed on Schedule 1.12(k) , including the right to recover any amounts under such contracts, agreements or settlements.

PayPal Designees ” shall mean the entities (including corporations, general or limited partnerships, trusts, joint ventures, unincorporated organizations, limited liability entities or other entities) that will be members of the PayPal Group as of immediately prior to the Effective Time designated by PayPal to accept PayPal Assets and assume PayPal Liabilities.

PayPal GPI Software ” shall mean the Software set forth on Schedule 1.13 .

 

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PayPal Group ” shall mean (a) prior to the Effective Time, PayPal and each Person that will be a Subsidiary of PayPal as of immediately after the Effective Time, including the Transferred Entities, even if, prior to the Effective Time, such Person is not a Subsidiary of PayPal; and (b) on and after the Effective Time, PayPal and each Person that is a Subsidiary of PayPal.

PayPal Indemnified Parties ” shall have the meaning set forth in Section 4.3 .

PayPal Information Technology ” shall mean: (a) all Software and all Information Technology owned or licensed by either Party or any member of its Group primarily used or primarily held for use in the PayPal Business as of the Effective Time, other than any eBay Data Center Infrastructure, including the Licensed PayPal Software and any other Software and Information Technology set forth on Schedule 1.14(a) ; and (b) all Intellectual Property Rights of either Party or any member of its Group in any of the foregoing.

PayPal Intellectual Property ” shall mean: (a) the PayPal Patents; (b) the Specified PayPal Patents; (c) the other Registered IP set forth on Schedule 1.15(c) ; (d) all Other IP owned by, licensed by or to, or sublicensed by or to either Party or any member of its Group as of the Effective Time primarily used or primarily held for use in the PayPal Business, including any Other IP set forth on Schedule 1.15(d) ; and (e) all Intellectual Property Rights of either Party or any member of its Group in any of the foregoing.

PayPal Liabilities ” shall have the meaning set forth in Section 2.3(a) .

PayPal Patents ” shall mean: (a) the issued patents set forth on Schedule 1.16 ; (b) any patent issuing on any patent application set forth on Schedule 1.16 ; (c) any patent claims issuing on any patent application that claims priority from, and that cover exclusively subject matter that is entitled to priority to, any patent or patent application set forth on Schedule 1.16 (including, but not limited to, any divisional, continuation, continuation-in-part, reissue, reexamination, or extension) with a priority date that is on or before the Distribution Date; and (d) any foreign counterpart of any of the foregoing patents and patent applications with a priority date that is on or before the Distribution Date.

PayPal Permits ” shall mean all Permits owned or licensed by either Party or member of its Group primarily used or primarily held for use in the PayPal Business as of the Effective Time.

PayPal Proceedings ” shall mean the proceedings set forth in Schedule 1.17 .

PayPal Real Property ” shall mean (a) all of the Real Property owned by either Party or member of its Group as of the Effective Time listed or described on Schedule 1.18(a) , and (b) all the Real Property Leases to which either Party or member of its Group is party as of the Effective Time set forth on Schedule 1.18(b) .

PayPal Shares ” shall mean the shares of common stock, par value $0.0001 per share, of PayPal.

PayPal Specified Actions ” shall mean those Actions set forth on Schedule 1.19 .

 

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PayPal Specified Persons ” shall mean the Persons set forth on Schedule 1.20 .

PayPal Stock Exchange ” shall mean The NASDAQ Stock Market.

Permits ” shall mean permits, approvals, authorizations, consents, licenses or certificates issued by any Governmental Authority.

Person ” shall mean an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

Plan of Reorganization ” shall have the meaning set forth in Section 2.1(a) .

Prime Rate ” shall mean the rate that Bloomberg displays as “Prime Rate by Country United States” at  www.bloomberg.com/markets/rates-bonds/key-rates/ or on a Bloomberg terminal at PRIMBB Index.

Privileged Information ” means any information, in written, oral, electronic or other tangible or intangible forms, including any communications by or to attorneys (including attorney-client privileged communications), memoranda and other materials prepared by attorneys or under their direction (including attorney work product), as to which a Party or any member of its Group would be entitled to assert or have asserted a privilege, including the attorney-client and attorney work product privileges.

Product Development Agreement ” shall mean the Product Development Agreement to be entered into by and between eBay and PayPal or the members of their respective Groups pursuant to the Operating Agreement and in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement.

Real Property ” shall mean land together with all easements, rights and interests arising out of the ownership thereof or appurtenant thereto and all buildings, structures, improvements and fixtures located thereon.

Real Property Leases ” shall mean all leases to Real Property and, to the extent covered by such leases, any and all buildings, structures, improvements and fixtures located thereon.

Record Date ” shall mean the close of business on the date to be determined by the eBay Board as the record date for determining holders of eBay Shares entitled to receive PayPal Shares pursuant to the Distribution.

Record Holders ” shall mean the holders of record of eBay Shares as of the Record Date.

Registered IP ” shall mean all Intellectual Property Rights that are registered, filed, issued or granted under the authority of, with or by, any Governmental Authority, including all patents, invention registrations, registered copyrights, registered trademarks, registered service marks, registered trade secrets, registered Internet domain names, and all applications for any of the foregoing.

 

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Representatives ” shall mean, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants, attorneys or other representatives.

Residual Information ” shall mean information in non-tangible form that may be retained in the unaided memory of Representatives of a Party or members of such Party’s Group who have had access to confidential and proprietary information concerning the other Party or any member of the other Party’s Group.

SEC ” shall mean the U.S. Securities and Exchange Commission.

Security Interest ” shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever.

Separation ” shall have the meaning set forth in the Recitals.

Shared Contingent Liabilities ” shall mean the following Liabilities of either Party or any member of its Group:

(a) any Liabilities relating to, arising out of or resulting from a general corporate matter of eBay occurring or existing at or prior to the Effective Time, including any such Liabilities (including any Liabilities relating to, arising out of or resulting from stockholder litigation or controversies arising out of or relating to actions or omissions occurring prior to the Effective Time, to the extent unresolved prior to the Effective Time and any amount paid or payable after the Effective Time by either Party or any member of its Group in respect of such Liabilities, and any Liabilities under federal and state securities laws) relating to, arising out of or resulting from claims made by or on behalf of holders of any of eBay’s securities (including debt securities), in their capacities as such, in respect of such general corporate matter;

(b) any Liabilities relating to, arising out of or resulting from any Action with respect to the Separation or the Distribution (other than any Action related to any Disclosure Document) made or brought by any Third Party against either Party or any member of its Group (but excluding any Action by a Party or a member of such Party’s Group, on the one hand, against another Party or member of either Party’s Group, on the other hand);

(c) any Liabilities relating to, arising out of or resulting from any (i) claims for indemnification by any current or former directors, officers or employees of eBay or any of its current or former Subsidiaries, in their capacities as such, or (ii) claims for breach of fiduciary duties brought against current or former directors, officers or employees of eBay or any of its current or former Subsidiaries, in their capacities as such, in each case, relating to any acts, omissions or events at or prior to the Effective Time; and

 

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(d) any Liabilities relating to, arising out of or resulting from the Actions set forth on Schedule 1.21(d) ;

except, in each case, (A) any Liability that is otherwise specified to be a PayPal Liability or an eBay Liability, (B) any Liability for Taxes, which shall be governed by the Tax Matters Agreement, (C) any Liability that is otherwise specifically allocated under this Agreement or any other Ancillary Agreement or (D) any Liability relating to, arising out of or resulting from any eBay Proceedings, Joint Proceedings or PayPal Proceedings.

Shared Contract ” shall have the meaning set forth in Section 2.8(a) .

Software ” shall mean any and all (a) computer programs, including any and all software implementation of algorithms, models and methodologies, whether in source code, object code, human readable form or other form, (b) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (c) descriptions, flow charts and other work products used to design, plan, organize and develop any of the foregoing, (d) screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons and (e) documentation, including user manuals and other training documentation, relating to any of the foregoing.

Source Code ” shall mean the human-readable version of a computer program that can be compiled into Executable Code.

Specified eBay Patents ” shall mean: (a) the issued patents set forth on Schedule 1.22 ; (b) any patent issuing on any patent application set forth on Schedule 1.22 ; (c) any patent claims issuing on any patent application that claims priority from, and that cover exclusively subject matter that is entitled to priority to, any patent or patent application set forth on Schedule 1.22 (including any divisional, continuation, continuation-in-part, reissue, reexamination, or extension) with a priority date that is on or before the Distribution Date; and (d) any foreign counterpart of any of the foregoing patents and patent applications with a priority date that is on or before the Distribution Date.

Specified PayPal Patents ” shall mean: (a) the issued patents set forth on Schedule 1.23 ; (b) any patent issuing on any patent application set forth on Schedule 1.23 ; (c) any patent claims issuing on any patent application that claims priority from, and that cover exclusively subject matter that is entitled to priority to, any patent or patent application set forth on Schedule 1.23 (including any divisional, continuation, continuation-in-part, reissue, reexamination, or extension) with a priority date that is on or before the Distribution Date; and (d) any foreign counterpart of any of the foregoing patents and patent applications with a priority date that is on or before the Distribution Date.

Subsidiary ” shall mean, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities, (ii) the total combined equity interests or (iii) the capital or profit interests, in the case of a partnership, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

 

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Tangible Information ” shall mean Information that is contained in written, electronic or other tangible forms.

Tax ” shall have the meaning set forth in the Tax Matters Agreement.

Tax Matters Agreement ” shall mean the Tax Matters Agreement to be entered into by and between eBay and PayPal in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement.

Tax Opinion ” shall have the meaning set forth in the Recitals.

Tax Return ” shall have the meaning set forth in the Tax Matters Agreement.

Technical Information ” shall have the meaning set forth in the Intellectual Property Matters Agreement.

Technology ” shall have the meaning set forth in the Intellectual Property Matters Agreement, in each case, other than Software.

Third Party ” shall mean any Person other than the Parties or any members of their respective Groups.

Third-Party Claim ” shall have the meaning set forth in Section 4.5(a) .

Transfer Documents ” shall have the meaning set forth in Section 2.1(b) .

Transferred Cash Amount ” shall have the meaning set forth in Section 2.12 .

Transferred Entities ” shall mean the entities set forth on Schedule 1.24 .

Transition Committee ” shall have the meaning set forth in Section 2.14 .

Transition Services Agreement ” shall mean the Transition Services Agreement to be entered into by and between eBay and PayPal or any members of their respective Groups in connection with the Separation, the Distribution and the other transactions contemplated by this Agreement.

Unreleased eBay Liability ” shall have the meaning set forth in Section 2.5(b)(ii) .

Unreleased PayPal Liability ” shall have the meaning set forth in Section 2.5(a)(ii) .

 

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ARTICLE II

THE SEPARATION

2.1 Transfer of Assets and Assumption of Liabilities .

(a) On or prior to the Effective Time, but in any case, prior to the Distribution, in accordance with the plan and structure set forth on Schedule 2.1(a) (the “ Plan of Reorganization ”):

(i) Transfer and Assignment of PayPal Assets . eBay shall, and shall cause the applicable members of its Group to, contribute, assign, transfer, convey and deliver to PayPal, or the applicable PayPal Designees, and PayPal or such PayPal Designees shall accept from eBay and the applicable members of the eBay Group, all of eBay’s and such eBay Group members’ respective direct or indirect right, title and interest in and to all of the PayPal Assets (it being understood that if any PayPal Asset is held by a Transferred Entity or a wholly owned Subsidiary of a Transferred Entity, such PayPal Asset may be assigned, transferred, conveyed and delivered to PayPal as a result of the transfer of all of the equity interests in such Transferred Entity from eBay or the applicable members of the eBay Group to PayPal or the applicable PayPal Designee);

(ii) Acceptance and Assumption of PayPal Liabilities . PayPal and the applicable PayPal Designees shall accept, assume and agree faithfully to perform, discharge and fulfill all the PayPal Liabilities in accordance with their respective terms (it being understood that if any PayPal Liability is a liability of a Transferred Entity or a wholly owned Subsidiary of a Transferred Entity, such PayPal Liability may be assumed by PayPal as a result of the transfer of all of the equity interests in such Transferred Entity from eBay or the applicable members of the eBay Group to PayPal or the applicable PayPal Designee); provided , that PayPal shall cause such Transferred Entity and such PayPal Designee to perform, discharge and fulfill all such PayPal Liabilities. PayPal and such PayPal Designees shall be responsible for all PayPal Liabilities, regardless of when or where such PayPal Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such PayPal Liabilities are asserted or determined (including any PayPal Liabilities arising out of claims made by eBay’s or PayPal’s respective Subsidiaries, Affiliates or Representatives, or by the respective Representatives of their Subsidiaries or Affiliates, against any member of the eBay Group or the PayPal Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the eBay Group or the PayPal Group, or any of their respective Subsidiaries, Affiliates or Representatives;

(iii) Transfer and Assignment of eBay Assets . eBay and PayPal shall cause PayPal and the PayPal Designees to contribute, assign, transfer, convey and deliver to eBay or certain members of the eBay Group designated by eBay, and eBay or such members of the eBay Group shall accept from PayPal and the PayPal Designees, all of PayPal’s and such PayPal Designees’ respective direct or indirect right, title and interest in and to all eBay Assets held by PayPal or a PayPal Designee; and

 

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(iv) Acceptance and Assumption of eBay Liabilities . eBay and the applicable members of the eBay Group designated by eBay shall accept and assume and agree faithfully to perform, discharge and fulfill all of the eBay Liabilities in accordance with their respective terms. eBay and the applicable members of the eBay Group shall be responsible for all eBay Liabilities in accordance with their respective terms, regardless of when or where such eBay Liabilities arose or arise, whether the facts on which they are based occurred prior to or subsequent to the Effective Time, where or against whom such eBay Liabilities are asserted or determined (including any such eBay Liabilities arising out of claims made by eBay’s or PayPal’s respective Subsidiaries, Affiliates or Representatives, or by the respective Representatives of their Subsidiaries or Affiliates, against any member of the eBay Group or the PayPal Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the eBay Group or the PayPal Group, or any of their respective Subsidiaries, Affiliates or Representatives.

(b) Transfer Documents . In furtherance of the contribution, assignment, transfer, conveyance and delivery of the Assets and the acceptance and assumption of the Liabilities in accordance with Section 2.1(a) , (i) each Party shall execute and deliver, and shall cause the applicable members of its Group to execute and deliver, such bills of sale, quitclaim deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence the transfer, conveyance and assignment of all of such Party’s and the applicable members of its Group’s right, title and interest in and to such Assets to the other Party and the applicable members of its Group in accordance with Section 2.1(a) , and (ii) each Party shall execute and deliver, and shall cause the applicable members of its Group to execute and deliver, to the other Party such assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the Liabilities by such Party or the applicable members of its Group in accordance with Section 2.1(a) . All of the foregoing documents contemplated by this Section 2.1(b) shall be referred to collectively herein as the “ Transfer Documents .”

(c) Misallocations . In the event that at any time or from time to time (whether prior to, at or after the Effective Time), one Party (or any member of such Party’s respective Group) shall receive or otherwise possess any Asset that is allocated to the other Party (or any member of such Party’s Group) pursuant to this Agreement or any Ancillary Agreement, such Party shall promptly transfer, or cause to be transferred, such Asset to the Party so entitled thereto (or to any member of such Party’s Group), and such Party (or member of such Party’s Group) shall accept such Asset. Prior to any such transfer, the Person receiving or possessing such Asset shall hold such Asset in trust for any such other Person. In the event that at any time or from time to time (whether prior to, at or after the Effective Time), one Party hereto (or any member of such Party’s respective Group) shall receive or otherwise assume any Liability that is allocated to the other Party (or any member of such Party’s Group) pursuant to this Agreement or any Ancillary Agreement, such Party shall promptly transfer, or cause to be transferred, such Liability to the Party responsible therefor (or to the applicable member of such Party’s Group), and such Party (or member of such Party’s Group) shall accept, assume and agree to faithfully perform such Liability. The Parties shall, and shall cause the applicable members of their respective Group to, execute such Transfer Documents and take such further actions as may be required to effectuate the Transfers denoted in this Section 2.1 .

 

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(d) Waiver of Bulk-Sale and Bulk-Transfer Laws . PayPal hereby waives compliance by each and every member of the eBay Group with the requirements and provisions of any “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the PayPal Assets to any member of the PayPal Group. eBay hereby waives compliance by each and every member of the PayPal Group with the requirements and provisions of any “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the eBay Assets to any member of the eBay Group.

(e) Intellectual Property Rights .

(i) If and to the extent that, as a matter of Law in any jurisdiction, eBay or the applicable members of its Group cannot assign, transfer or convey any of eBay’s or such eBay Group members’ respective direct or indirect right, title and interest in and to any Registered IP, Other IP, Software or Intellectual Property Rights included in the PayPal Assets, then, to the extent possible, eBay shall, and shall cause the applicable members of its Group to, irrevocably grant to PayPal, or the applicable PayPal Designees, an exclusive, irrevocable, assignable, transferable, sublicenseable, worldwide, perpetual, royalty-free license to use, exploit and commercialize in any manner now known or in the future discovered and for whatever purpose, any such right, title or interest.

(ii) If and to the extent that, as a matter of Law in any jurisdiction, PayPal or the applicable members of its Group cannot assign, transfer or convey any of PayPal’s or such PayPal Group members’ respective direct or indirect right, title and interest in and to any Registered IP, Other IP, Software or Intellectual Property Rights included in the eBay Assets, then, to the extent possible, PayPal shall, and shall cause the applicable members of its Group to, irrevocably grant to eBay, or the applicable eBay Designees, an exclusive, irrevocable, assignable, transferable, sublicenseable, worldwide, perpetual, royalty-free license to use, exploit and commercialize in any manner now known or in the future discovered and for whatever purpose, any such right, title or interest.

2.2 PayPal Assets; eBay Assets .

(a) PayPal Assets . For purposes of this Agreement, “ PayPal Assets ” shall mean:

(i) all issued and outstanding capital stock or other equity interests of the Transferred Entities that are owned by either Party or any members of its Group as of the Effective Time;

(ii) all Assets (including cash and cash equivalents) of either Party or any of the members of its Group included or reflected as assets of the PayPal Group on the PayPal Balance Sheet, subject to any dispositions of such Assets subsequent to the date of the PayPal Balance Sheet; provided , that the amounts set forth on the PayPal

 

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Balance Sheet with respect to any Assets shall not be treated as minimum amounts or limitations on the amount of such Assets that are included in the definition of PayPal Assets pursuant to this clause (ii);

(iii) all Assets of either Party or any of the members of its Group as of the Effective Time that are of a nature or type that would have resulted in such Assets being included as Assets of PayPal or members of the PayPal Group on a pro forma combined balance sheet of the PayPal Group or any notes or subledgers thereto as of the Effective Time (were such balance sheet, notes and subledgers to be prepared on a basis consistent with the determination of the Assets included on the PayPal Balance Sheet), it being understood that (x) the PayPal Balance Sheet shall be used to determine the types of, and methodologies used to determine, those Assets that are included in the definition of PayPal Assets pursuant to this subclause (iii); and (y) the amounts set forth on the PayPal Balance Sheet with respect to any Assets shall not be treated as minimum amounts or limitations on the amount of such Assets that are included in the definition of PayPal Assets pursuant to this subclause (iii);

(iv) all Assets of either Party or any of the members of its Group as of the Effective Time that are expressly provided by this Agreement or any Ancillary Agreement as Assets to be transferred to or owned by PayPal or any other member of the PayPal Group;

(v) all PayPal Contracts as of the Effective Time and all rights, interests or claims of either Party or any of the members of its Group thereunder as of the Effective Time;

(vi) all PayPal Intellectual Property and all rights, interests or claims of either Party or any of the members of its Group thereunder as of the Effective Time;

(vii) all PayPal Information Technology and all rights, interests or claims of either Party or any of the members of its Group thereunder as of the Effective Time;

(viii) all rights of PayPal and any member of the PayPal Group under any license of Technology, Software or Intellectual Property Rights granted by eBay or any member of the eBay Group pursuant to the terms of the Intellectual Property Matters Agreement;

(ix) all rights of PayPal and any member of the PayPal Group under any covenant not to sue granted by eBay or any member of the eBay Group pursuant to the terms of the Intellectual Property Matters Agreement;

(x) any lease, sublease, license or right to use the eBay Data Center Infrastructure granted by eBay or any member of the eBay Group to PayPal or any member of the PayPal Group pursuant to the terms of the Colocation Services Agreements;

 

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(xi) all PayPal Permits as of the Effective Time and all rights or interests of either Party or any of the members of its Group thereunder as of the Effective Time;

(xii) all PayPal Real Property as of the Effective Time;

(xiii) to the extent not already identified in clauses (i) through (xii) of this Section 2.2(a) , all Assets of either Party or any of the members of its Group as of the Effective Time that are exclusively used or exclusively held for use in the PayPal Business;

(xiv) subject to applicable Law and the provisions of the applicable Ancillary Agreements, to the extent not already identified in clauses (i) through (xii) of this Section 2.2(a) , all rights, interests and claims of either Party or any of the members of its Group as of the Effective Time with respect to Information that is exclusively related to the PayPal Assets, the PayPal Liabilities, the PayPal Business or the Transferred Entities, and a non-exclusive right to all Information that is related to, but not exclusively related to, the PayPal Assets, the PayPal Liabilities, the PayPal Business or the Transferred Entities (it being understood that no member of the eBay Group or the PayPal Group shall be required to delete any Information from its systems); and

(xv) any and all Assets set forth on Schedule 2.2(a)(xv) .

Notwithstanding the foregoing, the PayPal Assets shall not in any event include any Asset referred to in clauses (i), (ii) or (iv) through (vii) of Section 2.2(b) .

(b) eBay Assets . For the purposes of this Agreement, “ eBay Assets ” shall mean all Assets of either Party or the members of its Group as of the Effective Time, other than the PayPal Assets, it being understood that the eBay Assets shall include:

(i) all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be retained by eBay or any other member of the eBay Group;

(ii) all Contracts of either Party or any of the members of its Group as of the Effective Time (other than the PayPal Contracts);

(iii) all Registered IP, Other IP, and Software of either Party or any of the members of its Group as of the Effective Time (other than the PayPal Intellectual Property and PayPal Information Technology, all rights of PayPal and any member of the PayPal Group under any license of technology, Software or Intellectual Property Rights granted by eBay or any member of the eBay Group pursuant to the terms of the Intellectual Property Matters Agreement, all rights of PayPal and any member of the PayPal Group under any covenant not to sue granted by eBay or any member of the eBay Group pursuant to the terms of the Intellectual Property Matters Agreement and any lease, sublease, license or right to use the eBay Data Center Infrastructure granted by eBay or any member of the eBay Group to PayPal or any member of the PayPal Group pursuant to the terms of the Information Technology Services Agreement), including the

 

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eBay Name and eBay Marks, the eBay Patents, the Licensed eBay Software, the Specified eBay Patents, and the Registered IP, Software and Technology set forth on Schedule 2.2(b)(iii) ;

(iv) all Permits of either Party or any of the members of its Group as of the Effective Time (other than the PayPal Permits);

(v) all Real Property of either Party or any of the members of its Group as of the Effective Time (other than the PayPal Real Property);

(vi) any and all cash proceeds, securities or property received by either Party or any of the members of its Group as a result of the sale, spin-off, initial public offering or other disposition or divestiture of all or a portion of the Enterprise Business; and

(vii) any and all Assets set forth on Schedule 2.2(b)(vii) .

2.3 PayPal Liabilities; eBay Liabilities .

(a) PayPal Liabilities . For the purposes of this Agreement, “ PayPal Liabilities ” shall mean the following Liabilities of either Party or any of the members of its Group:

(i) all Liabilities included or reflected as liabilities or obligations of PayPal or the members of the PayPal Group on the PayPal Balance Sheet, subject to any discharge of such Liabilities subsequent to the date of the PayPal Balance Sheet; provided , that the amounts set forth on the PayPal Balance Sheet with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in the definition of PayPal Liabilities pursuant to this subclause (i);

(ii) all Liabilities as of the Effective Time that are of a nature or type that would have resulted in such Liabilities being included or reflected as liabilities or obligations of PayPal or the members of the PayPal Group on a pro forma combined balance sheet of the PayPal Group or any notes or subledgers thereto as of the Effective Time (were such balance sheet, notes and subledgers to be prepared on a basis consistent with the determination of the Liabilities included on the PayPal Balance Sheet), it being understood that (x) the PayPal Balance Sheet shall be used to determine the types of, and methodologies used to determine, those Liabilities that are included in the definition of PayPal Liabilities pursuant to this subclause (ii); and (y) the amounts set forth on the PayPal Balance Sheet with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in the definition of PayPal Liabilities pursuant to this subclause (ii);

(iii) all Liabilities relating to, arising out of or resulting from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case, to the extent that such Liabilities relate to, arise out of or result from the PayPal Business or a PayPal Asset;

 

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(iv) fifty percent (50%) of the Shared Contingent Liabilities;

(v) all Liabilities that are expressly provided by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed by PayPal or any other member of the PayPal Group, and all agreements, obligations and Liabilities of any member of the PayPal Group under this Agreement or any of the Ancillary Agreements;

(vi) all Liabilities relating to, arising out of or resulting from the PayPal Contracts, the PayPal Intellectual Property, the PayPal Information Technology, the PayPal Permits or the PayPal Real Property;

(vii) all Liabilities (A) relating to, arising out of or resulting from the PayPal Specified Actions or (B) set forth on Schedule 2.3(a)(vii) ;

(viii) all Liabilities arising out of claims made by any Third Party (including eBay’s or PayPal’s respective directors, officers, stockholders, current and former employees and agents) against any member of the eBay Group or the PayPal Group to the extent relating to, arising out of or resulting from the PayPal Business or the PayPal Assets or the other business, operations, activities or Liabilities referred to in clauses (i) through (vii) above;

provided that, notwithstanding the foregoing, the Parties agree that (A) the Liabilities set forth in Section 2.3(b) shall not be PayPal Liabilities but instead shall be eBay Liabilities and (B) the Liabilities of each Party relating to, arising out of or resulting from any eBay Proceedings, Joint Proceedings or PayPal Proceedings shall be governed exclusively by Schedule 5.6 .

(b) eBay Liabilities . For the purposes of this Agreement, “ eBay Liabilities ” shall mean the following Liabilities of either Party or any of the members of its Group:

(i) all Liabilities relating to, arising out of or resulting from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time) of any member of the eBay Group and, prior to the Effective Time, any member of the PayPal Group in each case, to the extent that such Liabilities are not PayPal Liabilities or Shared Contingent Liabilities;

(ii) fifty percent (50%) of the Shared Contingent Liabilities;

(iii) all Liabilities that are expressly provided by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed or retained by eBay or any other member of the eBay Group, and all agreements, obligations and Liabilities of any member of the eBay Group under this Agreement or any of the Ancillary Agreements;

 

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(iv) all Liabilities relating to, arising out of or resulting from the sale, spin-off, initial public offering or other disposition or divestiture of all or a portion of the Enterprise Business, and all fees and expenses of brokers, finders, counsel, financial advisors, accountants, consultants and other professional advisors incurred by either Party or any member of its Group in connection with such sale, spin-off, initial public offering or other disposition or divestiture;

(v) all Liabilities arising out of claims made by any Third Party (including eBay’s or PayPal’s respective directors, officers, stockholders, current and former employees and agents) against any member of the eBay Group or the PayPal Group to the extent relating to, arising out of or resulting from the eBay Business or the eBay Assets; and

(vi) all Liabilities all Liabilities (A) relating to, arising out of or resulting from the eBay Specified Actions or (B) set forth on Schedule 2.3(b)(vi) .

2.4 Approvals and Notifications .

(a) Approvals and Notifications for PayPal Assets . To the extent that the transfer or assignment of any PayPal Asset, the assumption of any PayPal Liability, the Separation, or the Distribution requires any Approvals or Notifications, the Parties shall use their commercially reasonable efforts to obtain or make such Approvals or Notifications as soon as reasonably practicable; provided , that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed between eBay and PayPal, neither eBay nor PayPal shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make such Approvals or Notifications.

(b) Delayed PayPal Transfers . If and to the extent that the valid, complete and perfected transfer or assignment to the PayPal Group of any PayPal Asset or assumption by the PayPal Group of any PayPal Liability would be a violation of applicable Law or require any Approvals or Notifications in connection with the Separation or the Distribution that have not been obtained or made by the Effective Time then, unless the Parties mutually shall otherwise determine, the transfer or assignment to the PayPal Group of such PayPal Assets or the assumption by the PayPal Group of such PayPal Liabilities, as the case may be, shall be automatically deemed deferred and any such purported transfer, assignment or assumption shall be null and void until such time as all legal impediments are removed or such Approvals or Notifications have been obtained or made. Notwithstanding the foregoing, any such PayPal Assets or PayPal Liabilities shall continue to constitute PayPal Assets and PayPal Liabilities, as the case may be, for all other purposes of this Agreement.

(c) Treatment of Delayed PayPal Assets and Delayed PayPal Liabilities . If any transfer or assignment of any PayPal Asset or any assumption of any PayPal Liability intended to be transferred, assigned or assumed hereunder, as the case may be, is not consummated on or prior to the Effective Time, whether as a result of the provisions of Section 2.4(b) or for any other reason (any such PayPal Asset, a “ Delayed PayPal Asset ” and any such PayPal Liability, a “ Delayed PayPal Liability ”), then, insofar as reasonably possible and

 

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subject to applicable Law, the member of the eBay Group retaining such Delayed PayPal Asset or such Delayed PayPal Liability, as the case may be, shall thereafter hold such Delayed PayPal Asset or Delayed PayPal Liability, as the case may be, for the use and benefit (or the performance and obligation, in the case of a Liability) of the member of the PayPal Group entitled thereto (at the expense of the member of the PayPal Group entitled thereto). In addition, the member of the eBay Group retaining such Delayed PayPal Asset or such Delayed PayPal Liability shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such Delayed PayPal Asset or Delayed PayPal Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the member of the PayPal Group to whom such Delayed PayPal Asset is to be transferred or assigned, or which will assume such Delayed PayPal Liability, as the case may be, in order to place such member of the PayPal Group in a substantially similar position as if such Delayed PayPal Asset or Delayed PayPal Liability had been transferred, assigned or assumed as contemplated hereby and so that all the benefits and burdens relating to such Delayed PayPal Asset or Delayed PayPal Liability, as the case may be, including use, risk of loss, potential for gain, and dominion, control and command over such Delayed PayPal Asset or Delayed PayPal Liability, as the case may be, and all costs and expenses related thereto, shall inure from and after the Effective Time to the PayPal Group.

(d) Transfer of Delayed PayPal Assets and Delayed PayPal Liabilities . If and when the Approvals or Notifications, the absence of which caused the deferral of transfer or assignment of any Delayed PayPal Asset or the deferral of assumption of any Delayed PayPal Liability pursuant to Section 2.4(b) , are obtained or made, and, if and when any other legal impediments for the transfer or assignment of any Delayed PayPal Asset or the assumption of any Delayed PayPal Liability have been removed, the transfer or assignment of the applicable Delayed PayPal Asset or the assumption of the applicable Delayed PayPal Liability, as the case may be, shall be effected in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement.

(e) Costs for Delayed PayPal Assets and Delayed PayPal Liabilities . Any member of the eBay Group retaining a Delayed PayPal Asset or Delayed PayPal Liability due to the deferral of the transfer or assignment of such Delayed PayPal Asset or the deferral of the assumption of such Delayed PayPal Liability, as the case may be, shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced (or otherwise made available) by PayPal or the member of the PayPal Group entitled to the Delayed PayPal Asset or Delayed PayPal Liability, other than reasonable out-of-pocket expenses, attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by PayPal or the member of the PayPal Group entitled to such Delayed PayPal Asset or Delayed PayPal Liability.

(f) Approvals and Notifications for eBay Assets . To the extent that the transfer or assignment of any eBay Asset or the assumption of any eBay Liability requires any Approvals or Notifications, the Parties shall use their commercially reasonable efforts to obtain or make such Approvals or Notifications as soon as reasonably practicable; provided , that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed between eBay and PayPal, neither eBay nor PayPal shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make such Approvals or Notifications.

 

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(g) Delayed eBay Transfers . If and to the extent that the valid, complete and perfected transfer or assignment to the eBay Group of any eBay Asset or assumption by the eBay Group of any eBay Liability would be a violation of applicable Law or require any Approval or Notification that has not been obtained or made by the Effective Time then, unless the Parties mutually shall otherwise determine, the transfer or assignment to the eBay Group of such eBay Assets or the assumption by the eBay Group of such eBay Liabilities, as the case may be, shall be automatically deemed deferred and any such purported transfer, assignment or assumption shall be null and void until such time as all legal impediments are removed or such Approval or Notification has been obtained or made. Notwithstanding the foregoing, any such eBay Assets or eBay Liabilities shall continue to constitute eBay Assets and eBay Liabilities, as the case may be, for all other purposes of this Agreement.

(h) Treatment of Delayed eBay Assets and Delayed eBay Liabilities . If any transfer or assignment of any eBay Asset or any assumption of any eBay Liability intended to be transferred, assigned or assumed hereunder, as the case may be, is not consummated on or prior to the Effective Time whether as a result of the provisions of this Section 2.4(h) or for any other reason (any such eBay Asset, a “ Delayed eBay Asset ” and any such eBay Liability, a “ Delayed eBay Liability ”), then, insofar as reasonably possible, the member of the PayPal Group retaining such Delayed eBay Asset or such Delayed eBay Liability, as the case may be, shall thereafter hold such Delayed eBay Asset or Delayed eBay Liability, as the case may be, for the use and benefit (or the performance or obligation, in the case of a Liability) of the member of the eBay Group entitled thereto (at the expense of the member of the eBay Group entitled thereto). In addition, the member of the PayPal Group retaining such Delayed eBay Asset or such Delayed eBay Liability shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such Delayed eBay Asset or Delayed eBay Liability in the ordinary course of business in accordance with past practice. Such member of the PayPal Group shall also take such other actions as may be reasonably requested by the member of the eBay Group to which such Delayed eBay Asset is to be transferred or assigned, or which will assume such Delayed eBay Liability, as the case may be, in order to place such member of the eBay Group in a substantially similar position as if such Delayed eBay Asset or Delayed eBay Liability had been transferred, assigned or assumed and so that all the benefits and burdens relating to such Delayed eBay Asset or Delayed eBay Liability, and all costs and expenses related thereto, shall inure from and after the Effective Time to the eBay Group.

(i) Transfer of Delayed eBay Assets and Delayed eBay Liabilities . If and when the Approvals or Notifications, the absence of which caused the deferral of transfer or assignment of any Delayed eBay Asset or the deferral of assumption of any Delayed eBay Liability, are obtained or made, and, if and when any other legal impediments for the transfer or assignment of any Delayed eBay Asset or the assumption of any Delayed eBay Liability have been removed, the transfer or assignment of the applicable Delayed eBay Asset or the assumption of the applicable Delayed eBay Liability, as the case may be, shall be effected in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement.

 

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(j) Costs for Delayed eBay Assets and Delayed eBay Liabilities . Any member of the PayPal Group retaining a Delayed eBay Asset or Delayed eBay Liability due to the deferral of the transfer or assignment of such Delayed eBay Asset or the deferral of the assumption of such Delayed eBay Liability, as the case may be, shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced (or otherwise made available) by eBay or the member of the eBay Group entitled to the Delayed eBay Asset or Delayed eBay Liability, other than reasonable out-of-pocket expenses, attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by eBay or the member of the eBay Group entitled to such Delayed eBay Asset or Delayed eBay Liability.

2.5 Novation of Liabilities .

(a) Novation of PayPal Liabilities.

(i) Each of eBay and PayPal, at the request of the other, shall use its commercially reasonable efforts to obtain, or to cause to be obtained, as soon as reasonably practicable, any consent, substitution, approval or amendment required to novate or assign all PayPal Liabilities and obtain in writing the unconditional release of each member of the eBay Group that is a party to or otherwise bound by any such arrangements, so that, in any such case, the members of the PayPal Group shall be solely responsible for such PayPal Liabilities; provided , that, except as otherwise expressly provided in this Agreement or any of the Ancillary Agreements, neither eBay nor PayPal shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any third Person from whom any such consent, substitution, approval, amendment or release is requested.

(ii) If eBay or PayPal is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release and the applicable member of the eBay Group continues to be bound by such agreement, lease, license or other obligation or Liability (each, an “ Unreleased PayPal Liability ”), PayPal shall, to the extent not prohibited by Law, as indemnitor, guarantor, agent or subcontractor for such member of the eBay Group, as the case may be, (A) pay, perform and discharge fully all the obligations or other Liabilities of such member of the eBay Group that constitute Unreleased PayPal Liabilities from and after the Effective Time and (B) use its commercially reasonable efforts to effect such payment, performance or discharge prior to the time any demand for such payment, performance or discharge is permitted to be made by the obligee thereunder on any member of the eBay Group. If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased PayPal Liabilities shall otherwise become assignable or able to be novated, eBay shall promptly assign, or cause to be assigned, and PayPal or the applicable PayPal Group member shall assume, such Unreleased PayPal Liabilities without exchange of further consideration.

 

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(b) Novation of eBay Liabilities.

(i) Each of eBay and PayPal, at the request of the other, shall use its commercially reasonable efforts to obtain, or to cause to be obtained, as soon as reasonably practicable, any consent, substitution, approval or amendment required to novate or assign all eBay Liabilities and obtain in writing the unconditional release of each member of the PayPal Group that is a party to or otherwise bound by any such arrangements, so that, in any such case, the members of the eBay Group shall be solely responsible for such eBay Liabilities; provided , that, except as otherwise expressly provided in this Agreement or any of the Ancillary Agreements, neither eBay nor PayPal shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any third Person from whom any such consent, substitution, approval, amendment or release is requested.

(ii) If eBay or PayPal is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release and the applicable member of the PayPal Group continues to be bound by such agreement, lease, license or other obligation or Liability (each, an “ Unreleased eBay Liability ”), eBay shall, to the extent not prohibited by Law, as indemnitor, guarantor, agent or subcontractor for such member of the PayPal Group, as the case may be, (A) pay, perform and discharge fully all the obligations or other Liabilities of such member of the PayPal Group that constitute Unreleased eBay Liabilities from and after the Effective Time and (B) use its commercially reasonable efforts to effect such payment, performance or discharge prior to the time any demand for such payment, performance or discharge is permitted to be made by the obligee thereunder on any member of the PayPal Group. If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased eBay Liabilities shall otherwise become assignable or able to be novated, PayPal shall promptly assign, or cause to be assigned, and eBay or the applicable eBay Group member shall assume, such Unreleased eBay Liabilities without exchange of further consideration.

2.6 Release of Guarantees . In furtherance of, and not in limitation of, the obligations set forth in Section 2.5 :

(a) On or prior to the Effective Time or as soon as practicable thereafter, each of eBay and PayPal shall, at the request of the other Party and with the reasonable cooperation of such other Party and the applicable member(s) of such Party’s Group, use commercially reasonable efforts to (i) have any member(s) of the eBay Group removed as guarantor of or obligor for any PayPal Liability to the extent that they relate to PayPal Liabilities, including the removal of any Security Interest on or in any eBay Asset that may serve as collateral or security for any such PayPal Liability; and (ii) have any member(s) of the PayPal Group removed as guarantor of or obligor for any eBay Liability to the extent that they relate to eBay Liabilities, including the removal of any Security Interest on or in any PayPal Asset that may serve as collateral or security for any such eBay Liability.

 

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(b) To the extent required to obtain a release from a guarantee of:

(i) any member of the eBay Group, PayPal shall execute a guarantee agreement in the form of the existing guarantee or such other form as is agreed to by the relevant parties to such guarantee agreement, which agreement shall include the removal of any Security Interest on or in any eBay Asset that may serve as collateral or security for any such eBay Liability, except to the extent that such existing guarantee contains representations, covenants or other terms or provisions either (A) with which PayPal would be reasonably unable to comply or (B) which PayPal would not reasonably be able to avoid breaching; and

(ii) any member of the PayPal Group, eBay shall execute a guarantee agreement in the form of the existing guarantee or such other form as is agreed to by the relevant parties to such guarantee agreement, which agreement shall include the removal of any Security Interest on or in any PayPal Asset that may serve as collateral or security for any such PayPal Liability, except to the extent that such existing guarantee contains representations, covenants or other terms or provisions either (A) with which eBay would be reasonably unable to comply or (B) which eBay would not reasonably be able to avoid breaching.

(c) If eBay or PayPal is unable to obtain, or to cause to be obtained, any such required removal or release as set forth in clauses (a) and (b) of this Section 2.6 , (i) the Party or the relevant member of its Group that has assumed the Liability with respect to such guarantee shall indemnify, defend and hold harmless the guarantor or obligor against or from any Liability arising from or relating thereto in accordance with the provisions of Article IV and shall, as agent or subcontractor for such guarantor or obligor, pay, perform and discharge fully all the obligations or other Liabilities of such guarantor or obligor thereunder; and (ii) each of eBay and PayPal, on behalf of itself and the other members of their respective Group, agree not to renew or extend the term of, increase any obligations under, or transfer to a Third Party, any loan, guarantee, lease, contract or other obligation for which the other Party or a member of its Group is or may be liable unless all obligations of such other Party and the members of such other Party’s Group with respect thereto are thereupon terminated by documentation satisfactory in form and substance to such other Party.

2.7 Termination of Agreements .

(a) Except as set forth in Section 2.7(b) , in furtherance of the releases and other provisions of Section 4.1 , PayPal and each member of the PayPal Group, on the one hand, and eBay and each member of the eBay Group, on the other hand, hereby terminate any and all agreements, arrangements, commitments or understandings, whether or not in writing, between or among PayPal and/or any member of the PayPal Group, on the one hand, and eBay and/or any member of the eBay Group, on the other hand, effective as of the Effective Time. No such terminated agreement, arrangement, commitment or understanding (including any provision thereof which purports to survive termination) shall be of any further force or effect after the Effective Time. Each Party shall, at the reasonable request of the other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.

 

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(b) The provisions of Section 2.7(a) shall not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof): (i) this Agreement, the Ancillary Agreements and the Commercial Agreements (and each other agreement or instrument expressly contemplated by this Agreement or any Ancillary Agreement or Commercial Agreement to be entered into by any of the Parties or any of the members of their respective Groups or to be continued from and after the Effective Time); (ii) any agreements, arrangements, commitments or understandings listed or described on Schedule 2.7(b)(ii) ; (iii) any agreements, arrangements, commitments or understandings to which any Third Party is a party; (iv) any intercompany accounts payable or accounts receivable accrued as of the Effective Time that are reflected in the books and records of the Parties or otherwise documented in writing in accordance with past practices, which shall be settled in the manner contemplated by Section 2.7(c) ; (v) any agreements, arrangements, commitments or understandings to which any non-wholly owned Subsidiary of eBay or PayPal, as the case may be, is a party (it being understood that directors’ qualifying shares or similar interests will be disregarded for purposes of determining whether a Subsidiary is wholly owned); and (vi) any Shared Contracts.

(c) All of the intercompany accounts receivable and accounts payable between any member of the eBay Group, on the one hand, and any member of the PayPal Group, on the other hand, outstanding as of the Effective Time and arising out of the contracts or agreements described in Section 2.7(b) or out of the provision, prior to the Effective Time, of the services to be provided following the Effective Time pursuant to the Ancillary Agreements or the Commercial Agreements shall be repaid or settled following the Effective Time in the ordinary course of business or, if otherwise mutually agreed prior to the Effective Time by duly authorized representatives of PayPal and eBay, cancelled, assigned or assumed by PayPal or one or more PayPal Subsidiaries. All other intercompany accounts receivable and accounts payable between any member of the eBay Group, on the one hand, and any member of the PayPal Group, on the other hand, outstanding as of the Effective Time shall be repaid or settled as promptly as practicable after the Effective Time.

2.8 Treatment of Shared Contracts .

(a) Subject to applicable Law and without limiting the generality of the obligations set forth in Section 2.1 , unless the Parties otherwise agree or the benefits of any contract, agreement, arrangement, commitment or understanding described in this Section 2.8 are expressly conveyed to the applicable Party pursuant to this Agreement or an Ancillary Agreement, any (i) contract or agreement, a portion of which is a PayPal Contract, and the remainder of which is an eBay Asset or (ii) any contract or agreement entered into prior to the Effective Time that relates to the PayPal Business but is not exclusively related to the PayPal Business and with respect to which the portion that relates to the PayPal Business cannot be divided (any such contract or agreement, a “ Shared Contract ”), shall be assigned in relevant part to the applicable member(s) of the applicable Group, if so assignable, or appropriately amended prior to, on or after the Effective Time, so that each Party or applicable member of its Group shall, as of the Effective Time, be entitled to the rights and benefits, and shall assume the related portion of any Liabilities, inuring to its respective businesses; provided , that (A) in no event shall any member of any Group be required to assign (or amend) any Shared Contract in its entirety or to assign a portion of any Shared Contract which is not assignable (or cannot be amended) by its terms (including any terms imposing consents or conditions on an assignment where such

 

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consents or conditions have not been obtained or fulfilled) and (B) if any Shared Contract cannot be so partially assigned by its terms or otherwise or cannot be amended, if such assignment or amendment would impair the benefit the parties thereto derive from such Shared Contract or if such Shared Contract is listed or described on Schedule 2.8(a) , then the Parties shall, and shall cause each of the members of their respective Groups to, take such other reasonable and permissible actions (including by providing prompt written notice to the other Party with respect to any relevant claim of Liability or other relevant matters arising in connection with a Shared Contract so as to allow such other Party the ability to exercise any applicable rights under such Shared Contract) to cause a member of the PayPal Group or the eBay Group, as the case may be, to receive the rights and benefits of that portion of each Shared Contract that relates to the PayPal Business or the eBay Business, respectively (in each case, to the extent so related), as if such Shared Contract had been assigned to (or amended to admit) a member of the applicable Group pursuant to this Section 2.8 , and to bear the burden of the corresponding Liabilities (including any Liabilities that may arise by reason of such arrangement), as if such Liabilities had been assumed by a member of the applicable Group pursuant to this Section 2.8 .

(b) Each of eBay and PayPal shall, and shall cause the members of its Group to, (i) treat for all Tax purposes the portion of each Shared Contract inuring to its respective businesses as Assets owned by, and/or Liabilities of, as applicable, such Party, or the members of its Group, as applicable, not later than the Effective Time, and (ii) neither report nor take any Tax position (on a Tax Return or otherwise) inconsistent with such treatment (unless required by applicable Law).

(c) Nothing in this Section 2.8 shall require any member of any Group to make any non- de minimis payment (except to the extent advanced, assumed or agreed in advance to be reimbursed by any member of the other Group), incur any non- de minimis obligation or grant any non- de minimis concession for the benefit of any member of the other Group in order to effect any transaction contemplated by this Section 2.8 .

2.9 Bank Accounts; Cash Balances .

(a) Each Party agrees to take, or cause the members of its Group to take, at the Effective Time (or such earlier time as the Parties may agree), all actions necessary to amend all contracts or agreements governing each bank and brokerage account owned by PayPal or any other member of the PayPal Group (collectively, the “ PayPal Accounts ”) and all contracts or agreements governing each bank or brokerage account owned by eBay or any other member of the eBay Group (collectively, the “ eBay Accounts ”) so that each such PayPal Account and eBay Account, if currently Linked (whether by automatic withdrawal, automatic deposit or any other authorization to transfer funds from or to, hereinafter “ Linked ”) to any eBay Account or PayPal Account, respectively, is de-Linked from such eBay Account or PayPal Account, respectively.

(b) It is intended that, following consummation of the actions contemplated by Section 2.9(a) , there will be in place a cash management process pursuant to which the PayPal Accounts will be managed and funds collected will be transferred into one (1) or more accounts maintained by PayPal or a member of the PayPal Group.

 

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(c) It is intended that, following consummation of the actions contemplated by Section 2.9(a) , there will continue to be in place a cash management process pursuant to which the eBay Accounts will be managed and funds collected will be transferred into one (1) or more accounts maintained by eBay or a member of the eBay Group.

(d) With respect to any outstanding checks issued or payments initiated by eBay, PayPal, or any of the members of their respective Groups prior to the Effective Time, such outstanding checks and payments shall be honored following the Effective Time by the Person or Group owning the account on which the check is drawn or from which the payment was initiated, respectively.

(e) As between eBay and PayPal (and the members of their respective Groups), all payments made and reimbursements or other payments received after the Effective Time by either Party (or member of its Group) that relate to a business, Asset or Liability of the other Party (or member of its Group), shall be held by such Party in trust for the use and benefit of the Party entitled thereto and, promptly following receipt by such Party of any such payment or reimbursement, such Party shall pay over, or shall cause the applicable member of its Group to pay over, to the other Party the amount of such payment or reimbursement without right of set-off.

2.10 Ancillary Agreements . Effective on or prior to the Effective Time, each of eBay and PayPal will, or will cause the applicable members of their Groups to, execute and deliver all Ancillary Agreements to which it is a party.

2.11 Disclaimer of Representations and Warranties . EACH OF EBAY (ON BEHALF OF ITSELF AND EACH MEMBER OF THE EBAY GROUP) AND PAYPAL (ON BEHALF OF ITSELF AND EACH MEMBER OF THE PAYPAL GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT OR COMMERCIAL AGREEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR COMMERCIAL AGREEMENT, ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, ANY ANCILLARY AGREEMENT, ANY COMMERCIAL AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR APPROVALS REQUIRED IN CONNECTION THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT OR ANY COMMERCIAL AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS (AND, IN THE CASE OF ANY REAL PROPERTY, BY MEANS OF A QUITCLAIM OR SIMILAR FORM OF DEED OR CONVEYANCE) AND

 

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THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

2.12 Cash Transfer . Prior to the Effective Time and pursuant to the Plan of Reorganization, eBay shall transfer, or cause its Subsidiaries to transfer (including by one or more transfers or capital contributions), to PayPal and/or the applicable PayPal Designees an aggregate amount of cash and cash equivalents (“ Cash Amounts ”) equal to $[•] (such Cash Amounts, the “ Transferred Cash Amount ”). All Cash Amounts held by PayPal or any member of the PayPal Group as of the Effective Time shall be a PayPal Asset, and all Cash Amounts held by eBay or any member of the eBay Group as of the Effective Time shall be an eBay Asset.

2.13 Financial Information Certifications . eBay’s disclosure controls and procedures and internal control over financial reporting (as each is contemplated by the Exchange Act) are currently applicable to PayPal as its Subsidiary. In order to enable the principal executive officer and principal financial officer of PayPal to make the certifications required of them under Section 302 of the Sarbanes-Oxley Act of 2002, eBay, within thirty-five (35) days of the end of any fiscal quarter during which PayPal remains eBay’s Subsidiary, shall provide PayPal with one (1) or more certifications (in a format to be agreed by eBay and PayPal in good faith) with respect to such disclosure controls and procedures, its internal control over financial reporting and the effectiveness thereof. Such certification(s) shall be provided by eBay (and not by any officer or employee in their individual capacity).

2.14 Transition Committee . Prior to the Effective Time, the Parties shall establish a transition committee (the “ Transition Committee ”) that shall consist of an equal number of members from eBay and PayPal. The Transition Committee shall be responsible for monitoring and managing all matters related to any of the transactions contemplated by this Agreement or any Ancillary Agreements. The Transition Committee shall have the authority to (a) establish one (1) or more subcommittees from time to time as it deems appropriate or as may be described in any Ancillary Agreements, with each such subcommittee comprised of one or more members of the Transition Committee or one or more employees of either Party or any member of its respective Group, and each such subcommittee having such scope of responsibility as may be determined by the Transition Committee from time to time; (b) delegate to any such committee any of the powers of the Transition Committee; (c) combine, modify the scope of responsibility of, and disband any such subcommittees; and (d) modify or reverse any such delegations. The Transition Committee shall establish general procedures for managing the responsibilities delegated to it under this Section 2.14 , and may modify such procedures from time to time. All decisions by the Transition Committee or any subcommittee thereof shall be effective only if mutually agreed by both Parties. The Parties shall utilize the procedures set forth in Article VII to resolve any matters as to which the Transition Committee is not able to reach a decision.

 

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ARTICLE III

THE DISTRIBUTION

3.1 Sole and Absolute Discretion; Cooperation .

(a) eBay shall, in its sole and absolute discretion, determine the terms of the Distribution, including the form, structure and terms of any transaction(s) and/or offering(s) to effect the Distribution and the timing and conditions to the consummation of the Distribution. In addition, eBay may, at any time and from time to time until the consummation of the Distribution, modify or change the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution. Nothing shall in any way limit eBay’s right to terminate this Agreement or the Distribution as set forth in Article IX or alter the consequences of any such termination from those specified in Article IX .

(b) PayPal shall cooperate with eBay to accomplish the Distribution and shall, at eBay’s direction, promptly take any and all actions necessary or desirable to effect the Distribution, including in respect of the registration under the Exchange Act of PayPal Shares on the Form 10. eBay shall select any investment bank or manager in connection with the Distribution, as well as any financial printer, solicitation and/or exchange agent and financial, legal, accounting and other advisors for eBay. PayPal and eBay will provide to the Agent any information required in order to complete the Distribution.

3.2 Actions Prior to the Distribution . Prior to the Effective Time and subject to the terms and conditions set forth herein, the Parties shall take, or cause to be taken, the following actions in connection with the Distribution:

(a) Notice to eBay Stock Exchange . eBay shall, to the extent possible, give the eBay Stock Exchange not less than ten (10) days’ advance notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act.

(b) PayPal Certificate of Incorporation and PayPal Bylaws . On or prior to the Distribution Date, eBay and PayPal shall take all necessary actions so that, as of the Effective Time, the PayPal Certificate of Incorporation and the PayPal Bylaws shall become the certificate of incorporation and bylaws of PayPal, respectively.

(c) PayPal Directors and Officers . On or prior to the Distribution Date, eBay and PayPal shall take all necessary actions so that as of the Effective Time: (i) the directors and executive officers of PayPal shall be those set forth in the Information Statement made available to the Record Holders prior to the Distribution Date, unless otherwise agreed by the Parties; and (ii) PayPal shall have such other officers as the board of directors of PayPal shall appoint.

(d) PayPal Stock Exchange Listing . PayPal shall prepare and file, and shall use its reasonable best efforts to have approved, an application for the listing of the PayPal Shares to be distributed in the Distribution on the PayPal Stock Exchange, subject to official notice of distribution.

 

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(e) Securities Law Matters . PayPal shall file any amendments or supplements to the Form 10 as may be necessary or advisable in order to cause the Form 10 to become and remain effective as required by the SEC or federal, state or other applicable securities Laws. eBay and PayPal shall cooperate in preparing, filing with the SEC and causing to become effective registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or advisable in connection with the transactions contemplated by this Agreement and the Ancillary Agreements. eBay and PayPal will prepare, and PayPal will, to the extent required under applicable Law, file with the SEC any such documentation and any requisite no-action letters which eBay determines are necessary or desirable to effectuate the Distribution, and eBay and PayPal shall each use its reasonable best efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable. eBay and PayPal shall take all such action as may be necessary or appropriate under the securities or blue sky Laws of the United States (and any comparable Laws under any foreign jurisdiction) in connection with the Distribution.

(f) Availability of Information Statement . eBay shall, as soon as is reasonably practicable after the Form 10 is declared effective under the Exchange Act and the eBay Board has approved the Distribution, cause the Information Statement to be mailed to the Record Holders or, in connection with the delivery of a notice of Internet availability of the Information Statement to such holders, posted on the Internet.

(g) The Distribution Agent . eBay shall enter into a distribution agent agreement with the Agent or otherwise provide instructions to the Agent regarding the Distribution.

(h) Stock-Based Employee Benefit Plans . eBay and PayPal shall take all actions as may be necessary to approve the grants of adjusted equity awards by eBay (in respect of eBay shares) and PayPal (in respect of PayPal shares) in connection with the Distribution in order to satisfy the requirements of Rule 16b-3 under the Exchange Act.

3.3 Conditions to the Distribution .

(a) The consummation of the Distribution will be subject to the satisfaction, or waiver by eBay in its sole and absolute discretion, of the following conditions:

(i) The SEC shall have declared effective the Form 10; no order suspending the effectiveness of the Form 10 shall be in effect; and no proceedings for such purposes shall have been instituted or threatened by the SEC.

(ii) The Information Statement shall have been mailed to the Record Holders or, in connection with the delivery of a notice of Internet availability of the Information Statement to such holders, posted on the Internet.

(iii) eBay shall have received the Tax Opinion regarding the qualification of the Contribution and the Distribution, taken together, as a transaction that is generally tax free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code.

 

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(iv) The transfer of the PayPal Assets (other than any Delayed PayPal Asset) and PayPal Liabilities (other than any Delayed PayPal Liability) contemplated to be transferred from eBay to PayPal on or prior to the Distribution shall have occurred as contemplated by Section 2.1 , and the transfer of the eBay Assets (other than any Delayed eBay Asset) and eBay Liabilities (other than any Delayed eBay Liability) contemplated to be transferred from PayPal to eBay on or prior to the Distribution Date shall have occurred as contemplated by Section 2.1 , in each case pursuant to the Plan of Reorganization.

(v) The actions and filings necessary or appropriate under applicable U.S. federal, U.S. state or other securities Laws or blue sky Laws and the rules and regulations thereunder shall have been taken or made, and, where applicable, have become effective or been accepted.

(vi) Any Approvals or Notifications of any Governmental Authorities required for the consummation of the Separation and Distribution, including any required Approvals or Notifications of the Commission de Surveillance du Secteur Financier and the Bank Centrale du Luxembourg, have been obtained.

(vii) Each of the Ancillary Agreements shall have been duly executed and delivered by the applicable parties thereto.

(viii) No order, injunction or decree issued by any Governmental Authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Separation, the Distribution or any of the transactions related thereto shall be in effect.

(ix) The PayPal Shares to be distributed to the eBay stockholders in the Distribution shall have been accepted for listing on the PayPal Stock Exchange, subject to official notice of distribution.

(x) PayPal and/or the applicable PayPal Designees shall have received the Transferred Cash Amount.

(xi) No other events or developments shall exist or shall have occurred that, in the judgment of the eBay Board, in its sole and absolute discretion, makes it inadvisable to effect the Separation, the Distribution or the transactions contemplated by this Agreement or any Ancillary Agreement.

(b) The foregoing conditions are for the sole benefit of eBay and shall not give rise to or create any duty on the part of eBay or the eBay Board to waive or not waive any such condition or in any way limit eBay’s right to terminate this Agreement as set forth in Article IX or alter the consequences of any such termination from those specified in Article IX . Any determination made by the eBay Board prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in Section 3.3(a) shall be conclusive and binding on the Parties. If eBay waives any material condition, it shall promptly issue a press release disclosing such fact and file a Current Report on Form 8-K with the SEC describing such waiver.

 

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3.4 The Distribution .

(a) Subject to Section 3.3 , on or prior to the Effective Time, PayPal will deliver to the Agent, for the benefit of the Record Holders, book-entry transfer authorizations for such number of the outstanding PayPal Shares as is necessary to effect the Distribution, and shall cause the transfer agent for the eBay Shares to instruct the Agent to distribute at the Effective Time the appropriate number of PayPal Shares to each such holder or designated transferee or transferees of such holder by way of direct registration in book-entry form. PayPal will not issue paper stock certificates in respect of the PayPal Shares. The Distribution shall be effective at the Effective Time.

(b) Subject to Sections 3.3 and 3.4(c) , each Record Holder will be entitled to receive in the Distribution a number of whole PayPal Shares equal to the number of eBay Shares held by such Record Holder on the Record Date multiplied by the Distribution Ratio, rounded down to the nearest whole number.

(c) No fractional shares will be distributed or credited to book-entry accounts in connection with the Distribution, and any such fractional shares interests to which a Record Holder would otherwise be entitled shall not entitle such Record Holder to vote or to any other rights as a stockholder of PayPal. In lieu of any such fractional shares, each Record Holder who, but for the provisions of this Section 3.4(c) , would be entitled to receive a fractional share interest of a PayPal Share pursuant to the Distribution, shall be paid cash, without any interest thereon, as hereinafter provided. As soon as practicable after the Effective Time, eBay shall direct the Agent to determine the number of whole and fractional PayPal Shares allocable to each Record Holder, to aggregate all such fractional shares into whole shares, and to sell the whole shares obtained thereby in the open market at the then-prevailing prices on behalf of each Record Holder who otherwise would be entitled to receive fractional share interests (with the Agent, in its sole and absolute discretion, determining when, how and through which broker-dealer and at what price to make such sales), and to cause to be distributed to each such Record Holder, in lieu of any fractional share, such Record Holder’s or owner’s ratable share of the total proceeds of such sale, after deducting any Taxes required to be withheld and applicable transfer Taxes, and after deducting the costs and expenses of such sale and distribution, including brokers fees and commissions. None of eBay, PayPal or the Agent will be required to guarantee any minimum sale price for the fractional PayPal Shares sold in accordance with this Section 3.4(c) . Neither eBay nor PayPal will be required to pay any interest on the proceeds from the sale of fractional shares. Neither the Agent nor the broker-dealers through which the aggregated fractional shares are sold shall be Affiliates of eBay or PayPal. Solely for purposes of computing fractional share interests pursuant to this Section 3.4(c) and Section 3.4(e) , the beneficial owner of eBay Shares held of record in the name of a nominee in any nominee account shall be treated as the Record Holder with respect to such shares.

(d) Notwithstanding anything herein to the contrary, if the distribution of PayPal Shares pursuant to the Distribution is not permitted under the applicable Law of any jurisdiction (each such jurisdiction, a “ Prohibited Jurisdiction ”), each Record Holder in such Prohibited Jurisdiction who, but for such applicable Law, would have received a PayPal Share pursuant to the Distribution, shall receive a distribution of cash, without any interest thereon, in lieu of such PayPal Share to the extent permitted by the applicable Law of such Prohibited

 

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Jurisdiction. The procedures set forth in Section 3.4(c) with respect to fractional shares shall apply to the distribution of PayPal Shares to Record Holders in Prohibited Jurisdictions, mutatis mutandis , with each reference to a “fractional share” in such sentences being deemed a reference to a PayPal Share that, but for this Section 3.4(d) and for applicable Law, would have been distributed pursuant to the Distribution to a Record Holder in a Prohibited Jurisdiction.

(e) Any PayPal Shares or cash in lieu of PayPal Shares (or fractions thereof) that remain unclaimed by any Record Holder one hundred and eighty (180) days after the Distribution Date shall be delivered to PayPal, and PayPal shall hold such PayPal Shares for the account of such Record Holder, and the Parties agree that all obligations to provide such PayPal Shares and cash, if any, in lieu of PayPal Shares (or fractions thereof) shall be obligations of PayPal, subject in each case to applicable escheat or other abandoned property Laws, and eBay shall have no Liability with respect thereto.

(f) Until the PayPal Shares are duly transferred in accordance with this Section 3.4 and applicable Law and subject to Section 3.4(d) , from and after the Effective Time, PayPal will regard the Persons entitled to receive such PayPal Shares as record holders of PayPal Shares in accordance with the terms of the Distribution without requiring any action on the part of such Persons. PayPal agrees that, subject to any transfers of such shares, from and after the Effective Time (i) each such holder will be entitled to receive all dividends payable on, and exercise voting rights and all other rights and privileges with respect to, the PayPal Shares then held by such holder, and (ii) each such holder will be entitled, without any action on the part of such holder, to receive evidence of ownership of the PayPal Shares then held by such holder.

ARTICLE IV

MUTUAL RELEASES; INDEMNIFICATION

4.1 Release of Pre-Distribution Claims .

(a) PayPal Release of eBay. Except as provided in Sections 4.1(c) and 4.3 , effective as of the Effective Time, PayPal does hereby, for itself and each other member of the PayPal Group, and their respective successors and assigns, and, to the extent permitted by Law, all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the PayPal Group (in each case, in their respective capacities as such), surrender, relinquish, release and forever discharge (i) eBay and the members of the eBay Group, and their respective successors and assigns, and (ii) all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the eBay Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, and (iii) all Persons who at any time prior to the Effective Time are or have been stockholders, directors, officers, agents or employees of a Transferred Entity and who are not, as of immediately following the Effective Time, directors, officers or employees of PayPal or a member of the PayPal Group, in each case from: (A) all PayPal Liabilities, (B) all Liabilities arising from or in connection with the transactions and all other activities to implement the Separation and the Distribution and (C) all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or

 

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foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the PayPal Business, the PayPal Assets or the PayPal Liabilities.

(b) eBay Release of PayPal. Except as provided in Sections 4.1(c) and 4.2 , effective as of the Effective Time, eBay does hereby, for itself and each other member of the eBay Group and their respective successors and assigns, and, to the extent permitted by Law, all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the eBay Group (in each case, in their respective capacities as such), surrender, relinquish, release and forever discharge (i) PayPal and the members of the PayPal Group and their respective successors and assigns, and (ii) all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the PayPal Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from (A) all eBay Liabilities, (B) all Liabilities arising from or in connection with the transactions and all other activities to implement the Separation and the Distribution and (C) all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the eBay Business, the eBay Assets or the eBay Liabilities.

(c) Obligations Not Affected. Nothing contained in Section 4.1(a) or 4.1(b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement or any agreements, arrangements, commitments or understandings that are specified in Section 2.7(b) or the applicable Schedules thereto as not to terminate as of the Effective Time, in each case in accordance with its terms. Nothing contained in Sections 4.1(a) or 4.1(b) shall release any Person from:

(i) any Liability provided in or resulting from any agreement among any members of the eBay Group or the PayPal Group that is specified in Section 2.7(b) or the applicable Schedules thereto as not to terminate as of the Effective Time, or any other Liability specified in Section 2.7(b) as not to terminate as of the Effective Time;

(ii) any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group under, this Agreement or any Ancillary Agreement;

(iii) any Liability for the sale, lease, construction or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of the other Group prior to the Effective Time;

(iv) any Liability for unpaid amounts for products or services or refunds owing on products or services due on a value-received basis for work done by a member of one Group at the request or on behalf of a member of the other Group;

 

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(v) any Liability provided in or resulting from any Contract or understanding that is entered into after the Effective Time between any Party (and/or a member of such Party’s Group), on the one hand, and any other Party (and/or a member of the other Party’s Group), on the other hand;

(vi) any Liability that the Parties may have with respect to indemnification or contribution pursuant to this Agreement, any Ancillary Agreement or otherwise for claims brought against the Parties by third Persons, which Liability shall be governed by the provisions of this Article IV and Article V and, if applicable, the appropriate provisions of the Ancillary Agreements; or

(vii) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 4.1 .

In addition, nothing contained in Section 4.1(a) shall release any member of the eBay Group from honoring its existing obligations to indemnify any director, officer or employee of PayPal who was a director, officer or employee of any member of the eBay Group on or prior to the Effective Time, to the extent such director, officer or employee becomes a named defendant in any Action with respect to which such director, officer or employee was entitled to such indemnification pursuant to such existing obligations, it being understood that, if the underlying obligation giving rise to such Action is a PayPal Liability, PayPal shall indemnify eBay for such Liability (including eBay’s costs to indemnify the director, officer or employee) in accordance with the provisions set forth in this Article IV .

(d) No Claims. PayPal shall not make, and shall not permit any member of the PayPal Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against eBay or any other member of the eBay Group, or any other Person released pursuant to Section 4.1(a) , with respect to any Liabilities released pursuant to Section 4.1(a) . eBay shall not make, and shall not permit any other member of the eBay Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification against PayPal or any other member of the PayPal Group, or any other Person released pursuant to Section 4.1(b) , with respect to any Liabilities released pursuant to Section 4.1(b) .

(e) Execution of Further Releases. At any time at or after the Effective Time, at the request of either Party, the other Party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions of this Section 4.1 .

4.2 Indemnification by PayPal . Except as otherwise specifically set forth in this Agreement or in any Ancillary Agreement, to the fullest extent permitted by Law, PayPal shall, and shall cause the other members of the PayPal Group to, indemnify, defend and hold harmless eBay, each member of the eBay Group and each of their respective past, present and future directors, officers, employees and agents, in each case in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ eBay Indemnified Parties ”), from and against any and all Liabilities of the eBay Indemnified Parties relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

 

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(a) any PayPal Liability;

(b) any failure of PayPal, any other member of the PayPal Group or any other Person to pay, perform or otherwise promptly discharge any PayPal Liabilities in accordance with their terms, whether prior to, on or after the Effective Time;

(c) the PayPal Specified Actions and 50% of the Shared Contingent Liabilities;

(d) any breach by PayPal or any other member of the PayPal Group of this Agreement or any of the Ancillary Agreements (other than the Ancillary Agreements set forth on Schedule 4.2(d) , which shall be subject to the indemnification provisions contained therein);

(e) except to the extent it relates to an eBay Liability, any guarantee, indemnification or contribution obligation, surety bond or other credit support agreement, arrangement, commitment or understanding for the benefit of any member of the PayPal Group by any member of the eBay Group that survives following the Distribution; and

(f) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained in the Form 10, the Information Statement (as amended or supplemented if PayPal shall have furnished any amendments or supplements thereto) or any other Disclosure Document, other than the matters described in clause (f)  of Section 4.3 .

4.3 Indemnification by eBay . Except as otherwise specifically set forth in this Agreement or in any Ancillary Agreement, to the fullest extent permitted by Law, eBay shall, and shall cause the other members of the eBay Group to, indemnify, defend and hold harmless PayPal, each member of the PayPal Group and each of their respective past, present and future directors, officers, employees or agents, in each case in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ PayPal Indemnified Parties ”), from and against any and all Liabilities of the PayPal Indemnified Parties relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

(a) any eBay Liability;

(b) any failure of eBay, any other member of the eBay Group or any other Person to pay, perform or otherwise promptly discharge any eBay Liabilities in accordance with their terms, whether prior to, on or after the Effective Time;

(c) the eBay Specified Actions and 50% of the Shared Contingent Liabilities;

(d) any breach by eBay or any other member of the eBay Group of this Agreement or any of the Ancillary Agreements (other than the Ancillary Agreements set forth on Schedule 4.2(d) , which shall be subject to the indemnification provisions contained therein);

 

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(e) except to the extent it relates to a PayPal Liability, any guarantee, indemnification or contribution obligation, surety bond or other credit support agreement, arrangement, commitment or understanding for the benefit of any member of the eBay Group by any member of the PayPal Group that survives following the Distribution; and

(f) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to statements made explicitly in eBay’s name in the Form 10, the Information Statement (as amended or supplemented if PayPal shall have furnished any amendments or supplements thereto) or any other Disclosure Document; it being agreed that the statements set forth on Schedule 4.3(f) shall be the only statements made explicitly in eBay’s name in the Form 10, the Information Statement or any other Disclosure Document, and all other information contained in the Form 10, the Information Statement or any other Disclosure Document shall be deemed to be information supplied by PayPal.

4.4 Indemnification Obligations Net of Insurance Proceeds and Other Amounts .

(a) The Parties intend that any Liability subject to indemnification, contribution or reimbursement pursuant to this Article IV or Article V will be net of Insurance Proceeds or other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof) from any Person by or on behalf of the Indemnified Party in respect of such indemnifiable Liability. Accordingly, the amount that either Party (an “ Indemnifying Party ”) is required to pay to any Person entitled to indemnification or contribution hereunder (an “ Indemnified Party ”) will be reduced by any Insurance Proceeds or other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof) from any Person by or on behalf of the Indemnified Party in respect of the related Liability. If an Indemnified Party receives a payment (an “ Indemnity Payment ”) under this Agreement from an Indemnifying Party in respect of any Liability and subsequently receives Insurance Proceeds or any other amounts in respect of the same Liability, then the Indemnified Party will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or such other amounts (net of any out-of-pocket costs or expenses incurred in the collection thereof) had been received, realized or recovered before the Indemnity Payment was made.

(b) The Parties agree that an insurer that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of any provision contained in this Agreement or any Ancillary Agreement, have any subrogation rights with respect thereto, it being understood that no insurer or any other Third Party shall be entitled to a “windfall” ( i.e. , a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the liability allocation, indemnification and contribution provisions hereof. Accordingly, any provision herein that could have the result of giving any insurer or other Third Party such a “windfall” shall be suspended or amended to the extent necessary to not provide such “windfall.” Each Party shall, and shall cause the members of its Group to, use commercially reasonable efforts (taking into account the probability of success on the merits and the cost of expending such efforts, including attorneys’ fees and expenses) to

 

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collect or recover any Insurance Proceeds that may be collectible or recoverable respecting the Liabilities for which indemnification or contribution may be available under this Article IV . Notwithstanding the foregoing, an Indemnifying Party may not delay making any indemnification payment required under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the outcome of any Action to collect or recover Insurance Proceeds, and an Indemnified Party need not attempt to collect any Insurance Proceeds prior to making a claim for indemnification or contribution or receiving any Indemnity Payment otherwise owed to it under this Agreement or any Ancillary Agreement.

4.5 Procedures for Indemnification of Third-Party Claims .

(a) Notice of Claims. If, at or following the date of this Agreement, an Indemnified Party shall receive notice or otherwise learn of the assertion by a Person (including any Governmental Authority) who is not a member of the eBay Group or the PayPal Group of any claim or of the commencement by any such Person of any Action (collectively, a “ Third-Party Claim ”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnified Party pursuant to Sections 4.2 or 4.3 , or any other Section of this Agreement or any Ancillary Agreement, such Indemnified Party shall give such Indemnifying Party written notice within thirty (30) days of becoming aware of such Third-Party Claim (or sooner if the nature of the Third-Party Claim so requires). Any such notice shall describe the Third-Party Claim in reasonable detail, including, to the extent set forth in or readily apparent from the notices and documents received by the Indemnified Party, the facts and circumstances giving rise to such claim for indemnification, and include copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third-Party Claim. Notwithstanding the foregoing, the failure of an Indemnified Party to provide notice in accordance with this Section 4.5(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent to which the Indemnifying Party is prejudiced by the Indemnified Party’s failure to provide notice in accordance with this Section 4.5(a) .

(b) Control of Defense. An Indemnifying Party may elect to control the defense of (and unless the Indemnifying Party has specified any reservations or exceptions, seek to settle or compromise), at its own expense and with its own counsel, any Third-Party Claim; provided , that, prior to the Indemnifying Party assuming and controlling defense of such Third-Party Claim, it shall first confirm to the Indemnitee in writing that, assuming the facts presented to the Indemnifying Party by the Indemnitee being true, the Indemnifying Party shall indemnify the Indemnitee for any such Damages to the extent resulting from, or arising out of, such Third-Party-Claim. Notwithstanding the foregoing, if the Indemnifying Party assumes such defense and, in the course of defending such Third-Party Claim, (i) the Indemnifying Party discovers that the facts presented at the time the Indemnifying Party acknowledged its indemnification obligation in respect of such Third-Party Claim were not true in all material respects or that such facts, while true in all material respects, do not form the basis upon which such Third-Party Claim is predicated ( e.g. , as a result of the allegations made in such Third-Party Claim changing over time) and (ii) such untruth or change provides a reasonable basis for asserting that the Indemnifying Party does not have an indemnification obligation in respect of such Third-Party Claim, then (A) the Indemnifying Party shall not be bound by such acknowledgment, (B) the Indemnifying Party shall promptly thereafter provide the Indemnitee written notice of its

 

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assertion that it does not have an indemnification obligation in respect of such Third-Party Claim (giving the reasons therefor) and (C) the Indemnitee shall have the right to assume the defense of such Third-Party Claim. Within thirty (30) days after the receipt of a notice from an Indemnified Party in accordance with Section 4.5(a) (or sooner, if the nature of the Third-Party Claim so requires), the Indemnifying Party shall provide written notice to the Indemnified Party indicating whether the Indemnifying Party shall assume responsibility for defending the Third-Party Claim, which written notice shall specify any reservations or exceptions by the Indemnifying Party. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnified Party of its election within thirty (30) days after receipt of the notice from an Indemnified Party as provided in Section 4.5(a) , then the Indemnified Party that is the subject of such Third-Party Claim shall be entitled to continue to conduct and control the defense of such Third-Party Claim. Notwithstanding an election by an Indemnifying Party to defend a Third-Party Claim pursuant to this Section 4.5(b) , the Indemnified Party may, upon written notice to the Indemnifying Party, elect to take over the defense of such Third-Party Claim (although the Indemnifying Party may continue to participate but not control such defense) if (I) in its exercise of reasonable business judgment, the Indemnified Party determines that the Indemnifying Party is not defending such Third-Party Claim competently or in good faith, (II) the Indemnified Party determines in good faith that such Indemnified Party and the Indemnifying Party have actual or potential differing defenses or conflicts of interest between them that make joint representation inappropriate, (III) the Indemnifying Party makes a general assignment for the benefit of creditors, has filed against it or files a petition in bankruptcy or insolvency or is declared bankrupt or insolvent or declares that it is bankrupt or insolvent, or (IV) there occurs a change of control of the Indemnifying Party.

(c) Allocation of Defense Costs . If an Indemnifying Party has elected to assume the defense of a Third-Party Claim, then such Indemnifying Party shall be solely liable for all fees and expenses incurred by it in connection with the defense of such Third-Party Claim and shall not be entitled to seek any indemnification or reimbursement from the Indemnified Party for any such fees or expenses incurred by the Indemnifying Party during the course of the defense of such Third-Party Claim by such Indemnifying Party, regardless of any subsequent decision by the Indemnifying Party to reject or otherwise abandon its assumption of such defense. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnified Party of its election within thirty (30) days after receipt of a notice from an Indemnified Party as provided in Section 4.5(a) or the Indemnified Party takes over the defense of any Third Party-Claim pursuant to Section 4.5(b) , and the Indemnified Party conducts and controls the defense of such Third-Party Claim and the Indemnifying Party has an indemnification obligation with respect to such Third-Party Claim, then the Indemnifying Party shall be liable for all reasonable fees and expenses incurred by the Indemnified Party in connection with the defense of such Third-Party Claim.

(d) Right to Monitor and Participate. An Indemnified Party that does not conduct and control the defense of any Third-Party Claim, or an Indemnifying Party that has failed to elect to defend any Third-Party Claim as contemplated hereby or from whom the Indemnified Party has taken over control of defense of the claim pursuant to Section 4.5(b) , nevertheless shall have the right to employ separate counsel (including local counsel as necessary) of its own choosing to monitor and participate in (but not control) the defense of any Third-Party Claim for which it is a potential Indemnified Party or Indemnifying Party, but the

 

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fees and expenses of such counsel shall be borne by such Indemnified Party or non-controlling Indemnifying Party, as the case may be, and the provisions of Section 4.5(c) shall not apply to such fees and expenses; provided , that if the Indemnifying Party has elected to defend the Third-Party Claim but has specified, and continues to assert, any reservations or exceptions, then the Indemnifying Party shall reimburse the reasonable fees and expenses of such counsel for the potential Indemnified Party. Notwithstanding the foregoing, but subject to Sections 6.7 and 6.8 , and whether or not participating in the defense of a claim, such Party shall use commercially reasonable efforts to cooperate with the Party entitled to conduct and control the defense of such Third-Party Claim in such defense and make available to the controlling Party, all witnesses, information and materials in such Party’s possession or under such Party’s control relating thereto as are reasonably required by the controlling Party (with the reasonable out-of-pocket costs associated with such cooperation being at the expense of the Indemnifying Party). In addition to the foregoing, if any Indemnified Party shall in good faith determine that such Indemnified Party and the Indemnifying Party have actual or potential differing defenses or conflicts of interest between them that make joint representation inappropriate, then the Indemnified Party shall have the right to employ separate counsel (including local counsel as necessary) and to participate in (but not control) the defense, compromise, or settlement thereof, and the Indemnifying Party shall bear the reasonable fees and expenses of one such counsel and local counsel (as appropriate) for all Indemnified Parties.

(e) No Settlement. The Indemnifying Party may not settle or compromise any Third-Party Claim without the consent of the Indemnified Party, which consent may not be unreasonably withheld, unless such settlement or compromise is solely for monetary damages, does not involve any finding or determination of wrongdoing or violation of Law by the other Party and provides for a full, unconditional and irrevocable release of the other Party from all Liability in connection with the Third-Party Claim. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnified Party of its election within thirty (30) days after receipt of a notice from an Indemnified Party as provided in Section 4.5(a) , and the Indemnified Party conducts and controls the defense of such Third-Party Claim, the Indemnified Party may enter into a reasonable settlement or compromise of such Third-Party Claim without the consent of the Indemnifying Party. If the Indemnified Party takes over the defense of any Third Party-Claim pursuant to Section 4.5(b) , the Indemnified Party may not settle or compromise any Third-Party Claim without the consent of the Indemnifying Party, which consent may not be unreasonably withheld or delayed. The Parties hereby agree that if a Party presents the other Party with a written notice containing a proposal to settle or compromise a Third-Party Claim for which either Party is seeking to be indemnified hereunder and the Party receiving such proposal does not respond in any manner to the Party presenting such proposal within thirty (30) days (or within any such shorter time period that may be required by applicable Law or court order) of receipt of such proposal, then the Party receiving such proposal shall be deemed to have consented to the terms of such proposal.

(f) Legal Hold Orders . PayPal shall prepare and circulate a legal hold order (“ LHO ”) covering relevant categories of documents as promptly as practical following receipt of any notice pursuant to Section 4.5(a) with respect to any Action that PayPal determines in good faith is meritorious and shall promptly notify eBay after such LHO has been circulated. eBay shall prepare and circulate a LHO covering documents in the possession, custody or control of the eBay Group with respect to any Action so notified to PayPal. eBay shall prepare and

 

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circulate an LHO covering relevant categories of documents as promptly as practical following receipt of any notice pursuant to Section 4.5(a) with respect to any Action that eBay determines in good faith is meritorious and shall promptly notify PayPal after such LHO has been circulated. PayPal shall prepare and circulate a LHO covering documents in the possession, custody or control of the PayPal Group with respect to any Action so notified to eBay.

(g) Reporting . An Indemnifying Party shall provide the Indemnified Party with a monthly written report identifying any Third-Party Claims that such Indemnifying Party has elected to defend pursuant to Section 4.5(b) , the Actions relating to the Shared Contingent Liabilities and the eBay Specified Actions or the PayPal Specified Actions, as applicable. In addition, the Indemnifying Party shall establish a procedure reasonably acceptable to the Indemnified Party to automatically send electronic notice from the Indemnifying Party to the Indemnified Party through the litigation management system or any successor system when any such Third-Party Claim is closed, regardless of whether such Third-Party Claim was decided by settlement, verdict, dismissal or was otherwise disposed of.

4.6 Additional Matters .

(a) Timing of Payments. Indemnification or contribution payments in respect of any Liabilities for which an Indemnified Party is entitled to indemnification or contribution under this Article IV shall be paid reasonably promptly (but in any event within thirty (30) days of the final determination of the amount that the Indemnified Party is entitled to indemnification or contribution under this Article IV ) by the Indemnifying Party to the Indemnified Party as such Liabilities are incurred upon demand by the Indemnified Party, including reasonably satisfactory documentation setting forth the basis for the amount of such indemnification or contribution payment, including documentation with respect to calculations made and consideration of any Insurance Proceeds that actually reduce the amount of such Liabilities. The indemnity and contribution provisions contained in this Article IV shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnified Party, and (ii) the knowledge by the Indemnified Party of Liabilities for which it might be entitled to indemnification hereunder.

(b) Notice of Direct Claims. Any claim for indemnification or contribution under this Agreement or any Ancillary Agreement that does not result from a Third-Party Claim shall be asserted by written notice given by the Indemnified Party to the applicable Indemnifying Party; provided , that the failure by an Indemnified Party to so assert any such claim shall not prejudice the ability of the Indemnified Party to do so at a later time except to the extent (if any) that the Indemnifying Party is prejudiced thereby. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such thirty (30)-day period, such specified claim shall be conclusively deemed a Liability of the Indemnifying Party under this Section 4.6(b) or, in the case of any written notice in which the amount of the claim (or any portion thereof) is estimated, on such later date when the amount of the claim (or such portion thereof) becomes finally determined. If such Indemnifying Party does not respond within such thirty (30)-day period or rejects such claim in whole or in part, such Indemnified Party shall, subject to the provisions of Article VII , be free to pursue such remedies as may be available to such party as contemplated by this Agreement and the Ancillary Agreements, as applicable, without prejudice to its continuing rights to pursue indemnification or contribution hereunder.

 

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(c) Pursuit of Claims Against Third Parties. If (i) a Party incurs any Liability arising out of this Agreement or any Ancillary Agreement; (ii) an adequate legal or equitable remedy is not available for any reason against the other Party to satisfy the Liability incurred by the incurring Party; and (iii) a legal or equitable remedy may be available to the other Party against a Third Party for such Liability, then the other Party shall use its commercially reasonable efforts to cooperate with the incurring Party, at the incurring Party’s expense, to permit the incurring Party to obtain the benefits of such legal or equitable remedy against the Third Party.

(d) Subrogation. In the event of payment by or on behalf of any Indemnifying Party to any Indemnified Party in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnified Party as to any events or circumstances in respect of which such Indemnified Party may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other Person. Such Indemnified Party shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

(e) Substitution. In the event of an Action for which a Party is entitled to indemnification hereunder in which the Indemnifying Party is not a named defendant, if either the Indemnified Party or Indemnifying Party shall so request, the Parties shall endeavor to substitute the Indemnifying Party for the named defendant. If such substitution or addition cannot be achieved for any reason or is not requested, the named defendant shall allow the Indemnifying Party to manage the Action as set forth in Section 4.5 and this Section 4.6 , and the Indemnifying Party shall fully indemnify the named defendant against all costs of defending the Action (including court costs, sanctions imposed by a court, attorneys’ fees, experts fees and all other external expenses), the costs of any judgment or settlement and the cost of any interest or penalties relating to any judgment or settlement.

4.7 Right of Contribution .

(a) Contribution. If any right of indemnification contained in Sections 4.2 or 4.3 is held unenforceable or is unavailable for any reason, or is insufficient to hold harmless an Indemnified Party in respect of any Liability for which such Indemnified Party is entitled to indemnification hereunder, then the Indemnifying Party shall contribute to the amounts paid or payable by the Indemnified Parties as a result of such Liability (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and the members of its Group, on the one hand, and the Indemnified Parties entitled to contribution, on the other hand, as well as any other relevant equitable considerations.

(b) Allocation of Relative Fault. Solely for purposes of determining relative fault pursuant to this Section 4.7 : (i) any fault associated with the business conducted with the Delayed PayPal Assets or Delayed PayPal Liabilities (except for the gross negligence or intentional misconduct of a member of the eBay Group) or with the ownership, operation or

 

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activities of the PayPal Business prior to the Effective Time shall be deemed to be the fault of PayPal and the other members of the PayPal Group, and no such fault shall be deemed to be the fault of eBay or any other member of the eBay Group; (ii) any fault associated with the business conducted with Delayed eBay Assets or Delayed eBay Liabilities (except for the gross negligence or intentional misconduct of a member of the PayPal Group) shall be deemed to be the fault of eBay and the other members of the eBay Group, and no such fault shall be deemed to be the fault of PayPal or any other member of the PayPal Group; (iii) any fault associated with the ownership, operation or activities of the eBay Business prior to the Effective Time shall be deemed to be the fault of eBay and the other members of the eBay Group, and no such fault shall be deemed to be the fault of PayPal or any other member of the PayPal Group; and (iv) (iii) any fault associated with the ownership, operation or activities of the PayPal Business prior to the Effective Time shall be deemed to be the fault of PayPal and the other members of the PayPal Group, and no such fault shall be deemed to be the fault of eBay or any other member of the eBay Group.

4.8 Covenant Not to Sue . Each Party hereby covenants and agrees that none of it, the members of such Party’s Group or any Person claiming through it shall bring suit or otherwise assert any claim against any Indemnified Party, or assert a defense against any claim asserted by any Indemnified Party, before any court, arbitrator, mediator or administrative agency anywhere in the world, alleging that: (a) the assumption of any PayPal Liabilities by PayPal or a member of the PayPal Group on the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason; (b) the retention of any eBay Liabilities by eBay or a member of the eBay Group on the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason, or (c) the provisions of this Article IV are void or unenforceable for any reason.

4.9 Remedies Cumulative . The remedies provided in this Article IV shall be cumulative and, subject to the provisions of Article VIII , shall not preclude assertion by any Indemnified Party of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

4.10 Survival of Indemnities . The rights and obligations of each of eBay and PayPal and their respective Indemnified Parties under this Article IV shall survive (a) the sale or other transfer by either Party or any member of its Group of any assets or businesses or the assignment by it of any liabilities; or (b) any merger, consolidation, business combination, sale of all or substantially all of its Assets, restructuring, recapitalization, reorganization or similar transaction involving either Party or any of the members of its Group.

4.11 Coordination with Ancillary Agreements .

(a) The provisions of Sections 4.2 through 4.10 hereof shall not apply with respect to Taxes or Tax matters (including the control of Tax related proceedings), which shall be governed by the Tax Matters Agreement. In the case of any conflict between this Agreement and the Tax Matters Agreement in relation to any matters addressed by the Tax Matters Agreement, the Tax Matters Agreement shall control.

 

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(b) The provisions of Sections 4.2 through 4.10 hereof shall not apply (except as expressly set forth in the applicable Ancillary Agreement) with respect to the representations, warranties, covenants and agreements set forth in the Operating Agreement, the Transition Services Agreement, the Colocation Services Agreements, the Data Sharing Addendum and the Product Development Agreement, which shall be governed by the Operating Agreement, the Transition Services Agreement, the Colocation Services Agreements, the Data Sharing Addendum and the Product Development Agreement, respectively.

(c) In the case of any conflict between this Agreement and the Operating Agreement in relation to any matters addressed by the Operating Agreement, the Operating Agreement shall control. In the case of any conflict between this Agreement and the Transition Services Agreement in relation to any matters addressed by the Transition Services Agreement, the Transition Services Agreement shall control. In the case of any conflict between this Agreement and the Intellectual Property Matters Agreement in relation to any matters addressed by the Intellectual Property Matters Agreement, the Intellectual Property Matters Agreement shall control. In the case of any conflict between this Agreement and a Colocation Services Agreement in relation to any matters addressed by the Colocation Services Agreement, the Colocation Services Agreement shall control. In the case of any conflict between this Agreement and the Data Sharing Addendum in relation to any matters addressed by the Data Sharing Addendum, the Data Sharing Addendum shall control. In the case of any conflict between this Agreement and the Product Development Agreement in relation to any matters addressed by the Product Development Agreement, the Product Development Agreement shall control.

ARTICLE V

CERTAIN OTHER MATTERS

5.1 Insurance Matters .

(a) eBay and PayPal agree to cooperate in good faith to provide for an orderly transition of insurance coverage from the date hereof through the Effective Time. In no event shall eBay, any other member of the eBay Group or any eBay Indemnified Party have Liability or obligation whatsoever to any member of the PayPal Group in the event that any insurance policy or other contract or policy of insurance shall be terminated or otherwise cease to be in effect for any reason, shall be unavailable or inadequate to cover any Liability of any member of the PayPal Group for any reason whatsoever, or shall not be renewed or extended beyond the current expiration date.

(b) From and after the Effective Time, with respect to any losses, damages and Liability incurred by any member of the PayPal Group prior to the Effective Time, eBay will provide PayPal with access to, and PayPal may, upon prior written notice to eBay in accordance with the procedures set forth on Schedule 5.1(b) , make claims under, eBay’s policies or contracts of insurance in place immediately prior to the Effective Time and eBay’s historical policies of insurance, but solely to the extent that such policies provided coverage for members of the PayPal Group prior to the Effective Time; provided , that such access to, and the right to make claims under, such insurance policies, shall be subject to the terms and conditions of such insurance policies, including any limits on coverage or scope, any deductibles and other fees and expenses, and shall be subject to the following additional conditions:

 

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(i) PayPal shall report any claim to eBay, as promptly as practicable, and in any event in sufficient time so that such claim may be made in accordance with eBay’s claim reporting procedures in effect immediately prior to the Effective Time (or in accordance with any modifications to such procedures after the Effective Time communicated by eBay to PayPal in writing);

(ii) PayPal and the members of the PayPal Group shall indemnify, hold harmless and reimburse eBay and the members of the eBay Group for any deductibles, self-insured retention (other than any such retention under an eBay Group captive insurance arrangement), fees and expenses incurred by eBay or any members of the eBay Group to the extent resulting from any access to, any claims made by PayPal or any other members of the PayPal Group under, any insurance provided pursuant to this Section 5.1(b) , including any indemnity payments, settlements, judgments, legal fees and allocated claims expenses and claim handling fees, whether such claims are made by PayPal, its employees or third Persons (it being understood that amounts recovered under an eBay Group captive insurance arrangement shall not be deemed to be fees and expenses incurred by eBay or any member of the eBay Group); and

(iii) PayPal shall exclusively bear (and neither eBay nor any members of the eBay Group shall have any obligation to repay or reimburse PayPal or any member of the PayPal Group for) and shall be liable for all uninsured, uncovered, unavailable or uncollectible amounts of all such claims made by PayPal or any member of the PayPal Group under the policies as provided for in this Section 5.1(b) . In the event an insurance policy aggregate is exhausted, or believed likely to be exhausted, due to noticed claims, the PayPal Group, on the one hand, and the eBay Group, on the other hand, shall be responsible for their pro rata portion of the reinstatement premium, if any, based upon the losses of such Group submitted to eBay’s insurance carrier(s) (including any submissions prior to the Effective Time). To the extent that the eBay Group or the PayPal Group is allocated more than its pro rata portion of such premium due to the timing of losses submitted to eBay’s insurance carrier(s), the other party shall promptly pay the first party an amount so that each Group shall be properly allocated its pro rata portion of the reinstatement premium. Subject to the following sentence, eBay may elect not to reinstate the policy aggregate. In the event that eBay elects not to reinstate the policy aggregate, it shall provide prompt written notice to PayPal, and PayPal may direct eBay in writing to, and eBay shall, in such case, reinstate the policy aggregate; provided , that PayPal shall then be responsible for all reinstatement premiums and other costs associated with such reinstatement.

In the event that any member of the eBay Group incurs any losses, damages or Liability prior to or in respect of the period prior to the Effective Time for which such member of the eBay Group is entitled to coverage under PayPal’s insurance policies, the same process pursuant to this Section 5.1(b) shall apply, substituting “eBay” for “PayPal” and “PayPal” for “eBay.”

 

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(c) Except as provided in Section 5.1(b) , from and after the Effective Time, neither PayPal nor any member of the PayPal Group shall have any rights to or under any of the insurance policies of eBay or any other member of the eBay Group. At the Effective Time, PayPal shall have in effect all insurance programs required to comply with PayPal’s contractual obligations and such other insurance policies required by Law or as reasonably necessary or appropriate for companies operating a business similar to PayPal’s. Such insurance programs may include general liability, commercial auto liability, workers’ compensation, employer’s liability, product liability, professional services liability, property, cargo, employment practices liability, employee dishonesty/crime, directors’ and officers’ liability and fiduciary liability.

(d) Neither PayPal nor any member of the PayPal Group, in connection with making a claim under any insurance policy of eBay or any member of the eBay Group pursuant to this Section 5.1 , shall take any action (other than the act of making the claim) that would be reasonably likely to (i) have an adverse impact on the then-current relationship between eBay or any member of the eBay Group, on the one hand, and the applicable insurance company, on the other hand; (ii) result in the applicable insurance company terminating or reducing coverage, or increasing the amount of any premium owed by eBay or any member of the eBay Group under the applicable insurance policy; or (iii) otherwise compromise, jeopardize or interfere with the rights of eBay or any member of the eBay Group under the applicable insurance policy. All payments and reimbursements by PayPal pursuant to this Section 5.1 will be made within thirty (30) days after PayPal’s receipt of an invoice therefor from eBay. If eBay incurs costs to enforce PayPal’s obligations herein, PayPal agrees to indemnify and hold harmless eBay for such enforcement costs, including reasonable attorneys’ fees pursuant to Section 4.6(b) .

(e) eBay shall retain responsibility for and have the exclusive right to control Insurance Administration of its insurance policies and programs and any and all other rights with respect to its insurance policies and programs, including the right to exhaust, settle, release, commute, buyback or otherwise resolve disputes with respect to any of its insurance policies and programs and to amend, modify or waive any rights under any such insurance policies and programs, notwithstanding whether any such policies or programs apply to any PayPal Liabilities and/or claims PayPal has made or could make in the future, and no member of the PayPal Group shall (without the prior written consent of eBay) erode, exhaust, settle, release, commute, buyback or otherwise resolve disputes with eBay’s insurers with respect to any of eBay’s insurance policies and programs, or amend, modify or waive any rights under any such insurance policies and programs. PayPal shall cooperate with eBay and share such information as is reasonably necessary to permit eBay to manage and conduct its insurance matters as it deems appropriate. Neither eBay nor any of the members of the eBay Group shall have any obligation to secure extended reporting for any claims under any Liability policies of eBay or any member of the eBay Group for any acts or omissions by any member of the PayPal Group incurred prior to the Effective Time.

(f) eBay shall, and shall cause the members of the eBay Group to, (i) use commercially reasonable efforts, at PayPal’s reasonable request (and provided that PayPal complies with the requirements of Section 5.1(b) ), to assist PayPal in making claims under the eBay insurance policies described in Section 5.1(b) , (ii) notify PayPal within thirty (30) days of any election by eBay to control any claim under an eBay insurance policy or program to the extent such claim relates to a PayPal Asset and/or PayPal Liability and (iii) promptly (and in any event within thirty (30) days after eBay’s receipt thereof) pay over to PayPal or the applicable member of the PayPal Group any Insurance Proceeds that are received by eBay or any member of the eBay Group in respect of such claims.

 

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(g) This Agreement shall not be considered as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of any member of the eBay Group in respect of any insurance policy or any other contract or policy of insurance.

(h) PayPal does hereby, for itself and each other member of the PayPal Group, agree that no member of the eBay Group shall have any Liability whatsoever as a result of the insurance policies and practices of eBay and the members of the eBay Group as in effect at any time, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise.

5.2 Directors and Officers Insurance . Prior to the Effective Time, eBay shall obtain and fully pay for a directors and officers liability run-off insurance policy and a fiduciary liability run-off insurance policy, in each case for claims made after the Effective Time covering wrongful acts that have occurred prior to and through the Effective Time and arising out of or relating to PayPal, the other members of the PayPal Group or the PayPal Business (as the PayPal Business exists as of immediately after the Effective Time), with a policy period of at least six (6) years from and after the Effective Time, covering (a) any Persons who, as of or at any time prior to the Effective Time, are or have been directors or officers of eBay or any other member of the eBay Group; (b) any Persons who, as of or at any time prior to the Effective Time, are or have been directors or officers of PayPal or the other members of the PayPal Group; and (c) eBay, the other members of the eBay Group, PayPal, the other members of the PayPal Group and the PayPal Business (as the PayPal Business exists as of immediately after the Effective Time). Such directors and officers liability run-off insurance policy shall be consistent in all material respects with the directors and officers liability insurance policy maintained by eBay as of the Effective Time (except for the policy period and provisions excluding coverage for wrongful acts occurring after the Effective Time).

5.3 Late Payments . Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement or any Ancillary Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within thirty (30) days of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to Prime Rate plus two percent (2%).

5.4 Inducement . PayPal acknowledges and agrees that eBay’s willingness to cause, effect and consummate the Separation and the Distribution has been conditioned upon and induced by PayPal’s covenants and agreements in this Agreement and the Ancillary Agreements, including PayPal’s assumption of the PayPal Liabilities pursuant to the Separation and the provisions of this Agreement and PayPal’s covenants and agreements contained in Article IV .

 

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5.5 Post-Effective Time Conduct . The Parties acknowledge that, after the Effective Time, each Party shall be independent of the other Party, with responsibility for its own actions and inactions and its own Liabilities relating to, arising out of or resulting from the conduct of its business, operations and activities following the Effective Time, except as may otherwise be provided in any Ancillary Agreement, and each Party shall (except as otherwise provided in Article IV ) use commercially reasonable efforts to prevent such Liabilities from being inappropriately borne by the other Party.

5.6 Conduct of Certain Intellectual Property Matters . Commencing as of the Effective Time, the Parties will cooperate and coordinate on the conduct of the defense or prosecution of the Joint Proceedings, eBay Proceedings, and PayPal Proceedings as set forth in Schedule 5.6 . The provisions of Sections 4.2 through 4.10 hereof shall not apply with respect to any such Joint Proceedings, eBay Proceedings or PayPal Proceedings, which shall be governed by Schedule 5.6 .

ARTICLE VI

EXCHANGE OF INFORMATION; CONFIDENTIALITY

6.1 Agreement for Exchange of Information .

(a) Subject to Section 6.9 , any other applicable confidentiality obligations, any Ancillary Agreement or any other agreement between the Parties, each of eBay and PayPal, on behalf of itself and each member of its respective Group, agrees to use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the other Party and the members of such other Party’s Group, at any time before, on or after the Effective Time, as soon as reasonably practicable after written request therefor, any information (or a copy thereof) in the possession or under the control of such Party or its Group which the requesting Party or its Group to the extent that (i) such information relates (A) to the PayPal Business, or any PayPal Asset or PayPal Liability, if PayPal is the requesting Party, or (B) to the eBay Business, or any eBay Asset or eBay Liability, if eBay is the requesting Party; (ii) such information is required by the requesting Party to comply with its obligations under this Agreement or any Ancillary Agreement; or (iii) such information is required by the requesting Party to comply with any obligation imposed by any Governmental Authority; provided , that if the Party to whom the request has been made determines that, in the reasonable good faith judgment of such Party, any such provision of information could be detrimental to the Party providing the information, then the Parties shall use commercially reasonable efforts to permit compliance with such obligations to the extent and in a manner that avoids any such harm or consequence. Notwithstanding the foregoing, this Section 6.1 shall not require the Party to whom the request has been made to provide such information if such Party determines that doing so would, in the reasonable good faith judgment of such Party, reasonably be expected to result in any violation of any Law or agreement or waive any privilege available under applicable Law, including any attorney-client privilege; provided , that the Parties shall use commercially reasonable efforts to cooperate in seeking to find a way to permit compliance with such obligations to the extent and in a manner that avoids such consequence. The Party providing information pursuant to this Section 6.1 shall only be obligated to provide such information in the form, condition and format in which it then exists, and in no event shall such Party be required to perform any improvement, modification, conversion, updating or reformatting of any such information, and nothing in this Section 6.1 shall expand the obligations of a Party under Section 6.4 .

 

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(b) Without limiting the generality of the foregoing, until the first PayPal fiscal year end during which the Distribution Date occurs (and for a reasonable period of time afterwards as required for each Party to prepare consolidated financial statements or complete a financial statement audit for the fiscal year during which the Distribution Date occurs), each Party shall use its commercially reasonable efforts to cooperate with the other Party’s information requests to enable (i) the other Party to meet its timetable for dissemination of its earnings releases, financial statements and management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K promulgated under the Exchange Act; and (ii) the other Party’s accountants to timely complete their review of the quarterly financial statements and audit of the annual financial statements, including, to the extent applicable to such Party, its auditor’s audit of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the SEC’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder and any other applicable Laws.

(c) Without limiting the generality of the foregoing, each Party shall deliver to the other Party a reasonably complete draft (to the extent practicable) of (i) its first quarterly report on Form 10-Q to be filed with the Commission that includes its respective financial statements, (ii) its first annual report on Form 10-K to be filed with the Commission that includes its respective annual financial statements in the form expected to be covered by the audit report of such Party’s independent auditor and (iii) the proxy materials to be filed with the Commission in respect of such Party’s first annual meeting of stockholders following the Distribution Date (the documents described in clauses (i), (ii) and (iii), the “ Financial Reporting and Proxy Materials ”) at least fifteen (15) days prior to the expected date of filing and to deliver to the other Party any supplements, amendments or significant revisions following such delivery. Each Party shall notify the other Party as soon as reasonably practicable after it becomes aware of any material accounting differences between its Financial Reporting and Proxy Materials and the other Party’s Financial Reporting and Proxy Materials with respect to transactions or activities conducted prior to or at the Effective Time, and the Parties shall subsequently confer and use commercially reasonable efforts to consult with each other in good faith and resolve such differences prior to the filing of the applicable Financial Reporting and Proxy Materials.

6.2 Ownership of Information . The provision of any information pursuant to Section 6.1 or Section 6.7 shall not affect the ownership of such information (which shall be determined solely in accordance with the terms of this Agreement and the Ancillary Agreements), or constitute a grant of rights in or to any such information.

6.3 Compensation for Providing Information . Subject to any Ancillary Agreement or any other agreement between the Parties, the Party requesting information agrees to reimburse the other Party for the reasonable costs, if any, of creating, gathering, copying, transporting and otherwise complying with the request with respect to such information (including any reasonable costs and expenses incurred in any review of information for purposes of protecting the Privileged Information of the providing Party or in connection with the

 

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restoration of backup media for purposes of providing the requested information). Except as may be otherwise specifically provided elsewhere in this Agreement, any Ancillary Agreement or any other agreement between the Parties, such costs shall be computed in accordance with the providing Party’s standard methodology and procedures as provided to the other Party from time to time.

6.4 Record Retention . To facilitate the possible exchange of information pursuant to this Article VI and other provisions of this Agreement after the Effective Time, the Parties agree to use their commercially reasonable efforts, which shall be no less rigorous than those used for retention of such Party’s own information, to retain all information in their respective possession or control on the Effective Time (including information that is subject to an LHO) in accordance with the policies of eBay as in effect on the Effective Time or such other policies as may be adopted by eBay after the Effective Time ( provided , that in the case of PayPal, eBay notifies PayPal of any such change). Except in accordance with its, or its applicable Subsidiaries’, policies and ordinary course practices, no Party will destroy, or permit any of its Subsidiaries to destroy, any information that would, in accordance with such policies or ordinary course practices, be archived or otherwise filed in a centralized filing system by such party or its applicable Subsidiaries and, without limiting the foregoing, comply with the requirements of any LHO that relates to (x) any Action that is pending as of the Effective Time; or (y) any Action that arises or becomes threatened or reasonably anticipated after the Effective Time as to which such Party or its Subsidiaries has received a notice of the applicable LHO from the other Party. Notwithstanding anything in this Article VI to the contrary, (a) the Tax Matters Agreement shall govern the retention of Tax related records and the exchange of Tax related information, (b) the Employee Matters Agreement shall govern the retention of employment and benefits related records and (c) the Data Sharing Addendum will govern the retention of the records specified therein.

6.5 Limitations of Liability . Neither Party shall have any Liability to the other Party in the event that any information exchanged or provided pursuant to this Agreement is found to be inaccurate in the absence of gross negligence or willful misconduct by the Party providing such information. Neither Party shall have any Liability to any other Party if any information is destroyed after commercially reasonable efforts by such Party to comply with the provisions of Section 6.4 .

6.6 Other Agreements Providing for Exchange of Information .

(a) The rights and obligations granted under this Article VI are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange, retention or confidential treatment of information set forth in any Ancillary Agreement.

(b) Any party that receives, pursuant to a request for information in accordance with this Article VI , Tangible Information that is not relevant to its request shall (i) return it to the providing Party or, at the providing Party’s request, destroy such Tangible Information; and (ii) deliver to the providing Party written confirmation that such Tangible Information was returned or destroyed, as the case may be, which confirmation shall be signed by an authorized representative of the requesting Party.

 

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6.7 Production of Witnesses; Records; Cooperation .

(a) After the Effective Time, except in the case of an adversarial Action or Dispute between eBay and PayPal or as prohibited by applicable Law, or any members of their respective Groups, each Party shall use its reasonable best efforts (which shall not impose undue burden on such Party) to make available to the other Party, upon written request, the former and then-current directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its possession, custody or control, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any Action in which the requesting Party (or member of its Group) may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder. The requesting Party shall bear all costs and expenses in connection therewith.

(b) If an Indemnifying Party chooses to defend any Third-Party Claim, the other Party shall make available to such Indemnifying Party (without undue burden to such other Party), upon written request, the former and then-current directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its possession, custody or control, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with such defense, or such prosecution, evaluation or pursuit, as the case may be, and shall otherwise cooperate in such defense, or such prosecution, evaluation or pursuit, as the case may be.

(c) Without limiting the foregoing, the Parties shall cooperate and consult with each other to the extent reasonably necessary with respect to any Actions.

(d) The obligation of the Parties to provide witnesses pursuant to this Section 6.7 is intended to be interpreted in a manner so as to facilitate cooperation and shall include the obligation to provide as witnesses inventors and other officers without regard to whether the witness or the employer of the witness could assert a possible business conflict (subject to the exception set forth in the first sentence of Section 6.7(a) ).

6.8 Privileged Matters .

(a) The Parties recognize that legal and other professional services that have been and will be provided prior to the Effective Time (whether by outside counsel, in-house counsel or other legal professionals) have been and will be rendered for the collective benefit of each of the members of the eBay Group and the PayPal Group, and that each of the members of the eBay Group and the PayPal Group shall be deemed to be the client with respect to such services for the purposes of asserting all privileges which may be asserted under applicable Law in connection therewith. The Parties recognize that legal and other professional services will be provided following the Effective Time, which services will be rendered solely for the benefit of the eBay Group or the PayPal Group, as the case may be.

 

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(b) The Parties agree as follows:

(i) eBay shall be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the eBay Business and not to the PayPal Business, whether or not the Privileged Information is in the possession or under the control of any member of the eBay Group or any member of the PayPal Group. eBay shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the eBay Specified Actions or to any eBay Liabilities resulting from any other Actions that are now pending or may be asserted in the future, whether or not the Privileged Information is in the possession or under the control of any member of the eBay Group or any member of the PayPal Group; and

(ii) PayPal shall be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the PayPal Business and not to the eBay Business, whether or not the Privileged Information is in the possession or under the control of any member of the PayPal Group or any member of the eBay Group. PayPal shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the PayPal Specified Actions or to any PayPal Liabilities resulting from any other Actions that are now pending or may be asserted in the future, whether or not the Privileged Information is in the possession or under the control of any member of the PayPal Group or any member of the eBay Group.

(iii) If the Parties do not agree as to whether certain information is Privileged Information, then such information shall be treated as Privileged Information, and the Party that believes that such information is Privileged Information shall be entitled to control the assertion or waiver of all privileges and immunities in connection with any such information until such time as it is finally judicially determined that such information is not Privileged Information, unless the Parties otherwise agree. The Parties shall use the procedures set forth in Article VII to resolve any disputes as to whether any information relates solely to the eBay Business, solely to the PayPal Business, or to both the eBay Business and the PayPal Business.

(c) Subject to the remaining provisions of this Section 6.8 , the Parties agree that they shall have a shared privilege or immunity with respect to all privileges and immunities not allocated pursuant to Section 6.8(b) and all privileges and immunities relating to any Actions or other matters that involve both Parties (or one or more members of their respective Groups) and in respect of which both Parties have Liabilities under this Agreement, and that no such shared privilege or immunity may be waived by either Party without the written consent of the other Party. The Parties will enter into common interest or joint defense agreements as deemed necessary to preserve privilege, allow coordination of defenses, and avoid waivers of privilege in connection with any Privileged Information that relates to Shared Contingent Liabilities, whether or not the Privileged Information is in the possession or under the control of any member of the PayPal Group or any member of the eBay Group.

 

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(d) If any Dispute arises between the Parties or any members of their respective Group regarding whether a privilege or immunity should be waived to protect or advance the interests of either Party and/or any member of their respective Groups, each Party agrees that it shall (i) negotiate with the other Party in good faith; (ii) endeavor to minimize any prejudice to the rights of the other Party; and (iii) not unreasonably withhold consent to any request for waiver by the other Party. Further, each Party specifically agrees that it shall not withhold its consent to the waiver of a privilege or immunity for any purpose except in good faith to protect its own legitimate interests.

(e) Subject to Section 6.9 , in the event of any adversarial Action or Dispute between eBay and PayPal, or any members of their respective Groups, either Party may waive a privilege in which the other Party or member of such other Party’s Group has a shared privilege, without obtaining consent pursuant to Section 6.8(c) ; provided , that such waiver of a shared privilege shall be effective only as to the use of information with respect to the Action or Dispute between the Parties and/or the applicable members of their respective Groups, and shall not operate as a waiver of the shared privilege with respect to any Third Party.

(f) Upon receipt by either Party, or by any member of its respective Group, of any subpoena, discovery or other request (or of written notice that it will or has received such subpoena, discovery or other request) that may reasonably be expected to result in the production or disclosure of Privileged Information subject to a shared privilege or immunity or as to which another Party has the sole right hereunder to assert a privilege or immunity, or if either Party obtains knowledge or becomes aware that any of its, or any member of its respective Group’s, current or former directors, officers, agents or employees have received any subpoena, discovery or other requests (or have received written notice that they will or have received such subpoena, discovery or other requests) that may reasonably be expected to result in the production or disclosure of such Privileged Information, such Party shall promptly notify the other Party of the existence of the request (which notice shall be delivered to such other Party no later than five (5) business days following the receipt of (or of written notice that it will or has received) any such subpoena, discovery or other request) and shall provide the other Party a reasonable opportunity to review the Privileged Information and to assert any rights it or they may have, under this Section 6.8 or otherwise, to prevent the production or disclosure of such Privileged Information; provided , that if such Party is prohibited by applicable Law from disclosing the existence of the request, such Party shall provide written notice of such related information for which disclosure is not prohibited by applicable Law and use commercially reasonable efforts to inform the other Party of any related information such Party determines, in its discretion, is necessary or appropriate for the other Party to be informed of to enable the other Party to review the Privileged Information and to assert its rights, under this Section 6.8 or otherwise, to prevent the production or disclosure of such Privileged Information.

(g) Any furnishing of, or access or transfer of, any information pursuant to this Agreement is made in reliance on the agreement of eBay and PayPal set forth in this Section 6.8 and in Section 6.9 to maintain the confidentiality of Privileged Information and to assert and maintain all applicable privileges and immunities. The Parties agree that their respective rights to any access to information, witnesses and other Persons, the furnishing of notices and documents and other cooperative efforts between the Parties contemplated by this Agreement, and the transfer of Privileged Information between the Parties and members of their

 

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respective Groups pursuant to this Agreement, shall not be deemed a waiver of any privilege that has been or may be asserted under this Agreement or otherwise. The Parties further agree that (i) the exchange by one Party to the other Party of any Privileged Information that should not have been transferred pursuant to the terms of this Article VI shall not be deemed to constitute a waiver of any privilege or immunity that has been or may be asserted under this Agreement or otherwise with respect to such Privileged Information; and (ii) the Party receiving such Privileged Information shall promptly return such Privileged Information to the Party who has the right to assert the privilege or immunity.

(h) In connection with any matter contemplated by Section 6.7 or this Section 6.8 , the Parties agree to, and to cause the applicable members of their Group to, use reasonable efforts to maintain their respective separate and joint privileges and immunities, including by executing joint defense and/or common interest agreements where necessary or useful for this purpose.

6.9 Confidentiality .

(a) Confidentiality. Subject to Section 6.10 and any Ancillary Agreement, from and after the Effective Time until the five (5) year anniversary of the Effective Time (other than in the case of any item of Technical Information, for which the obligations in this Section 6.9 will continue until such time as any of the exceptions set forth in clauses (A) through (C) of this Section 6.9(a) have been satisfied with respect to such item of Technical Information), each of eBay and PayPal, on behalf of itself and each member of its respective Group, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to eBay’s confidential and proprietary information pursuant to policies in effect as of the Effective Time, all confidential and proprietary information concerning the other Party or any member of the other Party’s Group or their respective businesses that is either (i) in its possession (including confidential and proprietary information in its possession prior to the date hereof) or (ii) furnished by any such other Party or any member of such Party’s Group or their respective Representatives at any time pursuant to this Agreement, any Ancillary Agreement or otherwise, and shall not use any such confidential and proprietary information other than for such purposes as shall be expressly permitted hereunder or thereunder, except, in each case, to the extent that such confidential and proprietary information is or was (A) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any member of such Party’s Group or any of their respective Representatives in violation of this Agreement, (B) later lawfully acquired from other sources by such Party (or any member of such Party’s Group) which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such confidential and proprietary information, or (C) independently developed or generated without reference to or use of any proprietary or confidential information of the other Party or any member of such Party’s Group. If any confidential and proprietary information of one Party or any member of its Group is disclosed to the other Party or any member of such other Party’s Group in connection with providing services to such first Party or any member of such first Party’s Group under this Agreement or any Ancillary Agreement, then such disclosed confidential and proprietary information shall be used only as required to perform such services.

 

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(b) No Release; Return or Destruction. Each Party agrees not to release or disclose, or permit to be released or disclosed, any information addressed in Section 6.9(a) to any other Person, except its Representatives who need to know such information in their capacities as such (who shall be advised of their obligations hereunder with respect to such information), and except in compliance with Section 6.10 . Without limiting the foregoing, when any such information is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each Party shall, at its option and as promptly as practicable after receiving a written request from the other Party, either (i) return to the other Party all such information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or (ii) certify to the other Party that it has destroyed such information (and such copies thereof and such notes, extracts or summaries based thereon); provided , that such Party’s Representatives may retain one (1) copy of such information to the extent required by applicable Law or professional standards, and shall not be required to destroy any such information located in back-up, archival electronic storage).

(c) Third-Party Information; Privacy or Data Protection Laws. Each Party acknowledges that it and members of its Group may presently have and, following the Effective Time, may gain access to or possession of confidential or proprietary information of, or personal information relating to, Third Parties (i) that was received under confidentiality or non-disclosure agreements entered into between such Third Parties, on the one hand, and the other Party or members of such Party’s Group, on the other hand, prior to the Effective Time; or (ii) that, as between the Parties, was originally collected by the other Party or members of such Party’s Group and that may be subject to and protected by privacy, data protection or other applicable Laws. Subject to the Data Sharing Addendum and any other Ancillary Agreement, each Party agrees that it shall hold, protect and use, and shall cause the members of its Group and its and their respective Representatives to hold, protect and use, in strict confidence the confidential and proprietary information of, or personal information relating to, Third Parties in accordance with privacy, data protection or other applicable Laws and the terms of any agreements that were either entered into before the Effective Time or affirmative commitments or representations that were made before the Effective Time by, between or among the other Party or members of the other Party’s Group, on the one hand, and such Third Parties, on the other hand.

(d) Residual Information . Notwithstanding anything to the contrary herein, each Party and the members of such Party’s Group shall be free to use for any purpose the Residual Information resulting from access Representatives of such Party or the members of its Group have had to confidential and proprietary information concerning the other Party or any member of the other Party’s Group. The Parties acknowledge and understand that the foregoing does not constitute a license under any patents or copyrights.

6.10 Protective Arrangements . In the event that a Party or any member of its Group either determines on the advice of its counsel that it is required to disclose any information pursuant to applicable Law or receives any request or demand under lawful process or from any Governmental Authority to disclose or provide information of the other Party (or any member of the other Party’s Group) that is subject to the confidentiality provisions hereof, such Party shall notify the other Party (to the extent legally permitted) as promptly as practicable under the circumstances prior to disclosing or providing such information and shall cooperate, at such other Party’s cost and expense, in seeking any appropriate protective order reasonably

 

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requested by the other Party. In the event that such other Party fails to receive such appropriate protective order in a timely manner and the Party receiving the request or demand reasonably determines that its failure to disclose or provide such information will actually prejudice the Party receiving the request or demand, then the Party that received such request or demand may thereafter disclose or provide information to the extent required by such Law (as so advised by its counsel) or by lawful process or such Governmental Authority, and the disclosing Party shall promptly provide the other Party with a copy of the information so disclosed, in the same form and format so disclosed, together with a list of all Persons to whom such information was disclosed, in each case to the extent legally permitted.

ARTICLE VII

DISPUTE RESOLUTION

7.1 Good-Faith Negotiation . Subject to Section 7.5 , either Party seeking resolution of any dispute, controversy or claim arising out of or relating to this Agreement or Ancillary Agreement (including regarding whether any Assets are PayPal Assets, any Liabilities are PayPal Liabilities or the validity, interpretation, breach or termination of this Agreement or any Ancillary Agreement) (a “ Dispute ”) that cannot be resolved by the Transition Committee, shall provide written notice thereof to the other Party (the “ Initial Notice ”), and within thirty (30) days of the delivery of the Initial Notice, the Parties shall attempt in good faith to negotiate a resolution of the Dispute. The negotiations shall be conducted by executives who hold, at a minimum, the title of senior vice president or general counsel and who have authority to settle the Dispute. All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. If the Parties are unable for any reason to resolve a Dispute within thirty (30) days after the delivery of such notice or if a Party reasonably concludes that the other Party is not willing to negotiate as contemplated by the preceding sentences of this Section 7.1 , the Dispute shall be submitted to the Escalation Committee.

7.2 Escalation Committee . As of the Effective Time, the Parties shall establish an escalation committee (the “ Escalation Committee ”) with six (6) members, consisting of the Chief Executive Officer of each of PayPal and eBay, the Chairman of the board of each of PayPal and eBay, a member of the eBay Board who shall be appointed by eBay and a member of the board of directors of PayPal who shall be appointed by PayPal (together with the member of the eBay Board, the “ Other Board Members ”). Each of eBay and PayPal will use its good faith efforts to avoid replacing the initial Other Board Members for the first two (2) years after the Effective Time. Thereafter, eBay and PayPal will, to the extent practicable, honor the other Party’s reasonable objections to any replacements of Other Board Members. While any person is serving as a member of the Escalation Committee, such person may not designate any substitute or proxy for purposes of attending or voting at an Escalation Committee meeting. The Escalation Committee will meet at least annually and will make a good faith effort to promptly (and in any event within forty-five (45) days of the dispute being referred to the Escalation Committee) resolve all Disputes referred to it. Escalation Committee decisions made with the consent of at least four (4) members, including at least one (1) eBay member and at least one PayPal member, will be binding on eBay, PayPal and their respective Group members. If the Escalation Committee does not agree to a resolution of a Dispute within the forty-five (45)-day period following the referral of such Dispute to the Escalation Committee, the Parties may refer the Dispute to mediation in accordance with Section 7.3 .

 

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7.3 Non-Binding Mediation . Any Dispute not resolved pursuant to Section 7.2 shall, upon the written request of a Party (a “ Mediation Request ”), be submitted to nonbinding mediation in accordance with the then current JAMS International Mediation Rules (the “ Mediation Rules ”), except as modified herein. The mediation shall be held in (i) San Jose, California or (ii) such other place as the Parties may mutually agree in writing. The Parties shall have twenty (20) days from receipt by a Party of a Mediation Request to agree on a mediator. If no mediator has been agreed upon by the Parties within twenty (20) days of receipt by a party of a Mediation Request, then a Party may request (on written notice to the other Party), that JAMS appoint a mediator in accordance with the Mediation Rules. All mediation pursuant to this clause shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence, and no oral or documentary representations made by the Parties during such mediation shall be admissible for any purpose in any subsequent proceedings. No Party shall disclose or permit the disclosure of any information about the evidence adduced or the documents produced by the other Party in the mediation proceedings or about the existence, contents or results of the mediation without the prior written consent of such other Party, except in the course of a judicial or regulatory proceeding or as may be required by Law or requested by a Governmental Authority or securities exchange. Before making any disclosure permitted by the preceding sentence, the Party intending to make such disclosure shall, to the extent reasonably practicable, give the other Party reasonable written notice of the intended disclosure and afford the other party a reasonable opportunity to protect its interests. If the Dispute has not been resolved within sixty (60) days of the appointment of a mediator, or within ninety (90) days after receipt by a Party of a Mediation Request (whichever occurs sooner), or within such longer period as the Parties may agree to in writing, then the Dispute shall be submitted to binding arbitration in accordance with Section 7.4 .

7.4 Arbitration; Litigation .

(a) In the event that a Dispute has not been resolved within sixty (60) days of the appointment of a mediator in accordance with Section 7.3 , or within ninety (90) days after receipt by a Party of a Mediation Request (whichever occurs sooner), or within such longer period as the Parties may agree to in writing, then, unless the amount in dispute, inclusive of all claims and counterclaims, totals $250 million or more or the Dispute involves primarily non-monetary relief (in which case such Dispute shall be addressed in accordance with Section 7.4(e) ), such Dispute shall, upon the written request of a Party (an “ Arbitration Request ”) be submitted to be finally resolved by binding arbitration pursuant to the then current CPR Arbitration Commercial Arbitration Rules of the American Arbitration Association (the “ Arbitration Rules ”). The arbitration shall be held in the same location as the mediation pursuant to Section 7.3 . Unless otherwise agreed by the Parties in writing, any Dispute to be decided by binding arbitration pursuant to this Section 7.4 will be decided (i) before a sole independent arbitrator if the amount in dispute, inclusive of all claims and counterclaims, totals $50 million or less; or (ii) by a panel of three (3) arbitrators if the amount in dispute, inclusive of all claims and counterclaims, totals more than $50 million but less than $250 million.

 

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(b) The panel of three (3) arbitrators will be chosen as follows: (i) within fifteen (15) days from the date of the receipt of the Arbitration Request, each Party will name an arbitrator; and (ii) the two (2) Party-appointed arbitrators will thereafter, within thirty (30) days from the date on which the second of the two (2) arbitrators was named, name a third, independent arbitrator who will act as chairperson of the arbitral tribunal. In the event that either Party fails to name an arbitrator within fifteen (15) days from the date of receipt of the Arbitration Request, then upon written application by either Party, that arbitrator shall be appointed pursuant to the Arbitration Rules. In the event that the two (2) Party-appointed arbitrators fail to appoint the third, then the third, independent arbitrator will be appointed pursuant to the Arbitration Rules. If the arbitration will be before a sole independent arbitrator, then the sole independent arbitrator will be appointed by agreement of the Parties within fifteen (15) days of the date of receipt of the Arbitration Request. If the Parties cannot agree to a sole independent arbitrator, then upon written application by either party, the sole independent arbitrator will be appointed pursuant to the Arbitration Rules.

(c) If the amount in dispute, inclusive of all claims and counterclaims, totals $25 million or less, then each Party shall provide the arbitrator with its respective resolution of the Dispute, including the net amount to be paid or received by such Party, together with the supporting calculations and analyses prepared with respect thereto, and the arbitrator shall select either the resolution of the Dispute as proposed by eBay or by PayPal; provided , that the arbitrator may award only one or the other of the net amounts so submitted. If the amount in dispute, inclusive of all claims and counterclaims, totals more than $25 million but less than $250 million, the arbitrator(s) will have the right to award, on an interim basis, or include in the final award, any monetary relief which it deems proper in the circumstances, including money damages (with interest on unpaid amounts from the due date) and attorneys’ fees and costs. The arbitrator(s) will decide the substance of all claims in accordance with applicable Law, including recognized principles of equity, and will honor all claims of privilege recognized by Law. In no event shall the arbitrator(s) award any relief not specifically requested by the parties or award any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a Third-Party Claim). Upon selection of the arbitrator(s) following any grant of interim relief by a special arbitrator or court pursuant to Section 7.5 , the arbitrator(s) may affirm or disaffirm that relief, and the parties will seek modification or rescission of the order entered by the court as necessary to accord with the decision of the arbitrator(s). The award of the arbitrator(s) shall be final and binding on the Parties, and may be enforced in any court of competent jurisdiction. The Parties shall share equally the administration and arbitrator fees associated with the arbitration.

(d) The initiation of mediation or arbitration pursuant to this Article VII will toll the applicable statute of limitations for the duration of any such proceedings.

(e) If the amount in dispute, inclusive of all claims and counterclaims, totals $250 million or more or if the Dispute involves primarily non-monetary relief, then such Dispute shall not be submitted to arbitration, and either Party may commence litigation in the Delaware Court of Chancery (or, if such court does not have subject matter jurisdiction thereof, any other federal or state court located in the State of Delaware with subject matter jurisdiction).

 

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7.5 Litigation and Unilateral Commencement of Arbitration . Notwithstanding the foregoing provisions of this Article VII , (a) a Party may seek preliminary provisional or injunctive judicial relief with respect to a Dispute without first complying with the procedures set forth in Sections 7.1 to 7.4 if such action is reasonably necessary to avoid irreparable damage and (b) either Party may initiate arbitration before the expiration of the periods specified in Sections 7.3 and 7.4 if (i) such Party has submitted a Mediation Request or Arbitration Request, as applicable, and the other party has failed, within the applicable periods set forth in Section 7.3 , to agree upon a date for the first mediation session to take place within thirty (30) days after the appointment of such mediator or such longer period as the Parties may agree to in writing or (ii) such Party has failed to comply with Section 7.4 in good faith with respect to commencement and engagement in arbitration. In such event, the other Party may commence and prosecute such arbitration unilaterally in accordance with the Arbitration Rules. Immediately following the issuance of any preliminary provisional or injunctive relief pursuant to clause (a) of the immediately preceding sentence, the Party seeking such relief will consent to the stay of any judicial proceedings pending the resolution of the Dispute pursuant to the procedures set forth in Sections 7.1 to 7.4 .

7.6 Conduct During Dispute Resolution Process . Unless otherwise agreed in writing, the Parties shall, and shall cause their respective members of their Group to, continue to honor all commitments under this Agreement and each Ancillary Agreement to the extent required by such agreements during the course of dispute resolution pursuant to the provisions of this Article VII , unless such commitments are the specific subject of the Dispute at issue.

ARTICLE VIII

FURTHER ASSURANCES AND ADDITIONAL COVENANTS

8.1 Further Assurances .

(a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the Parties shall use its reasonable best efforts, prior to, on and after the Effective Time, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

(b) Without limiting the foregoing, prior to, on and after the Effective Time, each Party hereto shall cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party, to execute and deliver, or use its reasonable best efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all Approvals or Notifications of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument (including any Governmental Approvals) and to take all such other actions as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements, the transfers of the PayPal Assets and the eBay Assets, the assignment and assumption of the PayPal Liabilities and the eBay Liabilities and the other transactions

 

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contemplated hereby and thereby. Without limiting the foregoing, each Party will, at the reasonable request, cost and expense of the other Party, take such other actions as may be reasonably necessary to vest in such other Party good and marketable title to the Assets transferred or allocated to such Party under this Agreement or any of the Ancillary Agreements, free and clear of any Security Interest, if and to the extent it is practicable to do so.

(c) On or prior to the Effective Time, eBay and PayPal in their respective capacities as direct and indirect stockholders of the members of their respective Groups, shall each ratify any actions which are reasonably necessary or desirable to be taken by eBay, PayPal or any of the members of their respective Groups, as the case may be, to effectuate the transactions contemplated by this Agreement and the Ancillary Agreements.

ARTICLE IX

TERMINATION

9.1 Termination . This Agreement and all Ancillary Agreements may be terminated and the Distribution may be amended, modified or abandoned at any time prior to the Effective Time by eBay, in its sole and absolute discretion, without the approval or consent of any other Person, including PayPal. After the Effective Time, this Agreement may not be terminated except by an agreement in writing signed by a duly authorized officer of each of the Parties.

9.2 Effect of Termination . In the event of any termination of this Agreement prior to the Effective Time, no Party (nor any of its directors, officers or employees) shall have any Liability or further obligation to the other Party by reason of this Agreement.

ARTICLE X

MISCELLANEOUS

10.1 Counterparts; Entire Agreement; Corporate Power .

(a) This Agreement and each Ancillary 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.

(b) 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.

 

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(c) eBay represents on behalf of itself and each other member of the eBay Group, and PayPal represents on behalf of itself and each other member of the PayPal 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 each Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and

(ii) this Agreement and each Ancillary Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

(d) 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 or any Ancillary 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 or any Ancillary 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 each such Ancillary Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

10.2 Governing Law . This Agreement and, unless expressly provided therein, each Ancillary Agreement (and any claims or disputes arising out of or related hereto or thereto or to the transactions contemplated hereby and thereby or to the inducement of any party to enter herein and therein, 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.

10.3 Assignability . Except as set forth in any Ancillary Agreement, this Agreement and each Ancillary Agreement shall be binding upon and inure to the benefit of the Parties and the parties thereto, respectively, and their respective successors and permitted assigns; provided , that neither Party nor any such party thereto may assign its rights or delegate its obligations under this Agreement or any Ancillary Agreement without the express prior written consent of the other Party hereto or other parties thereto, as applicable. 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

 

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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. Nothing herein is intended to, or shall be construed to, prohibit either Party or any member of its Group from being party to or undertaking a change of control.

10.4 Third-Party Beneficiaries . Except for the indemnification rights under this Agreement of any eBay Indemnified Party or PayPal Indemnified Party in their respective capacities as such, (a) the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and (b) there are no third-party beneficiaries of this Agreement or any Ancillary Agreement and neither this Agreement nor any Ancillary Agreement shall provide any third person with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.

10.5 Notices . All notices, requests, claims, demands or other communications under this Agreement and, to the extent, applicable and unless otherwise provided therein, under each of the Ancillary Agreements 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 10.5 ):

If to eBay, to:

eBay Inc.

2065 Hamilton Avenue

San Jose, California 95125

Attention: General Counsel

Email: [•]

If to PayPal, to:

PayPal Holdings, Inc.

2211 North First Street

San Jose, California 95131

Attention: General Counsel

Email: [•]

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

10.6 Severability . If any provision of this Agreement or any Ancillary 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 thereof, or the application of such provision to Persons or circumstances or in jurisdictions other

 

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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.

10.7 Force Majeure . No Party shall be deemed in default of this Agreement or, unless otherwise expressly provided therein, any Ancillary Agreement for any delay or failure to fulfill any obligation (other than a payment obligation) hereunder or thereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance of such obligations (other than a payment obligation) shall be extended for a period equal to the time lost by reason of the delay. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement and the Ancillary Agreements, as applicable, as soon as reasonably practicable.

10.8 No Set-Off . Except as set forth in any Ancillary Agreement or as otherwise mutually agreed to in writing by the Parties, neither Party nor any member of such Party’s Group shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Agreement or any Ancillary Agreement; or (b) any other amounts claimed to be owed to the other Party or any member of its Group arising out of this Agreement or any Ancillary Agreement.

10.9 Publicity . Prior to the Effective Time, each of PayPal and eBay shall consult with each other prior to issuing any press releases or otherwise making public statements with respect to the Separation, the Distribution or any of the other transactions contemplated hereby or under any Ancillary Agreement and prior to making any filings with any Governmental Authority with respect thereto.

10.10 Expenses . Except as otherwise expressly set forth in this Agreement or any Ancillary Agreement, or as otherwise agreed to in writing by the Parties, all out-of-pocket fees, costs and expenses incurred prior to the Effective Time in connection with the preparation, execution, delivery and implementation of this Agreement and any Ancillary Agreement, the Separation, the Plan of Reorganization, the Form 10, the Distribution and the consummation of the transactions contemplated hereby and thereby will be borne by eBay and (b) all out-of-pocket fees, costs and expenses incurred following the Effective Time will be borne by the Party or its applicable Subsidiary incurring such fees, costs or expenses.

10.11 Headings . The article, section and paragraph headings contained in this Agreement and in the Ancillary Agreements are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement or any Ancillary Agreement.

10.12 Survival of Covenants . Except as expressly set forth in this Agreement or any Ancillary Agreement, the covenants, representations and warranties contained in this Agreement and each Ancillary Agreement, and Liability for the breach of any obligations contained herein, shall survive the Separation and the Distribution and shall remain in full force and effect in accordance with their terms.

 

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10.13 Waivers of Default . Waiver by a Party of any default by the other Party of any provision of this Agreement or any Ancillary 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 or any Ancillary 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.

10.14 Specific Performance . Subject to the provisions of Article VII , in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any Ancillary Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief in respect of its or their rights under this Agreement or such Ancillary Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties.

10.15 Amendments . No provisions of this Agreement or any Ancillary 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.

10.16 Interpretation . In this Agreement and any Ancillary Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires; (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement (or the applicable Ancillary Agreement) as a whole (including all of the Schedules, Exhibits and Appendices hereto and thereto) and not to any particular provision of this Agreement (or such Ancillary Agreement); (c) Article, Section, Schedule, Exhibit and Appendix references are to the Articles, Sections, Schedules, Exhibits and Appendices to this Agreement (or the applicable Ancillary Agreement) unless otherwise specified; (d) unless otherwise stated, all references to any agreement shall be deemed to include the exhibits, schedules and annexes to such agreement; (e) the word “including” and words of similar import when used in this Agreement (or the applicable Ancillary Agreement) shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) unless otherwise specified in a particular case, the word “days” refers to calendar days; (h) references to “business day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by law to close in the United States or San Jose, California; (i) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the

 

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date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified; and (j) unless expressly stated to the contrary in this Agreement or in any Ancillary Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to [•], 201[•].

10.17 Limitations of Liability . Notwithstanding anything in this Agreement to the contrary, neither PayPal or any member of the PayPal Group, on the one hand, nor eBay or any member of the eBay Group, on the other hand, shall be liable under this Agreement to the other for any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability to the extent payable to a Third-Party with respect to a Third-Party Claim).

10.18 Performance . eBay will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the eBay Group. PayPal will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the PayPal Group. Each Party (including its permitted successors and assigns) further agrees that it will (a) give timely notice of the terms, conditions and continuing obligations contained in this Agreement and any applicable Ancillary Agreement to all of the other members of its Group and (b) cause all of the other members of its Group not to take any action or fail to take any such action inconsistent with such Party’s obligations under this Agreement, any Ancillary Agreement or the transactions contemplated hereby or thereby.

10.19 Mutual Drafting . This Agreement and the Ancillary Agreements shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the Parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives.

 

[•]
By:

 

Name:
Title:
[•]
By:

 

Name:
Title:

[Signature Page to Separation and Distribution Agreement]

Exhibit 3.1

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

PAYPAL HOLDINGS, INC.

PayPal Holdings, Inc., a corporation organized and existing under the laws of the State of Delaware, does hereby certify as follows:

A. The name of the corporation is PayPal Holdings, Inc. The date of the filing of its original certificate of incorporation with the Secretary of State was January 30, 2015.

B. This amended and restated certificate of incorporation amends, restates and integrates the certificate of incorporation of said corporation (the “ original certificate of incorporation ”) and has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware (the “ DGCL ”) by the written consent of its sole stockholder in accordance with Section 228 of the DGCL.

C. The text of the original certificate of incorporation is hereby amended and restated to read herein as set forth in full.

ARTICLE I

The name of the corporation is PayPal Holdings, Inc. (the “ corporation ”).

ARTICLE II

The address of the registered office of the corporation in the State of Delaware is 160 Greentree Drive, Suite 101, City of Dover 19904, County of Kent. The name of its registered agent at that address is National Registered Agents, Inc.

ARTICLE III

The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

ARTICLE IV

A. The total number of shares of all classes of stock which the corporation has the authority to issue is [•] shares, consisting of two classes:  [•] shares of common stock, $0.0001 par value per share (the “ Common Stock ”), and 100,000,000 shares of preferred stock, 0.0001 par value per share (the “ Preferred Stock ”).

B. Except as may otherwise be provided in this certificate of incorporation, in a Certificate of Designation (as defined below) or as required by law, the holders of the outstanding shares of Common Stock shall have the right to vote on all questions to the exclusion of all other stockholders, each holder of record of Common Stock being entitled to one vote for


each share of Common Stock standing in the name of the stockholder on the books of the corporation.

C. The Board of Directors is authorized, subject to any limitations prescribed by the law of the State of Delaware, to provide for the issuance of the shares of Preferred Stock in one or more series, for such consideration and for such corporate purposes as the Board of Directors (or a duly authorized committee thereof) may from time to time determine, and, by filing a certificate (referred to as a “ Certificate of Designation ”) pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof to the fullest extent now or hereafter permitted by this certificate of incorporation and the laws of the State of Delaware, including, without limitation, voting rights, dividend rights, liquidation rights, redemption rights and conversion rights, as shall be stated and expressed in a resolution or resolutions adopted by the Board of Directors (or such committee thereof) providing for the issuance of, or increase or decrease of the number of shares of, such series of Preferred Stock.

D. Except as otherwise expressly provided in any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article IV, any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board of Directors without approval of the holders of Common Stock or the holders of Preferred Stock, or any series thereof, and any such new series may have powers, preferences and rights, senior to, junior to or pari passu with the rights of the Common Stock, the Preferred Stock, or any future class or series of Preferred Stock or Common Stock. Each series of Preferred Stock shall be distinctly designated. The authority of the Board of Directors with respect to each series of Preferred Stock shall include, but not be limited to, determination of the following:

 

  (i) the designation of the series, which may be by distinguishing number, letter or title;

 

  (ii) the number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the Certificate of Designation) increase or decrease (but not below the number of shares thereof then outstanding);

 

  (iii) the amounts payable on, and the preferences, if any, of shares of the series in respect of dividends, and whether such dividends, if any, shall be cumulative or noncumulative;

 

  (iv) dates at which dividends, if any, shall be payable;

 

  (v) the redemption rights and price or prices, if any, for shares of the series;

 

  (vi) the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series;

 

  (vii) the amounts payable on, and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation;

 

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  (viii) whether the shares of the series shall be convertible into or exchangeable for shares of any other class or series, or any other security, of the corporation or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible or exchangeable and all other terms and conditions upon which such conversion or exchange may be made;

 

  (ix) restrictions on the issuance of shares of the same series or of any other class or series; and

 

  (x) the voting rights, if any, of the holders of shares of the series.

ARTICLE V

In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors of the corporation shall have the power to adopt, amend or repeal by-laws of the corporation (the “ Bylaws ”), in whole or in part.

ARTICLE VI

A. Election of directors need not be by written ballot unless the Bylaws of the corporation shall so provide.

B. Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the total number of directors that the corporation would have if there were no vacancies.

C. Each nominee for director, other than those who may be elected by the holders of Preferred Stock under specified circumstances, shall stand for election as a director at the next annual meeting of stockholders and shall, if elected, hold office until the next annual meeting of stockholders and until their respective successors are duly elected and qualified, subject to their earlier death, resignation, retirement or removal from service as a director.

D. Advance notice of stockholder nominations for the election of directors and of any stockholder proposals to be considered at an annual stockholder meeting shall be given in the manner provided in the Bylaws. Nominations of any person for election to the Board of Directors at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only (i) by or at the direction of the Board of Directors, including by any committee or persons appointed by the Board of Directors, (ii) by a stockholder who (1) was a stockholder of record (and, with respect to any beneficial owner, if different, on whose behalf such nomination is proposed to be made, only if such beneficial owner was the beneficial owner of shares of the corporation) both at the time of giving the notice provided for in the Bylaws and at the time of the meeting, (2) is entitled to vote at the meeting, and (3) has complied with the procedures set forth in the Bylaws as to such nomination or (iii) by a stockholder or group of stockholders as provided in Clause E of this Article VI. The foregoing Clauses (ii) and (iii) shall be the exclusive means for a stockholder to make any nomination of a

 

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person or persons for election to the Board of Directors at an annual meeting or special meeting (other than, if permitted by Article VII, pursuant to a Special Meeting Request).

E. Subject to the terms and conditions of this Clause E and the applicable provisions of the Bylaws, the corporation shall include in its proxy statement for an annual meeting of the stockholders of the corporation the name, together with the Required Information (defined below), of any person nominated for election (the “ Stockholder Nominee ”) to the Board of Directors by one or more stockholders that satisfy, the requirements of this Clause E (such person or group, the “ Eligible Stockholder ”), and that expressly elects at the time of providing the notice required by this Clause E to have its nominee included in the corporation’s proxy materials pursuant to this Clause E. Such notice shall consist of all of the information required in a stockholder’s notice required by the Bylaws with respect to any director nomination, in proper form, along with a copy of the Eligible Stockholder’s Schedule 14N (the “ Schedule 14N ”) that has been or will be filed with the Securities and Exchange Commission (the “ Commission ”) in accordance with Rule 14a-18 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (as so amended and inclusive of such rules and regulations, the “ Exchange Act ”), and any additional information as required to be delivered to the corporation by this Clause E (all such information collectively referred to as the “ Notice ”), and such Notice shall be delivered to the corporation in accordance with the procedures and at the times set forth in this Clause E. This Clause E shall be the exclusive means by which the corporation may be required (subject to the terms and conditions of this Clause E and the applicable provisions of the Bylaws) to include in its proxy statement for any meeting of the stockholders of the corporation any person nominated for election to the Board of Directors by a stockholder. Without limiting the foregoing:

(i) The Notice, to be timely, must be delivered to or mailed and received at the principal executive offices of the corporation within the time periods applicable to stockholder notices of nominations delivered pursuant to the Bylaws and further be updated and supplemented, if necessary, in accordance with the Bylaws. In addition, for the Notice to be timely, an Eligible Stockholder must file or cause to be filed its Schedule 14N with the Commission no later than the thirtieth (30th) day following the final date specified in the Bylaws for delivery of the Notice. In no event shall any adjournment or postponement of an annual meeting, the date of which has been announced by the corporation, commence a new time period for the giving of a Notice. For the avoidance of doubt, the requirement to update and supplement a Notice and to file a Schedule 14N with the Commission shall not allow an Eligible Stockholder to change or add any proposed Stockholder Nominee.

(ii) Subject to the provisions of this Clause E(ii), the maximum number of Stockholder Nominees (including Stockholder Nominees that were submitted by an Eligible Stockholder for inclusion in proxy materials of the corporation pursuant to this Clause E but either are subsequently withdrawn, or that the Board of Directors itself determines to nominate for election) appearing in the corporation’s proxy materials with respect to any annual meeting of stockholders shall not exceed 20% of the number of directors in office as of the last day on which the Notice may be delivered, or if such amount is not a whole number, the closest whole number below 20% of such number of directors (the “ Permitted Number ”); provided , that the Permitted Number shall be

 

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reduced by (1) the number of such director candidates for which the corporation shall have received one or more valid stockholder notices nominating director candidates pursuant to Clause D(ii) of this Article VI, (2) the number of directors or director candidates that the corporation has agreed to include in its proxy materials as a nominee pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders and (3) the number of directors in office and whom the Board of Directors is renominating for election for whom access to the corporation’s proxy materials was previously provided pursuant to this Clause E (other than any such director who has served as a director continuously for at least twenty-four (24) months), but only to the extent that the Permitted Number after such reduction with respect to this clause (3) equals or exceeds one (1); provided , further , that if one or more vacancies for any reason occurs on the Board of Directors at any time before the date of the annual meeting and the Board of Directors resolves to reduce the size of the Board of Directors in connection therewith, the Permitted Number shall be calculated based on the number of directors in office as so reduced. If the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Clause E exceeds the Permitted Number, each Eligible Stockholder will select one Stockholder Nominee for inclusion in the corporation’s proxy materials until the Permitted Number is reached, going in order of the amount (largest to smallest) of shares of Common Stock each Eligible Stockholder disclosed as owned in its Notice. If the Permitted Number is not reached after each Eligible Stockholder has selected one Stockholder Nominee, this selection process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached.

(iii) An Eligible Stockholder is one or more stockholders of record who own and have owned, or are acting on behalf of one or more beneficial owners who own and have owned (in each case as defined below), continuously for at least thirty-six (36) months as of both the date that the Notice is received by the corporation pursuant to this Clause E, and as of the record date for determining stockholders eligible to vote at the annual meeting, Common Stock of the corporation representing at least three percent (3%) of the corporation’s issued and outstanding Common Stock (the “ Required Shares ”), and who continue to own the Required Shares at all times between the date such Notice is received by the corporation and the date of the applicable meeting of stockholders, provided that the aggregate number of stockholders, and, if and to the extent that a stockholder is acting on behalf of one or more beneficial owners, of such beneficial owners, whose stock ownership is counted for the purpose of satisfying the foregoing ownership requirement shall not exceed fifteen (15). Two or more funds that are (1) under common management and investment control or (2) under common management and funded primarily by a single employer (such funds together under each of (1) or (2) comprising a “ Qualifying Fund ”) shall be treated as one stockholder for the purpose of determining the aggregate number of stockholders in this Clause E, provided that each fund comprising a Qualifying Fund otherwise meets the requirements set forth in this Clause E. No stockholder or beneficial holder may be a member of more than one group constituting an Eligible Stockholder under this Clause E. A record holder acting on behalf of a beneficial owner will be counted as a stockholder only with respect to the shares owned by beneficial owners on whose behalf such record holder has been directed in writing to act, and, with respect to the shares covered by such directions, will be

 

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deemed to be the same stockholder as the beneficial owner for purposes of determining the number of stockholders whose holdings may be considered as part of an Eligible Stockholder’s holdings.

(iv) No later than the final date specified in this Clause E for delivery of the Notice, an Eligible Stockholder must provide the following information in writing to the Secretary of the corporation: (1) one or more written statements from the record holders of the shares (and from each intermediary through which the shares are or have been held during the requisite thirty-six (36)-month holding period) verifying that, as of a date within seven calendar days prior to the date the Notice is received by the corporation, the Eligible Stockholder owns, and has owned continuously for the preceding thirty-six (36) months, the Required Shares, and the Eligible Stockholder’s agreement to provide, within five (5) business days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying the Eligible Stockholder’s continuous ownership of the Required Shares through the record date; (2) the information required to be set forth in the Notice, together with the written consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected; (3) a representation that the Eligible Stockholder (including each member of any group of stockholders that together is an Eligible Stockholder) (a) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control of the corporation, and does not presently have such intent, (b) presently intends to maintain qualifying ownership of the Required Shares through the date of the annual meeting, (c) has not nominated and will not nominate for election to the Board of Directors at the annual meeting any person other than its Stockholder Nominee(s) being nominated pursuant to this Clause E, (d) has not engaged and will not engage in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors, (e) will not distribute to any stockholder any form of proxy for the annual meeting other than the form distributed by the corporation and (f) will provide facts, statements and other information in all communications with the corporation and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading and other comply with all applicable laws, rules and regulations in connection with any actions taken pursuant to this Clause E; (4) in the case of a nomination by a group of stockholders that together is such an Eligible Stockholder, the designation by all group members of one group member that is authorized to act on behalf of all members of the nominating stockholder group with respect to the nomination and matters related thereto, including withdrawal of the nomination; and (5) an undertaking that the Eligible Stockholder agrees to (a) assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder’s communications with the stockholders of the corporation or out of the information that the Eligible Stockholder provided to the corporation, (b) indemnify and hold harmless the corporation and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the corporation or any of its directors, officers or employees arising

 

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out of any violation of law, regulation or contract (including any provisions of this certificate of incorporation or the corporation’s Bylaws) in connection with any nomination submitted by the Eligible Stockholder pursuant to this Clause E, and (c) file with the Commission under Regulation 14A of the Exchange Act any solicitation or other communication with the corporation’s stockholders relating to the meeting at which the Stockholder Nominee will be nominated.

(v) The Eligible Stockholder may provide to the Secretary, at the time the Notice is timely delivered to the corporation pursuant to this Clause E, a written statement for inclusion in the corporation’s proxy statement for the annual meeting, not to exceed 500 words, in support of the Stockholder Nominee’s candidacy (the “ Statement ”). Notwithstanding anything to the contrary contained in this Clause E, the corporation may omit from its proxy materials any information or Statement that it, in good faith, believes is materially false or misleading, omits to state any material fact, or would violate any applicable law or regulation. Nothing in this certificate of incorporation shall limit the corporation’s ability to solicit against and include in the proxy statement its own statement relating to any Stockholder Nominee.

(vi) At the request of the corporation, each Stockholder Nominee must (1) provide an executed agreement, in a form deemed satisfactory by the Board of Directors or its designee, that (a) the Stockholder Nominee has read and agrees, if elected, to serve as a member of the Board of Directors, to adhere to the corporation’s Corporate Governance Guidelines and Code of Conduct and any other corporation policies and guidelines applicable to directors, and (b) that the Stockholder Nominee is not and will not become a party to any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity in connection with his or her nomination, service or action as a director of the corporation, or any agreement, arrangement or understanding with any person or entity as to how the Stockholder Nominee would vote or act on any issue or question as a director, in each case that has not been fully disclosed to the corporation; (2) submit completed and signed questionnaires required of the corporation’s directors (forms of which shall be made available by the Secretary following written request); and (3) provide such additional information as necessary to permit the Board of Directors to determine if such Stockholder Nominee is independent under the listing standards of each principal U.S. exchange upon which the Common Stock is listed, any applicable rules of the Commission and any publicly disclosed standards used by the Board of Directors in determining and disclosing the independence of the corporation’s directors. If any information or communications provided by or on behalf of the Eligible Stockholder or the Stockholder Nominee to the corporation or its stockholders ceases to be true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, each Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the Secretary of any defect in such previously provided information and of the information that is required to correct any such defect.

(vii) Any Stockholder Nominee who is included in the corporation’s proxy materials for a particular annual meeting of stockholders but either (1) withdraws from or

 

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becomes ineligible or unavailable for election at the annual meeting (other than by reason of such Stockholder Nominee’s death, disability or other health reason) or (2) does not receive at least 10% of the votes cast in favor of the election of such Stockholder Nominee (as calculated pursuant to the applicable provisions of the Bylaws), will be ineligible to be a Stockholder Nominee pursuant to this Clause E for the next two (2) annual meetings of stockholders of the corporation. Any Stockholder Nominee who is included in the corporation’s proxy statement for a particular annual meeting of stockholders, but subsequently is determined not to satisfy the eligibility requirements of this Clause E or any other provision of this certificate of incorporation or the corporation’s Bylaws, Corporate Governance Guidelines or other applicable regulation any time before the annual meeting of Stockholders, will not be eligible for election at the relevant annual meeting of stockholders and may not be substituted by the Eligible Stockholder that nominated such Stockholder Nominee.

(viii) Notwithstanding anything to the contrary, the corporation shall not be required to include, pursuant to this Clause E, any Stockholder Nominee in its proxy materials for any annual meeting of stockholders or, if the proxy statement already has been filed, to allow the nomination of a Stockholder Nominee, notwithstanding that proxies in respect of such vote may have been received by the Corporation: (1) if the Stockholder Nominee or the Eligible Stockholder (or any member of any group of stockholders that together is such Eligible Stockholder) who has nominated such Stockholder Nominee has engaged in or is currently engaged in, or has been or is a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors; (2) who is not independent under the listing standards of each principal U.S. exchange upon which the Common Stock is listed, any applicable rules of the Commission and any publicly disclosed standards used by the Board of Directors in determining and disclosing independence of the corporation’s directors, in each case as determined in good faith by the Board of Directors; (3) whose election as a member of the Board of Directors would cause the corporation to be in violation of this certificate of incorporation, the Bylaws, the rules and listing standards of the principal U.S. exchanges upon which the Common Stock is listed, or any applicable state or federal law, rule or regulation; (4) who is an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, as amended; (5) who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past ten (10) years; (6) if such Stockholder Nominee or the applicable Eligible Stockholder (or any individual member of a group of Eligible Stockholders) shall have provided information to the corporation in connection with such nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, as determined by the Board of Directors or any duly authorized committee thereof; or (7) the Eligible Stockholder (or any member of a group of Eligible Stockholders) or applicable Stockholder Nominee otherwise breaches or fails to comply with its obligations pursuant to this certificate of incorporation, including without limitation this Clause E, or the Bylaws.

 

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(ix) Any Stockholder Nominee who is included in the corporation’s proxy materials for an annual meeting pursuant to this Clause E shall tender an irrevocable resignation in advance of the annual meeting. Such resignation shall become effective upon a determination in good faith by the Board of Directors or any duly authorized committee thereof that any of the provisions of Clause E(viii) shall be applicable.

(x) For purposes of this Clause E:

(1) “ Required Information ” that the corporation will include in its proxy statement is (a) the information concerning the Stockholder Nominee and the Eligible Stockholder that is required to be disclosed in the corporation’s proxy statement by the regulations promulgated under the Exchange Act; and (b) if the Eligible Stockholder so elects, a Statement.

(2) An Eligible Stockholder shall be deemed to “own” only those outstanding shares of Common Stock as to which the stockholder possesses both (a) the full voting and investment rights pertaining to the shares and (b) the full economic interest in (including the opportunity for profit and risk of loss on) such shares; provided, that the number of shares calculated in accordance with the immediately foregoing Clauses (a) and (b) shall not include any shares (x) sold by such stockholder or any of its affiliates in any transaction that has not been settled or closed, including short sales, (y) borrowed by such stockholder or any of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuant to an agreement to resell or (z) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of outstanding Common Stock, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (I) reducing in any manner, to any extent or at any time in the future, such stockholder’s or its affiliates’ full right to vote or direct the voting of any such shares, and/or (II) hedging, offsetting or altering to any degree gain or loss arising from the full economic ownership of such shares by such stockholder or affiliate. A stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder’s ownership of shares shall be deemed to continue during any period in which the stockholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of Common Stock are “owned” for these purposes shall be determined by the Board of Directors.

F. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, removal or

 

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other cause may be filled (a) by a majority of the directors, although less than a quorum, (b) by a sole remaining director or (c) in accordance with the proviso in Article VII, Section E(2), and directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders at which the term of office of the class to which they have been elected expires, and until their respective successors are elected, except in the case of the death, resignation, or removal of any director. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

ARTICLE VII

A. Any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of stockholders of the corporation and may not be effected by any consent in writing by such stockholders.

B. Subject to the terms of any class or series of Preferred Stock and except as required by law, special meetings of the stockholders of the corporation may be called only by: (i) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption); (ii) the Chairman of the Board; (iii) the Chief Executive Officer; and shall be held at such place, if any, and on such date, and at such time as they shall fix; or (iv) in accordance with the following sentence, subject to the provisions of this Article VII and the other applicable provisions of this certificate of incorporation, a special meeting of the stockholders shall be called by the Secretary of the corporation upon the written request (a “ Stockholder Requested Special Meeting ”) of one or more stockholders of record of the corporation that together have continuously held, for their own account or on behalf of others, beneficial ownership of at least a twenty percent (20%) “net long position” of the outstanding common stock of the corporation (the “ Requisite Percent ”) for at least thirty (30) days as of the Delivery Date.

For purposes of determining the Requisite Percent, “net long position” shall be determined with respect to each requesting holder in accordance with the definition thereof set forth in Rule 14e-4 under the Exchange Act; provided , that (x) for purposes of such definition, (1) “the date that a tender offer is first publicly announced or otherwise made known by the bidder to the holders of the security to be acquired” shall be the date of the relevant Special Meeting Request (as defined below), (2) the “highest tender offer price or stated amount of the consideration offered for the subject security” shall refer to the closing sales price of the Common Stock on the NASDAQ Global Select Market (or such other securities exchange designated by the Board of Directors if the Common Stock is not listed for trading on the NASDAQ Global Select Market) on such date (or, if such date is not a trading day, the next succeeding trading day), (3) the “person whose securities are the subject of the offer” shall refer to the corporation, and (4) a “subject security” shall refer to the outstanding common stock of the corporation; and (y) the “net long position” of such holder shall be reduced by the number of shares of Common Stock as to which the Board of Directors determines that such holder does not, or will not, have the right to vote or direct the vote at the special meeting or as to which the Board of Directors determines that such holder has entered into any derivative or other agreement, arrangement or understanding that hedges or transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of such shares.

 

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Whether the requesting holders have complied with the requirements of this Article VII and related provisions of this certificate of incorporation shall be determined in good faith by the Board of Directors, which determination shall be conclusive and binding on the corporation and its stockholders.

C. In order for a Stockholder Requested Special Meeting to be called, one or more requests for a special meeting (each, a “ Special Meeting Request ,” and collectively, the “ Special Meeting Requests ”) must be signed by the Requisite Percent of stockholders submitting such request and by each of the beneficial owners, if any, on whose behalf the Special Meeting Request is being made and must be delivered to the Secretary of the corporation. The Special Meeting Request(s) shall be delivered to the Secretary of the corporation at the principal executive offices of the corporation by overnight express courier or registered mail, return receipt requested. Each Special Meeting Request shall (i) set forth a statement of the specific purpose(s) of the meeting and the matters proposed to be acted on at it, (ii) bear the date of signature of each such stockholder signing the Special Meeting Request, (iii) set forth (1) the name and address, as they appear in the corporation’s books, of each stockholder signing such request and the beneficial owners, if any, on whose behalf such request is made, and (2) the class, if applicable, and the number of shares of Common Stock that are owned of record and beneficially (within the meaning of Rule 13d-3 under the Exchange Act) by each such stockholder and the beneficial owners, if any, on whose behalf such request is made, (iv) include documentary evidence that the stockholders requesting the special meeting own the Requisite Percent as of the Delivery Date (as defined below); provided , that if the stockholders are not the beneficial owners of the shares constituting all or part of the Requisite Percent, then to be valid, the Special Meeting Request must also include documentary evidence (or, if not simultaneously provided with the Special Meeting Request, such documentary evidence must be delivered to the Secretary of the corporation within ten (10) days after the Delivery Date) that the beneficial owners on whose behalf the Special Meeting Request is made beneficially own such shares as of the Delivery Date, (v) an agreement by each of the stockholders requesting the special meeting and each beneficial owner, if any, on whose behalf the Special Meeting Request is being made to notify the corporation promptly in the event of any decrease in the “net long position” held by such stockholder or beneficial owner following the delivery of such Special Meeting Request and prior to the special meeting and an acknowledgement that any such decrease shall be deemed to be a revocation of such Special Meeting Request by such stockholder or beneficial owner to the extent of such reduction, and (vi) contain all of the information required by the Bylaws to be disclosed pursuant to the Bylaws, provided that all references to “ Proposing Person ” and to “ Nominating Person ” in the Bylaws shall, for purposes of Clause C of this Article VII, mean (1) the stockholders of record making the Special Meeting Request, (2) any beneficial owner or beneficial owners, if different, on whose behalf the Special Meeting Request is being made, and (3) any affiliate or associate (each within the meaning of Rule 12b-2 under the Exchange Act for purposes of these Bylaws) of such stockholder or beneficial owner. Each stockholder making a Special Meeting Request and each beneficial owner, if any, on whose behalf the Special Meeting Request is being made is required to update the notice delivered pursuant to this Article VII in accordance with the applicable provisions of the Bylaws. Any requesting stockholder may revoke his, her or its Special Meeting Request at any time prior to the special meeting by written revocation delivered to the Secretary of the corporation at the principal executive offices of the corporation. If at any time after sixty (60) days following the earliest dated Special Meeting Request, the unrevoked (whether by specific written revocation by the stockholder or pursuant to

 

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Clause C(v) of this Article VII) valid Special Meeting Requests represent in the aggregate less than the Requisite Percent, then the requesting stockholder(s) or beneficial owner(s) shall be deemed to have withdrawn such request (in connection with which the Board of Directors may cancel the meeting).

In determining whether a special meeting of stockholders has been requested by stockholders holding in the aggregate at least the Requisite Percent, multiple Special Meeting Requests delivered to the Secretary of the corporation will be considered together only if each Special Meeting Request identifies substantially the same purpose or purposes of the special meeting and substantially the same matters proposed to be acted on at the special meeting (in each case as determined in good faith by the Board of Directors), and such Special Meeting Requests have been delivered to the Secretary of the corporation within sixty (60) days of the earliest dated Special Meeting Request.

D. Except as provided in the next sentence, a special meeting requested by stockholders shall be held at such date, time and place within or without the State of Delaware as may be fixed by the Board of Directors; provided , however , that the date of any such special meeting shall be not more than ninety (90) days after the date on which valid Special Meeting Request(s) constituting the Requisite Percent are delivered to the Secretary of the corporation (such date of delivery being the “ Delivery Date ”). Notwithstanding the foregoing, the Secretary of the corporation shall not be required to call a special meeting of stockholders if (i) the Board of Directors calls an annual meeting of stockholders, or a special meeting of stockholders at which a Similar Item (as defined below) is to be presented pursuant to the notice of such meeting, in either case to be held not later than sixty (60) days after the Delivery Date; (ii) the Delivery Date is during the period commencing ninety (90) days prior to the first anniversary of the date of the immediately preceding annual meeting and ending on the earlier of (1) the date of the next annual meeting and (2) thirty (30) days after the first anniversary of the date of the immediately preceding annual meeting; or (iii) the Special Meeting Request(s) (1) contain an identical or substantially similar item (as determined in good faith by the Board of Directors, a “ Similar Item ”) to an item that was presented at any meeting of stockholders held not more than one hundred and twenty (120) days before the Delivery Date (and for purposes of this Clause (iii), the election of directors shall be deemed a Similar Item with respect to all items of business involving the election or removal of directors); (2) relate to an item of business that is not a proper subject for action by the stockholders under applicable law and Article VII; (3) were made in a manner that involved a violation of Regulation 14A under the Exchange Act or other applicable law; or (4) do not comply with the provisions of this Article VII.

E. Business transacted at any Stockholder Requested Special Meeting (1) shall be limited to the purpose(s) stated in the Special Meeting Request for such special meeting; provided , that the Board of Directors shall have the authority in its discretion to submit additional matters to the stockholders and to cause other business to be transacted pursuant to the corporation’s notice of meeting, and (2) shall not include the election, removal or replacement of directors unless a single person or entity, or “group” of persons or entities who have filed as a “group” as defined under Section 13(d) of the Exchange Act with respect to their ownership of the then-outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors, has a “net long position” of greater than 50% of such shares as of the Delivery Date; provided , that following such time that a single person or entity, or “group” of

 

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persons or entities who have filed as a “group” as defined under Section 13(d) of the Exchange Act with respect to such ownership, has a net “net long position” at of greater than 50% of such shares as of the Delivery Date, then, subject to the rights of the holders of any series of Preferred Stock with respect to such series of Preferred Stock, any director, or the entire Board of Directors, may be removed from office at any time with or without cause, and replaced, by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class. If none of the stockholders who submitted a Special Meeting Request appears at or sends a duly authorized representative to the Stockholder Requested Special Meeting to present the matters to be presented for consideration that were specified in the Special Meeting Request, the corporation need not present such matters for a vote at such meeting.

ARTICLE VIII

A. The corporation shall not be governed by or subject to Section 203 of the DGCL.

B. Notwithstanding the foregoing, the corporation shall not engage in any business combination (as defined below), at any point in time at which the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, with any interested stockholder (as defined below) for a period of three (3) years following the time that such stockholder became an interested stockholder, unless:

(i) prior to such time, the Board of Directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder, or

(ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock (as defined below) of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by (i) persons who are directors and also officers or (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or

(iii) at or subsequent to such time, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two thirds (2/3) of the outstanding voting stock of the corporation which is not owned by the interested stockholder.

C. The restrictions contained in this Article VIII shall not apply if:

(i) the corporation, by action of its stockholders, adopts an amendment to this certificate of incorporation expressly deleting or deciding not to be bound by this Article VIII; provided that, in addition to any other vote required by law, such amendment to the certificate of incorporation must be approved by the affirmative vote of

 

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a majority of the shares entitled to vote. An amendment adopted pursuant to this paragraph shall not be effective until 12 months after the adoption of such amendment and shall not apply to any business combination between the corporation and any person who became an interested stockholder on or prior to such adoption;

(ii) a stockholder becomes an interested stockholder inadvertently and (1) as soon as practicable divests itself of ownership of sufficient shares so that the stockholder ceases to be an interested stockholder; and (2) would not, at any time within the 3-year period immediately prior to a business combination between the corporation and such stockholder, have been an interested stockholder but for the inadvertent acquisition of ownership; or

(iii) the business combination is proposed prior to the consummation or abandonment of and subsequent to the earlier of the public announcement or the notice required hereunder of a proposed transaction which (1) constitutes one of the transactions described in the second sentence of this paragraph; (2) is with or by a person who either was not an interested stockholder during the previous three years or who became an interested stockholder with the approval of the Board of Directors; and (3) is approved or not opposed by a majority of the members of the Board of Directors then in office (but not less than one) who were directors prior to any person becoming an interested stockholder during the previous three years or were recommended for election or elected to succeed such directors by a majority of such directors. The proposed transactions referred to in the preceding sentence are limited to (x) a merger or consolidation of the corporation (except for a merger in respect of which, pursuant to Section 251(f) of the DGCL, no vote of the stockholders of the corporation is required); (y) a sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), whether as part of a dissolution or otherwise, of assets of the corporation or of any direct or indirect majority-owned subsidiary of the corporation (other than to any direct or indirect wholly-owned subsidiary or to the corporation) having an aggregate market value equal to 50% or more of either that aggregate market value of all of the assets of the corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the corporation; or (z) a proposed tender or exchange offer for 50% or more of the outstanding voting stock of the corporation. The corporation shall give not less than twenty (20) days’ notice to all interested stockholders prior to the consummation of any of the transactions described in Clause (x) or (y) of the second sentence of this paragraph.

D. For purposes of this Article VIII, references to:

(i) “ affiliate ” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another person.

(ii) “ associate ,” when used to indicate a relationship with any person, means: (i) any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock; (ii) any trust or other estate in which such person has at

 

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least a 20% beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.

(iii) “ business combination ,” when used in reference to the corporation and any interested stockholder of the corporation, means:

(1) any merger or consolidation of the corporation or any direct or indirect majority-owned subsidiary of the corporation (a) with the interested stockholder, or (b) with any other corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the interested stockholder and as a result of such merger or consolidation, Clause B of this Article VIII is not applicable to the surviving entity;

(2) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder of the corporation, to or with the interested stockholder, whether as part of a dissolution or otherwise, of assets of the corporation or of any direct or indirect majority-owned subsidiary of the corporation which assets have an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the corporation;

(3) any transaction which results in the issuance or transfer by the corporation or by any direct or indirect majority-owned subsidiary of the corporation of any stock of the corporation or of such subsidiary to the interested stockholder, except: (a) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the corporation or any such subsidiary which securities were outstanding prior to the time that the interested stockholder became such; (b) pursuant to a merger under Section 251(g) of the DGCL; (c) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the corporation or any such subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the corporation subsequent to the time the interested stockholder became such; (d) pursuant to an exchange offer by the corporation to purchase stock made on the same terms to all holders of said stock; or (e) any issuance or transfer of stock by the corporation; provided , however , that in no case under items (c)-(e) of this subsection (3) shall there be an increase in the interested stockholder’s proportionate share of the stock of any class or series of the corporation or of the voting stock of the corporation (except as a result of immaterial changes due to fractional share adjustments);

(4) any transaction involving the corporation or any direct or indirect majority-owned subsidiary of the corporation which has the effect, directly or indirectly, of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the corporation or

 

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of any such subsidiary which is owned by the interested stockholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares of stock not caused, directly or indirectly, by the interested stockholder; or

(5) any receipt by the interested stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of the corporation), of any loans, advances, guarantees, pledges, or other financial benefits (other than those expressly permitted in subsections (1)-(4) above) provided by or through the corporation or any direct or indirect majority-owned subsidiary.

(iv) “ control ,” including the terms “ controlling ,” “ controlled by ” and “ under common control with ,” 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 the ownership of voting stock, by contract, or otherwise. A person who is the owner of 20% or more of the outstanding voting stock of any corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this Article VII, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.

(v) “ interested stockholder ” means any person (other than the corporation or any direct or indirect majority-owned subsidiary of the corporation) that (1) is the owner of 20% or more of the outstanding voting stock of the corporation, or (2) is an affiliate or associate of the corporation and was the owner of 20% or more of the outstanding voting stock of the corporation at any time within the three year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder, and the affiliates and associates of such person; provided , that the term “interested stockholder” shall not include any person whose ownership of shares in excess of the 20% limitation set forth herein is the result of any action taken solely by the corporation; provided , that any such person shall be an interested stockholder if thereafter such person acquires additional shares of voting stock of the corporation, except as a result of further corporate action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an interested stockholder, the voting stock of the corporation deemed to be outstanding shall include stock deemed to be owned by the person through application of the definition of “owner” below, but shall not include any other unissued stock of the corporation which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

(vi) “ owner ,” including the terms “ own ” and “ owned ,” when used with respect to any stock, means a person that individually or with or through any of its affiliates or associates:

(1) beneficially owns such stock, directly or indirectly; or

 

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(2) has (a) the right to acquire such stock (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, that a person shall not be deemed the owner of stock tendered pursuant to a tender or exchange offer made by such person or any of such person’s affiliates or associates until such tendered stock is accepted for purchase or exchange; or (b) the right to vote such stock pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any stock because of such person’s right to vote such stock if the agreement, arrangement or understanding to vote such stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to ten (10) or more persons; or

(3) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (b) of subsection (2) above), or disposing of such stock with any other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, such stock.

(vii) “ person ” means any individual, corporation, partnership, unincorporated association or other entity.

(viii) “ stock ” means, with respect to any corporation, capital stock and, with respect to any other entity, any equity interest.

(ix) “ voting stock ” means stock of any class or series entitled to vote generally in the election of directors. Every reference to a percentage of voting stock shall refer to such percentage of the votes of such voting stock.

ARTICLE IX

A. To the fullest extent permitted by law, no director of the corporation shall be personally liable either to the corporation or to any of its stockholders for monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the preceding sentence, if the Delaware General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.

B. To the fullest extent permitted by applicable law, this corporation is also authorized to provide indemnification of (and advancement of expenses to) agents (and any other persons to which Delaware law permits this corporation to provide indemnification) through bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the Delaware General Corporation Law, subject only to limits

 

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created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to the corporation, its stockholders, and others.

C. No amendment, modification or repeal of this Article IX, nor the adoption of any provision of this certificate of incorporation inconsistent with this Article IX, shall eliminate, reduce or otherwise adversely affect any right or protection of a director of the corporation hereunder in respect of any act or omission occurring prior to or at the time of such amendment, modification or repeal or adoption of such inconsistent provision.

ARTICLE X

Unless the corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the corporation to the corporation or the corporation’s stockholders, (c) any action asserting a claim against the corporation or any director or officer or other employee of the corporation arising pursuant to any provision of the DGCL or this certificate of incorporation or the Bylaws (as either may be amended from time to time), or (d) any action asserting a claim against the corporation or any director or officer or other employee of the corporation governed by the internal affairs doctrine shall be a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware). Any person or entity purchasing or otherwise acquiring any interests in shares of capital stock of the corporation shall be deemed to have notice of and to have consented to the provisions of this Article X.

ARTICLE XI

In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware as they presently exist or may hereafter be amended, the corporation may from time to time alter, amend, repeal or adopt, in whole or in part, any provisions of this certificate of incorporation.

IN WITNESS WHEREOF , this Amended and Restated Certificate of Incorporation of PayPal Holdings, Inc. has been signed and attested as of this [Date] of [Month, Year].

 

 

 

[Name]

[Position]

 

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Exhibit 3.2

AMENDED AND RESTATED BYLAWS

OF

PAYPAL HOLDINGS, INC.

(a Delaware corporation)

PayPal Holdings, Inc. (the “ Corporation ”), pursuant to the provisions of Section 109 of the Delaware General Corporation Law, hereby adopts these Amended and Restated Bylaws, which restate, amend and supersede the bylaws of the Corporation, as previously amended and restated, in their entirety as described below:

ARTICLE I

STOCKHOLDERS

Section 1.1 Place of Meetings . Meetings of the stockholders of the Corporation may be held at such place, either within or without the State of Delaware, as may be designated from time to time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law.

Section 1.2 Annual Meetings . If required by applicable law, an annual meeting of stockholders shall be held for the election of directors at such date and time, as the Board of Directors shall each year fix. Any other proper business may be transacted at the annual meeting.

Section 1.3 Special Meetings . Special meetings of the stockholders may be called and business at such special meetings may be transacted only in accordance with the provisions of Article VII of the Certificate of Incorporation (defined below).

Section 1.4 Notice of Meetings . Notice of all meetings of stockholders shall be given that shall state the place, if any, date and time of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation of the Corporation as currently in effect (the “ Certificate of Incorporation ”), such notice shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting.

Section 1.5 Manner of Giving Notice; Affidavit of Notice .

(a) Notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his, her or its address as it appears on the records of the Corporation.


(b) Except as otherwise prohibited by the Delaware General Corporation Law and without limiting the foregoing, any notice to stockholders given by the Corporation under any provision of the Delaware General Corporation Law, the Certificate of Incorporation or these Bylaws shall be effective if given by a form of electronic transmission consented to (and not properly revoked by written notice to the Corporation) by the stockholder to whom the notice is given, to the extent such consent is required by the Delaware General Corporation Law. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (i) the Corporation is unable to deliver by electronic transmission two (2) consecutive notices given by the Corporation in accordance with such consent and (ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent of the Corporation, or other person responsible for the giving of notice; provided , however , that the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Any such notice shall be deemed given (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder.

(c) For the purposes of these Bylaws, an “ electronic transmission ” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

(d) Except as otherwise prohibited under the Delaware General Corporation Law and without limiting the manner by which notice otherwise may be given to stockholders, any notice to stockholders given by the Corporation under any provision of the Delaware General Corporation Law, the Certificate of Incorporation or these Bylaws may be given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Such consent shall have been deemed to have been given if a stockholder fails to object in writing to the Corporation within sixty (60) days of having been given written notice by the Corporation of its intention to send the single notice in accordance with this Section 1.5(d). Any such consent shall be revocable by the stockholders by written notice to the Corporation.

(e) An affidavit of the Secretary or an Assistant Secretary of the Corporation or of the transfer agent or other agent of the Corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

Section 1.6 Adjournments . Any meeting of stockholders may adjourn from time to time to reconvene at the same or another place, if any, or by means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and notice need not be given of any such adjourned meeting if the place, if any, time and date thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken; provided ,

 

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however , that if the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, then a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting.

Section 1.7 Quorum . At each meeting of stockholders, the holders of a majority of the shares of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business, except if otherwise required by applicable law. Where a separate vote by a class or classes or series is required, a majority of the shares of such class or classes or series then outstanding and entitled to vote present in person or by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting may adjourn the meeting. Shares of the Corporation’s stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided , however , that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation’s stock held by it in a fiduciary capacity.

Section 1.8 Conduct of Business . Meetings of stockholders shall be presided over by such person as the Board of Directors may designate as chairman of the meeting, or, in the absence of such a person, the Chairman of the Board, or, in the absence of such person, the President of the Corporation, or, in the absence of such person, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting. The Secretary of the Corporation shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting. The Board of Directors shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, adjourning the meeting if the chairman determines in his or her sole discretion that an adjournment is advisable, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting and matters which are to be voted on by ballot.

Section 1.9 Voting; Proxies . Unless otherwise provided by law or the Certificate of Incorporation, each stockholder shall be entitled to one (1) vote for each share of stock held by such stockholder of record according to the records of the Corporation. The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance

 

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with the provisions of Section 1.10 of these Bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the Delaware General Corporation Law. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Unless otherwise provided in the Certificate of Incorporation or a Certificate of Designation relating to a series of Preferred Stock, directors shall be elected as provided in Section 2.2 of these Bylaws. Unless otherwise provided by applicable law, the rules or regulations of any stock exchange applicable to the Corporation, the Certificate of Incorporation or these Bylaws, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority in voting power of the shares of stock entitled to vote thereon that are present in person or represented by proxy at the meeting.

Section 1.10 Fixing Date for Determination of Stockholders of Record . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which (i) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be less than ten (10) nor more than sixty (60) days before the date of such meeting, and (ii) in the case of any other action, shall not be more than sixty (60) days prior to any such other action. If no record date is fixed by the Board of Directors, then the record date shall be as provided by applicable law. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however , that the Board of Directors may fix a new record date for the adjourned meeting.

Section 1.11 List of Stockholders Entitled to Vote . A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting, (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to the stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Except as otherwise provided by law, such list shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 1.11 or to vote in person or by proxy at any meeting of the stockholders. The

 

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Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list.

Section 1.12 Inspectors of Elections .

(a) Applicability . Unless otherwise provided in the Corporation’s Certificate of Incorporation or required by the Delaware General Corporation Law, the following provisions of this Section 1.12 shall apply only if and when the Corporation has a class of voting stock that is:

(i) listed on a national securities exchange;

(ii) authorized for quotation on an interdealer quotation system of a registered national securities association; or

(iii) held of record by more than 2,000 stockholders; in all other cases, observance of the provisions of this Section 1.12 shall be optional, and at the discretion of the Corporation.

(b) Appointment . The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.

(c) Inspector’s Oath . Each inspector of election, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability.

(d) Duties of Inspectors . At a meeting of stockholders, the inspectors of election shall:

(i) ascertain the number of shares outstanding and the voting power of each share;

(ii) determine the shares represented at a meeting and the validity of proxies and ballots;

(iii) count all votes and ballots;

(iv) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors; and

(v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.

 

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(e) Opening and Closing of Polls . The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the inspectors at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.

(f) Determinations . In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies in accordance with Section 211(e) or Section 212(c)(2) of the Delaware General Corporation Law, or any information provided pursuant to Section 211(a)(2)(B)(i) or (iii) of the Delaware General Corporation Law, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.12 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.

Section 1.13 Notice of Stockholder Business to Be Brought Before an Annual or Special Meeting .

(a) Business Properly Brought Before an Annual or Special Meeting . At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) brought before the meeting by the Corporation and specified in the notice of meeting given by or at the direction of the Board of Directors, (ii) brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the meeting by a stockholder who (A) was a stockholder of record (and, with respect to any beneficial owner, if different, on whose behalf such business is proposed, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time of giving the notice provided for in this Section 1.13 and at the time of the meeting, (B) is entitled to vote at the meeting, and (C) has complied with this Section 1.13 as to such business. Except for proposals properly made in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (as so amended and inclusive of such rules and regulations, the “ Exchange Act ”), and included in the notice of meeting given by or at the direction of the Board of Directors, the foregoing clause (iii) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of the stockholders. Stockholders shall not be permitted to propose business to be brought before a special meeting of the stockholders (other than pursuant to a request for a special meeting in accordance with the requirements set forth in Article VII of the Certificate of Incorporation (a “ Special Meeting Request ”)), and the only matters that may be brought before a special meeting are the matters specified in the Corporation’s notice of meeting. Stockholders seeking to nominate persons for election to the Board, if permitted by Article VII of the Certificate of Incorporation, must comply with

 

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Section 1.14 of these Bylaws, and this Section 1.13 shall not be applicable to nominations except as expressly provided in Section 1.14 of these Bylaws.

(b) Requirement of Timely Notice of Stockholder Business . Without qualification, for business to be properly brought before an annual meeting by a stockholder, the stockholder must (i) provide Timely Notice (as defined below) thereof in writing and in proper form to the Secretary of the Corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 1.13. To be timely, a stockholder’s notice with respect to an annual meeting of stockholders (other than a notice submitted in order to include a Stockholder Nominee (as defined below) in the Corporation’s proxy materials, as defined and described in Clause E of Article VI of the Certificate of Incorporation) must be delivered by overnight express courier or registered mail, return receipt requested, and received at, the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the one year anniversary of the preceding year’s annual meeting; provided , however , that if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered, or mailed and received, not earlier than the one hundred twentieth (120th) day prior to such annual meeting and not later than the ninetieth (90th) day prior to such annual meeting or, if later, the tenth (10th) day following the day on which public disclosure of the date of such annual meeting was first made (such notice within such time periods, “ Timely Notice ”). In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of Timely Notice as described above.

(c) Requirements for Proper Form of Stockholder Notice of Proposed Business . To be in proper form for purposes of this Section 1.13, a stockholder’s notice to the Secretary shall set forth:

(i) Stockholder Information . As to each Proposing Person (as defined below), (A) the name and address of such Proposing Person (including, if applicable, the name and address that appear on the Corporation’s books and records), (B) the class or series and number of shares of the Corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing Person, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future and (C) a representation whether such Proposing Person intends or is part of a group that intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding stock required to approve or adopt the proposal or (y) otherwise to solicit proxies from stockholders in support of such proposal;

(ii) Information Regarding Disclosable Interests . As to each Proposing Person, (A) any derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by such Proposing Person, the purpose or effect of which is to give such Proposing Person economic risk similar

 

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to ownership of shares of any class or series of the Corporation, including due to the fact that the value of such derivative, swap or other transactions are determined by reference to the price, value or volatility of any shares of any class or series of the Corporation, or which derivative, swap or other transactions provide, directly or indirectly, the opportunity to profit from any increase in the price or value of shares of any class or series of the Corporation (“ Synthetic Equity Interests ”), which such Synthetic Equity Interests shall be disclosed without regard to whether (x) such derivative, swap or other transactions convey any voting rights in such shares to such Proposing Person, (y) the derivative, swap or other transactions are required to be, or are capable of being, settled through delivery of such shares or (z) such Proposing Person may have entered into other transactions that hedge or mitigate the economic effect of such derivative, swap or other transactions, (B) any proxy (other than a revocable proxy or consent given in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a solicitation statement filed on Schedule 14A), agreement, arrangement, understanding or relationship pursuant to which such Proposing Person has or shares a right to vote any shares of any class or series of the Corporation, (C) any agreement, arrangement, understanding or relationship, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by such Proposing Person, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of shares of any class or series of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such Proposing Person with respect to the shares of any class or series of the Corporation, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of the shares of any class or series of the Corporation (“ Short Interests ”), (D) any rights to dividends on the shares of any class or series of the Corporation owned beneficially by such Proposing Person that are separated or separable from the underlying shares of the Corporation, (E) any performance related fees (other than an asset based fee) that such Proposing Person is entitled to based on any increase or decrease in the price or value of shares of any class or series of the Corporation, or any Synthetic Equity Interests or Short Interests, if any, and (F) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (A) through (F) are referred to as “ Disclosable Interests ”); provided , however , that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner; and

(iii) Description of Proposed Business . As to each item of business the stockholder proposes to bring before the annual or special meeting, (A) a

 

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reasonably brief description of the business desired to be brought before the annual or special meeting, the reasons for conducting such business at the annual or special meeting and any material interest in such business of each Proposing Person, (B) the text of the proposal or business (including the text of any resolutions proposed for consideration), and (C) a reasonably detailed description of all agreements, arrangements and understandings (x) between or among any of the Proposing Persons or (y) between or among any Proposing Person and any other person or entity (including their names) in connection with the proposal of such business by such stockholder.

(iv) Definition of Proposing Person . For purposes of this Section 1.13, the term “ Proposing Person ” shall mean (i) the stockholder providing the notice of business proposed to be brought before an annual or special meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual or special meeting is made, and (iii) any affiliate or associate of such stockholder or beneficial owner.

(d) Update and Supplement of Stockholder Notice of Proposed Business . A stockholder providing notice of business proposed to be brought before an annual or special meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 1.13 or in any Special Meeting Request shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight (8) business days prior to the date of the meeting, or in the case of any adjournment or postponement thereof, eight (8) business days prior to the date of such adjournment or postponement. For the avoidance of doubt, the obligation to update and supplement as set forth in this Section 1.13(d) or any other Section of these Bylaws shall not be deemed to extend any applicable deadlines under these Bylaws, cure deficiencies in any notice of business or permit a change in the proposal, business or resolution proposed to be brought before a meeting of the stockholders.

(e) Business Not Properly Brought Before a Meeting . Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual or special meeting except in accordance with this Section 1.13. The presiding officer of the meeting shall, if the facts warrant, determine that the business was not properly brought before the meeting in accordance with this Section 1.13, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

(f) Exchange Act Compliance . This Section 1.13 is expressly intended to apply to any business proposed to be brought before an annual or special meeting of stockholders other than any proposal made pursuant to Rule 14a-8 under the Exchange Act. In addition to the requirements of this Section 1.13 with respect to any business proposed to be brought before an annual or special meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such business.

 

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Nothing in this Section 1.13 shall be deemed to affect the rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

(g) Definition of Public Disclosure . For purposes of these Bylaws, “ public disclosure ” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

Section 1.14 Nominations .

(a) Who May Make Nominations . Nominations of any person for election to the Board of Directors at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only in accordance with the provisions of Clauses D and E of Article VI of the Certificate of Incorporation and any requirements imposed by this Section 1.14 as to such nomination. Clauses D and E of Article VI of the Certificate of Incorporation, together with any additional requirements imposed by this Section 1.14, shall be the exclusive means for a stockholder to make any nomination of a person or persons for election to the Board of Directors at an annual meeting or special meeting (other than, if permitted by Article VII of the Certificate of Incorporation, pursuant to a Special Meeting Request). Any person nominated for election to the Board of Directors pursuant to Clause E of Article VI of the Certificate of Incorporation shall be referred to herein as a “ Stockholder Nominee .”

(b) Requirement of Timely Notice of Stockholder Nominations . Without qualification, for a stockholder to make any nomination of a person or persons for election to the Board of Directors at an annual meeting, the stockholder must (i) provide Timely Notice (as defined in Section 1.13 of these Bylaws) thereof in writing and in proper form to the Secretary of the Corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 1.14. Without qualification, if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting, then for a stockholder to make any nomination of a person or persons for election to the Board of Directors at a special meeting, the stockholder must (i) provide timely notice thereof in writing and in proper form to the Secretary of the Corporation at the principal executive offices of the Corporation, and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 1.14. To be timely, a stockholder’s notice (other than a notice submitted in order to include a Stockholder Nominee (as defined above) in the Corporation’s proxy materials, as defined and described in Clause E of Article VI of the Certificate of Incorporation) for nominations to be made at a special meeting (other than, if permitted by Article VII of the Certificate of Incorporation, pursuant to a Special Meeting Request) must be delivered to, or mailed and received at, the principal executive offices of the Corporation not earlier than the one hundred twentieth (120th) day prior to such special meeting and not later than the ninetieth (90th) day prior to such special meeting or, if later, the tenth (10th) day following the day on which public disclosure (as defined in Section 1.13 of these Bylaws) of the date of such special meeting was first made. In no event shall any adjournment or postponement of an annual meeting or special meeting or the announcement thereof commence a new time period for

 

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the giving of a stockholder’s notice as described above.

(c) Requirements for Proper Form of Notice of Stockholder Nominations . To be in proper form for purposes of this Section 1.14, a stockholder’s notice to the Secretary shall set forth:

(i) Stockholder Information . As to each Nominating Person (as defined below), (A) the name and address of such Nominating Person (including, if applicable, the name and address that appear on the Corporation’s books and records), (B) the class or series and number of shares of the Corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Nominating Person, except that such Nominating Person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such Nominating Person has a right to acquire beneficial ownership at any time in the future and (C) a representation whether such Nominating Person intends or is part of a group that intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding stock reasonably believed by the Nominating Person to be sufficient to elect the nominee or nominees proposed to be nominated by the Nominating Person;

(ii) Information Regarding Disclosable Interests . As to each Nominating Person, any Disclosable Interests (as defined in Section 1.13(c)(ii), except that for purposes of this Section 1.14 the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 1.13(c)(ii)), and the disclosure in clause (F) of Section 1.13(c)(ii) shall be made with respect to the election of directors at the meeting;

(iii) Information Regarding Proposed Nominees . As to each person whom a Nominating Person proposes to nominate for election as a director, (A) all information with respect to such proposed nominee that would be required to be set forth in a stockholder’s notice pursuant to this Section 1.14 if such proposed nominee were a Nominating Person, (B) all information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Exchange Act (including such proposed nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (C) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among any Nominating Person, on the one hand, and each proposed nominee, his or her respective affiliates and associates, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if such Nominating Person were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant, and

 

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(D) a statement as to whether the proposed nominee, if elected, intends to tender, promptly following such person’s election or re-election, an irrevocable resignation effective upon the occurrence of both (1) such person’s failure to receive the required vote for re-election at the next meeting at which such person would face re-election and (2) acceptance of such resignation in accordance with Section 2.2 of these Bylaws and the Corporation’s Governance Guidelines for the Board of Directors; and

(iv) Other Information to Be Furnished by Proposed Nominees . The Corporation may require any proposed nominee to furnish such other information (A) as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation in accordance with the Corporation’s Governance Guidelines or (B) that could be material to a reasonable stockholder’s understanding of the independence or lack of independence of such proposed nominee.

(v) Definition of Nominating Person . For purposes of this Section 1.14, the term “Nominating Person” shall mean (i) the stockholder providing the notice of the nomination proposed to be made at the meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made, and (iii) any affiliate or associate of such stockholder or beneficial owner.

(d) Update and Supplement of Stockholder Notice of Nominations . A stockholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 1.14 or, if permitted by Article VII of the Certificate of Incorporation, in any Special Meeting Request, shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight (8) business days prior to the date of the meeting, or in the case of any adjournment or postponement thereof, eight (8) business days prior to the date of such adjournment or postponement. For the avoidance of doubt, the obligation to update and supplement as set forth in this Section 1.14(d) or any other Section of these Bylaws shall not be deemed to extend any applicable deadlines under these Bylaws, cure deficiencies in any notice of nominations or permit a change in the nominees or nominations proposed to be made at a meeting of the stockholders.

(e) Defective Nominations . Notwithstanding anything in these Bylaws to the contrary, no person shall be eligible for election as a director of the Corporation unless nominated in accordance with this Section 1.14. The presiding officer at the meeting shall, if the facts warrant, determine that a nomination was not properly made in accordance with this Section 1.14, and if he or she should so determine, he or she shall so declare such determination to the meeting and the defective nomination shall be disregarded.

 

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(f) Compliance with Exchange Act . In addition to the requirements of this Section 1.14 with respect to any nomination proposed to be made at a meeting, each Nominating Person shall comply with all applicable requirements of the Exchange Act with respect to any such nominations.

ARTICLE II

BOARD OF DIRECTORS

Section 2.1 Number; Qualifications . The Board of Directors shall consist of one or more members. The number of directors shall be fixed from time to time exclusively by resolution of the Board of Directors. No decrease in the authorized number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.

Section 2.2 Election .

(a) The directors shall be elected as provided in the Certificate of Incorporation.

(b) Each director to be elected by the stockholders of the Corporation shall be elected by the affirmative vote of a majority of the votes cast with respect to such director by the shares represented and entitled to vote therefor at a meeting of the stockholders for the election of directors at which a quorum is present (an “ Election Meeting ”); provided , however , that if the Board of Directors determines that the number of nominees exceeds the number of directors to be elected at such meeting (a “ Contested Election ”), and the Board of Directors has not rescinded such determination by the date that is twenty (20) days prior to the date of the Election Meeting as initially announced, each of the directors to be elected at the Election Meeting shall be elected by the affirmative vote of a plurality of the votes cast by the shares represented and entitled to vote at such meeting with respect to the election of such director. For purposes of this Section 2.2, a “majority of the votes cast” means that the number of votes cast “for” a candidate for director exceeds the number of votes cast “against” that director. In an election other than a Contested Election, stockholders will be given the choice to cast votes “for” or “against” the election of directors or to “abstain” from such vote and shall not have the ability to cast any other vote with respect to such election of directors. In a Contested Election, stockholders will be given the choice to cast “for” or “withhold” votes for the election of directors and shall not have the ability to cast any other vote with respect to such election of directors. In the event an Election Meeting involves the election of directors by separate votes by class or classes or series, the determination as to whether an election constitutes a Contested Election shall be made on a class by class or series by series basis, as applicable.

(c) In the event one or more incumbent directors (each, a “ Subject Director ”) fails to receive the affirmative vote of a majority of the votes cast at an Election Meeting at which there was no Contested Election, either (i) the Corporate Governance and Nominating Committee or (ii) if one or more of the members of the Corporate Governance and Nominating Committee is a Subject Director or the Board of Directors determines that any decision to be made with respect to a Subject Director should be made by a committee other than the Corporate

 

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Governance and Nominating Committee, a committee consisting solely of independent directors (as determined in accordance with any stock exchange rules and regulations applicable to the Corporation and any additional criteria set forth in the Corporation’s Governance Guidelines for the Board of Directors or Corporate Governance and Nominating Committee Charter, as applicable) who are not Subject Directors (the committee described in clause (i) or (ii) of this sentence, the “ Committee ”) will make a determination as to whether to accept or reject any previously tendered Resignations (as defined below), or whether other action should be taken (including whether to request that a Subject Director resign from the Board of Directors if no Resignation had been tendered prior to the relevant Election Meeting). The Committee will act with respect to any Subject Directors within ninety (90) days from the date of the certification of the election results and shall notify the Subject Directors of its decision. The Committee may consider all factors it considers relevant, including any stated reasons for “against” votes, whether the underlying cause or causes of the “against” votes are curable, the relationship between such causes and the actions of such Subject Director, the factors, if any, set forth in the Corporation’s Governance Guidelines for the Board of Directors or other policies that are to be considered by the Corporate Governance and Nominating Committee in evaluating potential candidates for the Board of Directors as such criteria relate to such Subject Director, the length of service of such Subject Director, the size and holding period of such Subject Director’s stock ownership in the Corporation, and such Subject Director’s contributions to the Corporation. Subject Directors shall not participate in the deliberation or decision(s) of the Committee. The Corporation shall publicly disclose the decision(s) of the Committee in a Current Report on Form 8-K filed with the Securities and Exchange Commission. Notwithstanding the foregoing, if the result of accepting all tendered Resignations then pending and requesting resignations from incumbent directors who did not submit a Resignation prior to the relevant Election Meeting, would be that the Corporation would have fewer than three (3) directors who were in office before the election of directors, the Committee may determine to extend such ninety (90)-day period by an additional ninety (90) days if it determines that such an extension is in the best interests of the Corporation and its stockholders. For purposes of this Section 2.2, a “ Resignation ” is an irrevocable resignation submitted by an incumbent director nominated for re-election prior to the relevant Election Meeting that will become effective upon the occurrence of both (i) the failure to receive the affirmative vote of a majority of the votes cast at an Election Meeting at which there was no Contested Election and (ii) acceptance of such resignation by the Committee.

(d) If a Subject Director’s tendered Resignation is not accepted by the Committee or such Subject Director does not otherwise submit his or her resignation to the Board of Directors, such director shall continue to serve until his or her successor is duly elected, or his or her earlier resignation or removal pursuant to Section 2.3. If a Subject Director’s Resignation is accepted by the Committee pursuant to this Section 2.2, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors, in its sole discretion, may fill any resulting vacancy pursuant to the provisions of Section 2.3 or decrease the size of the Board of Directors pursuant to the provisions of Section 2.1 of these Bylaws.

Section 2.3 Resignation; Removal; Vacancies . Subject to the provisions of the Certificate of Incorporation, each director shall serve until his or her successor is duly elected and qualified, or until his or her earlier death, resignation, retirement or removal

 

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from service as a director. Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. Subject to the rights of any holders of Preferred Stock then outstanding and the Certificate of Incorporation:

(i) the holders of a majority of the shares entitled to vote in an election of directors may remove any director or the entire Board of Directors with or without cause, and

(ii) any vacancy occurring in the Board of Directors for any reason, and any newly created directorship resulting from any increase in the authorized number of directors to be elected by all stockholders having the right to vote as a single class, shall be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

Section 2.4 Regular Meetings . Regular meetings of the Board of Directors may be held at such places, within or without the State of Delaware, and at such times as the Board of Directors may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board of Directors.

Section 2.5 Special Meetings . Special meetings of the Board of Directors may be called by the Chairman of the Board, the Chief Executive Officer or a majority of the members of the Board of Directors then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given, orally or in writing, by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is given by telephone, hand delivery, overnight express courier, facsimile, electronic mail or other electronic transmission. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting. The notice shall be deemed given:

(i) in the case of hand delivery or notice by telephone, when received by the director to whom notice is to be given or by any person accepting such notice on behalf of such director,

(ii) in the case of delivery by mail, upon deposit in the United States mail, postage prepaid, directed to the director to whom notice is being given at such director’s address as it appears on the records of the Corporation,

(iii) in the case of delivery by overnight express courier, on the first business day after such notice is dispatched, and

(iv) in the case of delivery via facsimile, electronic mail or other electronic transmission, when sent to the director to whom notice is to be given or by any person accepting such notice on behalf of such director at such director’s facsimile number or electronic mail address, as the case may be, as it appears on the Corporation’s records.

 

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Section 2.6 Telephonic Meetings Permitted . Members of the Board of Directors, or any committee of the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to conference telephone or similar communications equipment shall constitute presence in person at such meeting.

Section 2.7 Quorum; Vote Required for Action . At all meetings of the Board of Directors a majority of the total number of authorized directors shall constitute a quorum for the transaction of business. Except as otherwise provided herein or in the Certificate of Incorporation, or as required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. If a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

Section 2.8 Chairman of the Board . The Board of Directors shall have the power to elect the Chairman of the Board from among the members of the Board of Directors. The Chairman of the Board shall have the power to preside at all meetings of the Board of Directors and shall have such other powers and duties as provided in these Bylaws and as the Board of Directors may from time to time prescribe.

Section 2.9 Organization . Meetings of the Board of Directors shall be presided over by the Chairman of the Board, or in his or her absence by the Chief Executive Officer, or in his or her absence by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

Section 2.10 Written Action by Directors . Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing, or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee, respectively. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 2.11 Powers . The Board of Directors may, except as otherwise required by law or the notice is dispatched, and Certificate of Incorporation, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.

Section 2.12 Compensation of Directors . Directors, as such, may receive, pursuant to a resolution of the Board of Directors, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board of Directors.

 

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ARTICLE III

COMMITTEES

Section 3.1 Committees . The Board of Directors may, by resolution passed by a majority of the authorized number of directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting of such committee who are not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the Delaware General Corporation Law to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any Bylaw of the Corporation.

Section 3.2 Committee Rules . Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these Bylaws.

ARTICLE IV

OFFICERS

Section 4.1 Generally . The officers of the Corporation shall consist of a Chief Executive Officer and/or a President, one or more Vice Presidents, a Secretary, a Treasurer and such other officers, including a Chief Financial Officer, as may from time to time be appointed by the Board of Directors. All officers shall be elected by the Board of Directors; provided , however , that the Board of Directors may empower the Chief Executive Officer of the Corporation to appoint officers other than the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any number of offices may be held by the same person. Any officer may resign at any time upon written notice to the Corporation. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board of Directors.

 

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Section 4.2 Chief Executive Officer . Subject to the control of the Board of Directors and such supervisory powers, if any, as may be given by the Board of Directors, the powers and duties of the Chief Executive Officer of the Corporation are:

(a) To act as the general manager and, subject to the control of the Board of Directors, to have general supervision, direction and control of the business and affairs of the Corporation;

(b) To preside at all meetings of the stockholders;

(c) To call meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and

(d) To affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board of Directors or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation; and, subject to the direction of the Board of Directors, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.

The President shall be the Chief Executive Officer of the Corporation unless the Board of Directors shall designate another officer to be the Chief Executive Officer. If there is no President, and the Board of Directors has not designated any other officer to be the Chief Executive Officer, then the Chairman of the Board shall be the Chief Executive Officer.

Section 4.3 President . The President shall be the Chief Executive Officer of the Corporation unless the Board of Directors shall have designated another officer as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board of Directors, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board of Directors to the Chairman of the Board, and/or to any other officer, the President shall have the responsibility for the general management and the control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President) and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board of Directors.

Section 4.4 Vice President . Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President, or that are delegated to him or her by the Board of Directors or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer in the event of the Chief Executive Officer’s absence or disability.

 

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Section 4.5 Chief Financial Officer . Subject to the direction of the Board of Directors and the President, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of chief financial officer.

Section 4.6 Treasurer . The Treasurer shall have custody of all monies and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board of Directors or the President may from time to time prescribe.

Section 4.7 Secretary . The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board of Directors. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board of Directors or the President may from time to time prescribe.

Section 4.8 Delegation of Authority . The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.

Section 4.9 Removal . Any officer of the Corporation shall serve at the pleasure of the Board of Directors and may be removed at any time, with or without cause, by the Board of Directors. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.

ARTICLE V

STOCK

Section 5.1 Certificates . The shares of the Corporation may be uncertificated or may be represented by certificates. The Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Every holder of stock represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile.

Section 5.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares . The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to agree to indemnify the Corporation

 

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and/or to give the Corporation a bond sufficient to indemnify it, against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

Section 5.3 Other Regulations . The issue, transfer, conversion and registration of stock certificates or uncertificated shares shall be governed by such other regulations as the Board of Directors may establish.

ARTICLE VI

INDEMNIFICATION

Section 6.1 Indemnification of Officers and Directors . Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ proceeding ”), by reason of the fact that he or she (or a person of whom he or she is the legal representative), is or was a director or officer of the Corporation or a Reincorporated Predecessor (as defined below) or is or was serving at the request of the Corporation or a Reincorporated Predecessor (as defined below) as a director, officer or employee of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (each such director, officer or employee, a “ Covered Person ”), shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the Delaware General Corporation Law, against all expenses, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided , however , that the Corporation shall indemnify any such Covered Person seeking indemnity in connection with a proceeding (or part thereof) initiated by such Covered Person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. As used herein, the term “ Reincorporated Predecessor ” means a corporation that is merged with and into the Corporation in a statutory merger where (a) the Corporation is the surviving corporation of such merger; and (b) the primary purpose of such merger is to change the corporate domicile of the Reincorporated Predecessor to Delaware.

Section 6.2 Advance of Expenses . The Corporation shall pay all expenses (including attorneys’ fees) incurred by a Covered Person in defending any such proceeding as they are incurred in advance of its final disposition; provided , however , that if the Delaware General Corporation Law then so requires, the payment of such expenses incurred by a Covered Person in advance of the final disposition of such proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Covered Person, to repay all amounts so advanced if it should be determined ultimately that such Covered Person is not entitled to be indemnified under this Article VI or otherwise; and provided , further , that the Corporation shall not be required to advance any expenses to a Covered Person against whom the Corporation directly brings a claim, in a proceeding, alleging that such person has breached his or her duty of loyalty to the Corporation, committed an act or omission not in good faith or that involves intentional misconduct or a knowing violation of law, or derived an improper personal benefit from a transaction.

 

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Section 6.3 Non-Exclusivity of Rights . The rights conferred on any person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VI. The Board of Directors of the Corporation shall have the power to delegate to such officer or other person as the Board of Directors shall specify the determination of whether indemnification shall be given to any person pursuant to this Section 6.3.

Section 6.4 Indemnification Contracts . The Board of Directors is authorized to cause the Corporation to enter into indemnification contracts with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification rights to such person. Such rights may be greater than those provided in this Article VI.

Section 6.5 Continuation of Indemnification . The rights to indemnification and to advancement of expenses provided by, or granted pursuant to, this Article VI shall continue notwithstanding that the person has ceased to be a Covered Person and shall inure to the benefit of his or her estate, heirs, executors, administrators, legatees and distributees; provided , however , that the Corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

Section 6.6 Effect of Amendment or Repeal . The provisions of this Article VI shall constitute a contract between the Corporation, on the one hand, and, on the other hand, each individual who serves or has served as a Covered Person (whether before or after the adoption of these Bylaws), in consideration of such person’s performance of such services, and pursuant to this Article VI, the Corporation intends to be legally bound to each such current or former Covered Person. With respect to current and former Covered Persons, the rights conferred under this Article VI are present contractual rights and such rights are fully vested, and shall be deemed to have vested fully, immediately upon adoption of these Bylaws. With respect to any Covered Persons who commence service following adoption of these Bylaws, the rights conferred under this Article VI shall be present contractual rights, and such rights shall fully vest, and be deemed to have vested fully, immediately upon such Covered Person’s service in the capacity which is subject to the benefits of this Article VI.

ARTICLE VII

NOTICES

Section 7.1 General Notice . Except as otherwise specifically provided herein or required by law, all notices required to be given pursuant to these Bylaws shall be in writing and may in every instance be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by prepaid overnight express courier or facsimile. Any such notice shall be addressed to the person

 

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to whom notice is to be given at such person’s address or facsimile number, as the case may be, as it appears on the records of the Corporation. The notice shall be deemed given

(i) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person;

(ii) in the case of delivery by mail, upon deposit in the United States mail, postage prepaid, directed to the person to whom notice is being given at such person’s address as it appears on the records of the Corporation;

(iii) in the case of delivery by overnight express courier, on the first business day after such notice is dispatched; and

(iv) in the case of delivery via facsimile, when directed to the person to whom notice is to be given or by any person accepting such notice on behalf of such person.

Section 7.2 Waiver of Notice . Whenever notice is required to be given under any provision of these Bylaws, a written waiver of notice, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice or any waiver by electronic transmission.

ARTICLE VIII

INTERESTED DIRECTORS

Section 8.1 Interested Directors; Quorum . No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if:

(i) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum;

 

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(ii) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or

(iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

ARTICLE IX

MISCELLANEOUS

Section 9.1 Fiscal Year . The fiscal year of the Corporation shall be determined by resolution of the Board of Directors.

Section 9.2 Seal . The Board of Directors may provide for a corporate seal, which shall have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board of Directors.

Section 9.3 Form of Records . Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the Delaware General Corporation Law.

Section 9.4 Reliance Upon Books and Records . A member of the Board of Directors, or a member of any committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board of Directors, or by any other person as to matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

Section 9.5 Certificate of Incorporation Governs . In the event of any conflict between the provisions of the Certificate of Incorporation and Bylaws, the provisions of the Certificate of Incorporation shall govern.

Section 9.6 Severability . If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be

 

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invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.

ARTICLE X

AMENDMENT

Section 10.1 Amendments . Subject to Section 6.6 of these Bylaws, stockholders of the Corporation holding at least a majority of the Corporation’s outstanding voting stock shall have the power to adopt, amend or repeal Bylaws. To the extent provided in the Certificate of Incorporation, the Board of Directors of the Corporation shall also have the power to adopt, amend or repeal Bylaws of the Corporation.

 

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CERTIFICATION OF BYLAWS

OF

PAYPAL HOLDINGS, INC.

(a Delaware Corporation)

KNOW ALL BY THESE PRESENTS:

I, [name], certify that I am [position] of PayPal Holdings, Inc., a Delaware corporation (the “ Company ”), that I am duly authorized to make and deliver this certification, that the attached Bylaws are a true and correct copy of the Bylaws of the Company in effect as of the date of this certificate.

Dated: [Month Date, Year]

 

                                                                                  

[Name]

[Position]

Exhibit 10.1

 

FORM OF OPERATING AGREEMENT

BY AND BETWEEN

EBAY INC.

AND

PAYPAL HOLDINGS, INC.

DATED AS OF [●], 20[●]


TABLE OF CONTENTS

 

             Page  

ARTICLE I DEFINITIONS

     1   

ARTICLE II SERVICES

     11   
 

2.1

  Provision of Services; Scope      11   
 

2.2

  Terms and Conditions of Services      11   
 

2.3

  Services to Acquired Properties and Developed Properties      11   
 

2.4

  No Exclusivity      12   
 

2.5

  Additional Services      12   

ARTICLE III PRICING FOR EBAY MERCHANTS

     12   
 

3.1

  Take Rate      12   
 

3.2

  Market Check      13   
 

3.3

  Response to Market Check      14   
 

3.4

  Competitive Platform Operators      14   
 

3.5

  Changes in Law      15   

ARTICLE IV PERFORMANCE OF SERVICES; SERVICE LEVELS

     15   
 

4.1

  Manner of Performance      15   
 

4.2

  Facilities; Personnel      16   
 

4.3

  Subcontracting      16   
 

4.4

  Service Levels      16   
 

4.5

  Root Cause Analysis      17   
 

4.6

  Monitoring      17   
 

4.7

  Disaster Recovery      17   

ARTICLE V DATA SHARING; INFORMATION SECURITY; PRODUCT DEVELOPMENT

     18   
 

5.1

  Data Sharing Addendum      18   
 

5.2

  Access to Facilities      18   
 

5.3

  Systems Policies      18   
 

5.4

  Security and Stability      19   
 

5.5

  Unauthorized Access      19   
 

5.6

  Product Development Agreement      20   

ARTICLE VI REFERRAL SERVICES FEES; USAGE OF SERVICES; MARKETING

     20   
 

6.1

  Referral Services Fee      20   
 

6.2

  Credit Services Referral Fees      21   
 

6.3

  Penetration Rate Payments      21   

 

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6.4 Aggregate Quarterly Fees   22   

6.5

Descriptions of PayPal on eBay Covered Properties   22   

6.6

Integration of New PayPal Products   23   

ARTICLE VII FEES AND PAYMENT

  23   

7.1

Payment Terms   23   

7.2

Taxes   24   

ARTICLE VIII COMPLIANCE WITH LAW; AUDITS

  25   

8.1

Compliance with Law; Books and Records   25   

8.2

Audits   25   

8.3

Audit Responses   26   

ARTICLE IX CONFIDENTIALITY; USER DATA

  27   

9.1

Confidential Information   27   

9.2

Additional Confidentiality Provisions   28   

9.3

Competitive or Similar Materials   28   

9.4

User Data   28   

9.5

Privacy Policy   29   
ARTICLE X TERM AND TERMINATION   29   

10.1

Term   29   

10.2

Termination by eBay or PayPal   29   

10.3

Replacement Services   29   

10.4

Effect of Termination   30   

10.5

Termination Assistance Services   30   

10.6

Survival   30   

ARTICLE XI REPRESENTATIONS AND WARRANTIES

  31   

11.1

Representations and Warranties by the Parties   31   

11.2

Representations and Warranties by PayPal   31   

11.3

Representations and Warranties by eBay   31   

11.4

Disclaimer of Warranty   31   

ARTICLE XII INDEMNIFICATION

  32   

12.1

PayPal’s Indemnification of eBay   32   

12.2

eBay’s Indemnification of PayPal   32   

12.3

Indemnification Procedures   32   

12.4

Infringement Claims   32   

12.5

Exclusion of Other Indemnification Remedies   33   
ARTICLE XIII LIMITATION OF LIABILITY   33   

13.1

Limitation of Liability   34   

 

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ARTICLE XIV MERCHANT OF RECORD; NON-COMPETE

  34   

14.1

Merchant of Record   34   

14.2

eBay Non-Compete   35   

14.3

PayPal Non-Compete   35   

14.4

Exceptions to Non-Compete   35   

ARTICLE XV GOVERNANCE

  36   

15.1

Designated Operational Representatives   36   

15.2

Quarterly Reviews   37   

15.3

Internal Audits; Security Review   37   

15.4

Operational Review   38   

ARTICLE XVI DISPUTE RESOLUTION

  38   

16.1

Good Faith Negotiation   38   

16.2

Dispute Resolution Process   38   

16.3

Litigation and Unilateral Commencement of Arbitration   39   

16.4

Conduct During Dispute Resolution Process   39   

ARTICLE XVII MISCELLANEOUS

  39   

17.1

Mutual Cooperation   39   

17.2

Further Assurances   39   

17.3

Relationship   39   

17.4

No Third-Party Beneficiaries   39   

17.5

Amendment   40   

17.6

Compliance with Law   40   

17.7

Assignability   40   

17.8

Incorporation by Reference   40   

 

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SCHEDULES

 

Schedule 1.1

Additional Jurisdictions

Schedule 1.2

Buyer-Only Jurisdictions

Schedule 1.3

eBay Covered Properties

Schedule 1.4

eBay Excluded Properties

Schedule 1.5

Excluded Jurisdictions

Schedule 1.6

Penetration Rate

Schedule 3.1

Comparability

Schedule 5.1

Data Sharing Addendum

Schedule 5.4

Information Security Addendum

 

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OPERATING AGREEMENT

This OPERATING AGREEMENT, dated as of [●], 201[●] (this “ Agreement ”), is made and entered into by and between PayPal Holdings, Inc., a Delaware corporation (“ PayPal ”), and eBay Inc., a Delaware corporation (“ eBay ”). PayPal and eBay are sometimes referred to herein individually as a “ Party ” and collectively as the “ Parties ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I .

WHEREAS, the board of directors of eBay has determined that it is appropriate and advisable to separate the PayPal Business from the eBay Business;

WHEREAS, in order to effectuate the foregoing, eBay and PayPal have entered into a Separation and Distribution Agreement, dated as of [●], 201[●] (the “ Separation and Distribution Agreement ”), which provides for, among other things, the contribution from eBay to PayPal of certain assets, the assumption by PayPal of certain Liabilities from eBay, the distribution by eBay of PayPal common stock to eBay stockholders, and the execution and delivery of certain agreements in order to facilitate and provide for the foregoing, in each case subject to the terms and conditions set forth therein;

WHEREAS, PayPal currently provides certain Services to eBay and its customers;

WHEREAS, the Parties desire for PayPal to continue to provide such Services to eBay and its customers following the Distribution and for eBay to encourage its customers to use the Services following the Distribution; and

WHEREAS, the Parties have agreed to cooperate in fulfilling the purposes of this Agreement and to create a mutually beneficial strategic partnership.

NOW, THEREFORE, in consideration of the premises, the mutual covenants, agreements and respective representations and warranties contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS

For the purposes of this Agreement, the following capitalized terms will have the meanings ascribed to them below. All other capitalized terms not otherwise defined in this Agreement have the meaning ascribed to them in the Separation and Distribution Agreement.

2014 Measurement Rate ” shall have the meaning set forth in Section 6.3(e) .

Account Nationality ” means the country in which an eBay Merchant or eBay User is resident according to information given by the eBay Merchant or eBay User in registering for such eBay Merchant’s or eBay User’s eBay account.

Acquired Property ” means a Property acquired by eBay after the Effective Time, by way of merger, acquisition, stock purchase or similar transaction, or by acquiring all or substantially

 

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all of the assets of an entity or business line, including an e-commerce storefront or marketplace, such that such Acquired Property becomes an eBay Property.

Action ” shall have the meaning set forth in the Separation and Distribution Agreement.

Activated New User ” means, for any period, a PayPal User that had not sent or received any payments utilizing PayPal’s payments network prior to the beginning of the period and that successfully sent or received at least one payment through PayPal’s payment networks during such period: (a) on an eBay Covered Property; or (b) on a Property that is not an eBay Covered Property if such PayPal User was referred by eBay to PayPal through an eBay Covered Property or other trackable referral from eBay. A referral is “trackable” if eBay and/or PayPal is able to determine (using a methodology to be mutually agreed upon by the Parties) whether the PayPal User’s PayPal account was opened as a result of such referral.

Activated New Users Adjustment Amount ” shall have the meaning set forth in Section 6.1(b) .

Additional Jurisdiction Property ” shall have the meaning set forth in Section 2.3(b) .

Additional Jurisdictions ” means the jurisdictions listed on Schedule 1.1 .

Affiliate ” shall have the meaning set forth in the Separation and Distribution Agreement.

Aggregate Quarterly Fee ” shall have the meaning set forth in Section 6.4 .

Agreement ” shall have the meaning set forth in the preamble.

Ancillary Agreement ” shall have the meaning set forth in the Separation and Distribution Agreement.

Annual Statement ” shall have the meaning set forth in Section 7.1(a) .

API ” means an application programming interface.

Audit ” shall have the meaning set forth in Section 15.3(a) .

Audit Committees ” shall have the meaning set forth in Section 15.3(a) .

Audited Party ” shall have the meaning set forth in Section 8.2(a) .

“Baseline Rate” means eighty percent (80%); provided , that, beginning with the second Calendar Year during the Term, effective as of the first day of each such Calendar Year, the Baseline Rate shall be increased or decreased by an amount equal to (a) the Penetration Rate for the previous Calendar Year calculated using the foreign currency exchange rates used by eBay for its internal planning and budgeting purposes for the current Calendar Year (and not the actual foreign currency exchange rates in effect during the previous Calendar Year) minus (b) the Penetration Rate for the previous Calendar Year. For example, if the Penetration Rate for the

 

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previous Calendar Year was 82% but the same Penetration Rate, when calculated using the current Calendar Year’s foreign currency exchange rates used by eBay for its internal planning and budget purposes, equals 83%, then the Baseline Rate for the current Calendar Year will be increased by 1% to 81%.

Baseline Referral Services Fee ” shall have the meaning set forth in Section 6.1(a) .

Buyer-Only Jurisdictions ” means the jurisdictions listed in Schedule 1.2 .

Calendar Year ” means the twelve (12)-Month period ending December 31; or, (a) with respect to the first such twelve (12)-Month period that includes the Effective Time, the portion of such twelve (12)-Month period after the Effective Time, and (b) with respect to the twelve (12)-Month period that includes the last day of the Tail Period, the portion of such twelve (12)-Month period before the last day of the Tail Period.

CEO Assessment ” shall have the meaning set forth in Section 15.4 .

Change of Control ” means, with respect to a Party, the occurrence after the Effective Time of any of the following: (a) the sale, conveyance or disposition, in one or a series of related transactions, of all or substantially all of the assets of such Party to a third party that is not an Affiliate of such Party prior to such transaction or the first of such related transactions; (b) the consolidation, merger or other business combination of a Party with or into any other Person, immediately following which the stockholders of the Party prior to such transaction fail to own in the aggregate the Majority Voting Power of the surviving Party in such consolidation, merger or business combination or of its ultimate publicly traded parent Person; or (c) a transaction or series of transactions in which any Person or “group” (as such term is used in Section 13(d) of the Exchange Act) acquires the Majority Voting Power of such Party (other than a reincorporation or similar corporate transaction in which each of such Party’s stockholders own, immediately thereafter, interests in the new parent company in substantially the same percentage as such stockholder owned in such Party immediately prior to such transaction).

Colocation Services Agreement ” shall have the meaning set forth in the Separation and Distribution Agreement.

Commercial Agreement ” shall have the meaning set forth in the Separation and Distribution Agreement.

Common User Data ” shall have the meaning set forth in Section 9.4(b) .

Competing Business ” shall have the meaning set forth in Section 14.4(a) .

Competitive Platform Operator ” means a PayPal Specified Person, together with such Person’s wholly owned Subsidiaries.

Confidential Information ” shall have the meaning set forth in Section 9.1 .

 

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Contract ” means any loan or credit agreement, bond, debenture, note, mortgage, indenture, lease, supply agreement, license agreement, development agreement or other contract, agreement, obligation, commitment or instrument, including all amendments thereto.

Covered Jurisdictions ” shall mean the jurisdictions (other than Buyer-Only Jurisdictions and Excluded Jurisdictions) that are included in the determination of eBay Core GMV as of the Effective Time (based on user Account Nationality) and any Additional Jurisdictions from which eBay Merchants or eBay Users access Acquired Properties that have become eBay Covered Properties (also based on user Account Nationality.

CPO Conditions ” shall have the meaning set forth in Section 3.4(a) .

CPO MFP ” shall have the meaning set forth in Section 3.4 .

Credit Services ” means (a) all actions, activities and operations of PayPal that enable PayPal Users to make payments to eBay or to eBay Merchants in connection with transactions effected through any service or offering available on an eBay Covered Property that are funded in whole or in part through credit extended through PayPal (including by credit issued by a third Person) and (b) any applicable Related Services.

Credit Usage Fee ” shall have the meaning set forth in Section 6.2 .

Data Protection Laws ” means any data protection Laws, privacy Laws, or other Laws relating to the protection of Personal Information or other data or information, including Laws relating to payment data security, whether currently in force or enacted during the Term.

Data Sharing Addendum ” shall have the meaning set forth in Section 5.1(a) .

Designated Operational Representative ” shall have the meaning set forth in Section 15.1(a) .

Developed Property ” means a Property established or developed by eBay after the Effective Time, including an e-commerce storefront or marketplace (it being understood that Developed Properties excludes all Acquired Properties).

Development Project ” shall have the meaning set forth in Section 5.6 .

Disaster Recovery Plan ” shall have the meaning set forth in Section 4.7 .

Disclosing Party ” shall have the meaning set forth in Section 9.1 .

Dispute ” shall have the meaning set forth in Section 16.1 .

eBay ” shall have the meaning set forth in the preamble. As used in this Agreement, all references to “eBay” shall be deemed to refer to eBay and its Subsidiaries.

eBay Addressable GMV ” means, for any period, (a) the eBay Core GMV for such period minus (b) the GMV for all eBay Properties (other than eBay Excluded Properties) for such

 

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period that results from a transaction where (i) the eBay Merchant’s Account Nationality is a Buyer-Only Jurisdiction or (ii) both the eBay Merchant’s and eBay User’s Account Nationality is the same Excluded Jurisdiction minus (c) if eBay creates a localized Property in China, the GMV for such localized Property that results from a transaction where both the eBay Merchant’s and eBay User’s Account Nationality is China.

eBay Core GMV ” means, for any period, (a) the GMV for all eBay Properties for such period minus (b) the GMV for all eBay Excluded Properties for such period.

eBay Covered Properties ” means (a) all eBay Properties in existence as of the Effective Time that are not eBay Excluded Properties, including the eBay Properties set forth on Schedule 1.3 , (b) all eBay Properties that become eBay Covered Properties pursuant to the terms and provisions of this Agreement and (c) any mobile applications made available by eBay from which an eBay User may bid for, purchase, sell or list goods or services on or through the eBay Properties described in clauses (a) and (b).

eBay Excluded Properties ” means the eBay Properties set forth on Schedule 1.4 .

eBay Group ” shall have the meaning set forth in Section 12.1 .

eBay Merchant ” means a third Person seller, merchant or other provider of goods or services that makes use of or accesses the Services through an eBay Covered Property.

eBay Name and eBay Marks ” shall have the meaning set forth in the Separation and Distribution Agreement.

eBay Property ” means a Property that is directly or indirectly owned or controlled by eBay (other than any such Property owned by a Person in which eBay does not directly or indirectly own the Majority Voting Power of such Person).

eBay Restricted Business ” shall have the meaning set forth in Section 14.2 .

eBay User ” means a registered user of services offered by eBay identified by a unique account ID issued by eBay.

eBay User Data ” means customer or user information, including Personal Information, collected during the term of this Agreement from an eBay Merchant or from an eBay User that makes use of or accesses the Services through an eBay Covered Property.

Effective Time ” shall have the meaning set forth in the Separation and Distribution Agreement.

Escalation Committee ” shall have the meaning set forth in the Separation and Distribution Agreement.

Estimated Activated New Users ” shall have the meaning set forth in Section 6.1(b) .

Excluded Jurisdictions ” shall mean the jurisdictions listed in Schedule 1.5 .

 

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External Audit ” shall have the meaning set forth in Section 8.2(a) .

External Auditor ” shall have the meaning set forth in Section 8.2(a) .

First-Party Transaction ” shall have the meaning set forth in Section 14.1(a) .

GMV ” means, for any period, the total value of all successfully closed transactions between users on an eBay Property during such period, regardless of whether the buyer and seller actually consummated the transaction, excluding vehicles and real estate. In the event that eBay significantly changes its definition of GMV for purposes of its public financial reporting, the Parties will revisit the impact that any such change in definition could have on the Penetration Rate and make any appropriate adjustments so that the intent of the parties with respect to the Penetration Rate remains in effect.

Governmental Authority ” shall have the meaning set forth in the Separation and Distribution Agreement.

Group ” means the eBay Group or the PayPal Group, as applicable.

Highly Sensitive Information ” means, with respect to a Party, information confidential to such Party in the following categories: (a) user data, including Personal Information, that is not anonymized or aggregated; (b) algorithms, Source Code, Object Code; and (c) specifications and technical documentation regarding system security, fraud and abuse protection systems and detection of illegal or unusual activities that, in each case, relate primarily to the PayPal Business (in the case of eBay as the Receiving Party) or the eBay Business (in the case of PayPal as the Receiving Party) , as applicable. “Highly Sensitive Information” shall not, however, include any information which: (i) is or becomes commonly known within the public domain other than by breach of this Agreement or any other agreement that the Receiving Party has with any Person; (ii) is obtained from a third Person (other than Personnel of the Receiving Party) who is lawfully authorized to disclose such information free from any obligation of confidentiality; or (iii) is independently developed without reference to or use of any Highly Sensitive Information or Confidential Information of the Disclosing Party.

Indemnified Party ” shall have the meaning set forth in Section 12.3(a) .

Indemnifying Party ” shall have the meaning set forth in Section 12.3(a) .

Independent Expert ” shall have the meaning set forth in Section 3.2 .

Initial Notice ” shall have the meaning set forth in Section 16.1 .

Initial Term ” shall have the meaning set forth in Section 10.1 .

Integration Work ” shall have the meaning set forth in Section 2.3(b) .

Intellectual Property Matters Agreement ” shall have the meaning set forth in the Separation and Distribution Agreement.

 

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Intellectual Property Rights ” shall have the meaning set forth in the Intellectual Property Matters Agreement.

Interest Rate ” means a rate per annum equal to the Prime Rate plus two percent (2%) or the maximum rate under applicable Law, whichever is lower.

Internal Audit ” shall have the meaning set forth in Section 15.3(a) .

Internal Audit Party ” shall have the meaning set forth in Section 15.3(a) .

Law ” shall have the meaning set forth in the Separation and Distribution Agreement.

Losses ” shall have the meaning set forth in the Separation and Distribution Agreement.

Majority Voting Power ” means a majority of the voting power in the election of directors of all outstanding voting securities of the Person in question.

Market Check ” shall have the meaning set forth in Section 3.2 .

Merchant of Record ” means, except as otherwise agreed by the Parties, the entity that PayPal holds financially liable for all full and partial returns as well as any chargebacks initiated by the customer.

Month ” means, unless the context requires otherwise, a calendar month or, with respect to the first calendar month that includes the Effective Time, the portion of such calendar month after the Effective Time.

Non-eBay Merchants ” means sellers, merchants or other providers of goods or services that make use of or access PayPal’s payment processing services other than through an eBay Property.

Object Code ” means the fully compiled, machine-readable version of a software program that can be executed by a computer and used by an end user without further compilation.

Operational Review Group ” shall have the meaning set forth in Section 15.4 .

Payment Gateway ” means point of sale Software that links a merchant’s website or selling application to such merchant’s processing network and merchant account.

Payment Services ” means (a) all actions, activities and operations of PayPal that enable eBay Merchants to receive payments from PayPal Users, and/or other eBay buyers using a guest check-out flow or other PayPal processing service such as Braintree or Pro, in any manner offered by PayPal in connection with transactions effected through any service or offering available on an eBay Covered Property and (b) any applicable Related Services.

PayPal ” shall have the meaning set forth in the preamble. As used in this Agreement, all references to “PayPal” shall be deemed to refer to PayPal and its Subsidiaries.

PayPal Group ” shall have the meaning set forth in Section 12.2 .

 

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PayPal Net TPV ” means, for any period and of any Property, the total U.S. dollar volume of payments, net of payment reversals, successfully completed during such period through Services available through such Property (but excluding payments sent or received through PayPal’s Payment Gateways or through PayPal products that are not substantially similar to the PayPal products offered on eBay Properties).

PayPal Net TPV Off eBay ” means, for any period, the PayPal Net TPV of all Properties other than eBay Properties for such period.

PayPal Restricted Business ” shall have the meaning set forth in Section 14.3 .

PayPal User ” means a registered user of the payment processing services offered by PayPal that enable users to make or receive payments using a PayPal account (also known as a PayPal wallet) identified by a unique account ID and/or an eBay Merchant.

PayPal User Data ” means customer or user information, including Personal Information, collected from merchants and users of PayPal’s services during the term of this Agreement.

Penetration Rate ” means, for any period, (a) the eBay Addressable GMV successfully completed through Services available through eBay Covered Properties (including Services executed utilizing a “guest” check-out feature but excluding payments sent or received through (i) PayPal’s Payment Gateways or (ii) any PayPal product that the Parties agree from time to time should be set forth on Schedule 1.6 (which Schedule 1.6 shall be amended by the Parties following such agreement) because the Take Rate for such product is calculated using a “cost-plus” formula) for such period divided by (b) the eBay Addressable GMV for such period.

Penetration Rate Payment ” shall have the meaning set forth in Section 6.3 .

Person ” shall have the meaning set forth in the Separation and Distribution Agreement.

Personal Information ” means any information that identifies, or could reasonably be used by or on behalf of the recipient of such information to identify, any Person, including names, addresses, bank or other account numbers, and national identification numbers, but excludes anonymized and aggregated information that cannot be used to identify any Person.

Personnel ” means, with respect to any Person, any of such Person’s directors, officers, employees, agents, independent contractors, permitted subcontractors and consultants. Subcontractors of eBay shall be deemed Personnel of eBay, and subcontractors of PayPal shall be deemed Personnel of PayPal.

Platform ” means the technology, software, content, functionality, equipment, networks, Systems and any other materials delivered or used by PayPal in connection with providing the Services.

Product Development Agreement ” shall have the meaning set forth in Section 5.6 .

Product Development Plan ” shall have the meaning set forth in Section 5.6 .

 

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Prohibited Conditions ” shall have the meaning set forth in Section 3.4(b) .

Property ” means a website or mobile application, including an e-commerce storefront or marketplace.

Providing Party ” shall have the meaning set forth in Section 12.4(b) .

Quarter ” means any of the following during any calendar year: the three (3)-Month period ending March 31, June 30, September 30 or December 31; or, with respect to the first three (3)-Month period that includes the Effective Time, the portion of such three (3)-Month period after the Effective Time.

Quarterly Statement ” shall have the meaning set forth in Section 7.1(a) .

Receiving Party ” shall have the meaning set forth in Section 9.1 .

Referral Services Fee ” shall have the meaning set forth in Section 6.1(a) .

Related Services ” means, with respect to Credit Services or Payment Services, as applicable, (a) providing an available web or client-end application interface for eBay Merchants to accept payment and for PayPal Users to fund their accounts (where applicable) and transfer payments, processing and settling such payments, and maintaining records of transactions and balances through and in the accounts of such eBay Merchants and PayPal Users, (b) any and all services, functions, or responsibilities not specifically described in the definition of the applicable Services that are within the scope of the applicable Services and/or that are inherent in, required for, implied by, or incidental to the proper performance and provision by PayPal of the applicable Services and (c) any and all improvements and upgrades to, extensions of, successors to or substitutes for any of the applicable Services or any of the foregoing developed or offered by PayPal at any time during the Term.

Renewal Term ” shall have the meaning set forth in Section 10.1 .

Requesting Party ” shall have the meaning set forth in Section 8.2(a) .

Residual Information ” means information in non-tangible form that may be retained in the unaided memory of Personnel of the Receiving Party who have had access to the Confidential Information of the Disclosing Party.

Security Review ” shall have the meaning set forth in Section 15.3(b) .

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

Service Levels ” shall have the meaning set forth in Section 4.4 .

Services ” means the Credit Services, the Payment Services and the Related Services.

Source Code ” means the human-readable version of a software program that can be compiled into Object Code, including programmer’s notes and materials and documentation, suf-

 

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ficient to allow a reasonably skilled programmer to understand the design, logic, structure, functionality, operation and features of such software program and to use, operate, maintain, modify, support and diagnose errors pertaining to such software program.

Specified Change of Control ” means a Change of Control of PayPal with any eBay Specified Person or their direct or indirect Subsidiaries or controlled Affiliates.

Subsidiary ” shall have the meaning set forth in the Separation and Distribution Agreement.

Systems ” means, with respect to a Person, such Person’s computer equipment, software, servers, network infrastructure and other hardware or information systems (and components thereof) used in the operation of each Party’s respective business and otherwise used in connection with and/or necessary to provide or receive, as applicable, the Services hereunder.

Tail Period ” shall have the meaning set forth in Section 10.4(a) .

Take Rate ” means the fee PayPal charges a merchant to process a payment using PayPal’s payment services or offerings, measured as (a) net revenues received by PayPal from the transaction divided by (b) the amount of such payment (including any portion thereof paid to PayPal), in each case of clauses (a) and (b), in local currency.

Take Rate Offset ” shall have the meaning set forth in Section 3.3 .

Take Rate Overage ” shall have the meaning set forth in Section 3.3 .

Tax ” means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem , stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value added, alternative minimum, estimated or other 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.

Taxing Authority ” means, with respect to any Tax, the Governmental Authority 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.

Transaction Taxes ” shall have the meaning set forth in Section 7.2(a) .

Technology ” shall have the meaning set forth in the Intellectual Property Matters Agreement (including Software).

Term ” shall have the meaning set forth in Section 10.1 .

Termination Assistance Services ” shall have the meaning set forth in Section 10.5 .

Test Jurisdiction ” shall have the meaning set forth in Section 14.1(d) .

 

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Third-Party Claim ” means any Action, whether civil or criminal, at Law or in equity, made or brought by a third Person.

Transition Services Agreement ” shall have the meaning set forth in the Separation and Distribution Agreement.

User Data ” means eBay User Data together with PayPal User Data.

Viruses ” means any and all viruses and other contaminants (including code, commands, instructions, devices, techniques, bugs, web bugs, or design flaws) that are intended to be used to access (without authorization), alter, delete, threaten, infect, assault, vandalize, defraud, disrupt, damage, disable, inhibit, or shut down either Party’s Systems or other information or property.

ARTICLE II

SERVICES

2.1 Provision of Services; Scope . During the Term, PayPal shall provide the Services to eBay Merchants and eBay Users that make use of or access the Services through the eBay Covered Properties. This Agreement does not address PayPal’s provision of the Services through any eBay Excluded Property. eBay and PayPal shall mutually agree on any additional Properties that should be included in the eBay Covered Properties or the eBay Excluded Properties and shall jointly amend Schedules 1.3 and 1.4 to reflect such mutual agreement.

2.2 Terms and Conditions of Services . The Services shall be subject to the terms and conditions set forth herein and in the applicable User Agreement for each PayPal User, including the policies set forth therein. If any terms of this Agreement conflict with the terms and conditions of the applicable User Agreement, then as between PayPal and such PayPal User, the terms of the User Agreement shall govern to the extent of the conflict.

2.3 Services to Acquired Properties and Developed Properties . Except as set forth below, all Acquired Properties and all Developed Properties shall be Excluded Properties:

(a) If an Acquired Property or a Developed Property is incorporated into an eBay Covered Property or a mobile application supporting or relating to an eBay Covered Property in a Covered Jurisdiction, such Acquired Property or Developed Property shall be included in the eBay Covered Properties; if the Acquired Property or Developed Property continues to exist as a separate and distinct Property, the Parties shall jointly amend Schedules 1.3 and 1.4 , as applicable, to reflect such inclusion. For purposes of this Agreement, an Acquired Property or a Developed Property shall be “incorporated” into an eBay Covered Property, as described in this Section 2.3(a) , if: (i) eBay Users who attempt to access such Acquired Property or Developed Property are directed or redirected to an eBay Covered Property or to a web page or series of web pages that directs such eBay Users to an eBay Covered Property; (ii) the functions available or previously available on or through such Acquired Property or Developed Property are made available on or through an eBay Covered Property; or (iii) if such Acquired Property or Developed Property is primarily located in an Additional Jurisdiction, the total inventory of goods and services available on or through such Acquired Property or Developed Property is substantially equivalent to the total inventory of goods and services available on or through an eBay Covered Property.

 

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(b) If an Acquired Property is primarily located in an Additional Jurisdiction and, as of the date eBay consummates the acquisition of such Acquired Property, PayPal provides payment processing services to non-eBay Merchants in such Additional Jurisdiction (such Acquired Property, an “ Additional Jurisdiction Property ”), the Parties shall mutually cooperate in good faith to determine the scope and cost of the integration work that would be required to enable the Services to be made available through such Additional Jurisdiction Property in a manner that is substantially equivalent to the manner in which the Services are made available through the eBay Covered Properties as of such date (“ Integration Work ”) and shall use good faith efforts to negotiate any changes to the Product Development Plan required to complete the Integration Work; provided , that neither Party shall be required to agree to a change to the Product Development Plan that would materially delay or impede the completion of any current or projected Development Project or require such Party to invest a materially higher amount of resources into the Product Development Plan. If the Parties mutually agree on the required changes to the Product Development Plan in accordance with the immediately preceding sentence, the applicable Party or Parties shall perform the Integration Work on the timeline set forth in the revised Product Development Plan. Upon the completion of such Integration Work, the Acquired Property shall be included (or shall be deemed to be included) in the eBay Covered Properties and the Parties shall jointly amend Schedules 1.3 and 1.4 , as applicable, to reflect such inclusion.

(c) If an Acquired Property is a customer of PayPal at the time such Property is acquired by eBay, PayPal shall continue to provide to such Property all Services provided by PayPal to such Property prior to its acquisition by eBay in accordance with the terms of the then-existing agreement(s) governing the provision of such Services for a period ending on the later of (i) the expiration of the then-current term of any such existing agreement, (ii) the completion of Integration Work for such Property and (iii) the incorporation of such Property into an eBay Covered Property.

2.4 No Exclusivity . This Agreement shall be non-exclusive, and any Party (and any Party’s Subsidiaries) may, subject to Article 14 , contract with other Persons for the procurement or provision of comparable (or unrelated) services, including the provision of services to eBay Merchants and eBay Users that are PayPal Users on eBay Excluded Properties.

2.5 Additional Services . PayPal may also provide through eBay Properties services different from and in addition to the Services as eBay may reasonably request or require from time to time. The use of such additional services through eBay Properties will be governed by the terms and conditions of, and subject to the fees for, such additional services (a) as found on the applicable PayPal website in the jurisdiction in which such additional services are provided or (b) as mutually agreed upon by the Parties.

ARTICLE III

PRICING FOR EBAY MERCHANTS

3.1 Take Rate . It is the intention of the Parties that the Take Rate charged to eBay Merchants immediately following the Effective Time shall remain generally consistent with the Take Rates charged to such eBay Merchants as of immediately prior to the Effective Time. Furthermore, following the Effective Time and at all times during the Term, PayPal shall use reasonable best efforts to cause the Take Rate charged to comparable eBay Merchants (de-

 

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termined on an aggregate or average basis) to be comparable to the Take Rate charged to Non-eBay Merchants for comparable payment services in each Covered Jurisdiction, as set forth in more detail on Schedule 3.1 . The Parties shall determine whether eBay Merchants and Non-eBay Merchants are “comparable” by segmenting such eBay Merchants and Non-eBay Merchants using the characteristics set forth on Schedule 3.1 .

3.2 Market Check . Annually during the Term (or more frequently as mutually agreed by the Parties), a third-party, independent expert mutually agreed upon by the Parties (the “ Independent Expert ”) will, with respect to each Covered Jurisdiction, review the actual Take Rate for comparable (x) eBay Merchants with an Account Nationality in such Covered Jurisdiction (determined on an aggregate or average basis) and (y) Non-eBay Merchants in such Covered Jurisdiction, including Non-eBay Merchants that use or access PayPal’s services through Properties operated by a Competitive Platform Operator (other than Non-eBay Merchants that are also Competitive Platform Operators) (each such review, a “ Market Check ”), in accordance with the following procedures:

(a) The Independent Expert shall be an independent, external internationally recognized firm with appropriate qualifications and experience in conducting reviews of this nature.

(b) Before beginning a Market Check for a Covered Jurisdiction, the Independent Expert shall execute a confidentiality agreement with PayPal and eBay (or their respective Subsidiaries in such Covered Jurisdiction), the terms of which shall not frustrate or impede the purpose of the review or the disclosure of the results thereof to the Parties. If the Independent Expert has executed a confidentiality agreement in accordance with this Section 3.2(b) during the Term and such confidentiality agreement remains in full force and effect, the Independent Expert shall not be required to reexecute a second confidentiality agreement.

(c) The Independent Expert shall create a detailed written report of the results and findings of the Market Check for such Covered Jurisdiction and simultaneously provide copies of the report to both eBay and PayPal. The Independent Expert shall not disclose any Highly Sensitive Information that, if disclosed to eBay or PayPal, as applicable, would cause PayPal or eBay, as applicable, competitive harm, and shall not disclose any information to the extent disclosure of such information to such Party would violate applicable Law (including the law of a Covered Jurisdiction). Neither Party shall be required to disclose to the Independent Expert any information to the extent disclosure of such information to such Independent Expert would violate applicable Law (including the law of a Covered Jurisdiction).

(d) The Independent Expert shall conduct the Market Check in a manner that does not unreasonably interfere with eBay’s or PayPal’s business operations. Each Party and its respective Subsidiaries shall reasonably cooperate with the Independent Expert in connection with the Market Check, including by providing the Independent Expert with access to relevant financial and accounting books and statements, management and operating data, records and sample or survey data previously collected by such Party, financial statements, Systems, facilities, operations, and management Personnel and other Personnel, but only as reasonably necessary for the purposes of the Market Check, and ensure that its Personnel cooperate with the Mar-

 

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ket Check and all other reasonable requests by the Independent Expert for additional information or documentation related to the Market Check.

3.3 Response to Market Check . If the Independent Expert concludes following a Market Check for a Covered Jurisdiction that the Take Rate charged to comparable eBay Merchants with an Account Nationality in such Covered Jurisdiction (determined on an aggregate or average basis) is higher than the Take Rate charged to Non-eBay Merchants for comparable payment services in such Covered Jurisdiction (the amount of such excess, the “ Take Rate Overage ”), then (a) PayPal shall cause the Take Rate charged to comparable eBay Merchants with an Account Nationality in such Covered Jurisdiction (in aggregate) for the remainder of the Term to be comparable to the Take Rate charged to Non-eBay Merchants for comparable payment services in such Covered Jurisdiction and (b) eBay and PayPal shall cooperate in good faith and mutually agree on actions to be taken by PayPal and by eBay (if any) to communicate such change in the Take Rate to, and to remedy the Take Rate Overage during the previous year or years of the Term for, some or all of the eBay Merchants with an Account Nationality in such Covered Jurisdiction, including by means of a refund, discount or otherwise (the “ Take Rate Offset ”). If the Parties cannot mutually agree on the Take Rate Offset for a Covered Jurisdiction, the Parties shall resolve such dispute through the dispute resolution provisions set forth in Sections 16.1 and 16.2 .

3.4 Competitive Platform Operators . In the event that PayPal offers to Non-eBay Merchants that use or access PayPal’s services through Properties operated by a Competitive Platform Operator in a Covered Jurisdiction (other than Non-eBay Merchants that are also Competitive Platform Operators) (a) overall economic terms that are more favorable than the economic terms offered at such time to eBay Merchants accessing the Services through the eBay Covered Properties primarily located in such Covered Jurisdiction or (b) any non-economic term that is not offered at such time to eBay Merchants accessing the Services through the eBay Covered Properties primarily located in such Covered Jurisdiction (unless such non-economic term is exclusively offered at such time to Non-eBay Merchants who use or access PayPal’s services through Properties operated by such Competitive Platform Operator in such Covered Jurisdiction and is not offered at such time to other Non-eBay Merchants) (any such term described in clauses (a) or (b), whether temporary or permanent, a “ CPO MFP ”):

(a) Offer to eBay . Promptly after offering a CPO MFP to one or more Competitive Platform Operator(s), PayPal shall offer to eBay, on behalf of comparable eBay Merchants in such Covered Jurisdiction, the same CPO MFP, along with all other terms and conditions directly related to such CPO MFP, including any terms and conditions required to comply with applicable Law and any amendments or modifications to any Contracts to which eBay is a party (the “ CPO Conditions ”), other than any Prohibited Conditions. As part of such offer, PayPal shall provide to eBay the material terms of the CPO MFP and of the CPO Conditions in sufficient detail to enable eBay to evaluate the material terms and determine whether to choose to accept the CPO MFP and to comply with the CPO Conditions (other than the Prohibited Conditions). eBay shall notify PayPal in writing no later than ninety (90) days following eBay’s receipt of such material terms whether to accept the CPO Conditions (other than any Prohibited Conditions). If eBay chooses to accept the CPO MFP, eBay shall use reasonable efforts to comply with the CPO Conditions (other than any Prohibited Conditions) as soon as commercially reasonable following the date eBay communicates its acceptance to PayPal, and the CPO MFP

 

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shall be effective immediately upon eBay’s compliance with the CPO Conditions (other than any Prohibited Conditions).

(b) Prohibited Conditions . If one or more of the CPO Conditions is: (i) a term or condition with which eBay is not reasonably capable of complying, (ii) a term or condition applicable to merchants with which the eBay Merchants (in the aggregate) are not reasonably capable of complying, as described below; (iii) unique to such Competitive Platform Operator (such that only the Competitive Platform Operator could comply); or (iv) designed or intended to, or operates to, frustrate or interfere with, or otherwise has the effect of, discriminating against eBay or eBay Merchants or frustrating or circumventing the application of this Section 3.4 (collectively, the “ Prohibited Conditions ”), then eBay and the eBay Merchants shall receive the CPO MFP without having to comply with such CPO Condition ( provided , that eBay complies with all CPO Conditions that are not Prohibited Conditions). By way of example: (A) eBay and eBay Merchants will be deemed to be not “reasonably capable of complying” with any and all terms or conditions to the extent that they (1) impose a condition or requirement of size or ranking (in aggregate or with respect to a specific jurisdiction) that is unrelated to the Competitive Platform Operator’s payments volume on PayPal and that exceeds the size or ranking of the applicable eBay Covered Properties, (2) require eBay or eBay Merchants to violate any applicable Law or Contract (other than any Contract that may be amended by eBay without the consent of the other party or parties thereto to eliminate such violation) or (3) would require eBay to operate a Property that is not an eBay Covered Property or own or control operations in a jurisdiction that is not a Covered Jurisdiction; and (B) subject to clause (A), eBay shall not be deemed to be not “reasonably capable of complying” with a term or condition solely because such term or condition requires eBay to pay or commit to pay any amount or incur any obligation in favor of or offer or grant any accommodation (financial or otherwise) to the Competitive Platform Operator or in respect of such CPO MFP.

(c) In connection with the Market Check, the Independent Expert shall review the CPO MFPs, if any, offered by PayPal during the year covered by such Market Check and PayPal’s compliance with the terms of this Section 3.4 . The Independent Expert’s review shall be conducted in a manner consistent with the procedures and policies for the Market Check set forth in Sections 3.2(b) , (c)  and (d) , and PayPal shall provide the same level of cooperation to the Independent Expert that PayPal is required to provide in connection with the Market Check.

3.5 Changes in Law . If PayPal changes the terms, conditions or manner of performing the payment processing services it offers or the Take Rate charged to merchants for payment processing services in a Covered Jurisdiction in response to a change in Law, PayPal shall use its reasonable best efforts to implement such change in a manner that does not have a disproportionately adverse effect on the Take Rate charged to, and the terms, conditions or manner of performing payment processing services for, eBay Merchants relative to the impact on Non-eBay Merchants.

ARTICLE IV

PERFORMANCE OF SERVICES; SERVICE LEVELS

4.1 Manner of Performance . PayPal shall, at all times, ensure that the Services, and PayPal’s obligations under this Agreement, are performed at the highest level of quali-

 

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ty provided, or required to be provided, by PayPal with respect to comparable services provided to or for Non-eBay Merchants and PayPal Users, and by appropriately trained and qualified Personnel in a timely, professional and workmanlike manner. PayPal shall promptly notify eBay upon becoming aware of any circumstances that could reasonably be expected to jeopardize the performance of the Services or PayPal’s obligations under this Agreement in accordance with this Article 4 , and eBay shall promptly notify PayPal upon becoming aware of any circumstances that could reasonably be expected to jeopardize the performance by eBay of its obligations under this Agreement in accordance with this Article 4 .

4.2 Facilities; Personnel . Except as otherwise expressly provided herein, (a) each Party shall be responsible for providing all facilities, Personnel and other resources necessary to perform its obligations under this Agreement and (b) without limiting the foregoing, PayPal shall be responsible for providing all facilities, Personnel and other resources necessary to perform the Services; provided , that if eBay has agreed pursuant to another Ancillary Agreement or Commercial Agreement to provide to PayPal any facilities, Personnel or other resources used by PayPal in performing the Services, then eBay shall be responsible for providing such facilities, Personnel and other resources pursuant to the applicable Ancillary Agreement(s) and Commercial Agreement(s). Each Party shall manage, supervise and provide direction to its respective Personnel in connection with this Agreement, and shall cause them to comply with all obligations and restrictions applicable to such Party under this Agreement and, to the extent set forth in the proviso to clause (b) of the immediately preceding sentence, any other Ancillary Agreement or Commercial Agreement.

4.3 Subcontracting . Each of eBay and PayPal shall remain fully responsible and liable for the performance of all of its obligations under this Agreement even if performed, or failed to be performed, by a subcontractor. Each subcontracting arrangement entered into by either Party in connection with the performance of its obligations under this Agreement shall be documented in a written Contract, and each Party shall use reasonable best efforts to cause any such Contract not to contain any provision that is inconsistent with the terms of this Agreement. Unless otherwise requested by eBay, PayPal shall be eBay’s sole point of contact with respect to PayPal’s subcontractors and any subcontracting arrangements entered into by PayPal under this Agreement, and unless otherwise requested by PayPal, eBay shall be PayPal’s sole point of contact with respect to eBay’s subcontractors and any subcontracting arrangements entered into by eBay under this Agreement.

4.4 Service Levels . Without limiting Section 4.1 , during the Term, PayPal shall perform the Services in a manner that meets or exceeds the applicable service level requirements agreed by the Parties from time to time (the “ Service Levels ”). The Parties shall cooperate in good faith to update the service level requirements from time to time in order to reflect a Service Level that equals or exceeds the performance and quality standards set forth in Section

 

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4.1 , and PayPal’s provision of Services shall satisfy or exceed the requirements of the then-current Service Level.

4.5 Root Cause Analysis . Each time there occurs a failure to provide any Services due to system outages or interruptions, the Parties shall each promptly use commercially reasonable efforts to: (a) conduct a root cause analysis of the failure and prepare a written report identifying and describing in reasonable detail such root cause(s), (b) discuss the root cause(s) of the failure and each Party’s position with regard to such root cause(s), (c) correct the problem and begin providing the impacted Services as soon as practicable and (d) regularly advise the other Party of the status of such corrective efforts and respond promptly to any request by the other Party for an update regarding such efforts (it being agreed that, except as mutually agreed by the Parties, each Party may satisfy the requirements of the foregoing clauses (a) through (d) by using the same degree of effort that such Party used to analyze and discuss system outages and interruptions prior to the Effective Time). Each Party shall prioritize any root cause analysis performed hereunder at a level equal to or higher than that afforded to such Party’s testing or quality assurance investigations or activities conducted internally or for any other of such Party’s customers of services reasonably comparable to the Services. The Parties shall apportion the cost of correcting the problem based on the results of the root cause analysis and the relative contribution of each Party to the root cause(s) of the failure. All Service Levels and applicable Service Credits shall remain in effect notwithstanding the subsequent correction of any performance problem.

4.6 Monitoring . As part of the Services, PayPal shall implement measurement and monitoring tools and procedures necessary to measure its performance of the Services against the Service Levels on a monthly basis. Subject to the provisions of Article 15 , PayPal shall provide eBay with information and documentation regarding the measurement and monitoring tools necessary to verify compliance by PayPal with the Service Levels and shall provide eBay with such access to the measurement and monitoring tools as is necessary to conduct such analysis.

4.7 Disaster Recovery . In order to facilitate an orderly transition in connection with the Separation and Distribution, PayPal shall implement and maintain disaster recovery facilities and a written disaster recovery plan that is consistent with the terms of the Colocation Services Agreement and that is designed to ensure that in the case of a disaster within or around the geographic location of PayPal’s Systems used in connection with the Services, PayPal shall be able to switch to a redundant site (or colocated site hosted by eBay or a third Person) capable of meeting the requirements of this Agreement without disruption or lapse in service (such disaster recovery plan, the “ Disaster Recovery Plan ”). Subject to the foregoing, the Disaster Recovery Plan shall be consistent with, and be at least as protective as, the most protective disaster recovery plan that PayPal then provides or is required to provide to any other customer (other than eBay) of PayPal or any of its Subsidiaries. Upon PayPal’s discovery of circumstances requiring disaster recovery in connection with the Services, PayPal shall implement the Disaster Recovery Plan and shall promptly notify eBay of such circumstances. In the event that a disaster causes PayPal to allocate limited resources between or among its customers, PayPal shall allocate such resources to eBay in a manner no less favorable to eBay than PayPal allocates such resources to its most favored customers.

 

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ARTICLE V

DATA SHARING; INFORMATION SECURITY; PRODUCT DEVELOPMENT

5.1 Data Sharing Addendum .

(a) eBay and PayPal shall execute and deliver a data sharing addendum, substantially in the form set forth on Schedule 5.1 (a “ Data Sharing Addendum ”), effective as of the Effective Time, providing for each Party and its Subsidiaries to share data with the other Party and its Subsidiaries for use in risk, trust and fraud modeling and for the purpose of facilitating customer transactions and customer service. If there is any inconsistency or conflict between the terms of this Agreement and the terms and conditions of the Data Sharing Addendum, then the terms of the Data Sharing Addendum shall govern to the extent of the conflict.

(b) The Data Sharing Addendum shall provide that: (i) all data sharing will comply with all applicable Laws, including Data Protection Laws; and (ii) notwithstanding anything to the contrary in the Data Sharing Addendum, neither Party shall be required to share any data with the other Party in violation of any applicable Law; provided , that the Parties shall use commercially reasonable efforts to cooperate in seeking to find a way to permit compliance with the data sharing obligations contained in the Data Sharing Addendum to the extent and in a manner that avoids any violation of Law, including through (A) the amendment of the applicable privacy policy or (B) the redaction or anonymization of data so that the provision of such redacted or anonymized data to the other Party pursuant to the Data Sharing Addendum does not violate applicable Law.

(c) Upon the consummation of a Specified Change of Control, eBay can terminate all or any portion of the Data Sharing Addendum (without triggering the termination of this Agreement or any related arrangements) by delivering a written notice to PayPal at any time beginning at the effective date of such Specified Change of Control and ending ninety (90) days thereafter, with such termination to become effective on the date specified by eBay in such written notice.

5.2 Access to Facilities . To the extent that eBay’s or PayPal’s Personnel will access the other Party’s sites or facilities in connection with this Agreement, such Party shall cause its Personnel, while working at such sites or facilities, to comply with all applicable safety and security policies and procedures that have been provided to such Personnel, and shall be liable for any violation of any such policies and procedures by such Party’s Personnel.

5.3 Systems Policies . To the extent that eBay’s (or its Subsidiaries’) or PayPal’s (or its Subsidiaries’) Personnel will access the Systems of the other Party or its Subsidiaries in connection with this Agreement, that Party shall cause such Personnel, while accessing such Systems, to (a) comply with all applicable security policies and procedures that have been provided to such Personnel, (b) not tamper with, compromise or circumvent any security or audit measures employed by the other Party and (c) if requested by the other Party, execute a confidentiality agreement in the form provided by that Party. For clarity, access or use of APIs of a Party or its Subsidiaries shall not constitute access to Systems of such Party or its Subsidiaries. Each Party shall also:

 

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(a) Ensure that only those of its Personnel who are specifically authorized to have access to the other Party’s Systems gain such access, prevent its Personnel’s unauthorized access to, or use, destruction, alteration or loss of, any information contained therein, and notify its Personnel of the restrictions set forth in this Agreement; and

(b) Use commercially reasonable efforts to ensure that its Personnel who are authorized to have access to the other Party’s Systems shall access and use only those Systems, and only such data and information within such Systems, to which such Personnel have been granted the right to access and use.

5.4 Security and Stability . Each Party acknowledges that it is in the best interests of all Parties for each Party maintain a secure and stable environment and, to that end, except as set forth in the Data Sharing Addendum, each Party reserves the right to change at any time the method by which its applicable databases and/or data may be accessed by the other Party (and in the case of PayPal, the eBay Merchants); provided , that such access method shall not negatively affect, in any material way, the quality of or provision of the Services or either Party’s compliance with the obligations set forth in this Agreement. Each Party shall provide the other Party with advance written notice of any such changes to the method of access to the applicable databases and/or data and shall ensure that any such change does not materially and adversely impact the quality of or provision of the Services or either Party’s compliance with the obligations set forth in this Agreement. Each Party also agrees that, in the event of degradation or instability of the Platform or the other Party’s Systems or an emergency with respect to the Platform or such Systems, the other Party may, in its sole discretion, temporarily suspend access to the applicable, API, database and/or data under this Agreement in order to minimize threats to and protect the operational stability and security of the Platform and such other Party’s Systems. Each of the Parties agree to the information security requirements described on Schedule 5.4 (the “ Information Security Addendum ”); provided , that any change to the scope of Services provided under this Agreement would require additional review by the Parties’ security teams to determine whether additional information security requirements are necessary. The Parties shall negotiate in good faith any amendments to the Information Security Addendum required to reflect any such additional information security requirements.

5.5 Unauthorized Access . Each Party shall be responsible for implementing and appropriately updating reasonable policies, procedures and technology to prevent unauthorized access to the eBay Properties or PayPal’s Systems in connection with the usage or provision of the Services. Each Party shall apply appropriate internal information security practices, including: using appropriate firewall and anti-virus software; maintaining such countermeasures, operating systems, and other applications with up-to-date virus definitions and security patches; installing and operating security mechanisms in the manner in which they were intended sufficient to ensure that the eBay Properties or PayPal’s Systems will not be impacted nor operations disrupted in connection with the usage or provision of the Services; and permitting only authorized users access to computer systems and applications. Each Party shall also use up-to-date anti-virus tools to remove known Viruses from any email message or data transmitted to an eBay Property or PayPal’s Systems in connection with the usage or availability of the Services. Each Party shall be responsible for maintaining and providing the other Party with appropriate access to audit its policies, procedures and technology for safeguarding customer information. Each Party acknowledges and understands that such policies, procedures and technology are consid-

 

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ered Confidential Information. Additionally, each of PayPal and eBay shall not knowingly compromise the security of the other Party’s Systems, including by tampering with, compromising, or attempting to circumvent any physical or electronic security or audit measures employed by such Party in the course of its business operations.

5.6 Product Development Agreement . eBay and PayPal shall execute and deliver a product development agreement (the “ Product Development Agreement ”), effective as of the Effective Time, that provides for eBay and PayPal to mutually discuss in good faith and agree on a product development plan for improving the PayPal experience on eBay Covered Properties and to prioritize those improvements to be incorporated into the experience on the eBay Covered Properties (the “ Product Development Plan ”). The Product Development Plan shall set forth, at a minimum, a description of each development project to which eBay and PayPal mutually agree (each such project, a “ Development Project ”), the primary owner (eBay or PayPal), the Party with primary responsibility for the achievement of each action item or deliverable for each such Development Project, the expected timeline and key milestones for each such Development Project, the anticipated budget for each such Development Project, and the resource commitments by eBay and PayPal towards completing each such Development Project. The Product Development Agreement shall also provide, among other things, for each of eBay and PayPal to agree to commit resources and development staff, as mutually agreed by eBay and PayPal, to the Development Projects included in the Product Development Plan.

ARTICLE VI

REFERRAL SERVICES FEES; USAGE OF SERVICES; MARKETING

6.1 Referral Services Fee .

(a) Baseline Referral Services Fee . eBay shall be entitled to receive from PayPal, for each Quarter during the Term in which the Penetration Rate as of the beginning of such Quarter exceeds sixty percent (60%), an amount equal to $[•] (the “ Baseline Referral Services Fee ”), subject to adjustment pursuant to Sections 6.1(b) (the Baseline Referral Services Fee, as so adjusted, the “ Referral Services Fee ”).

(b) Adjustment Payments . Immediately following the Effective Time, PayPal and eBay shall mutually determine in good faith an estimate of (i) the number of Activated New Users for the period commencing on such date and ending at the beginning of the following Quarter and (ii) the number of Activated New Users for subsequent Quarters during the Term (clause (i) (with respect to the first Quarter following the Effective Time) and clause (ii) (with respect to all other Quarters during the Term), the “ Estimated Activated New Users ”). Within three (3) business days of the end of each Month and each Quarter, PayPal shall calculate and deliver to eBay a report of the number of Activated New Users since the beginning of the previous Month or Quarter, as applicable. If the number of Activated New Users for a Quarter exceeds the Estimated Activated New Users, then the Referral Services Fee for such Quarter shall equal (i) the Baseline Referral Services Fee plus (ii) an amount equal to (A) the absolute value of (I) the Activated New Users for such period minus (II) the Estimated Activated New Users mul-

 

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tiplied by (B) an amount that is mutually determined by eBay and PayPal (such amount for such Quarter, the “ Activated New Users Adjustment Amount ”). If the Estimated Activated New Users for a Quarter exceeds the number of Activated New Users for such Quarter, then the Referral Services Fee for such Quarter shall equal (I) the Baseline Referral Services Fee for such Quarter minus (II) the Activated New Users Adjustment Amount for such Quarter.

(c) Revisions to Baseline Referral Services Fee . If there occur three (3) or more consecutive Quarters in which the Activated New Users Adjustment Amount for each such Quarter exceeds five percent (5%) of the Baseline Referral Services Fee for the corresponding Quarter and either (i) the Referral Services Fee for each such Quarter exceeds the Baseline Referral Services Fee or (ii) the Referral Services Fee for each such Quarter is less than the Baseline Referral Services Fee, the Parties shall mutually adjust the Baseline Referral Services Fee for subsequent Quarters in the Term, in a manner to be mutually agreed by the Parties, to reflect the average number of Activated New Users over such consecutive Quarters.

6.2 Credit Services Referral Fees . eBay shall be entitled to receive from PayPal, for each Quarter during the Term, an amount equal to 0.30% of the PayPal Net TPV of eBay Properties for such Quarter completed through the Credit Services (the “ Credit Usage Fee ”). No later than three (3) business days following the end of each Month and each Quarter during the Term, the Parties shall calculate the PayPal Net TPV of eBay Properties for such Month or Quarter, as applicable, completed through the Credit Services and the resulting Credit Usage Fee.

6.3 Penetration Rate Payments . Either eBay or PayPal shall, subject to Section 6.3(d) , be entitled to receive from the other Party, for each Quarter during the Term, a payment in respect of the Penetration Rate for such Quarter, calculated in accordance with this Section 6.3 (the “ Penetration Rate Payment ”), as follows:

(a) Calculation . No later than the last business day of each Month during the Term, eBay will provide to PayPal the following: the Penetration Rate for the previous Month and an estimate of the Penetration Rate for the Quarter in which the current Month is included. The data provided by eBay will include country level detail of the Penetration Rate for at least the highest ten Covered Jurisdictions, measured by eBay Addressable GMV. In making its calculations, eBay will utilize foreign exchange rates consistent with those utilized by eBay for its internal planning and budgeting purposes. PayPal acknowledges that the Penetration Rate data to be provided by eBay is commercially sensitive and, accordingly, PayPal agrees to restrict access to the Penetration Rate data to the PayPal senior executive team and those PayPal Personnel who need access to such information to execute their job responsibilities, including accounting and financial reporting Personnel.

(b) Penetration Rate Above Baseline Rate . If the Penetration Rate for such Quarter exceeds the Baseline Rate, eBay shall be entitled to a Penetration Rate Payment in an amount equal to (i) $3,250,000 multiplied by (ii) (A) the Penetration Rate for such Quarter minus (B) the Baseline Rate, (C) rounded to the nearest hundredth of a percentage point, multiplied by

 

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(iii) one hundred (100). By way of example, if the Penetration Rate for a Quarter were 82.253%, eBay would be entitled to a Penetration Rate Payment for such Quarter equal to $3,250,000 multiplied by 2.25% multiplied by 100, or $7,312,500.

(c) Penetration Rate Less than Baseline Rate (0 to 5%) . If the Baseline Rate exceeds the Penetration Rate for such Quarter, PayPal shall be entitled to a Penetration Rate Payment in an amount equal to (i) $3,250,000 multiplied by (ii) the Baseline Rate minus the Penetration Rate for such Quarter, (C) rounded to the nearest hundredth of a percentage point, multiplied by (iii) one hundred (100). By way of example, if the Penetration Rate for a Quarter were 78.253%, PayPal would be entitled to a Penetration Rate Payment for such Quarter equal to $3,250,000 million multiplied by 1.75% multiplied by 100, or $5,687,500.

(d) Penetration Rate Less than Baseline Rate (More than 5%) . If the Baseline Rate exceeds the Penetration Rate for such Quarter by more than five percent (5%), then PayPal shall be entitled to a Penetration Rate Payment in an amount equal to (i) $16,250,000, (ii)  plus (A) $12,500,000 multiplied by (B) (I) the Baseline Rate minus (II) the Penetration Rate minus (III) five percent (5%), (IV) rounded to the nearest hundredth of a percentage point, multiplied by (C) one hundred (100). By way of example, if the Penetration Rate for a Quarter were 74.253%, PayPal would be entitled to a Penetration Rate Payment equal to $16,250,000 (calculated pursuant to Section 6.3(c) ) + $12,500,000 multiplied by 0.75 multiplied by 100 = $25,625,000.

(e) Elimination of Penetration Rate Payment . Notwithstanding the foregoing: (i) PayPal shall not be entitled to any Penetration Rate Payments for any Quarter ending after December 31, 2015 if PayPal Net TPV Off eBay in the calendar year ended December 31, 2015 is less than (A) eighty eight percent (88%)  multiplied by (B) the PayPal Net TPV Off eBay for the calendar year ending December 31, 2014 (such product, the “ 2014 Measurement Rate ”); (ii) PayPal shall not be entitled to any Penetration Rate Payments for any Quarter ending after December 31, 2016 if PayPal Net TPV Off eBay in the calendar year ended December 31, 2016 is less than the greater of: (A) the 2014 Measurement Rate and (B) (I) eighty eight percent (88%)  multiplied by (II) the highest PayPal Net TPV Off eBay in the previous two (2) calendar years; and (iii) for the calendar years ending on December 31, 2017, December 31, 2018 or December 31, 2019, PayPal shall not be entitled to any Penetration Rate Payments for any Quarter following the end of any calendar year in which PayPal Net TPV Off eBay is less than (A) eighty eight percent (88%)  multiplied by (B) the highest PayPal Net TPV Off eBay in the previous three consecutive calendar years.

6.4 Aggregate Quarterly Fees . The “ Aggregate Quarterly Fee ” for each Quarter shall equal (a) the Referral Services Fee for such Quarter plus (b) the Credit Usage Fee for such Quarter plus (c) if eBay is entitled to a Penetration Rate Payment for such Quarter, the Penetration Rate Payment for such Quarter minus (d) if PayPal is entitled to a Penetration Rate Payment for such Quarter, the Penetration Rate Payment for such Quarter. At the end of every Calendar Year during the Term, PayPal shall pay to eBay, in accordance with the provisions of Article 7 , the sum of the Aggregate Quarterly Fees accrued during the previous year.

6.5 Descriptions of PayPal on eBay Covered Properties . All text descriptions of PayPal on the eBay Covered Properties pursuant to this section shall be preapproved in writing by PayPal.

 

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6.6 Integration of New PayPal Products . eBay agrees to review and consider in good faith implementation of any new PayPal products and related offerings but shall have no obligation, now or in the future, to implement any such PayPal products or related offerings.

ARTICLE VII

FEES AND PAYMENT

7.1 Payment Terms .

(a) Within three (3) business days following the end of each Quarter, PayPal shall deliver to eBay (i) a calculation of the estimated Aggregate Quarterly Fee payable by eBay or PayPal, as applicable, for such Quarter, including each of the component fees, and (ii) true and complete statements of the Activated New Users for such Quarter and PayPal Net TPV on eBay Covered Properties completed through the Credit Services (each such statement and associated information, a “ Quarterly Statement ”). The Quarterly Statement shall also include the Penetration Rate for such Quarter delivered by eBay to PayPal pursuant to Section 6.3(a) . Within thirty (30) days following the end of each Calendar Year during the Term, PayPal shall deliver to eBay a statement that contains (A) a calculation of the Aggregate Quarterly Fee payable by eBay or PayPal, as applicable, for such Calendar Year, including each of the component fees, and (B) the PayPal Net TPV Off eBay for the most recently completed fiscal year (each such statement and associated information, an “ Annual Statement ”). The Parties will determine amongst themselves what additional information shall be included in the Quarterly Statements and Annual Statement and the form, substance and recipients of any invoices issued in respect of the Aggregate Quarterly Fee payable by eBay or PayPal, as applicable, for each Quarter and each Calendar Year.

(b) Subject to Section 7.1(c) , if the Annual Statement indicates that eBay is entitled to receive a payment from PayPal, then PayPal shall, or shall cause its applicable Affiliates to, pay to eBay the undisputed amount due pursuant to such Annual Statement within thirty (30) days after PayPal’s delivery of such Annual Statement. Subject to Section 7.1(c) , if the Annual Statement indicates that PayPal is entitled to receive a payment from eBay, then eBay shall, or shall cause its applicable Affiliates to, pay to PayPal the undisputed amount due pursuant to such Annual Statement within thirty (30) days after eBay’s receipt of such Annual Statement.

(c) Each Party may dispute in whole or in part any Quarterly Statement or Annual Statement, or any component thereof prepared by the other Party, by providing written notice to such other Party within thirty (30) days from the receipt of the relevant Quarterly Statement or Annual Statement (or component thereof), it being understood that any undisputed amounts on the Annual Statement (or components thereof) shall be paid when due by PayPal or eBay in accordance with Section 7.1(b) . If a Party does not dispute a Quarterly Statement (or component thereof) within such thirty (30)-day period, it shall not be permitted to dispute pursuant to this Section 7.1(c) the amounts set forth on the Annual Statement for the applicable Calendar Year to the extent that such amounts were included or reflected in such undisputed Quarterly Statement. eBay and PayPal shall attempt in good faith to negotiate a resolution of any dispute within thirty (30) days from the receipt of the written notice by the Party that prepared the disputed Quarterly Statement or Annual Statement (or component thereof). If the resolution of any such dispute with respect to an Annual Statement is that one Party owes a payment of any amount to the other Party or that one Party’s payment was in excess of the actual amount due,

 

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the Party that owes such payment or that received the excess payment, as applicable, shall pay such amount due or amount in excess to the other Party, plus interest accruing at the Interest Rate from the date that is thirty (30) days following the date set forth in Section 7.3(a) for PayPal to deliver to eBay’s the Annual Statement to the time of the payment, promptly, and in any event within thirty (30) days, after eBay and PayPal agree to such resolution. If a dispute regarding any Quarterly Statement or Annual Statement is not resolved within such thirty (30)-day period, the dispute may be resolved in accordance with Section 16.2 . The existence of a dispute (pursuant to this Section 7.1(c) or otherwise) shall not excuse any Party from any other obligation under this Agreement, including eBay’s or PayPal’s applicable obligation to pay any undisputed amounts and PayPal’s obligation to continue to perform Services hereunder, unless and until this Agreement is validly terminated pursuant to Section 10.2 .

(d) The Parties hereby agree that the consideration payable pursuant to this Agreement also constitutes compensation for the services rendered by each Party under the Product Development Agreement and the Data Sharing Addendum, and that no additional payments shall be required to be made by one Party to another Party as consideration for such services.

7.2 Taxes .

(a) The amounts payable to eBay or PayPal, as applicable, pursuant to Section 7.1 shall be exclusive of any and all value added, goods and services, sales, use, consumption, excise, service, transfer, stamp, documentary, filing, recordation taxes or similar taxes and any related interest and penalties (collectively, “ Transaction Taxes ”). The Party receiving any services hereunder for which it would be required to pay a component fee but for the aggregation of such fees pursuant to Sections 6.4 and 7.1 shall be responsible for any Transaction Taxes imposed or assessed with respect thereto. The Party providing any services hereunder shall issue proper invoices usable by the Party receiving any services hereunder in order to recover (by way of credit or refund) in jurisdictions where they are recoverable. The Parties shall cooperate to minimize any Transaction Taxes and in obtaining any refund, return or rebate, or applying an exemption or zero-rating for services giving rise to any Transaction Taxes, including by filing any exemption or other similar forms or providing valid tax identification number or other relevant registration numbers, certificates or other documents. The Parties shall cooperate regarding any requests for information, audit, or similar request by any Taxing Authority concerning Transaction Taxes payable with respect to services provided pursuant to this Agreement.

(b) The Party receiving services hereunder shall be entitled to deduct and withhold Tax required by applicable Law to be withheld on payments made to the Party providing any service hereunder. To the extent any amounts are so withheld, the Party receiving any service hereunder shall timely remit such deducted and withheld amount to the relevant Taxing Authority and promptly provide the Party providing any services hereunder with evidence of such payment. The Party providing any services hereunder agrees to complete and provide to the Party receiving any services hereunder or if required, to the relevant Taxing 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 Party receiving any services hereunder, in order to reduce or exempt the withholding of any Tax with respect to payments made to the Party providing any services hereunder when and where applicable by Law. The Parties shall cooperate regarding any

 

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requests for information, audit, or similar request by any Taxing Authority concerning the withholding of any Tax payable with respect to services provided pursuant to this Agreement.

(c) Any penalties or interested imposed on any Transaction Taxes described in Section 7.2(a) or Tax described Section 7.2(b)  shall be the responsibility of the Party receiving any services hereunder unless the penalties or interested are the result of an action or failure to act by the Party providing any services hereunder.

ARTICLE VIII

COMPLIANCE WITH LAW; AUDITS

8.1 Compliance with Law; Books and Records .

(a) Each Party shall ensure that the performance of its obligations hereunder complies with all applicable Laws (including all Data Protection Laws), and shall, at its sole expense, obtain and maintain in force all licenses, consents and permits required for it to comply with all such Laws. Without limiting the foregoing, neither Party shall be required to pay or commit to pay any amount or incur any obligation in favor of or offer or grant any accommodation (financial or otherwise) to enable the other Party to comply with such applicable Laws. Each Party shall notify the other Party of any requirements under applicable Law that require disclosures with respect to the Services to be made on any eBay Property or that require any other change to any such Property in connection with the Services, in each case to the extent such disclosure is required due to the nature of the Services. Notwithstanding the foregoing, to the extent required by applicable Law, PayPal and eBay shall be jointly responsible for notifying any Governmental Authority of this Agreement and of any modification hereto. The Parties shall, upon the reasonable request of the other Party, share information with each other as necessary to enable each Party to satisfy its obligations under this Section 8.1 .

(b) Each Party and its Subsidiaries shall each maintain (and cause to be maintained) complete and accurate books and records for the purpose of supporting and documenting the accuracy of the Quarterly Statements and Annual Statements and the calculation of the Aggregate Quarterly Fees, eBay Addressable GMV, PayPal Net TPV on eBay Covered Properties and PayPal Net TPV Off eBay, including any financial, operating and market data with respect to the Services, and as otherwise reasonably necessary to confirm such Party’s compliance with this Agreement (except for Sections 3.1 and 3.2 ). All such books and records will be retained at the applicable Party’s, or its applicable Subsidiary’s, principal place of business for a period of at least eighteen (18) months after the payments to which they pertain have been made. Each Party’s books and records will be open for inspection and review (as set forth in this Article 8 ) during such eighteen (18)-month period for the purpose of verifying the accuracy of the payments and charges made hereunder and such Party’s compliance with this Agreement.

8.2 Audits .

(a) Each Party shall have the right (but not the obligation) to engage an independent auditor to conduct (and such Party shall be permitted to cause such independent auditor to so conduct), at such Party’s sole cost and expense, audits (each, an “ External Audit ”) of the other Party to confirm: the accuracy of the Quarterly Statements, Annual Statements and any

 

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financial, operating and market data used to determine the Aggregate Quarterly Fees. The Party causing the External Audit to be conducted is referred to herein as the “ Requesting Party ,” and the Party that that is the subject of the External Audit is referred to herein as the “ Audited Party .” The scope of the External Audit referred to in the preceding sentence shall be set forth in an auditor’s review instruction letter that the Requesting Party shall provide to the auditor performing such External Audit (such auditor, the “ External Auditor ”). Any External Audit conducted pursuant to this Section 8.2 shall be conducted by an independent, external, internationally-recognized firm as mutually agreed upon by the Parties with appropriate qualifications and experience in conducting audits of this nature. Before beginning an External Audit, the External Auditor shall execute a confidentiality agreement with the Audited Party, the terms of which shall not frustrate or impede the purpose of the External Audit or the disclosure of the results thereof to the Requesting Party; provided , that if the External Auditor has executed a confidentiality agreement in accordance with this Section 8.2(a) during the Term and such confidentiality agreement remains in full force and effect, the External Auditor shall not be required to reexecute a second confidentiality agreement. The External Auditor shall create a detailed written report of the results and findings of each External Audit, and simultaneously provide copies of the report to both eBay and PayPal; provided , that such report shall not contain any Highly Sensitive Information that, if disclosed to the Requesting Party, would cause the Audited Party competitive harm, and shall not disclose any information to the extent disclosure of such information to the Requesting Party would violate applicable Law.

(b) The Requesting Party may, through an External Auditor, conduct External Audits under Section 8.2(a) no more than once per Calendar Year. The External Auditor shall conduct all audits during normal business hours and shall endeavor to conduct them in a manner that does not unreasonably interfere with the Audited Party’s business operations. The Audited Party shall reasonably cooperate with the External Auditor in connection with any External Audit, including by providing the External Auditor with access to financial and accounting books and statements, management and operating data, records, accounts, financial statements and management Personnel and other Personnel, but only as reasonably necessary for the purposes of the External Audit, and ensure that its Personnel cooperate with any such External Audit and all other reasonable requests by the External Auditor for additional information or documentation required to complete such External Audit. The Audited Party shall not be required pursuant to this Section 8.2 to disclose to the External Auditor any information to the extent disclosure of such information to the External Auditor would violate applicable Law.

(c) If an audit by a Governmental Authority having jurisdiction over either Party results in a finding that either Party is not in compliance with any generally accepted accounting principle or other audit or accounting requirement or any Law relating to the performance of its obligations under this Agreement, the Party that is found to be non-compliant shall, at its own expense and within the time period specified by such Governmental Authority auditor, address and resolve the deficiencies identified by such Governmental Authority.

8.3 Audit Responses .

(a) Subject to Section 8.3(c) , if any External Audit conducted pursuant to Section 8.2 or any Internal Audit conducted pursuant to Section 15.3 reveals that eBay overpaid any amount due or is owed any amount under this Agreement (except for any portion thereof disputed

 

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in good faith), PayPal shall within ten (10) business days after such determination reimburse eBay the amount of such underpayment or pay to eBay the amount owed, in each case plus interest accruing at the Interest Rate from the date of payment by eBay or the date such payment should have been made to eBay to the time of reimbursement or payment by PayPal. If any External Audit reveals any material inaccuracy of the Quarterly Statements, Annual Statements or Aggregate Quarterly Fees resulting from the conduct of or information provided by PayPal that equals or exceeds two hundred fifty thousand Dollars ($250,000) and also amounts to ten percent (10%) or more of the total amount payable by eBay for any period covered by the review, PayPal shall reimburse eBay for the cost of such External Audit.

(b) Subject to Section 8.3(c) , if any External Audit conducted pursuant to Section 8.2 or any Internal Audit conducted pursuant to Section 15.3 reveals that eBay underpaid any amount due or received any amount under this Agreement to which it was not entitled (except for any portion thereof disputed in good faith), eBay shall within ten (10) business days after such determination pay to PayPal the amount of such underpayment or reimburse PayPal the amount to which eBay was not entitled, in each case plus interest accruing at the Interest Rate from the date such payment originally should have been made by eBay or the date of payment by PayPal to the time of payment or reimbursement by eBay. If any External Audit reveals any material inaccuracy of the Quarterly Statements, Annual Statements or Aggregate Quarterly Fees resulting from the conduct of or information provided by eBay that equals or exceeds two hundred fifty thousand Dollars ($250,000) and also amounts to ten percent (10%) or more of the total amount payable by eBay for any period covered by the review, eBay shall reimburse PayPal for the cost of such External Audit.

(c) Either Party may dispute the results of an Audit by providing written notice to the other Party within thirty (30) days of the completion of the Audit and delivery of the applicable Audit report, in which case the Parties shall attempt in good faith to negotiate a resolution of any dispute within thirty (30) days of the receipt of such written notice. If the Parties are unable to resolve any such dispute after such thirty (30)-day period, the Parties shall resolve the dispute pursuant to Section 16.2 .

ARTICLE IX

CONFIDENTIALITY; USER DATA

9.1 Confidential Information . Each of eBay (and its Affiliates) and PayPal (and its Affiliates) (in such capacity, the “ Receiving Party ”) agrees to hold, and to cause its Personnel to hold, in strict confidence, the Confidential Information of the other Party (in such capacity, the “ Disclosing Party ”) using at least the same standard of care to prevent the public disclosure and dissemination thereof as the Receiving Party uses to protect its own comparable Confidential Information. “ Confidential Information ” of the Disclosing Party means information including marketing plans, product plans, business strategies, financial information, forecasts, Personal Information, Highly Sensitive Information, customer lists and customer data, technical documents and information and any similar materials and information, regarding the Disclosing Party and its Affiliates, or their representatives or customers, disclosed by the Disclosing Party to the Receiving Party under or in connection with this Agreement, whether orally, electronically, in writing, or otherwise, including copies thereof, that is, in each case, (a) if disclosed in a tangible form, marked using a legend such as “Confidential” or “Proprietary” or if not so marked,

 

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should be reasonably understood by the Receiving Party from the context of disclosure or from the information itself, to be confidential, or (b) if disclosed orally or visually, declared to be confidential or, if not so declared, should be reasonably understood by the Receiving Party from the context of disclosure or from the information itself to be confidential. Each of eBay and PayPal agrees, on its behalf and on behalf of its Affiliates, not to use any Confidential Information of the other Party other than for such purposes as shall be expressly permitted under this Agreement, except, in each case, to the extent that such Confidential Information has been (i) in the public domain or generally available to the public, other than as a result of a disclosure by the Receiving Party or any of its Affiliates or any of their Personnel in violation of this Agreement, (ii) later lawfully acquired from other sources by such Party (or any of its Affiliates) which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such Confidential Information or (iii) independently developed or generated without reference to or use of any proprietary or confidential information of the other Party or any of its Affiliates. If any Confidential Information of one Party or any of its Affiliates is disclosed to the other Party or of its Affiliates in connection with providing the Services under this Agreement, then such disclosed Confidential Information shall be used by the Receiving Party only as required to perform such Services.

9.2 Additional Confidentiality Provisions . Sections 6.9(b) and 6.10 of the Separation and Distribution Agreement are incorporated by reference into this Agreement, mutatis mutandis , except that each reference in the Separation and Distribution Agreement to “Section 6.9” or “the confidentiality provisions hereof” shall be deemed to refer to Section 9.1 . Notwithstanding anything to the contrary herein, the Receiving Party shall be free to use for any purpose the Residual Information resulting from access to any Confidential Information of the Disclosing Party disclosed to it under this Agreement. Receiving Party’s receipt of Confidential Information under this Agreement shall not create any obligation that in any way limits or restricts the assignment and/or reassignment of the Receiving Party’s Personnel. The Parties acknowledge and understand that the foregoing does not constitute a license under any patents or copyrights.

9.3 Competitive or Similar Materials . Subject to Article 14 , and without relieving either Party of its obligations under this Article 9 , in no event shall either Party be precluded from discussing, reviewing, developing for itself, having developed, acquiring, licensing or developing for third parties, as well as marketing and/or distributing, materials that are competitive with the other Party’s products and/or services, regardless of their similarity to current products or services or products or services that may be developed after the date of this Agreement.

9.4 User Data .

(a) As between the Parties, PayPal owns all PayPal User Data and PayPal does not in any way assign, transfer, or convey title to PayPal User Data. PayPal User Data may not be used by eBay for any reason other than for the purpose of carrying out eBay’s obligations under this Agreement and the Data Sharing Addendum. As between the Parties, eBay owns all eBay User Data and eBay does not in any way assign, transfer, or convey title to PayPal to any eBay User Data. eBay User Data may not be used by PayPal for any reason other than for the purpose of carrying out PayPal’s obligations under this Agreement and the Data Sharing Addendum; provided , that following the consummation of a Specified Change of Control, eBay User

 

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Data may not be used by the eBay Specified Person involved in such Specified Change of Control (or any of such Person’s direct or indirect Subsidiaries or controlled Affiliates, other than PayPal and its Subsidiaries existing as of the consummation of such Specified Change of Control) for any purpose.

(b) To the extent that eBay User Data includes information that also meets the definition of PayPal User Data, eBay and PayPal shall have overlapping ownership rights in such information, and the information shall be deemed both eBay User Data and PayPal User Data. eBay and PayPal shall use eBay User Data and PayPal User Data, respectively, in accordance with their respective privacy policies.

(c) In the event that the Disclosing Party discloses User Data to the Receiving Party that would not ordinarily be collected by the Receiving Party in the course of performing its obligations under this Agreement or the Data Sharing Addendum, that information shall be the Confidential Information of the Disclosing Party and, except as set forth in the Data Sharing Addendum, the Receiving Party shall keep such Confidential Information only as long as necessary to perform its obligations under this Agreement and shall not have the right to use, reproduce, display, perform, or modify such Confidential Information and any derivative works thereof except as strictly required to perform Services under this Agreement.

9.5 Privacy Policy . The terms of each Party’s privacy policy shall be adequately displayed within such Party’s respective websites and meet current legal and industry standards applicable within such Party’s reasonable determination.

ARTICLE X

TERM AND TERMINATION

10.1 Term . This Agreement shall commence on the Effective Time and shall remain in full force and effect for an initial term of five (5) years (the “ Initial Term ”). Thereafter, this Agreement may be renewed by mutual written agreement of the Parties for additional renewal terms of one (1) year each (each a “ Renewal Term ”). This Agreement may otherwise be terminated only as expressly provided in this Article 10. Collectively, the Initial Term and any Renewal Term(s) constitute the “ Term ”; provided , that the Term shall end if and when this Agreement is terminated in accordance with this Article 10 .

10.2 Termination by eBay or PayPal . Neither Party shall have any right to terminate this Agreement or any of the Services before the end of the Term except if the other Party (a) becomes insolvent or makes an assignment for the benefit of creditors; or (b) commits a material breach of this Agreement that is not cured within one hundred twenty (120) days after the breaching Party receives of notice of such breach, or is incapable of being cured within one hundred twenty (120) days of the receipt of such notice; provided , that no Party may terminate this Agreement pursuant to Section 10.2(b) until the Parties have completed the dispute resolution procedures set forth in Sections 16.1 and 16.2 .

10.3 Replacement Services . If either Party commits a material breach of this Agreement in its provision or usage of Services that has a significant impact on the non-breaching Party’s ability to conduct a material aspect of its business and the breaching Party is

 

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unable to cure such breach within twenty-four (24) hours of notice of such breach, the non-breaching Party may obtain replacement services from a third party that are comparable to the Services until the breach is cured or this Agreement is terminated, and the breaching Party will reimburse all commercially reasonable costs incurred by the non-breaching Party to obtain such replacement services until the breach is cured or this Agreement is terminated.

10.4 Effect of Termination . In connection with termination of this Agreement for any reason:

(a) Tail Period . During the one (1)-year period following the termination of this Agreement (the “ Tail Period ”), all of the provisions of this Agreement will continue to apply as if the Tail Period was part of the Term, except for: (i) the Parties ability to extend the Agreement for additional Renewal Terms pursuant to Section 10.1 ; (ii) the Parties’ obligations under the Product Development Agreement; (iii)  Article 14 and (iv) eBay’s obligation to make Penetration Rate Payments if the Penetration Rate is less than the Baseline Rate.

(b) Unpaid Amounts . No Party shall be relieved from its obligation to pay any fees, payments or other amounts incurred and payable to the other Party prior to termination of this Agreement, including, as applicable, the Aggregate Quarterly Fees.

10.5 Termination Assistance Services . During the Tail Period, each Party shall use reasonable best efforts to cooperate in good faith with the other Party to transition off of the Services provided under this Agreement, including by providing each other with all information and assistance necessary and requested by the other Party to assist in such transition, cooperating to develop a written disengagement plan and taking such other actions as may be reasonably required to allow the Parties to operate their respective businesses without the mutual arrangements set forth in this Agreement (the “ Termination Assistance Services ”). The Parties will discuss and agree to the appropriate service levels applicable to the Termination Assistance Services, which service levels may be different from the Service Levels applicable to the services provided under this Agreement; provided , that failure of the Parties to agree on a service level for Termination Assistance Services shall not affect the Parties’ respective obligations to provide such Termination Assistance Services. Notwithstanding the foregoing, neither Party has any obligation to provide the other Party or any third Person with any (a) Highly Sensitive Information pursuant to this Section 10.5 other than data regarding the eBay Merchants and PayPal Users to the extent (i) required for the purpose of facilitating any Services that are continuing to be provided pursuant to this Agreement ( provided , that such third Person shall not use such data for any other purpose), (ii) that disclosure of such data to a Party or a third Person, as the case may be, in accordance with this Agreement does not violate applicable Law and (iii) disclosure of such data to a Party or a third Person, as the case may be, in accordance with this Agreement does not violate the terms of use or terms of service under which such data was collected, or (b) other information or materials, to the extent that disclosure of such other information or materials to a Party or such third Person, as the case may be, would violate applicable Law.

10.6 Survival . Article 1 , Section 7.1 , Section 8.2 (for six (6) months after the payment due date of the final Annual Statement issued in accordance with this Agreement), Article 9 , Section 10.4 , Section 10.5 , this Section 10.6 , Article 11 , Article 12 , Article 13 , Article 16

 

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and Article 17 shall survive any termination of this Agreement. Any and all liabilities accrued prior to termination shall survive any termination of this Agreement.

ARTICLE XI

REPRESENTATIONS AND WARRANTIES

11.1 Representations and Warranties by the Parties . Each of eBay and PayPal hereby represents and warrants to the other Party as follows:

(a) The execution and performance of this Agreement by such Party does not violate, conflict with, or result in a material default under any other material Contract to which it is a party, or by which its assets or property is bound.

(b) It holds all the necessary licenses, consents and authorizations required to engage in the sale and performance of the Services.

11.2 Representations and Warranties by PayPal . PayPal hereby represents and warrants to eBay as follows:

(a) It has the skill and experience necessary to perform its obligations under this Agreement, including performing the Services, in a professional manner.

(b) The Services will be performed according to specifications set forth in any and all accompanying documents.

(c) The Services shall comply with all applicable Laws, including all Data Protection Laws.

11.3 Representations and Warranties by eBay . eBay hereby represents and warrants to eBay as follows:

(a) It has the skill and experience necessary to perform its obligations under this Agreement in a professional manner.

(b) The Services will be made available through the eBay Properties according to specifications set forth in any and all accompanying documents.

(c) The eBay Properties shall comply with all applicable Laws in connection with the Services, including all Data Protection Laws.

11.4 Disclaimer of Warranty . EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 11 , NO PARTY MAKES, AND EACH PARTY HEREBY EXPRESSLY DISCLAIMS FOR ITSELF AND ON BEHALF OF ITS AFFILIATES, ANY REPRESENTATION OR WARRANTY, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

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ARTICLE XII

INDEMNIFICATION

12.1 PayPal’s Indemnification of eBay . PayPal agrees to defend, indemnify, and hold harmless eBay, its Subsidiaries, and its and their respective directors, officers, employees, representatives and agents (the “ eBay Group ”) from and against any and all Losses arising out of or resulting from any Third-Party Claim to the extent arising out of or resulting from (a) the violation by PayPal of any Data Protection Laws in connection with the Services, (b) any breach (or a claim by a third Person that if true would be a breach) or alleged breach of any of PayPal’s representations or warranties set forth in Article 11 or the covenants of PayPal in this Agreement or (c) subject to Section 12.4 , the infringement or misappropriation of any Intellectual Property Right of any third Person as a result of the eBay Group’s use of any Services, Systems, Platform or other Technology provided by PayPal under this Agreement.

12.2 eBay’s Indemnification of PayPal . eBay agrees to defend, indemnify, and hold harmless PayPal, its Subsidiaries, and its and their respective directors, officers, employees, representatives and agents (the “ PayPal Group ”) from and against any and all Losses arising out of or resulting from any Third-Party Claim to the extent arising out of or resulting from (a) the violation by eBay of any Data Protection Laws in connection with the Services, (b) any breach (or a claim by a third Person that if true would be a breach) or alleged breach of any of eBay’s representations or warranties set forth in Article 11 or the covenants of eBay in this Agreement or (c) subject to Section 12.4 , the infringement or misappropriation of any Intellectual Property Right of any third Person as a result of the PayPal Group’s use of any Services, Systems, Platform or other Technology provided by eBay under this Agreement.

12.3 Indemnification Procedures .

(a) Promptly after receipt by the Party seeking indemnification pursuant to this Article 12 (the “ Indemnified Party ”) of notice of the commencement or threatened commencement of any Third-Party-Claim in respect of which such Indemnified Party intends to seek indemnification pursuant to Section 12.1 or Section 12.2 , the Indemnified Party shall notify the other Party (the “ Indemnifying Party ”) of such Third-Party Claim in writing. Any such notice shall describe the Third-Party Claim in reasonable detail, including the facts and circumstances giving rise to such claim for indemnification, and include copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third-Party Claim. No failure to so notify the Indemnifying Party shall relieve it of its obligations under this Agreement, except to the extent that it can demonstrate that it was prejudiced by such failure.

(b) The Parties shall resolve any Third-Party Claim for which indemnification is sought pursuant to this Article 12 in accordance with the provisions, procedures and rules set forth in Sections 4.5(b) through (g), 4.6 and 4.7 of the Separation and Distribution Agreement.

12.4 Infringement Claims .

(a) Exclusions . Notwithstanding any other provision in this Agreement, PayPal and eBay, as applicable, shall not have any obligation under Sections 12.1 , 12.2 or otherwise to the extent that any Third-Party Claim of infringement (including direct infringement, induce-

 

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ment to infringe, or contributory infringement) or misappropriation of Intellectual Property Rights is based on or arises in whole or in part out of: (i) the other Party’s (or any member of its Group’s) breach of this Agreement, where such infringement or misappropriation would not have occurred but for such breach; (ii) modifications of or enhancements to any of the Indemnifying Party’s Services, Systems, Platform or other Technology by any Person other than the Indemnifying Party (or any member of its Group), where such infringement or misappropriation would not have occurred but for such modifications or enhancements; (iii) the use of any of any of the Indemnifying Party’s Services, Systems, Platform or other Technology in combination with other software or technologies not provided by the Indemnifying Party, where such infringement or misappropriation would not have occurred but for such combination; (iv) the other Party’s (or any member of its Group’s) willful infringement of any Intellectual Property Rights of any third Person, or (v) the other Party’s (or any member of its Group’s) use of any of the Indemnifying Party’s Services, Systems, Platform or other Technology not in accordance with this Agreement.

(b) Mitigation . In addition to any other rights of or remedies available to the Parties, if the Services, Systems, Platform or any other Technology provided by eBay or PayPal (in such capacity, the “ Providing Party ”) is found or alleged to infringe or misappropriate any Intellectual Property Right of any third Person, or, in the Providing Party’s reasonable opinion is likely to be so found, then the Providing Party may, at its option and sole expense: (i) modify such infringing Services, Platform or Technology to make it (or them) non-infringing, provided , that such modification does not adversely affect in any material way the functionality, completeness, or accuracy of any of the Services or any Service Levels applicable thereto; (ii) procure for the other Party the right to continue using such Services, Systems, Platform or Technology; or, (ii) if neither (i) nor (ii) are possible within a reasonable time, replace such Services, Systems, Platform or Technology with substantially equivalent services or Technology that are non-infringing. If, after using commercially reasonable efforts, the Providing Party determines that it cannot implement one of the foregoing steps (i), (ii) or (iii) within a reasonable time, it shall promptly notify the other Party. Upon receiving any such notice, such other Party may, at its option and without limitation to any other rights of or remedies available to such Party, either cease offering such Services, Systems, Platform or Technology on eBay Covered Properties and adjust the Services offered on eBay Covered Properties and calculation of Penetration Rate appropriately.

(c) Sole Remedy . This Article 12 states each Party’s sole and exclusive remedy with respect to any direct or indirect infringement (whether actual or alleged) or misappropriation of any Intellectual Property Rights of any other Person (and any claim or action relating thereto) based on any Services, Systems, Platform or other Technology provided by the other Party under this Agreement.

12.5 Exclusion of Other Indemnification Remedies . The provisions of this Article 12 shall, to the maximum extent permitted by applicable Law, be the sole and exclusive remedies of the eBay Group and the PayPal Group, as applicable, for any Liability arising out of or resulting from any Third-Party Claim arising out of or resulting from this Agreement, whether such Third-Party Claim arises from statute, principle of common or civil law, principles of strict liability, tort, contract or otherwise under this Agreement.

 

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ARTICLE XIII

LIMITATION OF LIABILITY

13.1 Limitation of Liability .

(a) THE CUMULATIVE AGGREGATE LIABILITIES OF EACH PARTY AND ITS SUBSIDIARIES AND THEIR RESPECTIVE REPRESENTATIVES UNDER THIS AGREEMENT DURING ANY CALENDAR YEAR FOR ANY ACT OR FAILURE TO ACT IN CONNECTION HEREWITH (INCLUDING THE PERFORMANCE OR BREACH OF THIS AGREEMENT), OR FOR ANY OTHER MATTER UNDER THIS AGREEMENT, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, SHALL NOT EXCEED FIFTY PERCENT (50%) OF THE AGGREGATE REVENUE RECEIVED BY PAYPAL DURING SUCH CALENDAR YEAR GENERATED BY PAYPAL NET TPV ON EBAY COVERED PROPERTIES.

(b) IN NO EVENT SHALL EITHER PARTY, ITS SUBSIDIARIES OR THEIR RESPECTIVE REPRESENTATIVES BE LIABLE TO THE OTHER PARTY (OR ANY MEMBER OF ITS GROUP) FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE, EXEMPLARY, REMOTE, SPECULATIVE OR SIMILAR DAMAGES IN EXCESS OF COMPENSATORY DAMAGES OF THE OTHER PARTYOR ANY MEMBER OF ITS GROUP (INCLUDING LOST PROFITS OR LOST REVENUES) IN CONNECTION WITH THIS AGREEMENT (OTHER THAN ANY SUCH LIABILITY WITH RESPECT TO A THIRD-PARTY CLAIM), AND EACH PARTY HEREBY WAIVES ON BEHALF OF ITSELF, ITS SUBSIDIARIES AND ITS REPRESENTATIVES ANY CLAIM FOR SUCH DAMAGES, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE.

ARTICLE XIV

MERCHANT OF RECORD; NON-COMPETE

14.1 Merchant of Record .

(a) During the Term, except as set forth in Sections 14.1(b) , (c)  and (d) , eBay shall not declare itself as the Merchant of Record for transactions between users effected through any service or offering available on (i) an eBay Covered Property (excluding transactions that are excluded from the definition of eBay Addressable GMV) or (ii) any third party payments platform where the value of such transactions is included in the definition of eBay Addressable GMV (with all references in such definition to “eBay” being deemed to refer to such third party payments platform). Notwithstanding the foregoing, if and to the extent that eBay is the owner of inventory sold on an eBay Covered Property and takes financial responsibility for all full and partial returns and any chargebacks initiated by the customer (a “ First Party Transaction ”), eBay may elect to declare itself as the Merchant of Record solely with respect to such First Party Transaction.

(b) If PayPal provides payment processing services to a Competitive Platform Operator as a Merchant of Record for third party merchant transactions effected by or on such Competitive Platform Operator’s platform, eBay shall also be permitted to become a Merchant of

 

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Record for transactions effected by eBay Merchants on eBay Covered Properties, and the Parties shall cooperate in good faith to mutually develop a transition plan and adjustment to the Product Development Plan to enable eBay to become a Merchant of Record as described in this Section 14.1(b) .

(c) Upon the consummation of a Specified Change of Control, eBay may elect to become a Merchant of Record (without triggering the termination of this Agreement or any related arrangements) by delivering a written notice to PayPal at any time beginning at the effective date of such Specified Change of Control and ending ninety (90) days thereafter, with such Merchant of Record election to become effective on a date, specified by eBay in such written notice, that is no less than fifteen (15) months nor greater than twenty-one (21) months following the consummation of such Specified Change of Control.

(d) Following the three (3) year anniversary of the Effective Time, eBay shall be permitted to declare itself as a Merchant of Record for transactions effected by third Persons in up to two (2) Covered Jurisdictions as selected by eBay in its sole discretion (each, a “ Test Jurisdiction ”); provided , that (i) the GMV transacted as a Merchant of Record on all eBay Covered Properties in each Test Jurisdiction during the fourth (4th) year of the Term shall not exceed five percent (5%) of the GMV on all eBay Covered Properties in such Test Jurisdiction during such year, and (ii) the GMV transacted as a Merchant of Record on all eBay Covered Properties in each Test Jurisdiction during each of the fifth (5th) year of the Term and the Tail Period shall not exceed ten percent (10%) of the GMV on all eBay Covered Properties in such Test Jurisdiction during each such year.

14.2 eBay Non-Compete . During the Term, except as otherwise expressly contemplated in this Agreement or the Transition Services Agreement, eBay and its controlled Affiliates shall not, directly or indirectly, engage in the business of marketing, distributing, promoting or selling their own proprietary payment solution for use (i) on the eBay Covered Properties or (ii) on any Properties in the Covered Jurisdictions that are not eBay Properties (the “ eBay Restricted Business ”).

14.3 PayPal Non-Compete . During the Term, except as otherwise expressly contemplated in this Agreement or the Transition Services Agreement, PayPal and its controlled Affiliates shall not, directly or indirectly, engage in the business of marketing, distributing, promoting or selling their own proprietary marketplace offering for the sale of physical goods, other than the Tradera marketplace (the “ PayPal Restricted Business ”).

14.4 Exceptions to Non-Compete . Notwithstanding anything to the contrary set forth in Section 14.2 or 14.3 :

(a) Nothing in this Agreement shall prohibit, preclude or in any way restrict eBay and its controlled Affiliates, on the one hand, or PayPal and its controlled Affiliate, on the other hand, from: (i) purchasing or acquiring, or being the holder or beneficial owner of, up to the greater of five percent (5%) or $100 million of the outstanding equity securities of any Person; (ii) acquiring and, after such acquisition, owning an interest in any Person (or its successor) that is engaged in a business activity that would otherwise violate Section 14.2 or Section 14.3 , as applicable, (a “ Competing Business ”) if the annual revenue generated by such Competing

 

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Business in the last completed fiscal year of such Person did not exceed the greater of (A) ten percent (10%) of such Person’s consolidated annual revenues for such fiscal year and (B) the lesser of fifty percent (50%) of such Person’s consolidated annual revenues for such fiscal year and $500 million.

(b) Nothing in this Agreement shall prohibit, preclude or in any way restrict any director of eBay or PayPal from, whether in such director’s personal capacity or as a manager, partner, director, officer or other control person of an investment fund, investing in, participating in or directing the investment in, serving on the board of directors or similar governing body of, receiving information rights in or participating in other customary activities related to investments in, any Person that is engaged in the Competing Business.

(c) If the restrictions set forth in Section 14.2 are not enforceable for any portion of the Term or with respect to any portion of the eBay Restricted Business in any jurisdiction under the antitrust/competition laws of such jurisdiction, the Parties shall negotiate in good faith and agree upon a suitable and equitable alternative that, to the fullest extent permitted under the antitrust/competition laws of such jurisdiction, effects the original intent of Section 14.2 . If the restrictions set forth in Section 14.3 are not enforceable for any portion of the Term or with respect to any portion of the PayPal Restricted Business in any jurisdiction under the antitrust/competition laws of such jurisdiction, the Parties shall negotiate in good faith and agree upon a suitable and equitable alternative that, to the fullest extent permitted under the antitrust/competition laws of such jurisdiction, effects the original intent of Section 14.3 . Any such alternative agreed upon by the Parties pursuant to this Section 14.4 may include the payment of a fee or other lump sum amount by one Party to the other Party.

ARTICLE XV

GOVERNANCE

15.1 Designated Operational Representatives . eBay and PayPal shall each appoint and designate an individual to act as its initial designated representative (collectively, the “ Designated Operational Representative ”). Each Designated Operational Representative shall be directly responsible for coordinating and managing the delivery and use of the Services and the compliance with the other obligations of the designating Party under this Agreement, and shall have authority to act on eBay’s and PayPal’s behalf, as applicable with respect to the provision and use of such Services and such other obligations. Each Designated Operational Representative shall work with the Personnel of the Party appointing such Designated Operational Representative to periodically address issues and matters raised by the other Party relating to the provision of Services. The Designated Operational Representatives shall meet at least once per Month to review and discuss the delivery and use of the Services (including the results of any Account Review) and the Parties compliance with their respective obligations under this Agreement. In connection with such meetings, PayPal shall deliver to eBay, at least once per Month, reports regarding PayPal’s ongoing performance under the Service Levels and the Service Credits granted or due to eBay. All communications between the Parties pursuant to this Agreement regarding routine matters involving the Services and the other obligations of the Parties under this Agreement shall be directed to the applicable Designated Operational Representative. Each Party shall notify the other Party of the resignation of its Designated Operational Representative or

 

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appointment of a new Designated Manager at least ten (10) business days prior to such appointment.

15.2 Quarterly Reviews .

(a) At least once per Quarter, the Parties shall review in good faith each then-current Service Level to evaluate PayPal’s performance under such Service Level, including any remedial steps PayPal has taken to address any Service Level failures, during such period. As part of such review, the Parties shall discuss any ongoing improvements to the Services that are necessary to ensure continued adherence to the applicable Service Levels (including the Service Levels as updated, if applicable). PayPal shall also use reasonable efforts to identify any processes used by PayPal in connection with other customers that would benefit eBay to improve the performance of Services hereunder against the Service Levels, and shall consult with eBay as to the implementation of any such methods of improving such performance against the Service Levels approved by eBay.

(b) At least once per Quarter, the Chief Executive Officer of each of eBay and PayPal shall meet to review and discuss the Services, the performance by each Party of its respective obligations under this Agreement and the other aspects of the relationship between the Parties set forth in this Agreement.

15.3 Internal Audits; Security Review .

(a) At least annually, each Party shall conduct, at its sole cost and expense, an internal audit of its compliance with this Agreement (each, an “ Internal Audit ” and, together with an External Audit, an “ Audit ”). The Party conducting the Internal Audit is referred to herein as the “ Internal Audit Party .” The Internal Audit shall be conducted in accordance with the Internal Audit Party’s customary internal audit procedures and policies. The Internal Audit Party shall create a detailed written report of the results and findings of each review, and simultaneously provide copies of the report to the Audit Committees of the boards of directors of each of eBay and PayPal (the “ Audit Committees ”); provided , that such report shall not contain any Highly Sensitive Information that, if disclosed to such Audit Committees, would cause the Internal Audit Party competitive harm, and shall not disclose any information to the extent disclosure of such information to the Audit Committees would violate applicable Law.

(b) At least annually, each Party shall complete a security review (a “ Security Review ”), or provide certification of such Security Review, by an industry recognized third party firm agreed upon by the Parties that specializes in information systems security audits and assessments. The definition of passing criteria from the results of the Security Review shall include vulnerability findings with no greater than a risk categorization of “LOW.” Any findings from the Security Review categorized as “MEDIUM” or “HIGH” must be resolved to the other Party’s reasonable satisfaction as promptly as practicable following the date of the review. The Parties shall use reasonable best efforts to coordinate with each other so that each Party’s Security Review occurs at approximately the same time of the Calendar Year as such Party’s Internal Audit.

 

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15.4 Operational Review . During the Month of December of each Calendar Year during the Term (or such other Month as is mutually agreed by the Parties), the Chief Executive Officer of each of eBay and PayPal shall prepare a written assessment of each Party’s compliance under this Agreement and the Product Development Agreement, the costs and benefits of this Agreement and the Product Development Agreement to eBay or PayPal, as applicable, the Product Development Plan for the upcoming Calendar Year, the Parties’ performance of the Development Projects included in the Product Development Plan for the current Calendar Year and any other aspect of the relationship between the Parties governed by this Agreement and the Product Development Agreement as such Chief Executive Officer deems relevant (a “ CEO Assessment ”). The CEO Assessments shall be distributed to the Chairman of the board of directors, Chief Executive Officer and Chairman of the Audit Committee of eBay and PayPal as well as any member of the eBay or PayPal board of directors who served as the Chief Executive Officer or Chief Financial Officer of eBay immediately prior to the Effective Time (the “ Operational Review Group ”). The Operational Review Group shall meet within thirty (30) days of the distribution of the CEO Assessments to review the CEO Assessments and other aspects of the relationship between the Parties governed by this Agreement as the Operational Review Group shall deem relevant. The Operational Review Group will also consider any findings noted in each Audit report produced in an External Audit or an Internal Audit and develop and agree upon an action plan to promptly address and resolve any deficiencies, concerns and/or recommendations in such Audit report, and, unless mutually agreed by the Parties, the Party responding to a deficiency, concern and/or recommendation in an Audit report, shall, at its own expense, undertake remedial action in accordance with such action plan. During the Month of June of each Calendar Year during the Term (or such other Month as is mutually agreed by the Parties), the boards of directors of each of eBay and PayPal shall meet with each other and discuss the aspects of the relationship between the Parties governed by this Agreement, including opportunities for additional or expanded commercial relationships on arm’s length terms.

ARTICLE XVI

DISPUTE RESOLUTION

16.1 Good Faith Negotiation . Subject to Section 16.3 , either Party seeking resolution of any dispute, controversy or claim arising out of or relating to this Agreement, including the breach, termination or validity of this Agreement (a “ Dispute ”), shall provide written notice thereof to the other Party (the “ Initial Notice ”), and within thirty (30) days of the delivery of the Initial Notice, the Parties shall attempt in good faith to negotiate a resolution of the Dispute. The negotiations shall be conducted by executives who hold, at a minimum, the title of senior vice president or general counsel and who have authority to settle the Dispute. All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. If the Parties are unable for any reason to resolve a Dispute within thirty (30) days after the delivery of such notice or if a Party reasonably concludes that the other Party is not willing to negotiate as contemplated by the preceding sentences of this Section 16.1 , the Dispute shall be resolved in accordance with Section 16.2 .

16.2 Dispute Resolution Process . Any Dispute that cannot be resolved by good faith negotiations between the Parties shall be submitted to the Escalation Committee and resolved in accordance with Sections 7.2 to 7.6 of the Separation and Distribution Agreement.

 

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16.3 Litigation and Unilateral Commencement of Arbitration . Notwithstanding the foregoing provisions of this Article 16 or Sections 7.2 to 7.4 of the Separation and Distribution Agreement, a Party may seek preliminary provisional or injunctive judicial relief with respect to a Dispute without first complying with the procedures set forth in Section 16.1 , Section 16.2 or Sections 7.2 to 7.4 of the Separation and Distribution Agreement if such action is reasonably necessary to avoid irreparable damage.

16.4 Conduct During Dispute Resolution Process . Unless otherwise agreed in writing, the Parties shall, and shall cause their respective Subsidiaries to, continue to honor all commitments under this Agreement to the extent required by this Agreement during the course of dispute resolution pursuant to the provisions of this Article 16 , unless such commitments are the specific subject of the Dispute at issue. Notwithstanding the foregoing, PayPal agrees that its interruption of the Services may cause irreparable harm to eBay for which no adequate remedy exists at Law and agrees, during the pendency of any Dispute not to deny, withdraw, restrict or delay its provision of the Services to eBay Merchants or PayPal Users except as required by court order, by the resolution of the Dispute or as a result of the termination of this Agreement (subject to the Termination Assistance Services).

ARTICLE XVII

MISCELLANEOUS

17.1 Mutual Cooperation . Each Party shall, and shall cause its Subsidiaries to, cooperate with the other Party and its Subsidiaries in connection with the performance of the Services hereunder; provided , that such cooperation shall not unreasonably disrupt the normal operations of such Party or its Subsidiaries; provided , further , that this Section 17.1 shall not require such Party to incur any out-of-pocket costs or expenses unless and except as expressly provided in this Agreement or otherwise agreed to in writing by the Parties.

17.2 Further Assurances . Each Party shall take, or cause to be taken, any and all reasonable actions, including the execution, acknowledgment, filing and delivery of any and all documents and instruments that any other Party may reasonably request in order to effect the intent and purpose of this Agreement and the transactions contemplated hereby.

17.3 Relationship . The Parties each acknowledge and agree that they are separate entities, each of which has entered into this Agreement for its own independent business reasons. Nothing contained in this Agreement shall be construed as creating a joint venture, partnership, agency, fiduciary or employment relationship among or between any of the Parties.

17.4 No Third-Party Beneficiaries . Except for the indemnification rights under this Agreement of any member of the eBay Group or the PayPal Group in their respective capacities as such, (a) the provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and (b) there are no third-party beneficiaries of this Agreement and neither this Agreement nor any Ancillary Agreement shall provide any third person with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.

 

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17.5 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. If the Parties have each determined that it is necessary or advisable to amend this Agreement but cannot agree on the terms of such amendment, the Parties shall resolve the dispute pursuant to Sections 16.1 and 16.2 .

17.6 Compliance with Law . Notwithstanding anything to the contrary in this Agreement, none of the covenants or obligations in this Agreement shall require either Party to violate any applicable Law.

17.7 Assignability . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective 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 or other parties thereto, as applicable. Notwithstanding the foregoing, no such consent shall be required for (i) the assignment of a Party’s rights and obligations under this Agreement in whole or in part to any of its Subsidiaries; provided , that no such assignment shall release such Party from any liability or obligation under this Agreement; or (ii) the assignment of all of a Party’s rights and obligations under in whole ( i.e. , the assignment of a party’s rights and obligations under this Agreement, the Separation and Distribution Agreement and all other 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. Nothing in this Section 17.7 is intended to, or shall be construed to, prohibit eBay or PayPal from being party to or undertaking a change of control.

17.8 Incorporation by Reference . Sections 10.1 (excluding Sections 10.1(c)), 10.2, 10.5 through 10.14 and 10.16 through 10.19 of the Separation and Distribution Agreement are incorporated by reference into this Agreement, mutatis mutandis , except that each reference to “this Agreement”, “any Ancillary Agreement” or “each Ancillary Agreement” in the Separation and Distribution Agreement shall be deemed to refer to this Agreement.

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement by persons duly authorized as of the date and year first above written.

 

[●]
By:

 

Name:
Title:
[●]
By:

 

Name:
Title:

[ Signature Page to Operating Agreement ]

Exhibit 10.2

FORM OF

TRANSITION SERVICES AGREEMENT

BY AND BETWEEN

EBAY INC.

AND

PAYPAL HOLDINGS, INC.

DATED AS OF [•], 201[•]

 


TABLE OF CONTENTS

 

            Page  
ARTICLE I DEFINITIONS      1   

Section 1.01.

     Definitions      1   

ARTICLE II SERVICES

     5   

Section 2.01.

     Services      5   

Section 2.02.

     Additional Services      6   

Section 2.03.

     Performance of Services      6   

Section 2.04.

     Charges for Services      8   

Section 2.05.

     Reimbursement for Out-of-Pocket Costs and Expenses      9   

Section 2.06.

     Changes in the Performance of Services      9   

Section 2.07.

     Transitional Nature of Services      9   

Section 2.08.

     Subcontracting      9   

Section 2.09.

     TSA Managers and Service Managers      10   

Section 2.10.

     Services Not Included      10   

ARTICLE III OTHER ARRANGEMENTS

     11   

Section 3.01.

     Access      11   

Section 3.02.

     System Security and Data Protection      12   

ARTICLE IV PAYMENTS; BILLING; TAXES

     12   

Section 4.01.

     Procedure      12   

Section 4.02.

     Late Payments      12   

Section 4.03.

     Taxes      12   

Section 4.04.

     Audit Rights      13   

ARTICLE V TERM AND TERMINATION

     14   

Section 5.01.

     Term      14   

Section 5.02.

     Early Termination      15   

Section 5.03.

     Interdependencies      15   

Section 5.04.

     Effect of Termination      15   

ARTICLE VI CONFIDENTIALITY; PROTECTIVE ARRANGEMENTS

     16   

Section 6.01.

     eBay and PayPal Obligations      16   

Section 6.02.

     No Release; Return or Destruction      16   

Section 6.03.

     Privacy and Data Protection Laws; Residual Information      17   

Section 6.04.

     Protective Arrangements      17   

 

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ARTICLE VII LIMITED LIABILITY AND INDEMNIFICATION

  17   

Section 7.01.

Limitations on Liability   17   

Section 7.02.

Recipient Indemnity   18   

Section 7.03.

Provider Indemnity   18   

Section 7.04.

Indemnification Procedures   19   

Section 7.05.

Liability for Payment Obligations   19   

Section 7.06.

Exclusion of Other Remedies   19   

ARTICLE VIII DISPUTES

  19   

Section 8.01.

Dispute Resolution   19   

Section 8.02.

Disputes Over Charges and Termination Charges   19   

Section 8.03.

Litigation and Unilateral Commencement of Arbitration   20   

Section 8.04.

Conduct During Dispute Resolution Process   20   

ARTICLE IX MISCELLANEOUS

  20   

Section 9.01.

Mutual Cooperation   20   

Section 9.02.

Further Assurances   20   

Section 9.03.

Audit Assistance   20   

Section 9.04.

Title to Intellectual Property   21   

Section 9.05.

License.   21   

Section 9.06.

Independent Contractors   21   

Section 9.07.

Assignability   22   

Section 9.08.

Third-Party Beneficiaries   22   

Section 9.09.

Force Majeure   23   

Section 9.10.

No Set-Off   23   

Section 9.11.

Incorporation by Reference   23   

Exhibit A         Services

 

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TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT, dated as of [•], 201[•], (this “ Agreement ”), is by and between eBay Inc., a Delaware corporation (“ eBay ”), and PayPal Holdings, Inc., a Delaware corporation (“ PayPal ”). This Agreement is effective as of immediately following the Effective Time ( i.e. , 12:00:00 a.m. Eastern Time on the day immediately following the Distribution Date) (the “ TSA Effective Time ”).

R E C I T A L S:

WHEREAS, the board of directors of eBay (the “ eBay Board ”) has determined that it is in the best interests of eBay and its shareholders to create a new publicly traded company that shall operate the PayPal Business;

WHEREAS, in furtherance of the foregoing, the eBay Board has determined that it is appropriate and desirable to separate the PayPal Business from the eBay Business (the “ Separation ”) and, following the Separation, make a distribution, on a pro rata basis, to holders of eBay Shares on the Record Date of all the outstanding PayPal Shares owned by eBay (the “ Distribution ”);

WHEREAS, to effectuate the Separation and the Distribution, eBay and PayPal have entered into a Separation and Distribution Agreement, dated as of [•], 201[•], (the “ Separation and Distribution Agreement ”); and

WHEREAS, to facilitate and provide for an orderly transition in connection with the Separation and the Distribution, the Parties desire to enter into this Agreement to set forth the terms and conditions pursuant to which each of the Parties shall provide Services to the other Party for a transitional period.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

A G R E E M E N T:

ARTICLE I

DEFINITIONS

Section 1.01. Definitions . For purposes of this Agreement, the following terms shall have the following meanings:

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

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

Agreement ” has the meaning set forth in the Preamble .


Ancillary Agreements ” has the meaning set forth in the Separation and Distribution Agreement.

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

Change of Control ” shall mean, with respect to a Party, the occurrence after the Effective Time of any of the following: (a) the sale, conveyance or disposition, in one or a series of related transactions, of all or substantially all of the assets of such Party to a third party that is not an Affiliate of such Party prior to such transaction or the first of such related transactions; (b) the consolidation, merger or other business combination of a Party with or into any other Person, immediately following which the stockholders of the Party prior to such transaction fail to own in the aggregate the Majority Voting Power of the surviving Party in such consolidation, merger or business combination or of its ultimate publicly traded parent Person; or (c) a transaction or series of transactions in which any Person or “group” (as such term is used in Section 13(d) of the Exchange Act) acquires the Majority Voting Power of such Party (other than a reincorporation or similar corporate transaction in which each of such Party’s stockholders own, immediately thereafter, interests in the new parent company in substantially the same percentage as such stockholder owned in such Party immediately prior to such transaction).

Charge ” and “ Charges ” have the meaning set forth in Section 2.04 .

Confidential Information ” shall mean all Information that is either confidential or proprietary.

Dispute ” has the meaning set forth in Section 8.01 .

Distribution ” has the meaning set forth in the Recitals .

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

Divested Asset ” has the meaning set forth in Section 9.07(c) .

Divested Asset Acquirer ” has the meaning set forth in Section 9.07(c) .

eBay ” has the meaning set forth in the Preamble .

eBay Board ” has the meaning set forth in the Recitals .

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

eBay Shares ” has the meaning set forth in the Separation and Distribution Agreement.

eBay Specified Person ” has the meaning set forth in the Separation and Distribution Agreement.

Effective Time ” has the meaning set forth in the Separation and Distribution Agreement.

 

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

Force Majeure ” has the meaning set forth in the Separation and Distribution Agreement.

Governmental Authority ” has the meaning set forth in the Separation and Distribution Agreement.

Independent Auditor ” has the meaning set forth in Section 4.04(a) .

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

Information Technology ” has the meaning set forth in the Separation and Distribution Agreement.

Intellectual Property Matters Agreement ” has the meaning set forth in the Separation and Distribution Agreement.

Intellectual Property Rights ” has the meaning set forth in the Intellectual Property Matters Agreement.

Interest Payment ” has the meaning set forth in Section 4.02 .

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

Liability ” and “ Liabilities ” have the meaning set forth in the Separation and Distribution Agreement.

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

Majority Voting Power ” shall mean a majority of the voting power in the election of directors of all outstanding voting securities of the Person in question.

Parties ” and “ Party ” shall mean the parties to this Agreement.

PayPal ” has the meaning set forth in the Preamble .

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

PayPal Shares ” has the meaning set forth in the Separation and Distribution Agreement.

PayPal Specified Person ” has the meaning set forth in the Separation and Distribution Agreement.

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

 

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Personnel ” means, with respect to any Person, any of such Person’s directors, officers, employees, agents, independent contractors, permitted subcontractors and consultants. Subcontractors of any Person shall be deemed Personnel of that Person.

Provider ” shall mean, with respect to any Service, the Party identified on Exhibit A hereto as the “Provider” of such Service.

Provider Indemnitees ” has the meaning set forth in Section 7.02 .

Provider Systems ” shall mean, with respect to each Service, the Information Technology, Information, Software or other Technology owned or controlled by Provider or any of its Affiliates that is required for Recipient’s use of the Services.

Recipient ” shall mean, with respect to any Service, the Party receiving such Service hereunder.

Recipient Indemnitees ” has the meaning set forth in Section 7.03 .

Recipient Systems ” shall mean, with respect to each Service, the Information Technology, Information, Software or other Technology owned or controlled by Recipient or any of its Affiliates that is required for its use of the Services or the Provider’s provision of the Services.

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

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

Residual Information ” has the meaning set forth in the Separation and Distribution Agreement.

Separation ” has the meaning set forth in the Recitals .

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

Service Change ” has the meaning set forth in Section 2.03(c) .

Service Interruption ” has the meaning set forth in Section 2.03(a) .

Service Manager ” has the meaning set forth in Section 2.09 .

Service Period ” shall mean, with respect to any Service, the period commencing at the TSA Effective Time and ending on the earlier of (a) the date that a Party terminates the provision of such Service pursuant to Section 5.02 or (b) the date that is set forth opposite such Service on Exhibit A .

Services ” has the meaning set forth in Section 2.01 .

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

 

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

Tax ” has the meaning set forth in the Tax Matters Agreement.

Tax Matters Agreement ” has the meaning set forth in the Separation and Distribution Agreement.

Taxing Authority ” has the meaning set forth in the Tax Matters Agreement.

Technical Information ” shall have the meaning set forth in the Intellectual Property Matters Agreement.

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

Term ” has the meaning set forth in Section 5.01 .

Termination Charges ” shall mean, with respect to the termination of any Service pursuant to Section 5.02(a)(i) , the sum of (a) any and all costs, fees and expenses (other than any severance or retention costs paid to Personnel, except as permitted by clause (b) below) payable by the Provider of such Service to a Third Party that directly result from the early termination of such Service; provided , that the Provider shall use commercially reasonable efforts to minimize any costs, fees or expenses payable to any Third Party in connection with such early termination of such Service and credit any such reductions against the Termination Charges payable by the Recipient; and (b) any and all unreimbursed upfront or start-up fees and expenses incurred by Provider (supported by adequate documentation) to provide or to enable the provision of the Services (it being agreed that the costs set forth in this clause (b) shall only be the amount, if any, in excess of the upfront or start-up fees and expenses that such Provider would not have recovered from the Recipient if the Service had been provided for the full period during which such Service would have been provided hereunder but for such early termination).

Third Party ” shall mean any Person other than the Parties or any of their Affiliates.

Third-Party Claim ” shall mean any Action commenced by any Third Party against any Party or any of its Affiliates.

Transaction Taxes ” has the meaning set forth in Section 4.03(a) .

TSA Effective Time ” has the meaning set forth in the Preamble .

TSA Manager ” has the meaning set forth in Section 2.09 .

ARTICLE II

SERVICES

Section 2.01. Services . Commencing as of the TSA Effective Time, the Provider agrees to provide, or to cause one or more of its Subsidiaries to provide, to the Recipient, or any Subsidiary of the Recipient, the applicable services (the “ Services ”) set forth on Exhibit A

 

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hereto, and the Provider shall also perform those sub-tasks that are integral to and a necessary part of the proper discharge of the Services in accordance with standard industry practice.

Section 2.02. Additional Services . If during the period commencing on the TSA Effective Time and ending on the date that is one hundred and eighty (180) days following the Distribution Date, either Party identifies (i) (A) a service that was provided or performed by eBay or its Affiliates to or for PayPal or its Affiliates during the twelve (12)-month period immediately prior to the Distribution Date that PayPal or its Affiliates reasonably needs in order for the PayPal Business to continue to operate in substantially the same manner in which the PayPal Business operated prior to the Distribution Date, but is not listed on Exhibit A (other than because the Parties have otherwise agreed in writing that such service shall not be provided), or (B) a service that was provided or performed by PayPal or its Affiliates to or for eBay or its Affiliates during the twelve (12)-month period immediately prior to the Distribution Date that eBay or its Affiliates reasonably needs in order for the eBay Business to continue to operate in substantially the same manner in which the eBay Business operated prior to the Distribution Date, but is not listed on Exhibit A (other than because the Parties have agreed in writing that such service shall not be provided), and (ii) submits a written request describing such service to the applicable Manager(s), then such other Party shall consider in good faith the request to provide such additional services (such requested additional services, the “ Additional Services ”) . If the Parties agree on such Additional Services, then the terms of such Additional Service and the associated service fees shall be documented in writing by the Parties as an amendment to Exhibit A , and such Additional Service shall be a Service provided under this Agreement, subject to the terms of this Agreement. The Recipient’s costs for any such Additional Service shall be Charges to be calculated in accordance with Section 2.04 .

Section 2.03. Performance of Services .

(a) Except as set forth on Exhibit A , the Provider (i) shall perform, or shall cause one or more of its Subsidiaries to perform, all Services to be provided by the Provider in a commercially reasonable manner consistent with the nature, quality, standard of care and service levels at which the same or similar services were performed by or on behalf of Provider during the twelve (12)-month period immediately prior to the Distribution Date; and (ii) upon receipt of written notice from the Recipient identifying any outage, interruption, disruption, downturn or other failure of any Service (a “ Service Interruption ”), shall use commercially reasonable efforts to respond, or to cause one or more of its Subsidiaries to respond, to such Service Interruption in a manner that is substantially similar to the manner in which such Provider or its Affiliates responded to any Service Interruption of the same or similar services during the twelve (12)-month period prior to the Distribution Date. Except as set forth on Exhibit A , with respect to Services for which the same or similar services were not provided prior to the Distribution Date, the Provider: (A) shall perform, or shall cause one or more of its Subsidiaries to perform, such Services in a commercially reasonable manner consistent with the nature, quality, standard of care and service levels at which the same or similar services are performed by or on behalf of Provider to Provider, its Affiliates or its other business units; and (B) upon receipt of written notice from the Recipient identifying any Service Interruption with respect to such Services, shall use commercially reasonable efforts to respond, or to cause one or more of its Subsidiaries to respond, to such Service Interruption in a manner that is substantially similar

 

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to the manner in which such Provider or its Affiliates responds with respect to internally provided services.

(b) Nothing in this Agreement shall require the Provider to perform or cause to be performed any Service to the extent that the manner of such performance would constitute a violation of any applicable Law or any existing contract or agreement with a Third Party. If the Provider is or becomes aware of any potential violation on the part of the Provider, the Provider shall use commercially reasonable efforts to promptly advise the Recipient of such potential violation, and the Provider and the Recipient will mutually seek a reasonable alternative that addresses such potential violation. The Parties agree to cooperate in good faith and use commercially reasonable efforts to obtain any necessary Third Party Approvals required under any existing contract or agreement with a Third Party to allow the Provider to perform, or cause to be performed, all Services to be provided by the Provider hereunder in accordance with the standards set forth in this Section 2.03 ; provided , that neither Party shall be required to accept any terms or conditions, commit to pay any amount, incur any obligation in favor of or offer or grant any accommodation (financial or otherwise, regardless of any provision to the contrary in the existing contract or agreement) to any Third Party to obtain any such Approval. Unless otherwise agreed in writing by the Parties, all reasonable and documented out-of-pocket costs and expenses (if any) incurred by any Party or any of its Subsidiaries in connection with obtaining any such Third Party Approval (including, if agreed by the Parties, the amount paid, obligation incurred or accommodation granted to Third Parties to obtain such Approval) that is required to allow the Provider to perform or cause to be performed such Services shall be incurred by the Recipient. If, with respect to a Service, the Parties, despite the use of such commercially reasonable efforts, are unable to obtain a required Third Party Approval, or the performance of such Service by the Provider would constitute a violation of any applicable Law, the Parties shall use commercially reasonable efforts to develop a reasonable alternative arrangement that enables Provider to perform or cause to be performed such Service or an analogous service without obtaining such required Third Party Approval or violating any applicable Law.

(c) Except as set forth on Exhibit A , if Provider is required to (i) increase staffing; (ii) acquire, lease or license additional facilities, equipment or software; (iii) engage in significant capital expenditures; or (iv) apply for or obtain one or more Approval from Third Parties (other than renewals of any preexisting permits, licenses or authorizations) (clauses (i) to (iv), collectively, the “ Service Changes ”) in order to accommodate an increase in the use of any Service beyond the level of use of such Service by the Recipient during the twelve (12) month period immediately prior to the Distribution Date, including (A) as a result of a change in the manner in which the Recipient’s business is being conducted by such Recipient after the Distribution Date, but (B) excluding ordinary course expansion of the volume or the geographic scope of such business (such as ordinary-course increases in headcount, customers, supplier relationships and transaction volumes), then the Provider shall inform the Recipient in writing of the Service Change and propose a plan for implementing the Service Change before incurring any costs or expenses resulting from such Service Change. The Parties shall negotiate in good faith and mutually agree to adjust or change the Services, including the Charges, if necessary, before Provider is required to undertake any Service Change. If the Parties determine that the Provider shall undertake the Service Change, then such Service Change, together with any other adjustments or changes to the Services, including to the Charges, shall be documented in

 

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a written agreement signed by the Parties, and the Parties shall jointly amend Exhibit A to reflect such written agreement. Each amended section of Exhibit A , as agreed to in writing by the Parties, shall be deemed part of this Agreement as of the date of such written agreement and the Service Changes set forth in such amended section of Exhibit A shall be deemed a part of the “Services” provided under this Agreement, in each case subject to the terms and conditions of this Agreement.

(d) (i) Except as set forth on Exhibit A , neither the Provider nor any of its Subsidiaries shall be required to perform or to cause to be performed any of the Services for the benefit of any Third Party or any other Person other than the Recipient and its Subsidiaries, and (ii) EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 2.03 OR SECTION 7.03 , EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL SERVICES ARE PROVIDED ON AN “AS-IS” BASIS, AND THAT THE PROVIDER MAKES NO OTHER REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, WITH RESPECT TO THE SERVICES. EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

(e) Each Party shall be responsible for its own compliance with any and all Laws applicable to its performance under this Agreement. No Party shall knowingly take any action in violation of any such applicable Law that results in Liability being imposed on the other Party. If a change in or addition to Law applicable to the Provider or the Recipient causes the Provider to change the Services provided or incur additional expenses in providing such Services, the Provider shall use commercially reasonable efforts to promptly advise the Recipient of such additional expenses, and the Provider and the Recipient will mutually seek an alternative that minimizes such additional expenses. The Recipient shall be responsible for any and all such additional expenses.

Section 2.04. Charges for Services . Except as set forth on Exhibit A , the Recipient shall pay the Provider of the Services a fee (either one-time or recurring) for such Services (or category of Services, as applicable) (each fee constituting a “ Charge ” and, collectively, “ Charges ”). The Charges for each Service shall equal (x) the cost of providing such Services, which shall be consistent with the Provider’s direct costs, determined in a manner consistent with allocation methodology used by the Parties during the twelve (12) month period immediately prior to the Distribution Date, plus (y) seven percent (7%), unless otherwise agreed to by the Parties. During the Term, the amount of a Charge for any Service may be modified to the extent of (a) any adjustments mutually agreed to by the Parties, (b) any Service Change requested by the Recipient and agreed upon by the Provider pursuant to Section 2.03(c) , and (c) any adjustment in the rates or charges imposed by any Third-Party provider that is providing Services (proportional to the respective use of such Services by each Party); provided , that the rates or charges imposed by such Third-Party provider shall be passed through to the Recipient without adding any margin or mark-up. Together with any invoice for Charges, the Provider shall provide the Recipient with reasonable documentation to support the calculation of such Charges,

 

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including any additional documentation reasonably requested by the Recipient to the extent that such documentation is in the Provider’s or its Subsidiaries’ possession or control.

Section 2.05. Reimbursement for Out-of-Pocket Costs and Expenses . The Recipient shall reimburse the Provider for reasonable and documented out-of-pocket costs and expenses incurred by the Provider or any of its Subsidiaries in connection with providing the Services (including incremental license fees incurred by the Provider in connection with the performance of the Services and reasonable travel-related expenses) to the extent that such costs and expenses are not reflected in the Charges for such Services; provided , that any such cost or expense in excess of one thousand ($1,000.00), in the aggregate, that is not consistent with the historical practice between the Parties during the twelve (12) month period immediately prior to the Distribution Date for any Service shall require advance written approval of the Recipient. Any authorized travel-related expenses incurred in performing the Services shall be incurred and charged to the Recipient in accordance with the Recipient’s then-applicable business travel policies as provided to the Provider from time to time.

Section 2.06. Changes in the Performance of Services . Except as set forth on Exhibit A , subject to the performance standards for Services set forth in Sections 2.03(a) , 2.03(b) and 2.03(c) and subject to Section 2.08 , the Provider may make changes from time to time in the manner of performing the Services if the Provider furnishes to the Recipient reasonable prior written notice (in content and timing) of such changes. No such change shall materially reduce the quality or service level of, or increase the Charges for, the applicable Service. Subject to Section 2.03(e) , if any such change by the Provider reasonably requires the Recipient to incur a material increase in costs and expenses, in the aggregate, to continue to receive and utilize the applicable Services in the same manner as the Recipient was receiving and utilizing such Service prior to such change, the Provider shall be required to reimburse the Recipient for all such reasonable increase in costs and expenses. Upon request, the Recipient shall provide the Provider with reasonable documentation, including any additional documentation reasonably requested by the Provider to the extent such documentation is in the Recipient’s or its Subsidiaries’ possession or control, to support the calculation of such increase in costs and expenses.

Section 2.07. Transitional Nature of Services . The Parties acknowledge the transitional nature of the Services. The Recipient shall use commercially reasonable efforts to transition each Service from the Provider to the Recipient (or its designee) as soon as commercially practicable after the Distribution Date, but in any event before the end of the Service Period for such Service (as described in Section 5.01 ). The Parties agree to use reasonable efforts to assist and cooperate in good faith with each other in to effectuating such transition of the Services from the Provider to the Recipient (or its designee) in a timely and orderly manner.

Section 2.08. Subcontracting . The Provider may hire or engage one or more Third Parties to perform any or all of its obligations under this Agreement without the consent of the Recipient; provided , that, subject to Section 2.03(e) , (a) the hiring or engagement of such Third Party does not decrease the quality or level of services provided to the Recipient to below that provided by the Provider, (b) the use of such Third Party will not increase the Charges payable by the Recipient in connection with such Services, (c) the use of such Third Party will not change the manner in which the Services are delivered in a way that increases the Recipient’s costs of receiving the Services; provided , further , that if such Third Party has been engaged by

 

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Provider to perform the same or similar services prior to the Distribution Date, then clauses (a), (b) and (c) shall be deemed satisfied. The Provider shall in all cases remain primarily responsible for all of its obligations under this Agreement with respect to the scope of the Services, the performance standard for Services set forth in Section 2.03 or Exhibit A and the content of the Services provided to the Recipient, except that if a Third Party provides all or part of any Service pursuant to a written agreement with the Recipient, the Recipient agrees to be bound by, and to cause its Affiliates to comply with, those obligations that such agreement places on the Recipient, and the Provider shall not be responsible for its obligations under this Agreement that are specified in such agreement to be obligations of the Third Party provider. Subject to the confidentiality provisions set forth in Article VI , each Party shall, and shall cause their respective Affiliates to, provide, upon ten (10) business days’ prior written notice, any Information within such Party’s or its Affiliates’ possession that the requesting Party reasonably requests in connection with any Services being provided to such requesting Party by a Third Party, including any applicable invoices, agreements documenting the arrangements between such Third Party and the Provider and other supporting documentation.

Section 2.09. TSA Managers and Service Managers . eBay and PayPal shall each appoint and designate an individual to act as its initial manager with overall responsibility for all Services (the “ TSA Managers ”). eBay and PayPal shall provide each other with written notice of the identity and title of its TSA Manager upon execution of this Agreement. eBay and PayPal shall also each appoint and designate an individual holding the title set forth in the applicable sections of Exhibit A to act as the service manager for a particular Service (each, a “ Service Manager ”). Unless otherwise specified in Exhibit A , with respect to each Service, the Service Manager shall have primary responsibility for coordinating and managing the delivery and use of that Service and shall have authority to act on eBay’s or PayPal’s behalf, as applicable, with respect to the provision and use of such Service. In overseeing its Service Managers, the TSA Managers shall have all of the authority of each of their respective Service Managers across all Services, will be responsible for resolving any disputes that cannot be resolved between each Party’s Service Managers and will be responsible for ensuring that each of their respective Service Managers fulfills its responsibilities in connection with the Services and this Section 2.09. The TSA Managers and applicable Service Managers shall work with the Personnel and Third Party providers to periodically address issues and matters raised by the other Party relating to the provision of Services. All communications between the Parties pursuant to this Agreement regarding routine matters involving a Service shall be directed to the applicable Service Manager with a copy to the TSA Managers, and all other communications between the Parties pursuant to Article II of this Agreement (other than the negotiation and execution of any written agreement that amends Exhibit A ) shall be directed to the applicable TSA Manager. Each Party shall notify the other Party of any change in the status of any of its TSA Manager or any of its Service Managers that would affect such TSA Manager’s or Service Manager’s ability to carry out the responsibilities set forth in this Section 2.09 at least ten (10) business days prior to such change.

Section 2.10. Services Not Included . It is not the intent of the Provider to render to the Recipient, nor of the Recipient to receive from the Provider, professional advice or opinions, whether with regard to Tax, legal, treasury, finance, employment or other business, technical and financial matters; and the Recipient shall not rely on, or construe, any Service rendered by or on behalf of the Provider as such professional advice or opinions or technical advice.

 

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ARTICLE III

OTHER ARRANGEMENTS

Section 3.01. Access .

(a) PayPal shall, and shall cause its Subsidiaries to, allow eBay and its Subsidiaries and their respective Representatives reasonable access to the facilities of PayPal and its Subsidiaries that is necessary for eBay and its Subsidiaries to fulfill their obligations under this Agreement. In addition to the foregoing right of access, PayPal shall, and shall cause its Subsidiaries to, afford eBay, its Subsidiaries and their respective Representatives, upon reasonable advance written notice, reasonable access during normal business hours to the facilities, Information, systems, infrastructure and Personnel of PayPal and its Subsidiaries as reasonably necessary for eBay to verify the adequacy of internal controls over information technology, reporting of financial data and related processes employed in connection with the Services being provided by PayPal or its Subsidiaries, including in connection with verifying compliance with Section 404 of the Sarbanes-Oxley Act of 2002; provided , that (i) such access shall not unreasonably interfere with any of the business or operations of PayPal or any of its Subsidiaries, (ii) if PayPal determines that providing such access could violate any applicable Law or agreement or waive any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit such access in a manner that avoids each of such harm and consequence, and (iii) if PayPal determines that providing such access requires a Third Party Approval, such access shall be subject to the receipt of such Third Party Approval. eBay agrees that all of its and its Subsidiaries’ employees shall, and that it shall use commercially reasonable efforts to cause its Representatives’ employees to, when on the property of PayPal or its Subsidiaries, or when given access to any facilities, Information, systems, infrastructure or Personnel of PayPal or its Subsidiaries, conform to the reasonable policies and procedures of PayPal and its Subsidiaries, as applicable, concerning health, safety, conduct and security that are made known or provided to eBay from time to time.

(b) eBay shall, and shall cause its Subsidiaries to, allow PayPal and its Subsidiaries and their respective Representatives reasonable access to the facilities of eBay and its Subsidiaries that is necessary for PayPal and its Subsidiaries to fulfill their obligations under this Agreement. In addition to the foregoing right of access, eBay shall, and shall cause its Subsidiaries to, afford PayPal, its Subsidiaries and their respective Representatives, upon reasonable advance written notice, reasonable access during normal business hours to the facilities, Information, systems, infrastructure and Personnel of eBay and its Subsidiaries as reasonably necessary for PayPal to verify the adequacy of internal controls over information technology, reporting of financial data and related processes employed in connection with the Services being provided by eBay or its Subsidiaries, including in connection with verifying compliance with Section 404 of the Sarbanes-Oxley Act of 2002; provided , that (i) such access shall not unreasonably interfere with any of the business or operations of eBay or any of its Subsidiaries, (ii) if eBay determines that providing such access could violate any applicable Law or agreement or waive any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit such access in a manner that avoids each of such harm and consequence, and (iii) if eBay determines that providing such access requires a Third Party Approval, such access shall be subject to the receipt of such Third Party Approval. PayPal agrees that all of its and its Subsidiaries’ employees shall, and that it shall use commercially reasonable efforts to cause its

 

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Representatives’ employees to, when on the property of eBay or its Subsidiaries, or when given access to any facilities, Information, systems, infrastructure or Personnel of eBay or its Subsidiaries, conform to the reasonable policies and procedures of eBay and its Subsidiaries, as applicable, concerning health, safety, conduct and security that are made known or provided to PayPal from time to time.

Section 3.02. System Security and Data Protection . Each Party agrees that its and its Subsidiaries employees having access to the Information Technology, Software or other Technology of the other Party and its Subsidiaries in connection with the performance, receipt or delivery of a Service, shall, and that it shall use commercially reasonable efforts to cause its Representatives’ employees having such access to, comply with all security guidelines (including physical security, network access, internet security, confidentiality and personal data security guidelines) of such other Party and its Subsidiaries that are made known or provided to such Party from time to time. Each Party shall ensure that any access described by this Section 3.02 shall be used by its and its Subsidiaries’ Personnel, and shall use commercially reasonable efforts to ensure that any such access shall be used by its Representatives’ Personnel, only for the purposes contemplated by, and subject to the terms of, this Agreement. Subject to Article VI of the Separation and Distribution Agreement and any applicable provisions of the other Ancillary Agreements and the Commercial Agreements, the Provider shall only process personal data which it may receive from the Recipient while carrying out its duties under this Agreement: (a) in such a manner as is necessary to carry out those duties; (b) in accordance with (i) applicable instructions in Exhibit A and (ii) any instructions otherwise communicated by the Recipient; and (c) using appropriate technical and organizational measures to prevent the unauthorized or unlawful processing of such personal data or the accidental loss or destruction of, or damage to, such personal data.

ARTICLE IV

PAYMENTS; BILLING; TAXES

Section 4.01. Procedure . Charges for the Services shall be charged to and payable by the Recipient. Amounts payable pursuant to this Agreement shall be paid by wire transfer (or such other method of payment as may be agreed between the Parties from time to time) to the Provider (as directed by the Provider), on a monthly basis in the case of recurring fees, which amounts shall be due within sixty (60) days of the Recipient’s receipt of each such invoice, including reasonable documentation pursuant to Section 2.04 . Except as set forth on Exhibit A , all amounts due and payable hereunder shall be invoiced and paid in U.S. dollars.

Section 4.02. Late Payments . Charges not paid when due pursuant to this Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within sixty (60) days of the receipt of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus two percent (2%) or the maximum rate under applicable Law, whichever is lower (the “ Interest Payment ”).

Section 4.03. Taxes .

(a) All Charges for Services shall be exclusive of any value added, goods and services, sales, use, consumption, excise, service, transfer, stamp, documentary, filing,

 

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recordation taxes or similar taxes (“ Transaction Taxes ”). Without limiting any provision of this Agreement, the Recipient shall be responsible for all Transaction Taxes imposed or assessed with respect to the provision of Services by the Provider. The Provider 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 Provider 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 Services giving rise to any Transaction Taxes, including by filing any exemption or other similar forms or providing valid tax identification number or other relevant registration numbers, certificates or other documents. The Recipient and the Provider shall cooperate regarding any requests for information, audit, or similar request by any Taxing Authority concerning Transaction Taxes payable with respect to Services provided pursuant to this Agreement.

(b) The Recipient shall be entitled to deduct and withhold Tax required by applicable Law to be withheld on payments made to the Provider pursuant to this Agreement. To the extent any amounts are so withheld, the Recipient shall timely remit such deducted and withheld amount to the relevant Taxing Authority and promptly provide the Provider with evidence of such payment. Provider agrees to complete and provide to Recipient or if required, to the relevant Taxing Authority, at least ten (10) days prior to the payment due date, such forms, certifications or other documents as may be reasonably requested by Recipient, in order to reduce or exempt the withholding of any Tax with respect to payments made to Provider when and where applicable by Law. The Recipient and the Provider shall cooperate regarding any requests for information, audit, or similar request by any Taxing Authority concerning the withholding of any Tax payable with respect to Services provided pursuant to this Agreement.

(c) Any penalties or interest imposed on any Transaction Taxes described in Section 4.03(a) or Tax described Section 4.03(b) shall be the responsibility of the Recipient unless the penalties or interest are the result of an action or failure to act by the Provider.

Section 4.04. Audit Rights .

(a) During the Term and for eighteen (18) months thereafter, the Recipient shall be permitted to request, at the Recipient’s sole cost and expense, periodic (but no more frequently than annually) audits of the books and records of the Provider reasonably relating to the Services that the Provider is obligated to provide under this Agreement. Any review conducted pursuant to this Section 4.04 shall be conducted by an independent, external, internationally-recognized firm to be mutually agreed upon by the Recipient and the Provider with appropriate qualifications and experience in conducting reviews of this nature (the “ Independent Auditor ”). Before beginning its review, the Independent Auditor shall execute a confidentiality agreement with the Provider, the terms of which shall not frustrate or impede the purpose of the audit or the disclosure of the results thereof to the Recipient; provided , that if the Independent Auditor has executed a confidentiality agreement in accordance with this

Section 4.04(a) during the Term and such confidentiality agreement remains in full force and effect, the Independent Auditor shall not be required to reexecute a second confidentiality agreement. The Independent Auditor shall create a detailed written report of the results and findings of its audit, and simultaneously provide copies of the audit to both Parties.

 

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(b) The Provider may dispute the results of an audit conducted pursuant to Section 4.04(a) , in which case the Parties shall attempt in good faith to negotiate a resolution of any dispute within thirty (30) days of the Recipient’s demand for compensation or reimbursement arising out of the result of such audit. If the Parties are unable to resolve any such dispute after such thirty (30)-day period, the Parties shall resolve the dispute pursuant to Section 8.01 and Section 8.02 .

(c) The Provider shall reasonably cooperate with the Independent Auditor in connection with any audit under Section 4.04(a) , including by providing the Independent Auditor with access to financial and accounting books and statements, management and operating data, records, working papers of the Provider’s auditors (to the extent permitted by such auditors, provided, that the Provider shall not withhold any consents necessary to permit the Independent Auditor from providing access to such working papers), accounts, financial statements, systems, facilities, operations, and management Personnel and other Personnel, but only as reasonably necessary for the purposes set forth in Section 4.04(a) , and ensure that its Personnel cooperate with any such audit and all other reasonable requests by the Independent Auditor for additional information or documentation required to complete such audit. The Provider shall not be required pursuant to this Section 4.04 to disclose to the Independent Auditor any Information to the extent disclosure of such Information to the Independent Auditor would violate applicable Law.

(d) If any audit reveals that the Recipient overpaid any amount due (except for any portion thereof disputed in good faith), the Provider shall within ten (10) business days after such determination reimburse the Recipient an amount of cash equal to such overpayment, plus the Interest Payment, accruing from the date of payment by the Recipient to the time of reimbursement by the Provider. If any audit reveals that the Recipient has underpaid any amount due under this Agreement (except for any portion thereof disputed in good faith), the Recipient shall within ten (10) business days after such determination reimburse the Provider an amount of cash equal to such underpayment, plus the Interest Payment, accruing from the date such payment originally should have been made by the Recipient to the time of payment by the Recipient, subject to Section 4.04(c) . If any such overpayment or underpayment equals or exceeds two hundred and fifty thousand Dollars ($250,000) and also amounts to ten percent (10%) or more of the total amount payable by the Recipient for any period covered by the review, the Provider shall reimburse the Recipient for the cost of such review.

ARTICLE V

TERM AND TERMINATION

Section 5.01. Term . This Agreement shall commence at the TSA Effective Time and shall be in effect until terminated in accordance with this Article V (the “ Term ”). This Agreement shall terminate upon the earlier to occur of (a) the last date on which either Party is obligated to provide any Service to the other Party in accordance with the terms of this Agreement; (b) the mutual written agreement of the Parties to terminate this Agreement in its entirety; or (c) the date that is the twenty-fourth (24th) month anniversary of the Distribution Date. Unless otherwise terminated pursuant to Section 5.02 , this Agreement shall terminate with respect to each Service as of the close of business on the last day of the Service Period for such Service.

 

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Section 5.02. Early Termination .

(a) Without prejudice to the Recipient’s rights with respect to Force Majeure, the Recipient may from time to time terminate this Agreement with respect to the entirety of any individual Service but not a portion thereof:

(i) Except as set forth on Exhibit A , for any reason or no reason, upon the giving of at least thirty (30) days’ prior written notice to the Provider of such Service; provided , that if Exhibit A sets forth a different notice period, then the Recipient shall comply with such different notice period; provided , further , that any such termination shall be subject to the obligation to pay any applicable Termination Charges pursuant to Section 5.04 ; or

(ii) if the Provider of such Service has failed to perform any of its material obligations under this Agreement with respect to such Service, and such failure shall continue to be uncured for a period of at least thirty (30) days after receipt by the Provider of written notice of such failure from the Recipient; provided , that the Recipient shall not be entitled to terminate this Agreement with respect to the applicable Service if, as of the end of such period, there remains a good-faith Dispute between the Parties as to whether the Provider has cured the applicable breach.

(b) The Provider may terminate this Agreement with respect to any individual Service, but not a portion thereof, at any time upon prior written notice to the Recipient if the Recipient has failed to perform any of its material obligations under this Agreement relating to such Service, including making payment of Charges for such Service when due, and such failure shall continue to be uncured for a period of at least thirty (30) days after receipt by the Recipient of a written notice of such failure from the Provider; provided , that the Provider shall not be entitled to terminate this Agreement with respect to the applicable Service if, as of the end of such period, there remains a good-faith Dispute between the Parties as to whether the Recipient has cured the applicable breach.

(c) Exhibit A hereto shall be updated to reflect any terminated Service.

Section 5.03. Interdependencies . The Parties acknowledge and agree that (a) there may be interdependencies among the Services being provided under this Agreement; (b) upon the request of either Party, the Parties shall cooperate and act in good faith to determine whether (i) any such interdependencies exist with respect to the particular Service that a Party is seeking to terminate pursuant to Section 5.02 and (ii) in the case of such termination, the Provider’s ability to provide a particular Service in accordance with this Agreement would be materially and adversely affected by such termination of another Service; and (c) if the Parties have determined that such interdependencies exist (and, in the case of such termination that the Provider’s ability to provide a particular Service in accordance with this Agreement would be materially and adversely affected by such termination), the Parties shall negotiate in good faith to amend Exhibit A hereto with respect to such termination of such impacted Service, which amendment shall be consistent with the terms of comparable Services.

Section 5.04. Effect of Termination . Upon the termination of any Service pursuant to this Agreement, the Provider of the terminated Service shall have no further obligation to

 

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provide the terminated Service, and the Recipient of such Service shall have no obligation to pay any future Charges relating to such Service; provided , that the Recipient shall remain obligated to the Provider for (a) the Charges owed and payable in respect of Services provided prior to the effective date of termination for such Service, and (b) any applicable Termination Charges (which, in the case of each of clauses (a) and (b), shall be payable only if the Recipient terminates any Service pursuant to Section 5.02(a)(i) ). In connection with the termination of any Service, the provisions of this Agreement not relating solely to such terminated Service shall survive any such termination, and in connection with a termination of this Agreement, Article I , Section 4.04 , this Article V , Article VII and Article IX , all confidentiality obligations under this Agreement and Liability for all due and unpaid Charges and Termination Charges shall continue to survive indefinitely.

ARTICLE VI

CONFIDENTIALITY; PROTECTIVE ARRANGEMENTS

Section 6.01. eBay and PayPal Obligations . Subject to Section 6.04 , until the five (5) year anniversary of the date of the termination of this Agreement (other than in the case of any item of Technical Information, for which the obligations in this Section 6.01 will continue until such time as any of the exceptions set forth in clauses (a) through (c) of this Section 6.01 have been satisfied with respect to such item of Technical Information), each of eBay and PayPal, on behalf of itself and each of its Subsidiaries, agrees to hold, and to cause its Representatives to hold, in strict confidence, using at least the same standard of care to prevent the public disclosure and dissemination thereof that applies to eBay’s Confidential Information pursuant to policies in effect as of the TSA Effective Time, all Confidential Information concerning the other Party or its Subsidiaries or their respective businesses that is either (a) in its possession (including Confidential Information in its possession prior to the date hereof) or (b) furnished by any such other Party or such other Party’s Subsidiaries or their respective Representatives at any time pursuant to this Agreement, and shall not use any Confidential Information of the other Party other than for such purposes as expressly permitted hereunder, except, in each case, to the extent that such Confidential Information is or was (i) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any of its Subsidiaries or any of their respective Representatives in violation of this Agreement; (ii) later lawfully acquired from other sources by such Party or any of its Subsidiaries, which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such Confidential Information; or (iii) independently developed or generated without reference to or use of the Confidential Information of the other Party or any of its Subsidiaries. If any Confidential Information of a Party or any of its Subsidiaries is disclosed to the other Party or any of its Subsidiaries in connection with providing the Services, then such disclosed Confidential Information shall be used by the receiving Party only as required to perform such Services.

Section 6.02. No Release; Return or Destruction . Each Party agrees (a) not to release or disclose, or permit to be released or disclosed, any Confidential Information of the other Party addressed in Section 6.01 to any other Person, except its Representatives who need to know such Confidential Information in their capacities as such (who shall be advised of their obligations hereunder with respect to such Confidential Information) and except in compliance with Section 6.04 , and (b) to use commercially reasonable efforts to maintain such Confidential Information

 

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in accordance with Section 6.4 of the Separation and Distribution Agreement. Without limiting the foregoing, when any such Confidential Information is no longer needed for the purposes contemplated by the Separation and Distribution Agreement, this Agreement or any other Ancillary Agreements, each Party will promptly after request of the other Party either return to the other Party all such Confidential Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or notify the other Party in writing that it has destroyed such information (and such copies thereof and such notes, extracts or summaries based thereon); provided , that such Party’s Representatives may retain one (1) copy of such information to the extent required by applicable Law or professional standards, and shall not be required to destroy any such information located in back-up, archival electronic storage.

Section 6.03. Privacy and Data Protection Laws; Residual Information . Each Party shall comply with all applicable state, federal and foreign privacy and data protection Laws that are or that may in the future be applicable to the provision of the Services under this Agreement and any additional data protection requirements set forth on Exhibit A with respect to each Service. Notwithstanding anything to the contrary herein, each Party and its Subsidiaries shall be free to use for any purpose the Residual Information resulting from access Representatives of such Party or its Subsidiaries have had to confidential and proprietary information concerning the other Party or its Subsidiaries. The Parties acknowledge and understand that the foregoing does not constitute a license under any patents or copyrights.

Section 6.04. Protective Arrangements . If a Party or any of its Subsidiaries either determines on the advice of its counsel that it is required to disclose any information pursuant to applicable Law or receives any request or demand under lawful process or from any Governmental Authority to disclose or provide information of the other Party (or any of its Subsidiaries) that is subject to the confidentiality provisions hereof, such Party shall notify the other Party (to the extent legally permitted) as promptly as practicable under the circumstances prior to disclosing or providing such information and shall cooperate, at the expense of the other Party, in seeking any appropriate protective order requested by the other Party. If such other Party fails to receive such appropriate protective order in a timely manner and the Party receiving the request or demand reasonably determines that its failure to disclose or provide such information shall actually prejudice the Party receiving the request or demand, then the Party that received such request or demand may thereafter disclose or provide information to the extent required by such Law (as so advised by its counsel) or by lawful process or such Governmental Authority, and the disclosing Party shall promptly provide the other Party with a copy of the information so disclosed, in the same form and format so disclosed, together with a list of all Persons to whom such information was disclosed, in each case to the extent legally permitted.

ARTICLE VII

LIMITED LIABILITY AND INDEMNIFICATION

Section 7.01. Limitations on Liability .

(a) THE CUMULATIVE AGGREGATE LIABILITIES OF THE PROVIDER AND ITS SUBSIDIARIES AND THEIR RESPECTIVE REPRESENTATIVES, COLLECTIVELY, UNDER THIS AGREEMENT FOR ANY ACT OR FAILURE TO ACT IN CONNECTION HEREWITH (INCLUDING THE PERFORMANCE OR BREACH OF

 

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THIS AGREEMENT), OR FROM THE SALE, DELIVERY, PROVISION, USE OF OR FAILURE TO PROVIDE ANY SERVICES PROVIDED UNDER OR CONTEMPLATED BY THIS AGREEMENT, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, SHALL NOT EXCEED THE AGGREGATE CHARGES PAID AND PAYABLE TO SUCH PROVIDER FOR ALL SERVICES BY THE RECIPIENT PURSUANT TO THIS AGREEMENT THROUGHOUT THE TERM.

(b) IN NO EVENT SHALL EITHER PARTY, ITS SUBSIDIARIES OR THEIR RESPECTIVE REPRESENTATIVES BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE, EXEMPLARY, REMOTE, SPECULATIVE OR SIMILAR DAMAGES IN EXCESS OF COMPENSATORY DAMAGES OF THE OTHER PARTY (INCLUDING LOST PROFITS OR LOST REVENUES) IN CONNECTION WITH THE SALE, DELIVERY, PROVISION OR USE OF OR FAILURE TO PROVIDE SERVICES PROVIDED UNDER OR CONTEMPLATED BY THIS AGREEMENT (OTHER THAN ANY SUCH LIABILITY WITH RESPECT TO A THIRD-PARTY CLAIM), AND EACH PARTY HEREBY WAIVES ON BEHALF OF ITSELF, ITS SUBSIDIARIES AND ITS REPRESENTATIVES ANY CLAIM FOR SUCH DAMAGES, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE.

(c) The limitations in Section 7.01(a) and Section 7.01(b) shall not apply in respect of any Liability arising out of or in connection with (i) either Party’s obligations under Section 7.02 or Section 7.03 , (ii) the gross negligence, willful misconduct, or fraud of or by the Party to be charged or (iii) either Party’s obligations or Liabilities under the Intellectual Property Matters Agreement.

(d) The limitations in Section 7.01(a) shall not apply in respect of any Liability arising out of or in connection with either Party’s Liability for breaches of confidentiality under Article VI .

Section 7.02. Recipient Indemnity . Subject to Section 7.01 , Recipient hereby releases and agrees to indemnify, defend and hold harmless the Provider, its Subsidiaries and each of their respective Representatives, and each of the successors and assigns of any of the foregoing (collectively, the “ Provider Indemnitees ”), from and against any and all Liabilities arising from, relating to or in connection with the Recipient’s breaches of confidentiality obligations under Article VI , gross negligence, willful misconduct or fraud.

Section 7.03. Provider Indemnity . Subject to Section 7.01 , the Provider agrees to indemnify, defend and hold harmless the Recipient, its Subsidiaries and each of their respective Representatives, and each of the successors and assigns of any of the foregoing (collectively, the “ Recipient Indemnitees ”), from and against any and all Liabilities arising from, relating to or in connection with the sale, delivery, provision or use of any Services provided by such Provider hereunder, but only to the extent that such Liabilities relate to, arise out of or are a consequence

 

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of the Provider’s breaches of confidentiality obligations under Article VI , gross negligence, willful misconduct or fraud.

Section 7.04. Indemnification Procedures . The procedures for indemnification set forth in Sections 4.5, 4.6 and 4.7 of the Separation and Distribution Agreement shall govern claims for indemnification under this Agreement.

Section 7.05. Liability for Payment Obligations . Nothing in this Article VII shall be deemed to eliminate or limit, in any respect, either Party’s express obligation in this Agreement to pay Charges for Services rendered in accordance with this Agreement.

Section 7.06. Exclusion of Other Remedies . The provisions of Section 7.02 and Section 7.03 shall, to the maximum extent permitted by applicable Law, be the sole and exclusive remedies of the Provider Indemnitees and the Recipient Indemnitees, as applicable, for any Liability, whether arising from statute, principle of common or civil law, principles of strict liability, tort, contract or otherwise under this Agreement.

ARTICLE VIII

DISPUTES

Section 8.01. Dispute Resolution . In the event of any controversy, dispute or claim arising out of or relating to any Party’s rights or obligations under this Agreement (whether arising in contract, tort or otherwise), calculation or allocation of the costs of any Service or otherwise arising out of or relating in any way to this Agreement (including the interpretation or validity of this Agreement) (a “ Dispute ”), the Parties agree that each Party’s TSA Manager and each Party’s applicable Service Manager (or such other persons as the Parties may designate) shall negotiate in good faith in an attempt to resolve such Dispute amicably. If such Dispute has not been resolved to the mutual satisfaction of the Parties within forty-five (45) days after the initial written notice of the Dispute (or such longer period as the Parties may agree), then such Dispute shall be submitted to the Escalation Committee and resolved in accordance with Sections 7.2 to 7.6 of the Separation and Distribution Agreement, which shall be the sole and exclusive procedures for the resolution of any such Dispute unless otherwise specified herein or in Article VII of the Separation and Distribution Agreement.

Section 8.02. Disputes Over Charges and Termination Charges . In any Dispute regarding the amount of a Charge or a Termination Charge, if such Dispute is finally resolved by the applicable Service Managers, the TSA Managers or pursuant to the dispute resolution process set forth or referred to in Section 8.01 and it is determined that the Charge or the Termination Charge, as applicable, that the Provider has invoiced the Recipient, and that the Recipient has paid to the Provider, is greater or less than the amount that the Charge or the Termination Charge, as applicable, should have been, then (i) if it is determined that the Recipient has overpaid the Charge or the Termination Charge, as applicable, the Provider shall within five (5) business days after such determination reimburse the Recipient an amount of cash equal to such overpayment, plus the Interest Payment, accruing from the date of payment by the Recipient to the time of reimbursement by the Provider; and (ii) if it is determined that the Recipient has underpaid the Charge or the Termination Charge, as applicable, the Recipient shall within five (5) business days after such determination reimburse the Provider an amount of cash equal to

 

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such underpayment, plus the Interest Payment, accruing from the date such payment originally should have been made by the Recipient to the time of payment by the Recipient.

Section 8.03. Litigation and Unilateral Commencement of Arbitration . Notwithstanding the foregoing provisions of this Article VIII or Sections 7.2 to 7.4 of the Separation and Distribution Agreement, a Party may seek preliminary provisional or injunctive judicial relief with respect to a Dispute without first complying with the procedures set forth in Section 8.01 of this Agreement or Sections 7.2 to 7.4 of the Separation and Distribution Agreement if such action is reasonably necessary to avoid irreparable damage.

Section 8.04. Conduct During Dispute Resolution Process . Unless otherwise agreed in writing, the Parties shall, and shall cause their respective Subsidiaries to, continue to honor all commitments under this Agreement to the extent required by this Agreement during the course of Dispute resolution pursuant to the provisions of this Article VIII , unless such commitments are the specific subject of the Dispute at issue. Notwithstanding the foregoing, the Provider agrees that its interruption of the Services may cause irreparable harm to the Recipient for which no adequate remedy exists at Law and agrees, during the pendency of any Dispute, not to deny, withdraw, restrict or delay its provision of the Services to the Recipient except as required by court order, by the resolution of the Dispute or as a result of the termination of this Agreement.

ARTICLE IX

MISCELLANEOUS

Section 9.01. Mutual Cooperation . Each Party shall, and shall cause its Subsidiaries to, cooperate with the other Party and its Subsidiaries in connection with the performance of the Services hereunder; provided , that such cooperation shall not unreasonably disrupt the normal operations of such Party or its Subsidiaries; provided , further , that this Section 9.01 shall not require such Party to incur any out-of-pocket costs or expenses unless and except as expressly provided in this Agreement or otherwise agreed to in writing by the Parties.

Section 9.02. Further Assurances . Each Party shall take, or cause to be taken, any and all reasonable actions, including the execution, acknowledgment, filing and delivery of any and all documents and instruments that any other Party may reasonably request in order to effect the intent and purpose of this Agreement and the transactions contemplated hereby.

Section 9.03. Audit Assistance . Each of the Parties and their respective Subsidiaries are or may be subject to regulation and audit by a Governmental Authority (including a Taxing Authority), standards organizations, customers or other parties to contracts with such Parties or their respective Subsidiaries under applicable Law, standards or contract provisions. If a Governmental Authority, standards organization, customer or other party to a contract with a Party or its Subsidiary exercises its right to examine or audit such Party’s or its Subsidiary’s books, records, documents or accounting practices and procedures pursuant to such applicable Law, standards or contract provisions, and such examination or audit relates to the Services, then the other Party shall provide, at the sole cost and expense of the requesting Party, all assistance reasonably requested by the Party that is subject to the examination or audit in responding to such examination or audits or requests for Information, to the extent that such assistance or

 

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Information is within the reasonable control of the cooperating Party and is related to the Services.

Section 9.04. Title to Intellectual Property . Except as expressly provided for under the terms of this Agreement, the Separation and Distribution Agreement or the Intellectual Property Matters Agreement, the Recipient acknowledges that it shall acquire no right, title or interest (except for the express license rights set forth in Section 9.05(a)(ii) ) in any Intellectual Property Rights, Information Technology, Information, Software or other Technology which are owned or licensed by the Provider by reason of the provision of the Services hereunder. The Recipient shall not remove or alter any copyright, trademark, confidentiality or other proprietary notices that appear on any Information Technology, Information, Software or other Technology owned or licensed by the Provider, and the Recipient shall reproduce any such notices on any and all copies thereof. The Recipient shall not attempt to decompile or reverse engineer copies of any Software owned or licensed by the Provider that is provided in object code form only, and the Recipient shall promptly notify the Provider of any such attempt, regardless of whether by the Recipient or any Third Party, of which the Recipient becomes aware.

Section 9.05. License .

(a) Without affecting the rights and obligations of the Parties in the Separation and Distribution Agreement and the Intellectual Property Matters Agreement, with respect to each of the Services set forth in Exhibit A :

(i) Recipient hereby grants to Provider, and Provider hereby accepts, a non-exclusive, non-transferable (subject to Section 9.07 ), worldwide right during the Service Period to use Recipient Systems only to the extent necessary and for the sole purpose of performing Provider’s obligations under this Agreement, and not for any other purpose; and

(ii) Provider hereby grants to Recipient, and Recipient hereby accepts, a non-exclusive, non-transferable (subject to Section 9.07 ), worldwide right during the Service Period to use the Provider Systems only to the extent necessary and for the sole purpose of receiving the Services under this Agreement, and not for any other purpose.

(b) For clarity, the limited rights to use the Recipient Systems and Provider Systems granted in this Section 9.05 for each of the Services will terminate at the end of the applicable Service Period and will under no circumstances survive the termination or expiration of this Agreement.

Section 9.06. Independent Contractors . The Parties each acknowledge and agree that they are separate entities, each of which has entered into this Agreement for its own independent business reasons. The relationships of the Parties hereunder are those of independent contractors and nothing contained herein shall be deemed to create a joint venture, partnership or any other relationship between the Parties. Personnel performing services hereunder do so on behalf of, under the direction of, and as Personnel of, the Provider, and the Recipient shall have no right, power or authority to direct such Personnel.

Section 9.07. Assignability .

 

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(a) This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided , that except as set forth in Section 9.07(b) and Section 9.07(c) , 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.

(b) No consent of the other Party shall be required for: (i) the assignment of a Party’s rights and obligations under this Agreement in whole or in part to any of its Subsidiaries; provided , that no such assignment shall release such Party from any liability or obligation under this Agreement; or (ii) the assignment of all of a Party’s rights and obligations in whole ( i.e. , the assignment of a party’s rights and obligations under this Agreement, the Separation and Distribution Agreement and all Ancillary Agreements all at the same time) under this Agreement 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; provided , that, (A) in the event of a Change of Control of eBay in which such acquirer is a PayPal Specified Person, PayPal shall, in its capacity as a Provider, have the right to terminate this Agreement solely as it relates to any service for which continued provision of such service by PayPal would materially and adversely affect PayPal’s competitive position with respect to such PayPal Specified Person (and will have no other separate right to terminate this Agreement), and (B) in the event of a Change of Control of PayPal in which such acquirer is an eBay Specified Person, eBay shall, in its capacity as a Provider, have the right to terminate this Agreement solely as it relates to any service for which continued provision of such service by eBay would materially and adversely affect eBay’s competitive position with respect to such eBay Specified Person (and will have no other separate right to terminate this Agreement).

(c) If there occurs a divestiture or other disposition of any Subsidiary, division or business that is a Recipient or Provider of Services (a “ Divested Asset ”), the Party that is divesting or disposing of such Divested Asset shall assign all of its rights and obligations under this Agreement, in respect of the Divested Asset, to the Person that acquired control of such Divested Asset (such Person, the “ Divested Asset Acquirer ”), without any requirement to obtain the consent of the other Party, and the Divested Asset Acquirer shall accept in writing the terms of the Agreement and the applicable Services with respect to such Divested Asset; provided , that if such Divested Asset is a Recipient of Services and the Divested Asset Acquirer is a PayPal Specified Person (if eBay is divesting or disposing of such Divested Asset) or an eBay Specified Person (if PayPal is divesting or disposing of such Divested Asset), as applicable, the Provider of such Services to the Divested Asset may terminate this Agreement with respect to the Divested Asset.

Section 9.08. Third-Party Beneficiaries . Except as provided in Article VII with respect to the Provider Indemnitees and the Recipient Indemnitees in their capacities as such, (a) the provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any other Person except the Parties any rights or remedies hereunder; and (b) there are no other third-party beneficiaries of this Agreement and this Agreement shall not provide any other Third Party with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

 

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Section 9.09. Force Majeure . No Party shall be deemed in default of this Agreement for any delay or failure to fulfill any obligation hereunder (other than a payment obligation) so long as and to the extent to which any delay or failure in the fulfillment of such obligations is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance (other than a payment obligation) shall be extended for a period equal to the time lost by reason of the delay unless this Agreement has previously been terminated under Article V . A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such Force Majeure, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement as soon as reasonably practicable (and in no event later than the date that the affected Party resumes providing analogous services to, or otherwise resumes analogous performance under any other agreement for, itself, its Affiliates or any Third Party) unless this Agreement has previously been terminated under Article V . The Recipient shall be (i) relieved of the obligation to pay Charges for the affected Service(s) throughout the duration of such Force Majeure and (ii) if any Force Majeure prevents, hinders, or delays the performance by the Provider, the Recipient may procure the affected Services from an alternate source, including the Recipient’s Personnel (with the Provider reimbursing the Recipient for the cost of procuring the affected Services from such alternate source) throughout the duration of such Force Majeure, and the Provider shall cooperate in good faith with, provide any required Information to, and take such other action as may be reasonable required to enable such alternate source to provide the affected Services.

Section 9.10. No Set-Off . Except as mutually agreed to in writing by the Parties, neither Party shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Agreement; or (b) any other amounts claimed to be owed to the other Party arising out of this Agreement.

Section 9.11. Incorporation by Reference . Sections 10.1 (excluding Section 10.1(c)), 10.2, 10.5, 10.6, and 10.8 through 10.16, 10.18 and 10.19 of the Separation and Distribution Agreement are incorporated by reference into this Agreement, mutatis mutandis , except that (a) each reference to “this Agreement”, “any Ancillary Agreement” or “each Ancillary Agreement,” in such sections of the Separation and Distribution Agreement shall be deemed to refer to this Agreement, and (b) all notices regarding routine matters involving a Service under this Agreement shall be directed to the applicable Services Manager(s) or TSA Managers, as specified in Section 2.09 , and notices regarding all other matters under this Agreement shall be directed as required under Section 10.5 of the Separation and Distribution Agreement with a copy to each Party’s TSA Manager.

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement by persons duly authorized as of the date and year first above written.

 

[•]

By:

 

Name:

Title:

[•]

By:

 

Name:

Title:

[Signature Page to Transition Services Agreement]

Exhibit 10.4

FORM OF

EMPLOYEE MATTERS AGREEMENT

BY AND BETWEEN

EBAY INC.

AND

PAYPAL HOLDINGS, INC.

DATED AS OF [●], 2015


TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

  1   

Section 1.01.

Definitions

  1   

Section 1.02.

Interpretation

  8   

ARTICLE II GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

  8   

Section 2.01.

General Principles

  8   

Section 2.02.

Service Credit

  9   

Section 2.03.

Benefit Plans

  10   

Section 2.04.

Individual Agreements

  12   

Section 2.05.

Collective Bargaining

  12   

Section 2.06.

Non-U.S. Regulatory Compliance

  13   

ARTICLE III ASSIGNMENT OF EMPLOYEES

  13   

Section 3.01.

Employees

  13   

ARTICLE IV EQUITY, INCENTIVE AND EXECUTIVE COMPENSATION

  14   

Section 4.01.

Generally; Definitions

  14   

Section 4.02.

Equity Incentive Awards

  18   

Section 4.03.

Employee Stock Purchase Plans

  27   

Section 4.04.

Non-Equity Incentive Plans

  28   

Section 4.05.

Director Compensation

  30   

ARTICLE V RETIREMENT PLANS

  30   

Section 5.01.

PayPal 401(k) Plan

  30   

Section 5.02.

Non-U.S. Retirement Plans

  31   

ARTICLE VI NONQUALIFIED DEFERRED COMPENSATION PLAN

  32   

Section 6.01.

PayPal Deferred Compensation Plan

  32   

Section 6.02.

Participation; Distributions

  32   

ARTICLE VII WELFARE BENEFIT PLANS

  33   

Section 7.01.

Welfare Plans

  33   

Section 7.02.

COBRA

  35   

Section 7.03.

Paid Time Off, Holidays and Leaves of Absence