Stockholders Agreement - eBay Inc., Madison Dearborn Capital Partners III LP, Madison Dearborn Special Equity III LP, Nokia Ventures LP, Sequoia Capital IX, Sequoia Capital Entrepreneurs Fund, Sequoia Capital IX Principals Fund, and Thiel Capital International LLC
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement"), dated as of July 7,
2002, among the stockholders listed on the signature page hereto (each, a
"Stockholder" and, collectively, the "Stockholders") and eBay Inc., a Delaware
corporation ("Parent").
WHEREAS, simultaneously with the execution of this Agreement,
PayPal, Inc., a Delaware corporation (the "Company"), and Parent are entering
into an Agreement and Plan of Merger (the "Merger Agreement"), dated as of the
date hereof, providing, among other things, for the merger of a subsidiary of
Parent with and into the Company and the exchange of shares of Company Common
Stock (as defined below) for shares of Parent Common Stock (as defined below);
WHEREAS, the respective Boards of Directors of the Company and
Parent have approved and adopted the Merger Agreement and the transactions
contemplated thereby;
WHEREAS, as a condition to, and in consideration for Parent's
willingness to enter into the Merger Agreement and to consummate the
transactions contemplated thereby, Parent has required that the Stockholders
enter into this Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained herein
and in the Merger Agreement, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Certain Definitions.
(a) For purposes of this Agreement, all capitalized terms used
but not otherwise defined herein shall have the respective meanings given to
such terms in the Merger Agreement.
(b) For purposes of this Agreement, "beneficially own" or
"beneficial ownership" with respect to any securities shall mean having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act).
(c) For purposes of this Agreement, the following terms shall
have the following meanings:
"Company Common Stock" means the Company's shares of common stock,
par value $0.001 per share.
"Parent Common Stock" means Parent's shares of common stock, par
value $0.001 per share.
"Parent Derivative Securities" means any security convertible into
or exercisable or exchangeable for, or that represents the right to receive,
Parent Common Stock or any security the value of which is derived from the value
of Parent Common Stock.
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"Permitted Liens" means liens existing as of the date hereof and
described on the schedule attached hereto as Exhibit A.
"Stockholder's Subject Parent Common Stock" shall mean, with respect
to a particular Stockholder, a number of shares of Parent Common Stock equal to
the product of the number of such Stockholder's Subject Shares multiplied by the
Exchange Ratio (rounded down to the nearest whole number).
"Stockholder's Subject Shares" shall mean, with respect to a
particular Stockholder, the number of shares of Company Common Stock set forth
opposite such Stockholder's name on the schedule attached hereto as Exhibit A.
"Transfer" means, with respect to any security, the sale, transfer,
pledge, hypothecation, assignment or constructive sale or other disposition of
such security or the record or beneficial ownership thereof, the offer to make
such a sale, transfer, pledge, hypothecation, assignment, constructive sale or
other disposition, and each agreement, arrangement or understanding, whether or
not in writing, to effect any of the foregoing. The term "constructive sale"
means a short sale with respect to such security, entering into or acquiring an
offsetting derivative contract with respect to such security, entering into or
acquiring a futures or forward contract to deliver such security or entering
into any hedging, swap or other transaction that is designed to or which
reasonably could be expected to lead to or result in a sale or disposition of,
or reduction of economic risk with respect to, such security; provided, however,
that the term "constructive sale" shall not include transactions involving the
purchase and sale of securities tracking a broad based stock index.
2. Representations, Warranties and Covenants of Stockholder. Each
Stockholder, individually and not jointly or severally, hereby represents and
warrants to Parent as follows:
(a) Title. As of the date hereof, such Stockholder is the sole
record or beneficial owner of such Stockholder's Subject Shares. Such
Stockholder is the lawful owner of such Stockholder's Subject Shares, free and
clear of all liens, claims, charges, security interests or other encumbrances
other than Permitted Liens.
(b) Right to Vote. Such Stockholder has, with respect to all
such Stockholder's Subject Shares, and will have at the Stockholders Meeting,
sole voting power, sole power of disposition, sole power to issue instructions
with respect to the matters set forth in Section 4 hereof and to fulfill such
Stockholder's obligations under such Section and sole power to agree to all
matters set forth in this Agreement, in each case with no limitations,
qualifications or restrictions on such rights. Such Stockholder shall not take
any action or grant any person any proxy (revocable or irrevocable) or
power-of-attorney with respect to such Stockholder's Subject Shares inconsistent
with such Stockholder's obligations as provided by Sections 4 and 5 hereof. Such
Stockholder hereby revokes any and all proxies with respect to such
Stockholder's Subject Shares.
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(c) Authority. Such Stockholder has the legal power,
authority, legal capacity and right to execute and deliver, and to perform such
Stockholder's obligations under, this Agreement. No other proceedings or actions
on the part of such Stockholder are necessary to authorize the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by such Stockholder and constitutes a valid and binding
agreement of such Stockholder enforceable against such Stockholder in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity and fiduciary principles.
(d) Conflicting Instruments. As of the date hereof, neither
the execution and delivery of this Agreement nor the performance by such
Stockholder of such Stockholder's agreements and obligations hereunder will
result in any breach or violation of, or be in conflict with or constitute a
default under, any term of any agreement, judgment, injunction, order, decree,
Law or regulation to which such Stockholder is a party or by which such
Stockholder (or any of such Stockholder's assets) is bound or subject.
(e) Parent's Reliance. Such Stockholder understands and
acknowledges that Parent is entering into the Merger Agreement in reliance upon
such Stockholder's execution, delivery and performance of this Agreement.
3. Restriction on Transfer; Other Restrictions.
(a) Each Stockholder hereby agrees that, without the prior
written consent of Parent, it will not, during the period commencing on the date
hereof and ending 30 days after the Effective Time, Transfer or agree to
Transfer (i) any of such Stockholder's Subject Shares or (ii) any of such
Stockholder's Subject Parent Common Stock or Parent Derivative Securities,
except (A) as otherwise permitted by Section 3(b) of this Agreement or pursuant
to the Merger Agreement, (B) Transfers by operation of law if the transferee
remains, or agrees in writing to remain, bound by the terms of this Agreement,
(C) Transfers as a bona fide gift or gifts if the donee or donees thereof agrees
in writing to be bound by the terms of this Agreement, (D) Transfers to any
sibling or any other member of such Stockholder's immediate family, any of such
Stockholder's lineal descendants or any trust for the benefit of any of them, if
the recipient agrees in writing to be bound by the terms of this Agreement and
(E) to the extent such Stockholder is a corporate entity, Transfers (x) not
involving a change in beneficial ownership, (y) involving the distribution
without consideration of such securities by such Stockholder to any of its
partners, members or retired partners or members or, to the estate of any of its
partners, members or retired partners or members, or any of its stockholders (z)
to any individual or entity controlled by, controlling or under common control
with such Stockholder or any individual or entity with respect to which such
Stockholder (or any person controlled by, controlling or under common control
with such Stockholder) has the power to direct investment decisions, if the
recipient agrees in writing to be bound by the terms of this Agreement.
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(b) From the Effective Time, through and including the 30th
day following the Effective Time, each Stockholder may Transfer up to one-half
of such Stockholder's Subject Parent Common Stock, inclusive of any Transfer by
such Stockholder of Parent Derivative Securities.
4. Agreement to Vote. Each Stockholder hereby irrevocably and
unconditionally agrees to vote or to cause to be voted, or provide a consent
with respect to, all of such Stockholder's Subject Shares at the Stockholders
Meeting and at any other annual or special meeting of stockholders of the
Company or action by written consent where such matters arise (a) in favor of
the Merger and the Merger Agreement and approval of the terms thereof and (b)
against, and such Stockholder will not consent to, (i) approval of any
Acquisition Proposal or any acquisition agreement or similar agreement related
to an Acquisition Proposal, (ii) any change in the persons who constitute the
Board of Directors of the Company that is not approved in advance by at least a
majority of the persons who were directors of the Company as of the date hereof
(or their successors who were so approved) or (iii) any other action or proposal
involving the Company or any of its Subsidiaries that is intended, or could
reasonably be expected, to prevent, impede, interfere with, delay, postpone or
adversely affect the transactions contemplated by the Merger Agreement. Any such
vote shall be cast or consent shall be given in accordance with such procedures
relating thereto as shall ensure that it is duly counted for purposes of
determining that a quorum is present and for purposes of recording the results
of such vote or consent. Notwithstanding anything to the contrary in this
Agreement or in the Merger Agreement, the obligations of the Stockholders
specified in this Section 4 shall not be limited or otherwise affected by the
commencement, disclosure, announcement or submission to the Company of any
Acquisition Proposal, or by any change of recommendation of the Company's Board
of Directors.
5. Irrevocable Proxy. In furtherance of the transactions
contemplated hereby and by the Merger Agreement, and in order to secure the
performance of each Stockholder's duties under this Agreement, each Stockholder
hereby grants to Parent and its designees, an irrevocable proxy, or, if
applicable, a power of attorney, and irrevocably appoints Parent or its
designees, with full power of substitution, such Stockholder's attorney and
proxy to vote or, if applicable, to give consent with respect to, all of such
Stockholder's Subject Shares, with regard to any of the matters referred to in
Section 4 above at the Stockholders Meeting, however called, or in connection
with any action by written consent by the stockholders of the Company. Each
Stockholder acknowledges and agrees that such proxy is coupled with an interest,
constitutes, among other things, an inducement for Parent to enter into the
Merger Agreement, is irrevocable and shall not be terminated by operation of law
or otherwise upon the occurrence of any event and that no subsequent proxies
with respect to such Stockholder's Subject Shares shall be given (and if given
shall not be effective). The power of attorney granted by each Stockholder is a
durable power of attorney and shall survive the dissolution, bankruptcy, death
or incapacity of such Stockholder.
6. No Solicitation. From and after the date hereof, each Stockholder
agrees that neither such Stockholder nor any of such Stockholder's officers and
directors shall, and that such Stockholder shall direct and use such
Stockholder's best efforts to cause such Stockholder's
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employees, agents and representatives (including any investment banker, attorney
or accountant retained by Stockholder) not to, directly or indirectly, initiate,
solicit, encourage or otherwise facilitate any inquiries or the making of any
Acquisition Proposal. Such Stockholder further agrees that neither such
Stockholder nor any of such Stockholder's officers and directors shall, and that
such Stockholder shall direct and use such Stockholder's best efforts to cause
such Stockholder's employees, agents and representatives (including any
investment banker, attorney or accountant retained by Stockholder) not to,
directly or indirectly, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any Person
relating to an Acquisition Proposal, or otherwise entertain or facilitate any
effort or attempt to make or implement an Acquisition Proposal. Nothing in this
Section 6 shall affect the ability of such Stockholder or any of such
Stockholder's officers, directors, employees, agents or representatives to take
any action which is permissible for such Person to take under the Merger
Agreement.
7. Orderly Marketing. In order to help provide for the orderly
distribution of any Parent Common Stock that the Stockholders will receive in
connection with the Merger, Parent may make available means for the coordinated
sale of such Parent Common Stock through one or more block trades, underwritten
offerings or brokerage transactions through a broker-dealer of its choosing (a
"Coordinated Trade"). In the event Parent makes available means for a
Coordinated Trade, each Stockholder may agree, to the extent made available to
such Stockholder, to effect sales of Parent Common Stock through such
Coordinated Trade and to provide prior written notice to Parent of such
Stockholder's intent to participate in such Coordinated Trade in a timely manner
to permit such Parent Common Stock to be included in such Coordinated Trade.
8. Fiduciary Duties of Directors. Notwithstanding anything herein to
the contrary, nothing herein shall affect the ability of Stockholders who are
directors of the Company ("Stockholder Directors") to take any action as
directors of the Company permissible under the Merger Agreement or as such
director may determine to be otherwise necessary to comply with the fiduciary
duties as directors of the Company, whether or not such actions are consistent
with the obligations of such Persons as Stockholders under this Agreement. Such
Stockholder Directors are entering into this Agreement solely in their capacity
as stockholders of the Company, and not as directors of the Company.
9. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
(b) Costs and Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
(c) Invalid Provisions. If any provision of this Agreement
shall be invalid or unenforceable under applicable law, such provision shall be
ineffective to the extent of
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such invalidity or unenforceability only, without it affecting the remaining
provisions of this Agreement.
(d) Execution in Counterparts. This Agreement may be executed
in counterparts transmitted and delivered by facsimile each of which shall be an
original with the same effect as if the signatures hereto and thereto were upon
the same instrument.
(e) Specific Performance. Each Stockholder agrees with Parent
that if for any reason such Stockholder fails to perform any of such
Stockholder's agreements or obligations under this Agreement, irreparable harm
or injury to Parent would be caused as to which money damages would not be an
adequate remedy. Accordingly, such Stockholder agrees that, in seeking to
enforce this Agreement against such Stockholder, Parent shall be entitled, in
addition to any other remedy available at law, equity or otherwise, to specific
performance and injunctive and other equitable relief. The provisions of this
Section 9(e) are without prejudice to any other rights or remedies, whether at
law or in equity, that Parent may have against such Stockholder for any failure
to perform any of such Stockholder's agreements or obligations under this
Agreement.
(f) Amendments; Termination.
(i) This Agreement, including this Section 9(f), may not
be modified, amended, altered or supplemented, except that this Agreement
may be modified, amended, altered or supplemented, as between Parent and
any particular Stockholder, upon the execution and delivery of a written
agreement executed by Parent and such Stockholder..
(ii) The provisions of this Agreement (other than
Sections 3, 7 and 9) shall terminate upon the earliest to occur of (A) the
consummation of the Merger and (B) the termination of the Merger
Agreement. The provisions of Section 3, 7 and 9 of this Agreement shall
terminate upon the earliest to occur of (A) the termination of the Merger
Agreement and (B) date ending 30 days after the Effective Time.
(g) Governing Law and Venue. THIS AGREEMENT SHALL BE DEEMED TO
BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY
AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE
CONFLICT OF LAW PRINCIPLES THEREOF. The parties hereby irrevocably submit to the
jurisdiction of the courts of the State of Delaware and the Federal courts of
the United States of America located in the State of Delaware solely in respect
of the interpretation and enforcement of the provisions of this Agreement and of
the documents referred to in this Agreement, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a Delaware State or
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Federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 8(k) or in such
other manner as may be permitted by law shall be valid and sufficient service
thereof.
(h) Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 9(h).
(i) Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective legal successors (including, in the case of each Stockholder, any
executors, administrators, estates, legal representatives and heirs of such
Stockholder) and permitted assigns; provided that, except as otherwise provided
in this Agreement, no party may assign, delegate or otherwise transfer any of
its rights or obligations under this Agreement.
(j) Further Assurances. From time to time, at the other
party's request, and without further consideration, each party hereto shall
execute and deliver, or cause to be executed and delivered, such additional or
further documents and take lawful actions of a ministerial nature as may be
necessary and appropriate for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
(k) Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date of receipt and shall be delivered personally or
sent by overnight courier or sent by telecopy, to the Parties at the following
addresses or telecopy numbers (or at such other address or telecopy number for a
party as shall be specified by like notice):
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(i) if to a Stockholder, at the address of such
Stockholder set forth on Exhibit A attached hereto or at such other
address that such Stockholder may have provided in writing to Parent; and
(ii) if to Parent:
eBay Inc.
2145 Hamilton Avenue
San Jose, California 95125
Attention: General Counsel
Facsimile: (408) 376-7514
with a copy to:
Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067
Attention: Alison Ressler
Facsimile: (310) 712-6600
(l) Effectiveness. Notwithstanding anything herein to the
contrary, this Agreement shall only become effective upon the execution by the
Company of the Merger Agreement.
(m) Individual Obligations. Each Stockholder's obligations
under this Agreement are individual and not joint or several obligations and no
Stockholder shall have any liability to Parent for the performance or
non-performance by any other Stockholder under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement as of the date first written above.
EBAY INC.
By: ___________________________________
Name: Margaret C. Whitman
Title: President, Chief Executive Officer
and Director
STOCKHOLDERS:
_______________________________________
Name: Roelof F. Botha
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MADISON DEARBORN CAPITAL
PARTNERS III, L.P.
By: ___________________________________
Name: Timothy M. Hurd
Title: Managing Director
MADISON DEARBORN SPECIAL EQUITY III, L.P.
By: ___________________________________
Name: Timothy M. Hurd
Title: Managing Director
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NOKIA VENTURES, LP
By: ___________________________________
Name: _____________________________
Title:_____________________________
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SEQUOIA CAPITAL IX
SEQUOIA CAPITAL ENTREPRENEURS FUND
SEQUOIA CAPITAL IX PRINCIPALS FUND
By: SC IX Management LLC
A Delaware Limited Liability Company
General Partner of Each
By: ___________________________________
Managing Member
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THIEL CAPITAL INTERNATIONAL, LLC
By: ___________________________________
Name: _____________________________
Title:_____________________________