Prepared by MERRILL CORPORATION




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   EXHIBIT 10.16  


    August 27th,
2001 


    Mr. H.
David Johnson

3 Willow Spring Court

Moraga, CA 94556

(925) 376-6439 


Re: Settlement Agreement and Release of Claims  


Dear
Mr. Johnson: 


This
letter constitutes a settlement agreement and release of claims ("Agreement") that compromises, settles and discharges any and all claims that you may have against PayPal, Inc. (the
"Company") including those arising from your employment as Chief Financial Officer, the termination of your employment on August 8th, 2001, and the events surrounding the
termination of your employment. You and the Company may be referred to in this Agreement as "Parties," collectively, or as a "Party," individually. 



    1.  Separation.  Your last day of work with the Company and your employment termination date was
August 8th, 2001 (the "Separation Date"). 


    2.  Payment.  Although the Company has no policy or procedure requiring payment of any severance
benefits, the Company will pay you the gross lump sum amount of $75,000.00, subject to standard payroll deductions and withholdings. That amount will be paid in a lump sum by check within the day you
sign this Agreement and return it to the Company by hand. 


    3.  Restricted Stock.  Although the Company has no policy or procedure requiring the grant of additional
restricted stock, you will be eligible to vest an additional 168,750 Restricted Stock shares previously purchased by you pursuant to the Company's Restricted Stock plan the day you sign this agreement
and return it to the company by hand. All remaining Restricted shares previously granted to you will expire unvested on August 8th, 2001. As your start date was 11/8/99, through
your separation date you will have vested 21 months of Restricted Stock or 590,625 shares. As you were granted a recourse loan to purchase your initial Restricted Stock, you will need to submit
a check for $22,781.25 for the balance of your unvested Restricted Stock shares. 


    4.  Medical Benefits.  Although the Company has no policy or procedure requiring the payment of COBRA
premiums, should you elect to participate in COBRA, the Company agrees to pay for your medical, dental and vision monthly premium costs ($678.38 per month) for a maximum total of six months, or a
maximum value of $4,070.28. At the end of six months, you will be responsible for this monthly premium should you choose to continue to participate in COBRA. Should you elect COBRA, you will receive
invoices on a monthly basis, please forward these invoices as soon as you receive them directly to me for payment. 


    5.  Other Compensation or Benefits.  You acknowledge that, except as expressly provided in this
Agreement, you will not receive any additional compensation, severance or benefits after the Separation Date. 


    6.  Return of Company Property.  Within five (5) days after the Effective Date, you agree to
return to the Company all Company documents (and all copies thereof) and other Company property that you have had in your possession at any time, including, but not limited to, Company files, notes,
drawings, records, business plans and forecasts, financial information, specifications, computer-recorded information, tangible property (including, but not limited to, computers), credit cards, entry
cards, 


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identification badges and keys; and, any materials of any kind that contain or embody any proprietary or confidential information of the Company (and all reproductions thereof). 


    7.  Proprietary Information Obligations.  You will refrain from any use or disclosure of the Company's
proprietary or confidential information or materials, unless such use is authorized in writing by an appropriate Company representative. 



    8.  Confidentiality.  The provisions of this Agreement will be held in strictest confidence by you and
the Company and will not be publicized or disclosed in any manner whatsoever; provided, however, that: (a) you disclose this Agreement to your
immediate family; (b) the Parties may disclose this Agreement in confidence to their respective attorneys, accountants, auditors, tax preparers, and financial advisors; (c) the Company
may disclose this Agreement as necessary to fulfill standard or legally required corporate reporting or disclosure requirements; and (d) the Parties may disclose this Agreement insofar as such
disclosure may be necessary to enforce its terms or as otherwise required by law. In particular, and without limitation, you agree not to disclose the terms of this Agreement to any current or former
Company employee. You and the Company will respond to inquiries in words to the effect of: "Dave Johnson left PayPal, Inc. for personal reasons." 


    9.  Nondisparagement.  The Company agree not to disparage you, and you agree not to disparage the Company
or the Company's other officers, directors, employees, shareholders and agents, in any manner likely to be harmful to the Parties or their business, business reputation or personal reputation;
provided that you and the Company may respond accurately and fully to any question, inquiry or request for information when required by legal process. 


    10.  Releases.  


    8.1. In
exchange for the payment and other consideration under this Agreement to which you would not otherwise be entitled, you agree to execute the Employee Agreement
and Release attached hereto as Exhibit A. 


    8.2. The
releases attached hereto as Exhibit A expressly do not apply to or limit: (1) your rights to indemnification (if any) by the Company;
(2) either your potential claims with regard to the Company's future activities, or the Company's potential claims with regard to your future activities; or (3) any Party's rights to
enforce the terms of this Agreement. 


    11.  Miscellaneous.  This Agreement, including Exhibit A, constitutes the complete, final and
exclusive embodiment of the entire agreement among the Parties with regard to this subject matter. Each of the Parties represents, warrants and agrees that it has received independent legal advice
from counsel with respect to the advisability of making the release and settlement provided for herein and with respect to the advisability of executing this Agreement. 


Each
signatory below represents that he has the indicated Party's full authority to execute this Agreement on the Party's behalf. Furthermore, each of the Parties acknowledges that the Party has read
and understands this Agreement, and that the Party signs its release of all claims voluntarily, with the full appreciation that at no time in the future may the Party pursue any of the rights of the
Party has waived in this Agreement, including Exhibit A. This Agreement is entered into without reliance on any promise or representation, written or oral, other than those expressly contained
herein, and it supersedes any other such promises, warranties or representations. This Agreement may not be
modified or amended except in a writing signed by you, and a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of you and the
Company and inure to the benefit of you and the Company and your, or its heirs, successor and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in
part, this determination will not affect any other provision of this Agreement and the provision in question will be modified by the court so as to be rendered enforceable. This Agreement will be 


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deemed to have been entered into and will be construed and enforced in accordance with the laws of the State of California. 



If
this Agreement is acceptable to you please sign below and on the attached Employee Agreement and Release, which is part of this Agreement, and return the originals of both to me by hand. 


Sincerely, 



	PAYPAL, INC.	 	 
	

By:	
 	

/s/ SAL GIAMBANCO   
 Sal Giambanco

Vice President, HR and Administration	
 	

 
	
EXHIBIT A—EMPLOYEE AGREEMENT AND RELEASE	
 	

 
	
ACCEPTED AND AGREED BY H. DAVID JOHNSON:	
 	

 
	

/s/ H. DAVID JOHNSON   
 H. David Johnson	
 	

 




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EXHIBIT A

CONFIDENTIALITY AGREEMENT  





 
 

Exhibit A
  
    EMPLOYEE AGREEMENT AND RELEASE    
  


    I agree to the terms described in the foregoing letter Agreement. 


    Except
as otherwise set forth in this Agreement, I hereby release, acquit and forever discharge the Company, its subsidiaries, and their officers, directors, agents, servants,
employees, attorneys, shareholders, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or in any way related to agreements,
events, acts or conduct at any time prior to and including the date this Agreement is signed, including but not limited to: all such claims and demands directly or indirectly arising out of or in any
way connected with my employment with the Company, the termination of that employment or the events surrounding the termination; claims or demands related to salary, bonuses, commissions, stock, stock
options, or any other ownership interest in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; and claims pursuant to any federal,
state or local law, statute or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended, the federal Americans with Disabilities Act of 1990, the California Fair
Employment and Housing Act, as amended, tort law, contract law, wrongful discharge, discrimination, harassment, fraud, defamation, emotional distress, and breach of the implied covenant of good faith
and fair dealing. 


    I
UNDERSTAND THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. In giving this release, which includes claims that may be unknown to me at present, I acknowledge
that I have read and understand Section 1542 of the California Civil Code which reads as follows: "A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." I expressly
waive and relinquish all rights and benefits under that section and any law of Nebraska or any other jurisdiction of similar effect with respect to my release of any unknown or unsuspected claims I
may have against the Company. 



	 	 	By:	 	/s/
 H. David Johnson
	

 	
 	

Date:	
 	

August 29, 2001












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Exhibit A EMPLOYEE AGREEMENT AND RELEASE