paypal holdings, inc.; rule 14a-8 no action letter · involved. the receipt by the staff of such...

*** FISMA & OMB Memorandum M-07-16

March 9, 2018

Gary Gerstman Sidley Austin LLP [email protected]

Re: PayPal Holdings, Inc. Incoming letter dated January 19, 2018

Dear Mr. Gerstman:

This letter is in response to your correspondence dated January 19, 2018 concerning the shareholder proposal (the “Proposal”) submitted to PayPal Holdings, Inc. (the “Company”) by John Chevedden (the “Proponent”) for inclusion in the Company’s proxy materials for its upcoming annual meeting of security holders. We also have received correspondence from the Proponent dated January 23, 2018, January 24, 2018 and January 25, 2018. Copies of all of the correspondence on which this response is based will be made available on our website at http://www.sec.gov/divisions/corpfin/cf-noaction/14a-8.shtml. For your reference, a brief discussion of the Division’s informal procedures regarding shareholder proposals is also available at the same website address.

Sincerely,

Matt S. McNair Senior Special Counsel

Enclosure

cc: John Chevedden ***

http://www.sec.gov/divisions/corpfin/cfmailto:[email protected]

March 9, 2018

Response of the Office of Chief Counsel Division of Corporation Finance

Re: PayPal Holdings, Inc. Incoming letter dated January 19, 2018

The Proposal asks the board to amend the Company’s proxy access bylaw provisions and any associated documents in the manner specified in the Proposal.

There appears to be some basis for your view that the Company may exclude the Proposal under rule 14a-8(i)(2) or rule 14a-8(i)(6). We note that in the opinion of your counsel, implementation of the Proposal would cause the Company to violate state law and therefore the Company would lack the power or authority to implement the Proposal. It appears that this defect could be cured, however, if the Proposal were recast as a recommendation or request that the board of directors take the steps necessary to implement the Proposal. Accordingly, unless the Proponent provides the Company with a proposal revised in this manner within seven calendar days after receiving this letter, we will not recommend enforcement action to the Commission if the Company omits the Proposal from its proxy materials in reliance on rule 14a-8(i)(2) or rule 14a-8(i)(6).

We are unable to concur in your view that the Company may exclude the Proposal or portions of the supporting statement under rule 14a-8(i)(3). We are unable to conclude that the Proposal, taken as a whole, is so vague or indefinite that it is rendered materially misleading. We are also unable to conclude that the portions of the supporting statement you reference are irrelevant to a consideration of the subject matter of the Proposal such that there is a strong likelihood that a reasonable shareholder would be uncertain as to the matter on which he or she is being asked to vote. Accordingly, we do not believe that the Company may omit the Proposal or portions of the supporting statement from its proxy materials in reliance on rule 14a-8(i)(3).

We are unable to concur in your view that the Company may exclude the Proposal under rule 14a-8(i)(10). Based on the information presented, we are unable to conclude that the Company’s proxy access provisions compare favorably with the guidelines of the Proposal. Accordingly, we do not believe that the Company may omit the Proposal from its proxy materials in reliance on rule 14a-8(i)(10).

Sincerely,

Evan S. Jacobson Special Counsel

DIVISION OF CORPORATION FINANCE INFORMAL PROCEDURES REGARDING SHAREHOLDER PROPOSALS

The Division of Corporation Finance believes that its responsibility with respect to matters arising under Rule 14a-8 [17 CFR 240.14a-8], as with other matters under the proxy rules, is to aid those who must comply with the rule by offering informal advice and suggestions and to determine, initially, whether or not it may be appropriate in a particular matter to recommend enforcement action to the Commission. In connection with a shareholder proposal under Rule 14a-8, the Division’s staff considers the information furnished to it by the company in support of its intention to exclude the proposal from the company’s proxy materials, as well as any information furnished by the proponent or the proponent’s representative.

Although Rule 14a-8(k) does not require any communications from shareholders to the Commission’s staff, the staff will always consider information concerning alleged violations of the statutes and rules administered by the Commission, including arguments as to whether or not activities proposed to be taken would violate the statute or rule involved. The receipt by the staff of such information, however, should not be construed as changing the staff’s informal procedures and proxy review into a formal or adversarial procedure.

It is important to note that the staff’s no-action responses to Rule 14a-8(j) submissions reflect only informal views. The determinations reached in these no-action letters do not and cannot adjudicate the merits of a company’s position with respect to the proposal. Only a court such as a U.S. District Court can decide whether a company is obligated to include shareholder proposals in its proxy materials. Accordingly, a discretionary determination not to recommend or take Commission enforcement action does not preclude a proponent, or any shareholder of a company, from pursuing any rights he or she may have against the company in court, should the company’s management omit the proposal from the company’s proxy materials.

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SIDLEY

• •

Via Electronic Mail

[email protected]

•

•

A. Background of the Company’s Proxy Access Provisions.

B. Background of Rule 14a-8(i)(10)

See

See

Id.

See

See, e.g., General Electric Co. Exelon

Corp. Exxon Mobil Corp. (Burt) Anheuser-Busch Companies, Inc. ConAgra Foods, Inc. Johnson & Johnson Talbots Inc. Exxon Mobil Corp. Masco Corp.

The Gap, Inc.

Texaco, Inc.

See, e.g., Comcast Corp. ( );

Walgreen Co.

Masco Corp.

C. Application of Rule 14a-8(i)(10) to the Proposal Considering the Company’s Existing Proxy Access Provisions

• Aggregation Limit

See also Leidos Holdings, Inc. Quest Diagnostics Inc. Ecolab Inc.

ITT Inc. Edwards Lifesciences Corp. Omnicom Group Inc. Amazon.com, Inc. Equinix, Inc. General Motors Co. Amphenol Corp. Anthem, Inc. Citigroup Inc. International Paper Co. PG&E Corp.

Sempra Energy Target Corp. Time Warner Inc. United Health Group, Inc. VeriSign, Inc. Xylem Inc.

Northrop Grumman Corp. Raytheon Co. Eastman Chemical Co. The Dun & Bradstreet Corp. General Dynamics Corp. NextEra Energy, Inc. PPG Industries, Inc. recon. denied Reliance Steel & Aluminum Co. United Continental Holdings, Inc.

NVR, Inc. Oshkosh Corp. NVR

Oshkosh Corp

See H&R Block, Inc.

H&R Block

http:Inc.��0DU��Amazon.com

and its other shareholders an infinitely large

any

any other 19 shareholders

actual

materially

all

shareholders, regardless of the size of their individual holdings

• Nominee Limit

See, e.g., Northern Trust Corporation OGE Energy Corp. , Celgene Corporation Comcast Corp.

Mattel, Inc. .

.

inter alia

i.e.

i.e.

See

Williams v. Geier, see also Gantler v. Stephens

Lions Gate Entm’t Corp. v. Image Entm’t Inc.

Fortune Brands, Inc

Fortune Brands

Kiang v. Smith’s Food Drug Centers, Inc.,

See also Bristol-Myers Squibb Company

Exxon Mobil Corporation

Time Warner Inc

The Boeing Company

AT&T, Inc

Xerox Corporation

Burlington Resources Inc

Baker Hughes Inc.

Centaur Partners, IV Nat’l Intergroup, Inc Burr v. Burr Corp

See also Oberly v. Kirby

Essential Enterprises Corp. v. Automatic Steel Products, Inc see also Pricket v. American Steel & Pump Corp.

See also AlliedSignal, Inc

Weirton Steel Corporation recon. denied

Radiation Care, Inc

Dillard Department Stores

The Boeing Company

AT&T, Inc

,

Fuqua Industries, Inc.

See, e.g. Bank of America Corp.

Verizon Communications Inc.

International Business Machines Corp.

Peoples Energy Corp. recon. denied

Norfolk Southern Corp.

See Jefferies Group, Inc. recon. denied

JPMorgan Chase & Co.

•

•

•

Safescript Pharmacies, Inc.

Pfizer Inc.

Joseph Schlitz Brewing Co

Safescript Pfizer

Fuqua

Bob Evans Farms, Inc.

Burlington Northern Santa Fe Corp.

Boise Cascade Corp.

See also Entergy Corp. Energy East Corp. The Bear Stearns Cos. Inc.

Bob Evans Burlington Northern Boise

Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission January 19, 2018 Page 20

We would be happy to provide you with any additional infom1ation and answer any questions that you may have regarding this subject. If you have any questions regarding thi s request or desire additional information, please contact the undersigned at (312) 853-2060 or by email at [email protected].

Sincerely,

~$~ Gary Gerstman

Attachments

Cc: Brian Y. Yamasaki, Corporate Secretary, PayPal Holdings, Inc. John Chevedden


JOHN CHEVEDDEN

Ms. A. Louise Pentland PayPal Holdings, Inc. (PYPL) 2211 North First Street

KEI/IS E-0 /t..f DCC 'a. 0 I 7

San Jose, CA 95131 PH: 408-967-1000

Dear Ms. Pentland,

This Rule 14a-8 proposal is respectfully submitted in support of the long-term performance of our company.

This Rule 14a-8 proposal is intended as a low-cost method to improve company performance -especially compared to the substantial captializtion of our company.

This proposal is for the next annual shareholder meeting. Rule 14a-8 requirements will be met including the continuous ownership of the required stock value until after the date of the respective shareholder meeting and presentation of the proposal at the annual meeting. This submitted format, with the shareholder-supplied emphasis, is intended to be used for definitive proxy publication.

Your consideration and the consideration of the Board of Directors is appreciated in support of the long-term performance of our company. Please acknowledge receipt of this proposal by email to

Sincerely,

~~~e~~L..c-c -

~ cc: Monifa Clayton

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[PYPL - Rule 14a-8 Proposal, October 19, 2017 I Revised December 14, 2017] 12-14 [This line and any line above it-Not for publication.]

Proposal [4] - Shareholder Proxy Access Enhancement Stockholders ask the board of directors to amend its proxy access bylaw provisions and any associated documents, to include the following changes for the purpose of decreasing the average amount of Company common stock the average member of a nominating group would be required to hold for 3-years to satisfy the aggregate ownership requirements to form a nominating group and to increase the possible number of proxy access director candidates:

• No limitation shall be placed on the number of stockholders who can aggregate their shares to achieve the 3% of common stock required to nominate directors under our Company's proxy access provisions.

• The number of shareholder-nominated candidates eligible to appear in proxy materials will be 25% of Directors (rounded down) but not less than 2.

Even if the 20 largest public pension funds were able to aggregate their shares, they would not meet the current 3% criteria for a continuous 3-years at most companies according to the Council of Institutional Investors. This proposal addresses the contradiction that our company now has with proxy access for only the largest shareholders who are probably the least unlikely shareholders to make use of it.

It is especially important to improve a shareholder right, such as proxy access, to make up for our management taking away an important shareholder right - the right to an in-person annual meeting. We did not have an opportunity to vote on giving up this right.

For decades shareholders of U.S. companies had a once-a-year opportunity to ask a $10 million CEO and directors questions in person. Now our directors can casually flip their phones to mute during the annual shareholder meeting.

Our management is now free to run a make-believe meeting with Investor Relations devising softball questions in advance while tossing out challenging shareholder questions. Then our $10 million + CEO can simply read the scripted IR answers to a microphone - no opportunity for live audience feedback. There is no auditor present to see if IR is trashing incoming shareholder questions.

The lack of an in-person annual meeting means that a board meeting can be scheduled months after the virtual meeting - by which time any serious issues raised by shareholders under these adverse conditions will be long forgotten by the directors. Plus a virtual meeting guarantees that there will be no media coverage for the benefit of shareholders.

A virtual meeting is a complacency plan for our directors and top management. Top management has no incentive to avoid making mistakes for 365 days of the year out of concern that there will be an in-person accounting at the annual meeting in front of media.

Please vote to improve proxy access to help make up for our top management stripping away an important shareholder right:

Shareholder Proxy Access Enhancement - Proposal [4] [The above line -Is for publication.)


John Chevedden, sponsors this proposal.

Notes: This proposal is believed to conform with Staff Legal Bulletin No. 14B (CF), September 15, 2004 including ( emphasis added):

Accordingly, going forward, we believe that it would not be appropriate for companies to exclude supporting statement language and/or an entire proposal in reliance on rule 14a-8(I)(3) in the following circumstances:

' • the company objects to factual assertions because they are not supported; • the company objects to factual assertions that, while not materially false or misleading, may be disputed or countered; • the company objects to factual assertions because those assertions may be interpreted by shareholders in a manner that is unfavorable to the company, its directors, or its officers; and/or • the company objects to statements because they represent the opinion of the shareholder proponent or a referenced source, but the statements are not identified specifically as such.

We believe that it is appropriate under rule 14a-8 for companies to address these objections in their statements of opposition.

See also: Sun Microsystems, Inc. (July 21, 2005).

The stock supporting this proposal will be held until after the annual meeting and the proposal will be presented at the annual meeting. Please acknowledge this proposal promptly by email

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mailto:0ABOYKMIKIO2EYBOY=MYQA8YG8VQY2GHS2EYOA2M8AIE78MYF88QBG@�Y.SE8Y��2��YM8LSBM8F8GQOYUCEEY48YF8QYmailto:0ABOY.SE8Y��2��YKMIKIO2EYBOYM8OK85Q?EEWYOS4FBPP86YBGYOSKKIMQYI9YQA8YEIG@�P8MFYK8M:JMF2G58YI9Y

[PYPL - Rule 14a-8 Proposal, October 19, 2017] [This line and any line above it -Not for publication.]

Proposal [4] - Shareholder Proxy Access Enhancement RESOLVED: Stockholders ask the board of directors to amend its proxy access bylaw provisions and any associated documents, to include the following changes for the purpose of decreasing the average amount of Company common stock the average member of a nominating group would be required to hold for 3-years to satisfy the aggregate ownership requirements to form a nominating group and to increase the possible number of proxy access director candidates: No limitatiOI:\ shall be placed on the number of stockholders that can aggregate their shares to achieve the 3% of common stock required to nominate directors under our Company's proxy access provisions.

The number of shareholder-nominated candidates eligible to appear in proxy materials will not be less than 2 when our board has less than 12 members. The number of shareholder-nominated candidates eligible to appear in proxy materials will not be less than 3 when our board has more than 12 members.

Even if the 20 largest public pension funds were able to aggregate their shares, they would not meet the current 3% criteria for a continuous 3-years at most companies according to the Council oflnstitutional Investors. This proposal addresses the situation that our company now has with proxy access potentially for only the largest shareholders who are the least unlikely shareholders to make use of it.

It is especially important to improve a shareholder right, such as proxy access, to make up for our management taking away an important shareholder right - the right to an in-person annual meeting. We did not have an opportunity to vote on giving up this right.

For decades shareholders of U.S. companies had a once-a-year opportunity to ask a $10 million CEO and directors questions in person. Now our directors can casually flip their phones to mute during the annual shareholder meeting.

Our management is now free to run a make-believe meeting with Investor Relations devising softball questions in advance while tossing out challenging shareholder questions. Then our $10 million + CEO can simply read the scripted IR answers to a microphone - no opportunity for live audience feedback. There is no auditor present to see if IR is trashing incoming shareholder questions.

The lack of an in-person annual meeting means that a board meeting can be scheduled months after the virtual meeting - by which time any serious issues raised by shareholders under these adverse conditions will be long forgotten by the directors. Plus a virtual meeting guarantees that there will be no media coverage for the benefit of shareholders.

A virtual meeting is a complacency plan for our directors and top management. Top management has no incentive to avoid making mistakes for 365 days of the year out of concern that there will be an in-person accounting at the annual meeting.

Please vote to improve proxy access to help make up for our top management stripping away an important shareholder right:

Shareholder Proxy Access Enhancement - Proposal [4] [The above line -Is for publication.]


John Chevedden, sponsors this proposal.

Notes: This proposal is believed to conform with Staff Legal Bulletin No. 14B (CF), September 15, 2004 including ( emphasis added):

Accordingly, going forward, we believe that it would not be appropriate for companies to exclude supporting statement language and/or an entire proposal in reliance on rule 14a-8(I)(3) in the following circumstances:

• the company objects to factual assertions because they are not supported; • the company objects to factual assertions that, while not materially false or misleading, may be disputed or countered; • the company objects to factual assertions because those assertions may be interpreted by shareholders in a manner that is unfavorable to the company, its directors, or its officers; and/or • the company objects to statements because they represent the opinion of the shareholder proponent or a referenced source, but the statements are not identified specifically as such.

We believe that it is appropriate under rule 14a-8 for companies to address these objections in their statements of opposition.

See also: Sun Microsystems, Inc. (July 21, 2005).

The stock supporting this proposal will be held until after the annual meeting and the proposal will be presented at the annual meeting. Please acknowledge this proposal promptly by email

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January 19, 2018

PayPal Holdings, Inc. 2211 North First Street San Jose, CA 95131

Re: Stockholder Proposal Submitted by John Chevedden

Ladies and Gentlemen:

rucHARDS LAYTON&

FINGER Attorneys at Law

We have acted as special Delaware counsel to PayPal Holdings, Inc., a Delaware corporation (the "Company"), in connection with a proposal (the "Proposal") submitted by John Chevedden (the "Proponent") that the Proponent intends to present at the Company's 2018 annual meeting of stockholders (the "Annual Meeting"). In this connection, you have requested our opinion as to certain matters under the General Corporation Law of the State of Delaware (the "General Corporation Law").

For the purpose of rendering our opinion as expressed herein, we have been furnished and have reviewed the following documents:

(i) the Restated Certificate oflncorporation, as filed with the Secretary of State of the State of Delaware (the "Secretary of State") on July 20, 2017 (the "Certificate of Incorporation");

(ii) the Amended and Restated Bylaws of the Company (the "Bylaws"); and

(iii) the Proposal.

With respect to the foregoing documents, we have assumed: (a) the genuineness of all signatures, and the incumbency, authority, legal right and power and legal capacity under all applicable laws and regulations, of each of the officers and other persons and entities signing or whose signatures appear upon each of said documents as or on behalf of the paiiies thereto; (b) the conformity to authentic originals of all documents submitted to us as certified, conformed, photostatic, electronic or other copies; and ( c) that the foregoing documents, in the forms submitted to us for our review, have not been and will not be altered or amended in any respect material to our opinion as expressed herein. For the purpose of rendering our opinion as expressed herein, we have not reviewed any document other than the documents set forth above,

• • • One Rodney Square • 920 North King Street • Wilmington, DE 19801 • Phone: 302-651-7700 • Fax: 302-651-7701 RLFI 18757792v. f .

www.rlf.com

PayPal Holdings, Inc. January 19, 2018 Page2

and, except as set forth in this opinion, we assume there exists no provision of any such other document that bears upon or is inconsistent with our opinion as expressed herein. We have conducted no independent factual investigation of our own, but rather have relied solely upon the foregoing documents, the statements and information set forth therein, and the additional matters recited or assumed herein, all of which we assume to be true, complete and accurate in all material respects.

THE PROPOSAL

The Proposal reads as follows:

Stockholders ask the board of directors to amend its proxy access bylaw provisions and any associated documents, to include the following changes for the purpose of decreasing the average amount of Company common stock the average member of a nominating group would be required to hold for 3-years to satisfy the aggregate ownership requirements to form a nominating group and to increase the possible number of proxy access director candidates:

• No limitation shall be placed on the number of stockholders who can aggregate their shares to achieve the 3% of common stock required to nominate directors under our Company's proxy access provisions.

• The number of shareholder-nominated candidates eligible to appear in proxy materials will be 25% of Directors (rounded down) but not less than 2.

DISCUSSION

You have asked our opinion as to whether the Proposal, if adopted by the stockholders and implemented by the board of directors of the Company (the "Board"), would violate the General Corporation Law and whether the Company has the power and authority to implement the Proposal. For the reasons set forth below, in our opinion, the Proposal, if adopted by the stockholders and implemented by the Board, would violate the General Corporation Law. Because the Proposal if implemented would violate the General Corporation Law, the Company lacks and power and authority to implement the Proposal.

RLFI 18757792v.l

PayPal Holdings, Inc. January 19, 2018 Page 3

I. The Proposal, If Adopted by the Stockholders and Implemented by the Board, Would Violate the General Corporation Law.

A. The Proposal Would Require the Board to Adopt Amendments to the Bylaws that Would Conflict with the Certificate of Incorporation.

Because the Proposal purports to require the Board to adopt amendments to the Bylaws that would conflict with the Certificate of Incorporation, the Proposal, if adopted by the stockholders and implemented by the Board, would be invalid under the General Corporation Law. Under the General Corporation Law, a bylaw may not conflict with a provision of the certificate of incorporation. 8 Del. C. § 109(b) ("The bylaws may contain any provision, not inconsistent with law or with the certificate of incomoration....") (emphasis added). Indeed, "[w]here a by-law provision is in conflict with a provision of the charter, the by-law provision is a 'nullity."' Centaur Partners, IV v. National Intergroup, Inc., 582 A.2d 923, 929 (Del. 1990).

The Proposal purports to require the Board to amend the Bylaws with respect to proxy access to "decreas[ e] the average amount of Company common stock the average member of a nominating group would be required to hold for 3-years to satisfy the aggregate ownership requirements to form a nominating group and to increase the possible number of proxy access director candidates." The Bylaws, however, do not contain any specifics of the Company's proxy access prov1s10ns. Rather, the Bylaws refer to the provisions of the Certificate of Incorporation that provide for proxy access subject to the requirements set forth therein. To the extent the Board approved any amendments to the Bylaws that would implement the Proposal, any such provisions of the Bylaws would be in direct conflict with the Certificate of Incorporation. Article VI, Clause E of the Certificate of Incorporation sets forth limitations on the number of proxy access nominees at an annual meeting and on the number of stockholders that may aggregate their shares to meet the required ownership percentage. Specifically, the Certificate of Incorporation provides, in pertinent part, with respect to the limitation on the number of proxy access nominees at annual meeting:

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 comoration'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") ....

RLFI 18757792v.l

PayPal Holdings, Inc. January 19, 2018 Page4

Article VI, Clause E(ii) ( emphasis added). With respect to the limitation on the number of stockholders that may aggregate their shares to meet the required ownership percentage, the Certificate of Incorporation provides, in pertinent part:

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 twenty (20).

Article VI, Clause (E)(iii) ( emphasis added).

Thus, the Proposal, if approved by the stockholders and implemented by the Board, would violate the Certificate of Incorporation and would therefore contravene the General Corporation Law.

B. The Proposal Would Require the Board to Unilaterally Amend the Certificate of Incorporation.

The Proposal, if adopted by the stockholders, would be invalid under Delaware law, because it would require the Board to amend the Certificate of Incorporation without submitting such amendment to a stockholder vote and having such amendment adopted by the requisite stockholder vote. The Proposal purports to require "the board of directors to amend its proxy access bylaw provisions and any associated documents"1 to increase the number of stockholders who may aggregate their shares to meet the required ownership percentage and to increase the number of proxy access nominees at each annual meeting of stockholders. As indicated above, Article VI, Clause E of the Certificate of Incorporation imposes certain limitations on the

1 Because the proxy access provisions are included in the Certificate of Incorporation and the Proposal is seeking amendments to the proxy access provisions, the reference to "any associated documents" must include the Certificate of Incorporation.

RLFI 18757792v.l


number of stockholders who may aggregate their shares to meet the required ownership percentage and on the number of proxy access nominees at each annual meeting.

Because the Certificate of Incorporation includes such limitations, the Board would be required to amend the Certificate of Incorporation to modify Article VI, Clause E thereof in order to implement the Proposal. Under the General Corporation Law, the Board may not unilaterally amend the Certificate of Incorporation. Any such amendment could only be effected through an amendment to the Certificate of Incorporation adopted in accordance with Section 242 of the General Corporation Law. Section 242 of the General Corporation Law requires that any amendment to the certificate of incorporation be approved by the board of directors, declared advisable, and then submitted to the stockholders for adoption thereby. Specifically, Section 242 provides, in pertinent part:

Every amendment [to the Certificate of Incorporation] ... shall be made and effected in the following manner: (1) If the corporation has capital stock, its board of directors shall adopt a resolution setting forth the amendment proposed, declaring its advisability, and either calling a special meeting of the stockholders entitled to vote in respect thereof for consideration of such amendment or directing that the amendment proposed be considered at the next annual meeting of the stockholders .... If a majority of the outstanding stock entitled to vote thereon, and a majority of the outstanding stock of each class entitled to vote thereon as a class has been voted in favor of the amendment, a certificate setting forth the amendment and certifying that such amendment has been duly adopted in accordance with this section shall be executed, acknowledged and filed and shall become effective in accordance with § 103 of this title.

8 Del. C. § 242(b)(l). Contrary to this statutory construct, the Proposal would require the Board to amend the Certificate of Incorporation to modify Article VI, Clause E unilaterally and in excess of its authority under the General Corporation Law. Because implementation of the Proposal would require the Board to exceed its authority under Delaware law, the Proposal, if adopted by the stockholders and implemented by the Board, would be invalid under the General Corporation Law.

II. The Company Does Not Have the Power and Authority to Implement the Proposal.

As set forth above, the Proposal, if adopted by the stockholders and implemented by the Board, would violate the General Corporation Law. Therefore, in our opinion, the Company lacks the power and authority to implement the Proposal.

CONCLUSION

Based upon and subject to the foregoing, and subject to the limitations stated herein, it is our opinion that (i) the Proposal, if adopted by the stockholders and implemented by the Board,

RLFI 18757792v.l


would be invalid under the General Corporation Law and (ii) the Company lacks the power and authority to implement the Proposal.

The foregoing opinion is limited to the General Corporation Law. We have not considered and express no opinion on any other laws or the laws of any other state or jurisdiction, including federal laws regulating securities or any other federal laws, or the rules and regulations of stock exchanges or of any other regulatory body.

The foregoing opinion is rendered solely for your benefit in connection with the matters addressed herein. We understand that you may furnish a copy of this opinion letter to the Securities and Exchange Commission in connection with the matters addressed herein and that you may refer to it in your proxy statement for the Annual Meeting, and we consent to your doing so. Except as stated in this paragraph, this opinion letter may not be furnished or quoted to, nor may the foregoing opinion be relied upon by, any other person or entity for any purpose without our prior written consent.

Very truly yours,

P~ ~«~,A/ L47P'1 l f_/1.

MJG/JN/NRN

RLFI 18757792v.l

PayPal Holdings, Inc. (John Chevedden)14a-8 informal procedures insert - 7-19-2016123

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