Block, Inc. — Governance Information 2022

Jan 18, 2022

Extract of Afterpay Limited Scheme Booklet as released by Afterpay to the ASX announcements platform on 5 November 2021

5.9. Corporate Governance

(a) Overview

Square is incorporated under the laws of the State of Delaware and listed on NYSE. As such, Square’s general corporate activities are not primarily regulated by the Corporations Act or by ASIC, but instead are regulated by the DGCL, U.S. Securities Act of 1933, as amended (the Securities Act), U.S. Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations of the SEC and NYSE.

As Square is a US company which is listed on NYSE, the Square Board has adopted corporate governance guidelines and board committee charters reflecting NYSE listing standards. These documents can be found on Square’s website at https://investors.squareup.com/governance/governance-documents/default.aspx. Square has also agreed to establish a secondary listing for CDIs on ASX.

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Section 5 Information on Square

(b) Square Board

The business and affairs of Square are managed by or under the direction of the Square Board. The Square Board may exercise all powers of the company that are not required to be exercised by the company’s stockholders.

The Square Board is responsible for electing, and may remove, the elected officers of the company, including the CEO, President and CFO.

(c) Square Board committees

The Square Board has established an audit and risk committee (Square Audit and Risk Committee), a compensation committee (Square Compensation Committee) and a nominating and corporate governance committee (Square Nominating and Corporate Governance Committee).

(i) Square Audit and Risk Committee

The Square Audit and Risk Committee is, among other things, responsible for the following:

• selecting and hiring a qualified independent registered public accounting firm to audit Square’s financial statements;

• helping to ensure the independence and performance of the independent registered public accounting firm;

• reviewing Square’s financial statements and discussing the scope and results of the independent audit and quarterly reviews with the independent registered public accounting firm, and reviewing, with management and the independent registered public accounting firm, Square’s interim and yearend results of operations and the reports and certifications regarding internal controls over financial reporting and disclosure controls;

• preparing, reviewing and approving the audit and risk committee report that the SEC requires to be included in Square’s annual proxy statement;

• reviewing the adequacy and effectiveness of Square’s disclosure controls and procedures, and developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;

• reviewing Square’s program and policies on risk assessment and risk management, including risks associated with data privacy and cybersecurity; reviewing and overseeing related party transactions for which review or oversight is required by applicable law or required to be disclosed in Square’s financial statements or SEC filings; and

• approving or, as required, pre-approving, all audit and all permissible non-audit services and fees to be performed by the independent registered public accounting firm.

Each member of the Square Audit and Risk Committee meets the requirements for independence for audit committee members under the listing standards of the NYSE and SEC rules and regulations. The current members of the Square Audit and Risk Committee are David Viniar (Chair), Roelof Botha, Anna Patterson and Lawrence Summers.

(ii) Square Compensation Committee

The Square Compensation Committee is, among other things, responsible for the following:

• reviewing, approving and determining, or making recommendations to the Square Board regarding, the compensation of Square’s executive officers;

• overseeing Square’s overall compensation philosophy and compensation policies, plans and benefits programs, including those for Square’s executive officers;

• administering Square’s equity compensation plans; and

• reviewing, approving and making recommendations to the Square Board regarding incentive compensation and equity compensation plans.

Each member of the Square Compensation Committee meets the requirements for independence for compensation committee members under the listing standards of the NYSE and SEC rules and regulations. The current members of the Square Compensation Committee are Roelof Botha, Paul Deighton and Mary Meeker (Chair).

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(iii) Square Nominating and Corporate Governance Committee

The Square Nominating and Corporate Governance Committee is, among other things, responsible for the following:

• identifying, evaluating and making recommendations to the Square Board regarding nominees for election to the Square Board and its committees;

• evaluating the performance of the Square Board, individual directors and Square’s Chief Executive Officer;

• considering and making recommendations to the Square Board regarding the composition of the Square Board and its committees;

• overseeing, reviewing and making recommendations to the Square Board regarding Square’s corporate governance practices, including Square’s Corporate Governance Guidelines;

• overseeing Square’s process for stockholder communications with the Square Board;

• conducting a periodic review of environmental, social and governance and other corporate responsibility matters of significance to Square;

• overseeing Square’s commitment to inclusion and diversity (Square I&D), including the Square I&D policies and programs, and conducting a periodic review of the Square I&D efforts with Square’s People Lead and Inclusion and Diversity Lead;

• reviewing and monitoring compliance with Square’s Code of Business Conduct and Ethics and other actual and potential conflicts of interest, other than transactions with related parties reviewed by Square’s Audit and Risk Committee; and

• reviewing the succession planning for Square’s Chief Executive Officer, as well as each of Square’s other members of Square’s executive management team.

Each member of the Square Nominating and Corporate Governance Committee meets the requirements for independence for nominating and corporate governance committee members under the listing standards of the NYSE and SEC rules and regulations. The current members of the Square Nominating and Corporate Governance Committee are David Viniar, Amy Brooks, Randy Garutti (Chair) and Darren Walker.

(d) Insider Trading Policy and prohibitions on hedging and pledging transactions

Square’s Insider Trading Policy among other things, prohibits Square’s employees, including officers or directors from making short sales, engaging in transactions in publicly-traded options (such as puts and calls) and other derivative securities relating to Square’s common stock, pledging any of Square’s securities as collateral for a loan and holding any of Square’s securities in a margin account, whether such securities are granted as compensation or are held, directly or indirectly, by the employee or director. This prohibition extends to any hedging or similar transaction designed to decrease the risks associated with holding Square securities.

(e) Code of Business Conduct and Ethics

The Square Board has adopted a written Code of Business Conduct and Ethics, which applies to all employees, officers and directors of Square.

The objectives of the Code of Business Conduct and Ethics are to ensure that high standards of corporate and individual behaviour are observed by all of Square’s employees and that employees always act lawfully, honestly and ethically and in the best interest of Square.

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Section 9

Comparison of Relevant Australian and US Laws

9.1. Background

Afterpay is a public company limited by shares and registered in Victoria under Australian law. Afterpay Shares are quoted on ASX.

Square is incorporated in the United States, under the laws of the State of Delaware. Square Class A Shares are listed on NYSE.

If the Scheme is implemented, the rights of Afterpay Shareholders in respect of New Square Shares or New Square CDIs will be primarily governed by the DGCL, US federal securities laws, NYSE listing standards and Square’s Certificate of Incorporation and Bylaws.

In addition, Square will apply for admission to the ASX Official List as a Foreign Exempt Listing, conditional on the Scheme being implemented. Once Square is listed on ASX as a Foreign Exempt Listing, the rights of Afterpay Shareholders who receive New Square CDIs will also be governed by the terms of the New Square CDIs and the ASX Listing Rules relating to transfers and issues of securities and certain other procedural and administrative matters. However, once listed on ASX as a Foreign Exempt Listing, Square (as the parent company of the Combined Group) will be exempt from complying with most of the ASX Listing Rules (see section 6.4 for more information).

A comparison of some of the material provisions of Australian law and Delaware law as they relate to Afterpayand Square respectively is set out below, along with a description of certain securities laws and stock exchange rules where applicable.

References to Australian law where they appear in this section 9 are references to the Corporations Act, ASX Listing Rules, ASX Settlement Operating Rules and Australian common law, as applicable.

The terms of Square’s Certificate of Incorporation and Bylaws and Delaware law are more detailed than the general information provided below. As such, you should rely on the actual provisions of those documents and laws. If you would like to read Square’s Certificate of Incorporation or Bylaws, these documents are filed with the SEC.

The information in this section of the Scheme Booklet concerning Square has been prepared by Square and

is the responsibility of Square.

The comparison below is not an exhaustive statement of all relevant laws, rules and regulations and is intended as a general guide only. You should seek your own independent professional legal advice if you require further information.

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9.2. Shareholders Meetings

• (a) Requirement of annual meetings; ability to call special meetings

Under Australian law, the annual general meeting of Afterpay is required to be held at least once in each calendar year, and within five months after the end of its financial year.

A general meeting of Afterpay Shareholders may be called from time to time by the Afterpay Board, individual directors or by shareholders in the circumstances set out below:

• when requested to do so by Afterpay Shareholders holding at least 5% of the votes that may be cast at the meeting, Afterpay Directors must call a general meeting within 21 days after the request is given to Afterpay, and the meeting must be held not later than two months after the request is given; or

• alternatively, Afterpay Shareholders holding at least 5% of the votes that may be cast at the meeting may themselves call, and arrange to hold, a general meeting of Afterpay at their own cost.

Square is required by NYSE listing rules to hold an annual stockholders’ meeting during each fiscal year.

Under Square’s Certificate of Incorporation and Bylaws, special meetings of stockholders may only be called by an officer at the request of a majority of the Square Board, by the Chairman of the Square Board, by the Chief Executive Officer, or by the President in the absence of a Chief Executive Officer, except as otherwise required by law and subject to the rights of preferred stockholders.

Under the DGCL, a director or stockholder may petition the Delaware Court of Chancery for an order compelling an annual meeting if there has been no annual meeting (and no action by written consent to elect directors) for 30 days after the date designated for the annual meeting, or if no date for an annual meeting has been designated, for 13 months after the latest of the corporation’s incorporation or last annual meeting (or last action by written consent to elect directors).

(b) Notice of meeting

As Afterpay is listed on ASX, notice of a general meeting of Afterpay must be given at least 28 days before the date of the meeting. Afterpay is required to give notice only to Afterpay Shareholders entitled to vote at the meeting, as well as Afterpay Directors and Afterpay’s auditor(s).

Square’s Bylaws provide that notice of a stockholders’ meeting must be given not less than 10 days nor more than 60 days before the meeting to each stockholder of record entitled to vote at such meeting. The notice must state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

• (c) Quorum requirements

The quorum for a meeting under the Afterpay Constitution is three Afterpay Shareholders who are present at the meeting and entitled to vote on resolutions at the meeting. If within 30 minutes after the time appointed for a meeting, a quorum is not present, the meeting:

• if convened on a requisition of Afterpay Shareholders, is dissolved; and

• in any other case, stands adjourned to the same day in the next week and the same time and place or to such other day, time and place as the Afterpay Directors appoint by notice to the Afterpay Shareholders.

Square’s Bylaws provide that except as otherwise provided by law or by its Certificate of Incorporation, the presence (in person or by proxy) of holders of a majority of the voting power of Square Shares entitled to vote in the election of directors constitutes a quorum at a stockholders’ meeting, except that when specified business is to be voted on by a class or series of stock, the holders of a majority of the shares of such class or series will constitute a quorum.

At any adjournment meeting, three Afterpay Shareholders is still a quorum. If no quorum is present at any adjourned meeting within 30 minutes after the time appointed for the adjourned meeting, those Afterpay Shareholders who are present in person are deemed to be a quorum and may transact the business for which the meeting was called.

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Section 9 Comparison of Relevant Australian and US Laws

Afterpay	Square
(d)Voting requirements

Under the Corporations Act, a special resolution may be passed by Afterpay Shareholders if not less than 28 days’ notice of a general meeting is given, specifying the intention to propose the special resolution and stating the resolution. In order to pass, a special resolution requires approval of at least 75% of the votes cast by shareholders entitled to vote.

The Corporations Act requires certain matters to be resolved by a company by special resolution, including:

• amendment to the company’s constitution;

• the change of name of the company;

• a selective reduction of capital or selective share buy back;

• the conversion of ordinary shares into preference shares; and

• a decision to wind up the company voluntarily.

The Afterpay Constitution stipulates the following matters be resolved by special resolution:

• matters relating to the winding-up of Afterpay, including distribution of assets and power of the liquidator to vest property; and

• variation or cancellation of rights attaching to any class of shares on issue.

Pursuant to Square’s Certificate of Incorporation holders of Square Class A Shares and Square Class B Shares will generally vote together as one class on all matters submitted to a stockholder vote, with each Square Class A Share entitled to 1 vote and each Square Class B Share entitled to 10 votes, except as otherwise required by applicable law. Square’s Certificate of Incorporation provides that, except with respect to voting rights and conversion rights, Square Class A Shares and Square Class B Shares are treated equally and identically.

Square’s Bylaws provide that a plurality of the voting power (in person or by proxy) entitled to vote at any meeting for the election of directors at which a quorum is present will elect directors, subject to the rights of preferred stockholders to elect directors under specified circumstances. No stockholder is entitled to exercise any right of cumulative voting under Square’s Certificate of Incorporation.

All matters other than the election of directors will be determined by a majority of the voting power of shares represented in person or by proxy at the stockholders’ meeting and entitled to vote on the matter, except as otherwise provided by law, Square’s Certificate of Incorporation or NYSE listing rules.

Each Afterpay Share confers a right to vote at all general meetings. On a show of hands, each Afterpay Shareholder present in person, or by proxy, attorney or body corporate representative, has one vote. If a poll is held, Afterpay Shareholders present in person or by their proxy, attorney or body corporate representative will have:

• one vote for every fully paid Afterpay Share held at the voting record date; and

• a fraction of a vote for each party paid Afterpay Share, equivalent to the proportion which the amount paid (not credited) is of the total amounts paid and payable (excluding amounts credited) for that Afterpay Share (or, where applicable, a fraction of a Share), held at the voting record date.

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(e) Shareholders’ rights to bring a resolution before a meeting

Under the Corporations Act, Afterpay Shareholders	Under Square’s Bylaws, a stockholder must give
holding at least 5% of the votes that may be cast	timely written notice to Square’s Secretary to bring
at a general meeting may by written notice to	before an annual meeting any nomination or
Afterpay propose a resolution for consideration at	other proper matter for stockholder action (other
the next general meeting occurring more than two	than stockholder proposals included in the proxy
months after the date of the notice.	materials pursuant to the rules and regulations of
	the SEC, including Rule 14a-8 promulgated under
	the Exchange Act).
	The stockholder’s notice must be delivered to the
	Secretary not less than 90 nor more than 120 days
	prior to the frst anniversary of the preceding year’s
	annual meeting; provided, however, that if the date
	of the annual meeting is more than 30 days before
	or more than 60 days after such anniversary date,
	the stockholder’s notice must be delivered not
	less than 90 nor more than 120 days prior to the
	date of such annual meeting or, if the frst public
	announcement of the date of such annual meeting
	is less than 100 days prior to the date of such
	annual meeting, the 10th day following such public
	announcement.
	In the event that the number of directors to be
	elected to the Square Board is increased by the
	Square Board, and there is no public announcement
	by Square naming all of the nominees for director
	or specifying the size of the increased board at
	least 100 days prior to the frst anniversary of the
	preceding year’s annual meeting, a stockholder’s
	notice will be considered timely with respect to
	nominees for any new positions created by such
	increase if it is delivered to the Secretary by the close
	of business on the 10th day following the day of the
	public announcement frst made by Square.
	If a special meeting of stockholders is called to elect
	directors, a stockholder nominating individual(s) for
	election must deliver timely written notice to the
	Secretary not less than 90 nor more than 120 days
	prior to the date of such special meeting or, if the
	frst public announcement of the date of such
	special meeting is less than 100 days prior to the
	date of such special meeting, the 10th day following
	such public announcement.

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Afterpay Square

9.3. Directors

(a) Management of the business of the company

Under the Afterpay Constitution, the directors of Afterpay will manage or cause the management of the business of Afterpay. The Afterpay Directors may exercise all the powers of the company except any powers that the Corporations Act or the Afterpay Constitution requires the company to exercise in a general meeting.

Under Square’s Certificate of Incorporation and Bylaws, (i) Square’s business and affairs will be managed by or under the direction of the Square Board and (ii) Square Directors are empowered to exercise all such powers and do all such acts and things as may be exercised or done by Square, subject to the DGCL, the Certificate of Incorporation or Bylaws.

In addition, Square’s Bylaws allow the Square Board to exercise all such powers of Square and do all such lawful acts and things as are not required by statute or by the Certificate of Incorporation or Bylaws to be exercised or done by the stockholders.

• (b) Number and election of directors

Under the Afterpay Constitution, Afterpay must have no less than three nor more than the number determined by the Directors from time to time, which until otherwise determined by the directors is ten.

The Afterpay Directors may, at any time, appoint any person as a Afterpay Director, either to fill a casual vacancy or as an addition to the existing Afterpay Directors (provided the total number of Afterpay Directors does not at any time exceed the maximum number of directors described above).

An Afterpay Director may not hold office, without re-election:

• for a continuous period in excess of three years; or

• past the third annual general meeting following the director’s appointment or last election,

whichever is the longer. Afterpay’s managing director is exempt from the retirement and election by rotation procedures under the Afterpay Constitution.

Square’s Certificate of Incorporation and Bylaws provide that the number of directors will be fixed from time to time by resolution of the Square Board, subject to the rights of preferred stockholders to elect directors under specified circumstances. No decrease in the number of directors will shorten the term of any incumbent director.

The Square Board is divided into three classes, as nearly equal in number as possible. Each director will hold office until the third annual meeting following his or her election and until his or her successor is elected and qualified, or otherwise until his or her earlier death, resignation or removal.

Square’s Bylaws provide that vacancies resulting from death, retirement, removal or other cause, and newly created directorships may be filled only by a majority of the remaining directors, though less than a quorum, or by a sole remaining director. A director so chosen shall hold office until the annual stockholders’ meeting at which the term of his or her class expires and until his or her successor is duly elected and qualified.

• (c) Removal of directors

The shareholders of a public company such as Afterpay may remove an Afterpay Director before their period of office ends by passing a resolution to do so at a general meeting. The resolution must be passed by a majority of the votes cast by Afterpay Shareholders present and voting. Under the Corporations Act, Afterpay Directors cannot themselves remove an Afterpay Director from their office or require an Afterpay Director to vacate their office.

Square’s Certificate of Incorporation and Bylaws provide that subject to the rights of preferred stockholders, any director or the entire Square Board may be removed at any time, but only for cause and only by holders of a majority of the voting power of shares entitled to vote in the election of directors, represented in person or by proxy at a meeting for the election of directors duly called.

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9.4. Amendments to Constituent Documents

Any amendment to the Afterpay Constitution must be approved by a special resolution passed by Afterpay Shareholders present and voting on the resolution. A special resolution requires approval of at least 75% of the votes cast by shareholders entitled to vote.

Under the DGCL, unless the certificate of incorporation requires a greater vote or otherwise specified in the DGCL, an amendment to the certificate of incorporation requires: (i) the approval and recommendation of the board; (ii) the affirmative vote of a majority of the outstanding stock entitled to vote on the amendment; and (iii) the affirmative vote of a majority of the outstanding stock of each class entitled to vote on the amendment as a class.

Square’s Certificate of Incorporation provides that notwithstanding any provision of law that might permit a lesser vote, and in addition to any vote of any class or series of stock required, the affirmative vote of at least 2/3 of the voting power of outstanding shares entitled to vote in the election of directors, voting as a single class, is required to amend or repeal, or adopt any provision inconsistent with certain articles of the Certificate of Incorporation.

Subject to Delaware law, the Square Board has the power to adopt, amend, alter or repeal the Bylaws by a majority vote. The Bylaws may also be altered, amended or repealed, or new bylaws enacted, at any special meeting of stockholders duly called for that purpose or at any annual meeting, by a majority of the voting power of shares entitled to vote in the election of directors; provided, however, that any amendment of, or adoption of any provision inconsistent with certain sections of the Bylaws requires 2/3 of such voting power.

9.5. Issue of New Shares

Subject to specified exceptions, the ASX Listing Rules apply to restrict Afterpay from issuing, or agreeing to issue, more equity securities (including shares and options), than the number calculated as follows in any 12 month period without the approval of Afterpay Shareholders:

15% of the total of:

• the number of Afterpay Shares on issue 12 months before the date of the issue or agreement; plus

• the number of Afterpay Shares issued in the 12 months under a specified exception; plus

• the number of partly paid ordinary Afterpay Shares that became fully paid in the 12 months; plus

• the number of Afterpay Shares issued in the 12 months with Afterpay Shareholder approval; less

Square is authorised under its Certificate of Incorporation to issue 1.6 billion shares of capital stock, consisting of 1 billion Square Class A Shares, 500 million Square Class B Shares and 100 million shares of preferred stock.

Except under certain circumstances, Square will not issue any additional Square Class B Shares after incorporation, unless such issuance is approved by a majority of outstanding Square Class B Shares, voting separately as a single class.

Under NYSE listing rules, stockholder approval is required for certain significant issuances of securities, including issuances (in each case subject to certain exceptions):

• in connection with new or materially amended equity compensation plans;

• to a related party (including directors, officers, substantial security holders and their affiliates); or

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• the number of Afterpay Shares cancelled in the 12 months; less

• the number of equity securities issued or agreed to be issued in the 12 months before the date of issue or agreement to issue but not under a specified exception or with Afterpay Shareholder approval.

• in any transaction if the number of shares or voting power of common stock issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares or voting power of common stock outstanding before the issuance or of securities convertible into or exercisable for common stock.

Subject to certain exceptions, the ASX Listing Rules require the approval of Afterpay Shareholders by ordinary resolution in order for Afterpay to issue shares or options to Afterpay Directors.

Under the Afterpay Constitution, the Afterpay Directors may allot, issue, cancel or otherwise dispose of shares to any persons on any terms and conditions at that issue price and at those times as the Directors think fit, subject to the Corporations Act, the ASX Listing Rules.

9.6. Variation of Class Rights

Under the Afterpay Constitution, rights attaching to a share in Afterpay may only be varied or cancelled:

• by a special resolution passed at a meeting of the preference shareholders entitled to vote and holding shares in that class; or

• with the written consent of Afterpay Shareholders with at least 75% of the votes in the class.

Under the DGCL, the holders of the outstanding shares of a class are entitled to vote as a class upon any proposed amendment to the certificate of incorporation that will:

• increase or decrease the number of authorised shares of the class;

• increase or decrease the par value of the shares of the class; or

• alter or change the powers, preferences or special rights of the shares of the class so as to affect them adversely.

Such a proposed amendment requires approval of a majority of the outstanding shares of each class entitled to vote thereon.

Under Square’s Certificate of Incorporation, the number of authorised shares of Square Class A Shares, Square Class B Shares, or preferred stock may be increased or decreased (but not below the number of shares thereof outstanding) by a majority of the voting power of all outstanding shares entitled to vote thereon, irrespective of the DGCL provision requiring a class vote and without a separate class vote of preferred stockholders, unless required by the terms of preferred stock. Square’s Certificate of Incorporation provides that Square Class B Shares will be converted into Square Class A Shares under certain circumstances, including upon certain transfers of Square Class B Shares.

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9.7. Protection of Minority Shareholders

Under the Corporations Act, any Afterpay Shareholder can bring an action in cases of conduct which is contrary to the interests of Afterpay Shareholders as a whole, or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, any Afterpay Shareholder(s), whether in their capacity as a shareholder or in any other capacity. Former Afterpay Shareholders can also bring an action if it relates to the circumstances in which they ceased to be an Afterpay Shareholder.

A statutory derivative action may also be instituted by a shareholder, former shareholder or person entitled to be registered as a shareholder of Afterpay. In all cases, leave of the Court is required. Such leave will be granted if the Court is satisfied that:

Under Delaware law, a stockholder may bring a derivative action on behalf of the corporation under certain circumstances where those in control of the corporation have failed to assert a claim belonging to the corporation (and to the stockholders collectively).

Under the DGCL, a stockholder who wishes to bring a derivative action must meet certain requirements, including that the plaintiff was a stockholder of the corporation at the time of the transaction of which such stockholder complains or that such stockholder’s shares thereafter devolved upon such stockholder by operation of law. In addition, a derivative plaintiff must make a demand on the directors of the corporation to assert the corporate claim, unless that demand would be futile.

• it is probable that Afterpay will not itself bring the proceedings or properly take responsibility for them or for the steps in them;

• the applicant is acting in good faith;

• it is in the best interests of Afterpay that the applicant be granted leave;

• if the applicant is applying for leave to bring proceedings, there is a serious question to be tried; and

• either,

• at least 14 days before making the application, the applicant gave written notice to Afterpay of the intention to apply for leave or the reasons for applying; or

• it is otherwise appropriate to grant leave.

9.8. Payment of Dividends and Distributions

Under the Corporations Act, Afterpay must not pay a dividend unless:

• Afterpay’s assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend;

• the payment of the dividend is fair and reasonable to Afterpay Shareholders as a whole; and

• the payment of the dividend does not materially prejudice Afterpay’s ability to pay creditors.

Holders of Square’s common stock are entitled to ratably receive dividends if, as, and when declared from time to time by the Square Board, after payment of any dividends required to be paid on preferred stock.

Under the DGCL, Square can only pay dividends either out of surplus (as determined under the DGCL) or out of the current or the immediately preceding year’s net profits.

Subject to the Corporations Act, the Afterpay Constitution and the terms of issue or rights of any shares with special rights to dividends, the Afterpay Directors may declare or determine that a dividend is payable, fix the amount and the time for payment and the method of payment of the dividend.

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9.9. Remuneration of Directors and Officers

Under the ASX Listing Rules, the maximum amount to be paid to Afterpay Directors for their services as Afterpay Directors (other than the salary of an executive director) is not to exceed the amount approved by Afterpay Shareholders in a general meeting.

As at the date of this Scheme Booklet, the latest approval was at Afterpay’s 2019 annual general meeting, at which Afterpay Shareholders approved aggregate remuneration for nonexecutive directors of $1,800,000 per annum.

Afterpay’s annual report includes a remuneration report within the directors’ report. This remuneration report is required to include a discussion of the Afterpay Board’s policy in relation to remuneration of key management personnel of Afterpay.

Under the DGCL, unless otherwise restricted by the Certificate of Incorporation or Bylaws, the board of directors have the authority to fix the compensation of directors.

Under US securities laws, Square is required to disclose certain information about its policies and practices related to compensation for directors and executive officers.

US publicly traded companies are also required to hold advisory (i.e., non-binding) shareholder votes on (i) executive compensation (“say-on-pay votes”) at least once every three years and (ii) the frequency of such say-on-pay votes at least once every six years, in order to allow shareholders to express their views on a company’s compensation decisions.

Square currently holds the say-on-pay vote every year.

Under the Corporations Act, a listed company (such as Afterpay) must put its remuneration report to a shareholder vote at its annual general meeting. If in two consecutive annual general meetings, 25% or more of the votes cast on the resolution vote against adopting the remuneration report, a ‘spill resolution’ must then be put to shareholders. A spill resolution is a resolution that a spill meeting be held and all directors (other than a managing director who is exempt from the retirement by rotation requirements) cease to hold office immediately before the end of the spill meeting. If the spill resolution is approved by the majority of votes cast on the resolution, a spill meeting will be held within 90 days at which directors wishing to remain directors must stand for re-election.

9.10. Retirement Benefits

The Corporations Act provides that, in respect of termination benefits payable to a company director, senior executive or key management personnel under employment contracts entered into, renewed or varied on or after 24 November 2009, shareholder approval is required if the total value of the benefits exceed one year of that person’s base salary.

There is no limit on, or requirement of stockholder approval for, the payment of any termination or retirement benefits to directors and officers in the DGCL, Square’s Certificate of Incorporation or Bylaws, or NYSE listing standards.

Under US securities laws, Square is required to disclose certain information about its retirement and other post-employment compensation for directors and executive officers.

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9.11. Release from Liability and Indemnification of Directors and Officers

Under Australian law, Afterpay cannot:

• exempt an officer or auditor from liability to Afterpay incurred in their capacity as an officer or auditor;

• indemnify an officer or auditor against a liability owed to Afterpay or a Related Body Corporate; or

• indemnify an officer or auditor against the legal costs incurred in defending certain legal proceedings, including proceedings in which the person is found liable to Afterpay or a Related Body Corporate.

The Afterpay Constitution contains a provision permitting Afterpay (to the maximum extent permitted by law) to indemnify any current or former Afterpay Director or secretary or officer of Afterpay or a subsidiary of Afterpay, against, among other things, against any liability (other than legal costs) incurred in acting as a Director, Secretary, or other Officer of the Company, or as a director or secretary of another company at the request of the Company.

The DGCL provides that a corporation may eliminate or limit a director’s personal liability for monetary damages to the corporation or its stockholders for breach of fiduciary duty as a director, except for liability for: (i) breach of the duty of loyalty; (ii) acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law; (iii) unlawful payments of dividends, or unlawful share repurchases or redemptions; or (iv) any transaction from which the director derived an improper personal benefit.

Square’s Certificate of Incorporation provides that no Square Director will be personally liable to Square or Square stockholders for monetary damages for breach of fiduciary duty as a director, to the fullest extent permitted by the DGCL.

Square’s Certificate of Incorporation and Bylaws provide that Square will indemnify to the fullest extent permitted by applicable law, any person made, or threatened to be made a party, to any action, suit or proceeding by reason of the fact that such person was a director, officer, employee or agent of Square, or serving as a director, officer, employee or agent of another entity at Square’s request, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection therewith, if the person acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of Square, and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful.

Square’s Bylaws further provide that to the extent authorised by the DGCL, expenses (including attorneys’ fees) incurred by a person potentially eligible for indemnification (as specified above) in defending any proceeding will be paid by Square in advance of the final disposition of such proceeding; provided that, if required by the DGCL, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer will be made only upon delivery to Square of an undertaking by or on behalf of such director or officer to repay all amounts advanced if it is ultimately determined that he or she is not entitled to be indemnified.

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9.12. Fiduciary Duties of Directors and Officers

Under Australian law, the directors and officers of a company such as Afterpay are subject to a range of duties including duties to:

• act in good faith in the best interests of the company;

• act for a proper purpose;

• not fetter their discretion (in the case of directors only);

Under Delaware law, directors have fiduciary duties including the duty of care and the duty of loyalty. The duty of care generally requires directors to inform themselves of all reasonably available information before making business decisions on behalf of the corporation and to act with requisite care in discharging their duties to the corporation. The duty of loyalty generally requires directors to act in good faith and in the corporation’s best interests.

• exercise care and diligence in the performance of their duties;

• avoid conflicts of interest;

• not use their position to gain advantage for themselves or someone else, or to cause detriment to the company;

• not misuse information which they have gained through their position to gain advantage for themselves or someone else, or to cause detriment to the company; and

• otherwise act in accordance with the Corporations Act and, subject to the provisions of the Corporations Act, Afterpay’s constitution.

9.13. Transactions Involving Directors, Officers or Other Related Parties

The Corporations Act prohibits a public company such as Afterpay from giving a related party a financial benefit unless it:

• obtains the approval of shareholders and gives the benefit within 15 months after receipt of such approval; or

• the financial benefit is exempt.

A related party is defined by the Corporations Act to include any entity which controls the public company, directors of the public company, directors of any entity which controls the public company and, in each case, spouses and certain relatives of such persons.

Exempt financial benefits include indemnities, insurance premiums and payments for legal costs which are not otherwise prohibited by the Corporations Act and benefits given on arm’s length terms.

The ASX Listing Rules prohibit a listed entity such as Afterpay from acquiring a substantial asset (an asset the value or consideration for which is 5% or more of the entity’s equity interests) from, or disposing of a substantial asset to, certain related parties of the entity, unless it obtains the approval of shareholders. The related parties include directors, persons who have or have had (in aggregate with any of their associates) in the prior six month period an interest in 10% or more of the shares in the company and, in each case, any of their associates. The provisions apply even where the transaction may be on arm’s length terms.

The DGCL provides that a contract or transaction between a corporation and one or more of its directors or officers will not 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 or committee which authorises the contract or transaction, or solely because any such director’s or officer’s votes are counted for such purpose, if:

• material facts as to the director’s or officer’s 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 or committee in good faith authorises the contract or transaction by a majority of the disinterested directors, even though the disinterested directors be less than a quorum;

• • material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or

• the contract or transaction is fair as to the corporation as of the time it is authorised, approved or ratified by the board of directors, a committee of the board of directors or the stockholders.

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The ASX Listing Rules also prohibit a listed entity such as Afterpay from issuing or agreeing to issue shares to a director unless it obtains the approval of shareholders or the share issue is exempt. Exempt share issues include issues made pro rata to all shareholders, under an underwriting agreement in relation to a pro rata issue, under certain dividend or distribution plans or under an approved employee incentive plan.

The Corporations Act generally requires an Afterpay Director who has a material personal interest in a matter that relates to the affairs of Afterpay to give the other Afterpay Directors notice of that interest. That Afterpay Director must not be present at a meeting where the matter is being considered or vote on the matter unless the other Afterpay Directors or ASIC approve, or the matter is not one which requires disclosure under the Corporations Act. Under the Corporations Act, failure of an Afterpay Director to disclose a material personal interest, or voting despite a material personal interest, does not affect the validity of a contract in which the Afterpay Director has an interest. Afterpay Directors, when entering into transactions with Afterpay, are subject to the common law and statutory duties to avoid conflicts of interest.

The DGCL further provides that 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 authorises the contract or transaction.

Under US securities laws, Square is required to disclose certain information about certain recent or proposed transactions in which (i) the amount involved exceeds US$120,000 and (ii) any related person (including any director, officer or beneficial owner of more than 5% of any class of voting securities of Square) had or will have a direct or indirect material interest, including the related person’s interest in the transaction, the approximate dollar value of such interest and other material information. Square is also required to disclose its policies and procedures for the review and approval of such transactions.

9.14. Disclosure of Substantial Shareholdings

A person who obtains voting power in 5% or more of an ASX listed company is required to publicly disclose that fact within two business days after becoming aware of that fact via the filing of a substantial holding notice. A person’s voting power consists of their own ‘relevant interest’ in shares plus the relevant interests of their associates. A further notice must be filed within two business days after each subsequent voting power change of 1% or more, and after the person ceases to have voting power of 5% or more. The notice must attach all documents which contributed to the voting power the person obtained or provide a written description of arrangements which are not in writing.

A person or group of persons who acquires beneficial ownership of more than 5% of a voting class of a company’s equity securities registered under section 12 of the Exchange Act, is required to file a Schedule 13D with the SEC within 10 days after the acquisition. However, depending upon the facts and circumstances, including whether or not the person or group has acquired the security with the intent of influencing control of the issuer, the person or group of persons may be eligible to file the more abbreviated Schedule 13G in lieu of Schedule 13D. Any material changes in the facts contained in the schedule (including a material increase or decrease in the percentage of the class of equity securities that are beneficially owned by the person making the filing) require a prompt amendment.

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9.15. Takeovers

(a) Takeover requirements

Australian law imposes restrictions on a person acquiring interests in the voting shares of Afterpay where, as a result of the acquisition, that person’s or someone else’s voting power in the company increases from 20% or below to more than 20%, or from a starting point that is above 20% and below 90%. Exceptions to this restriction include an acquisition of no more than 3% of the voting shares in the company within a six month period, an acquisition made with shareholder approval, an acquisition made under a takeover bid conducted in accordance with Australian law or an acquisition that results from a Court-approved compromise or arrangement (such as the Scheme). Takeover bids must treat all shareholders alike and must not involve any collateral benefits. Various restrictions about conditional offers exist and there are also restrictions concerning the withdrawal and suspension of offers.

The DGCL provides that, if a person acquires 15% or more of a corporation’s voting shares, then the corporation may not engage in certain business combinations with such interested stockholder for three years following the time the stockholder became an interested stockholder unless:

• the board of directors had approved either the business combination or the transaction that resulted in the person becoming an interested stockholder;

• upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the corporation’s voting shares (with certain exceptions); or

• the business combination is approved by the board of directors and by 2/3 of the outstanding voting shares not owned by the interested stockholder.

Certain provisions of Square’s Certificate of Incorporation and Bylaws may have the effect of restricting takeovers, such as provisions:

• providing for a dual class common stock structure;

• designating a classified board structure;

• authorising the Square Board to issue any series of preferred stock and to fix designations, powers, preferences and rights thereof;

• requiring advance notice of a stockholder’s intention to nominate directors or submit proposals at a stockholders’ meeting;

• prohibiting stockholders from calling a special meeting of stockholders; and

• prohibiting stockholders from acting by written consent.

(b) Takeover defence mechanisms

Under Australian takeovers legislation and policy, boards of target companies are limited in the defensive mechanisms that they can put in place to discourage or defeat a takeover bid. For example, it is likely that the adoption of a shareholders’ rights plan (or so-called ‘poison pill’) would give rise to a declaration of unacceptable circumstances by the Australian Takeovers Panel if it had that effect.

Under Delaware law, there are a number of defensive mechanisms available to protect the corporation and its stockholders against hostile takeover bids. In particular, shareholder rights plans, which have been generally upheld by the Delaware courts, can protect a corporation and its stockholders from non-negotiated hostile takeover attempts made at unfair or inadequate prices or by coercive or unfair tactics.

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9.16. Right to Inspect Corporate Books and Records

Under the Corporations Act, a shareholder must obtain a court order to obtain access to the corporate books. The applicant must be acting in good faith and be making the inspection for a proper purpose. The Afterpay Constitution provides that Afterpay Directors may determine whether and to what extent Afterpay’s documents and records will be open to inspection by any person.

Square’s Certificate of Incorporation and Bylaws are on file with the SEC.

The DGCL provides that any stockholder will, upon written demand under oath stating the purpose thereof, have the right during usual business hours to inspect for any proper purpose the corporation’s stock ledger, stockholder list and certain books and records, and to make copies and extracts from those documents. If the corporation refuses to permit the stockholder’s inspection or does not reply to the stockholder’s written demand within five business days, the stockholder may seek remedy in the Delaware Court of Chancery.

9.17. Right to Inspect Register of Shareholders

Under Australian law, the register of shareholders of a company is usually kept at the registered office or principal place of business in Australia and must be available for inspection to shareholders free of charge at all times when the registered office is open to the public.

If a person asks Afterpay for a copy of the Afterpay Share Register (or any part of the Afterpay Share Register) and pays the requested fee (up to a prescribed amount), Afterpay must give that person the copy within seven days of the date on which Afterpay receives such payment.

The DGCL provides that, for at least 10 days before every stockholder meeting, a complete list of the stockholders entitled to vote at the meeting must be made and be open to examination by any stockholder. The list must also be produced at the meeting and be subject at all times during the meeting to the inspection of any stockholder present.

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Square

9.18. Winding-Up

Under Australian law, an insolvent company may be wound up by a liquidator appointed either by creditors or the court. Directors cannot use their powers after a liquidator has been appointed. If there are funds left over after payment of the costs of the liquidation, and payments to other priority creditors, including employees, the liquidator will pay these to unsecured creditors as a dividend. The shareholders rank behind the creditors and are, therefore, unlikely to receive any dividend in an insolvent liquidation.

Under Australian law, shareholders of a solvent company may decide to wind up the company if the directors are able to form the view that the company will be able to pay its debts in full within 12 months after the commencement of the winding-up. A meeting at which a decision is made to wind up a solvent company requires at least 75% of votes cast by the shareholders present and voting.

==> picture [223 x 212] intentionally omitted <==

----- Start of picture text -----

|||
|---|---|
|Under the DGCL, a corporation may be dissolved if:|
|•|a majority of the board adopts a resolution to|
|approve dissolution at a board meeting called|
|for that purpose and thereafter notice of a|
|stockholder meeting to take action on the|
|matter is given to each stockholder entitled to|
|vote thereon;|
|•|a majority of outstanding shares entitled to vote|
|on the matter votes for the proposed dissolution|
|at the stockholders’ meeting called for that|
|purpose; and|
|•|a certification of dissolution is thereafter filed|
|with the Delaware Secretary of State.|
|The DGCL also permits stockholders to authorise|
|the dissolution of the corporation without board|
|action if all stockholders entitled to vote on the|
|matter provide written consent to dissolution and a|
|certificate of dissolution is filed with the Delaware|
|Secretary of State.|

----- End of picture text -----

The Afterpay Constitution provides that on windingup, the liquidator may, with the sanction of a special resolution of Afterpay Shareholders, divide among Afterpay Shareholders in kind the whole or any part of Afterpay’s assets and may set the value as the liquidator considers fair and reasonable on any property to be so divided and may determine how the division is to be carried out.

9.19. Exclusive Forum

N/A

Square’s Bylaws provide that unless Square consents to the selection of an alternative forum, 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) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of Square; (ii) any action asserting a claim of breach of fiduciary duty owed by any of Square’s directors, officers, or other employees to Square or to its stockholders; (iii) any action asserting a claim arising pursuant to the DGCL, Certificate of Incorporation or Bylaws; or (iv) any action asserting a claim governed by the internal affairs doctrine.

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9.20. Disclosure
Afterpay is a ‘disclosing entity’ for the purposes	As outlined in section 6.4, Square will apply for
of section 111AC(1) of the Corporations Act and	admission to the offcial list of ASX as a Foreign
is subject to regular reporting and disclosure	Exempt Listing, conditional on the Scheme being
obligations under the Corporations Act and the	implemented. Once listed on ASX as a Foreign
Listing Rules.	Exempt Listing, Square (as the parent company
See section 4.16 for further information.	of the Combined Group) will be exempt from complying with most of the Listing Rules, including
	the Australian continuous disclosure regime set
	out in ASX Listing Rule 3.1. However, Square must
	provide to ASX a copy of each public fling it makes
	with the SEC.
	Under US securities laws, Square is required to fle
	with the SEC certain documents periodically or
	upon the occurrence of certain events, including:
	• annual reports on Form 10-K, containing, among other things, Square’s fnancial statements,
	management’s discussion and analysis of
	fnancial condition and results of operation, and
	disclosures about certain risks;
	• quarterly reports on Form 10-Q, containing, among other things, Square’s fnancial
	statements, management’s discussion and
	analysis of fnancial condition and results of
	operation, and disclosures about certain risks;
	and
	• current reports on Form 8-K, upon the occurrence of certain specifed events (generally within four business days of a specifed event).

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