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EXHIBIT 10.2  


 
 

PAYPAL, INC.
  
    2001 EQUITY INCENTIVE PLAN    
  






 
 
 

TABLE OF CONTENTS    
  



	 
	 	 
	 	Page

	1.	 	PURPOSES OF THE PLAN	 	1
	2.	 	DEFINITIONS	 	1
	3.	 	STOCK SUBJECT TO THE PLAN	 	3
	4.	 	ADMINISTRATION OF THE PLAN	 	3
	5.	 	ELIGIBILITY	 	5
	6.	 	LIMITATIONS	 	5
	7.	 	TERM OF PLAN	 	6
	8.	 	TERM OF OPTION	 	6
	9.	 	OPTION EXERCISE PRICE AND CONSIDERATION	 	6
	10	 	EXERCISE OF OPTION	 	7
	11	 	NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS	 	10
	12	 	STOCK PURCHASE RIGHTS	 	10
	13	 	ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR ASSET SALE	 	10
	14	 	TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS	 	14
	15	 	AMENDMENT AND TERMINATION OF THE PLAN	 	12
	16	 	STOCKHOLDER APPROVAL	 	12
	17	 	INABILITY TO OBTAIN AUTHORITY	 	13
	18	 	RESERVATION OF SHARES	 	13
	19	 	INFORMATION TO HOLDERS AND PURCHASERS	 	13
	20	 	REPURCHASE PROVISIONS	 	13
	21	 	INVESTMENT INTENT	 	14
	22	 	GOVERNING LAW	 	14




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PAYPAL, INC.
  
    2001 EQUITY INCENTIVE PLAN    
  


    1.
Purposes of the Plan.  The purposes of the PayPal, Inc. 2001 Equity Incentive Plan are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company's business. Options granted under the Plan may be
Incentive Stock Options or Non-Qualified Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan. 


    2.
Definitions.  As used herein, the following definitions shall apply: 



    (a) "Acquisition"
means (i) any consolidation or merger of the Company with or into any other corporation or other entity or person in which the stockholders of
the Company prior to such consolidation or merger own less than fifty percent (50%) of the Company's voting power immediately after such consolidation or merger, excluding any consolidation or merger
effected exclusively to change the domicile of the Company; or (ii) a sale of all or substantially all of the assets of the Company. 


    (b) "Administrator"
means the Board or the Committee responsible for conducting the general administration of the Plan, as applicable, in accordance with Section 4
hereof. 


    (c) "Applicable
Laws" means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities
laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options or Stock Purchase
Rights are granted under the Plan. 


    (d) "Board"
means the Board of Directors of the Company. 


    (e) "Code"
means the Internal Revenue Code of 1986, as amended, or any successor statute or statutes thereto. Reference to any particular Code section shall include any
successor section. 


    (f)  "Committee"
means a committee appointed by the Board in accordance with Section 4 hereof. 


    (g) "Common
Stock" means the common stock of the Company. 


    (h) "Company"
means PayPal, Inc., a Delaware corporation. 


    (i)  "Consultant"
means any consultant or adviser if: (i) the consultant or adviser renders bona fide services to the Company or any Parent or Subsidiary of the
Company; (ii) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Company's securities; and (iii) the consultant or adviser is a natural person who has contracted directly with the Company or any Parent or Subsidiary of
the Company to render such services. 


    (j)  "Director"
means a member of the Board. 


    (k) "Employee"
means any person, including an Officer or Director, who is an employee (as defined in accordance with Section 3401(c) of the Code) of the Company
or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment
upon expiration of such leave is guaranteed by statute or contract. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient, by itself, to constitute
"employment" by the Company. 






 


    (l)  "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto. Reference to any particular Exchange Act
section shall include any successor section. 


    (m) "Fair
Market Value" means, as of any date, the value of a share of Common Stock determined as follows: 



     (i) If
the Common Stock is listed on any established stock exchange or a national market system, including, without limitation, the Nasdaq National Market or The Nasdaq
SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for a share of such stock (or the closing bid, if no sales were reported) as quoted on such exchange
or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; 


    (ii) If
the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the
high bid and low asked prices for a share of the Common Stock on the last market trading day prior to the day of determination; or 


    (iii) In
the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. 




    (n) "Holder"
means a person who has been granted or awarded an Option or Stock Purchase Right or who holds Shares acquired pursuant to the exercise of an Option or
Stock Purchase Right. 


    (o) "Incentive
Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and which is designated as
an Incentive Stock Option by the Administrator. 


    (p) "Independent
Director" means a Director who is not an Employee of the Company. 


    (q) "Non-Qualified
Stock Option" means an Option (or portion thereof) that is not designated as an Incentive Stock Option by the Administrator, or which is designated
as an Incentive Stock Option by the Administrator but fails to qualify as an incentive stock option within the meaning of Section 422 of the Code. 


    (r) "Officer"
means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder. 


    (s) "Option"
means a stock option granted pursuant to the Plan. 


    (t)  "Option
Agreement" means a written agreement between the Company and a Holder evidencing the terms and conditions of an individual Option grant. The Option
Agreement is subject to the terms and conditions of the Plan. 


    (u) "Parent"
means any corporation, whether now or hereafter existing (other than the Company), in an unbroken chain of corporations ending with the Company if each of
the corporations other than the last corporation in the unbroken chain owns stock possessing more than fifty percent of the total combined voting power of all classes of stock in one of the other
corporations in such chain. 


    (v) "Plan"
means the PayPal, Inc. 2001 Equity Incentive Plan. 



    (w) "Public
Trading Date" means the first date upon which Common Stock of the Company is listed (or approved for listing) upon notice of issuance on any securities
exchange or designated 



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(or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system. 


    (x) "Restricted
Stock" means Shares acquired pursuant to the exercise of an unvested Option in accordance with Section 10(h) below or pursuant to a Stock
Purchase Right granted under Section 12 below. 


    (y) "Rule 16b-3"
means that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time. 


    (z) "Section
16(b)" means Section 16(b) of the Exchange Act, as such Section may be amended from time to time. 


    (aa) "Securities
Act" means the Securities Act of 1933, as amended, or any successor statute or statutes thereto. Reference to any particular Securities Act section
shall include any successor section. 



    (bb) "Service
Provider" means an Employee, Director or Consultant. 


    (cc) "Share"
means a share of Common Stock, as adjusted in accordance with Section 13 below. 


    (dd) "Stock
Purchase Right" means a right to purchase Common Stock pursuant to Section 12 below. 


    (ee) "Subsidiary"
means any corporation, whether now or hereafter existing (other than the Company), in an unbroken chain of corporations beginning with the Company if
each of the corporations other than the last corporation in the unbroken chain owns stock possessing more than fifty percent of the total combined voting power of all classes of stock in one of the
other corporations in such chain. 




    3.
Stock Subject to the Plan.  Subject to the provisions of Section 13 of the Plan, the shares of stock subject to Options or Stock Purchase Rights shall be
Common Stock, initially shares of the Company's Common Stock. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares which may be issued upon exercise of such
Options or Stock Purchase Rights is 38,000,000 Shares. Shares issued upon exercise of Options or Stock Purchase Rights may be authorized but unissued, or reacquired Common Stock. If an Option or Stock
Purchase Right expires or becomes unexercisable without having been exercised in full, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan
(unless the Plan has terminated). Shares which are delivered by the Holder or withheld by the Company upon the exercise of an Option or Stock Purchase Right under the Plan, in payment of the exercise
price thereof or tax withholding thereon, may again be optioned, granted or awarded hereunder, subject to the limitations of this Section 3. If Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for future grant under the Plan. Notwithstanding the provisions of this Section 3, no Shares may again be optioned,
granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an Incentive Stock Option under Code Section 422. 



    4.
Administration of the Plan.  



    (a) Administrator.
Unless and until the Board delegates administration to a Committee as set forth below, the Plan shall be administered by the Board. The Board may
delegate administration of the Plan to a Committee or Committees of one or more members of the Board, and the term "Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the
power to 



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delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. Notwithstanding the foregoing, however, from and after the
Public Trading Date, a Committee of the Board shall administer the Plan and the Committee shall consist solely of two or more Independent Directors each of whom is both an "outside director," within
the meaning of Section 162(m) of the Code, and a "non-employee director" within the meaning of Rule 16b-3. Within the scope of such authority, the Board or the Committee may (i) delegate
to a committee of one or more members of the Board who are not Independent Directors the authority to grant awards under the Plan to eligible persons who are either (1) not then "covered
employees," within the meaning of Section 162(m) of the Code and are not expected to be "covered employees" at the time of recognition of income resulting from such award or (2) not persons
with respect to whom the Company wishes to comply with Section 162(m) of the Code and/or (ii) delegate to a committee of one or more members of the Board who are not "non-employee directors,"
within the meaning of Rule 16b-3, the authority to grant awards under the Plan to eligible persons who are not then subject to Section 16 of the Exchange Act. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may only be filled by the Board. 


    (b) Powers
of the Administrator. Subject to the provisions of the Plan and the specific duties delegated by the Board to such Committee, and subject to the approval of
any relevant authorities, the Administrator shall have the authority in its sole discretion: 



     (i) to
determine the Fair Market Value; 


    (ii) to
select the Service Providers to whom Options and Stock Purchase Rights may from time to time be granted hereunder; 


    (iii) to
determine the number of Shares to be covered by each such award granted hereunder; 


    (iv) to
approve forms of agreement for use under the Plan; 


    (v) to
determine the terms and conditions of any Option or Stock Purchase Right granted hereunder (such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may vest or be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole
discretion, shall determine); 


    (vi) to
determine whether to offer to buyout a previously granted Option as provided in subsection 10(i) and to determine the terms and conditions of such offer
and buyout (including whether payment is to be made in cash or Shares); 


   (vii) to
prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for
the purpose of qualifying for preferred tax treatment under foreign tax laws; 


   (viii) to
allow Holders to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock
Purchase Right that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld based on the statutory withholding rates for federal and state 




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tax purposes that apply to supplemental taxable income. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined.
All elections by Holders to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; 


    (ix) to
amend the Plan or any Option or Stock Purchase Right granted under the Plan as provided in Section 15; and 


    (x) to
construe and interpret the terms of the Plan and awards granted pursuant to the Plan and to exercise such powers and perform such acts as the Administrator deems
necessary or desirable to promote the best interests of the Company which are not in conflict with the provisions of the Plan. 




    (c) Effect
of Administrator's Decision. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Holders. 




    5.
Eligibility.  Non-Qualified Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees. If
otherwise eligible, an Employee or Consultant who has been granted an Option or Stock Purchase Right may be granted additional Options or Stock Purchase Rights. 


    6.
Limitations.  



    (a) Each
Option shall be designated by the Administrator in the Option Agreement as either an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designations,
to the extent that the aggregate Fair Market Value of Shares subject to a Holder's Incentive Stock Options and other incentive stock options granted by the Company, any Parent or Subsidiary, which
become exercisable for the first time during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options or other options shall be treated as
Non-Qualified Stock Options. 


    For
purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be
determined as of the time of grant. 


    (b) Neither
the Plan, any Option nor any Stock Purchase Right shall confer upon a Holder any right with respect to continuing the Holder's employment or consulting
relationship with the Company, nor shall they interfere in any way with the Holder's right or the Company's right to terminate such employment or consulting relationship at any time, with or without
cause. 


    (c) No
Service Provider shall be granted, in any calendar year, Options or Stock Purchase Rights to purchase more than 10,000,000 Shares;  provided, however, that the foregoing limitation shall not apply prior
to the Public Trading Date and, following the Public Trading Date, the foregoing
limitation shall not apply until the earliest of: (i) the first material modification of the Plan (including any increase in the number of shares reserved for issuance under the Plan in
accordance with Section 3); (ii) the issuance of all of the shares of Common Stock reserved for issuance under the Plan; (iii) the expiration of the Plan; (iv) the first
meeting of stockholders at which Directors of the Company are to be elected that occurs after the close of the third calendar year following the calendar year in which occurred the first registration
of an equity security of the Company under Section 12 of the Exchange Act; or (v) such other date required by Section 162(m) of the Code and the rules and regulations
promulgated thereunder. The foregoing limitation shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 13. For purposes of this
Section 6(c), if an Option is canceled in the same calendar year it was granted (other than in connection with a transaction described in 



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Section 15), the canceled Option will be counted against the limit set forth in this Section 6(c). For this purpose, if the exercise price of an Option is reduced, the transaction shall
be treated as a cancellation of the Option and the grant of a new Option. 




    7.
Term of Plan.  The Plan shall become effective upon its initial adoption by the Board and shall continue in effect until it is terminated under Section 17 of the
Plan. No Options or Stock Purchase Rights may be issued under the Plan after the tenth (10th) anniversary of the earlier of (i) the date upon which the Plan is adopted by the Board or
(ii) the date the Plan is approved by the stockholders. 


    8.
Term of Option.  The term of each Option shall be stated in the Option Agreement; provided, however, that the term
shall be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to a Holder who, at the time the Option is granted, owns (or is treated as
owning under Code Section 424) stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option
shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement. 


    9.
Option Exercise Price and Consideration.  



    (a) Except
as provided in Section 13, the per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following: 



     (i) In
the case of an Incentive Stock Option 



    (A) granted
to an Employee who, at the time of grant of such Option, owns (or is treated as owning under Code Section 424) stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than one hundred ten percent (110%) of the Fair Market Value
per Share on the date of grant. 


    (B) granted
to any other Employee, the per Share exercise price shall be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of
grant. 




    (ii) In
the case of a Non-Qualified Stock Option 



    (A) granted
to a Service Provider who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of the grant. 


    (B) granted
to any other Service Provider, the per Share exercise price shall be no less than eighty-five percent (85%) of the Fair Market Value per Share on the date
of grant. 




    (iii) Notwithstanding
the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate
transaction. 




    (b) The
consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of grant). Such consideration may consist of (1) cash, (2) check, (3) with the consent of the
Administrator, a full recourse promissory note bearing interest (at a market rate of interest) and payable upon such terms as may be prescribed by the Administrator, (4) with the consent of the
Administrator, other Shares which (x) in the case of Shares acquired from the Company, have been owned by the Holder for more than six 



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(6) months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised,
(5) with the consent of the Administrator, surrendered Shares then issuable upon exercise of the Option having a Fair Market Value on the date of exercise equal to the aggregate exercise price
of the Option or exercised portion thereof, (6) property of any kind which constitutes good and valuable consideration, (7) with the consent of the Administrator, delivery of a notice
that the Holder has placed a market sell order with a broker with respect to Shares then issuable upon exercise of the Options and that the broker has been directed to pay a sufficient portion of the
net proceeds of the sale to the Company in satisfaction of the Option exercise price, provided, that payment of such proceeds is then made to the
Company upon settlement of such sale, or (8) with the consent of the Administrator, any combination of the foregoing methods of payment. 




    10.
Exercise of Option.  



    (a) Vesting;
Fractional Exercises. Except as provided in Section 13, Options granted hereunder shall be vested and exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth in the Option Agreement; provided, however, that, prior to the Public
Trading Date, except with regard to Options granted to Officers, Directors or Consultants, in no event shall an Option granted hereunder become vested and exercisable at a rate of less than twenty
percent (20%) per year over five (5) years from the date the Option is granted, subject to reasonable conditions, such as continuing to be a Service Provider. An Option may not be exercised for
a fraction of a Share. 


    (b) Deliveries
upon Exercise. All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Secretary of the Company
or his or her office: 



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     (i) A
written or electronic notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Holder or other person then entitled to exercise the Option or such portion of the Option; 


    (ii) Such
representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with Applicable Laws. The
Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance, including, without limitation, placing legends on share certificates
and issuing stop transfer notices to agents and registrars; 


    (iii) Upon
the exercise of all or a portion of an unvested Option pursuant to Section 10(h), a Restricted Stock purchase agreement in a form determined by the
Administrator and signed by the Holder or other person then entitled to exercise the Option or such portion of the Option; and 


    (iv) In
the event that the Option shall be exercised pursuant to Section 10(f) by any person or persons other than the Holder, appropriate proof of the right of
such person or persons to exercise the Option. 




    (c) Conditions
to Delivery of Share Certificates. The Company shall not be required to issue or deliver any certificate or certificates for Shares purchased upon the
exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: 



     (i) The
admission of such Shares to listing on all stock exchanges on which such class of stock is then listed; 


    (ii) The
completion of any registration or other qualification of such Shares under any state or federal law, or under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body which the Administrator shall, in its sole discretion, deem necessary or advisable; 


    (iii) The
obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its sole discretion, determine to
be necessary or advisable; 


    (iv) The
lapse of such reasonable period of time following the exercise of the Option as the Administrator may establish from time to time for reasons of administrative
convenience; and 


    (v) The
receipt by the Company of full payment for such Shares, including payment of any applicable withholding tax, which in the sole discretion of the Administrator
may be in the form of consideration used by the Holder to pay for such Shares under Section 9(b). 




    (d) Termination
of Relationship as a Service Provider. If a Holder ceases to be a Service Provider other than by reason of the Holder's disability or death, such Holder
may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination; provided,
however, that prior to the Public Trading Date, such period of time shall not be less than thirty (30) days (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Holder's termination.
If, on the date of termination, the Holder is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option immediately cease to be issuable under the Option and
shall again become available for issuance under the Plan. If, after termination, the Holder does not exercise his or her Option within the time period 



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specified herein, the Option shall terminate, and the Shares covered by such Option shall again become available for issuance under the Plan. 


    (e) Disability
of Holder. If a Holder ceases to be a Service Provider as a result of the Holder's disability, the Holder may exercise his or her Option within such
period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination; provided, however, that prior to
the Public Trading Date, such period of time shall not be less than six (6) months (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Holder's termination. If such disability is not a "disability" as
such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive Stock Option shall automatically cease to be treated as an Incentive Stock Option
and shall be treated for tax purposes as a Non-Qualified Stock Option from and after the day which is three (3) months and one (1) day following such termination. If, on the date of
termination, the Holder is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately cease to be issuable under the Option and shall again
become available for issuance under the Plan. If, after termination, the Holder does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered
by such Option shall again become available for issuance under the Plan. 


    (f)  Death
of Holder. If a Holder dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement  provided, however, that prior to the Public Trading
Date, such period of time shall not be less than six (6) months (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant), by the Holder's estate or by a person who acquires the right to exercise the Option by bequest or inheritance, but only to
the extent that the Option is vested on the date of death. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Holder's
termination. If, at the time of death, the Holder is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately cease to be issuable under
the Option and shall again become available for issuance under the Plan. The Option may be exercised by the executor or administrator of the Holder's estate or, if none, by the person(s) entitled to
exercise the Option under the Holder's will or the laws of descent or distribution. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall again become available for issuance under the Plan. 


    (g) Regulatory
Extension. A Holder's Option Agreement may provide that if the exercise of the Option following the termination of the Holder's status as a Service
Provider (other than upon the Holder's death or Disability) would be prohibited at any time solely because the issuance of shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in Section 8 or (ii) the expiration of a period of three (3) months after
the termination of the Holder's status as a Service Provider during which the exercise of the Option would not be in violation of such registration requirements. 



    (h) Early
Exercisability. The Administrator may provide in the terms of a Holder's Option Agreement that the Holder may, at any time before the Holder's status as a
Service Provider terminates, exercise the Option in whole or in part prior to the full vesting of the Option; provided, however, that subject to Section
22, Shares acquired upon exercise of an Option which has not fully vested may be subject to any forfeiture, transfer or other restrictions as the Administrator may determine in its sole discretion. 



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    (i)  Buyout Provisions. The Administrator may at any time offer to buyout for a payment in cash or Shares, an Option previously granted, based on such terms and
conditions as the Administrator shall establish and communicate to the Holder at the time that such offer is made. 




    11.
Non-Transferability of Options and Stock Purchase Rights.  Options and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Holder, only by the Holder. 



    12.
Stock Purchase Rights.  



    (a) Rights
to Purchase. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with Options granted under the Plan and/or cash awards made
outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing of the terms, conditions and restrictions
related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, and the time within which such person must accept such offer;  provided, however,
 that to the extent required to comply with applicable securities laws, the purchase price of such Shares shall not be less than the
purchase price requirements set forth in Section 260.140.42 of Title 10 of the California Code of Regulations. The offer shall be accepted by execution of a Restricted Stock purchase agreement in the
form determined by the Administrator. 


    (b) Repurchase
Right. Unless the Administrator determines otherwise, the Restricted Stock purchase agreement shall grant the Company the right to repurchase Shares
acquired upon exercise of a Stock Purchase Right upon the termination of the purchaser's status as a Service Provider for any reason. Subject to Section 22, the purchase price for Shares repurchased
by the Company pursuant to such repurchase right and the rate at which such repurchase right shall lapse shall be determined by the Administrator in its sole discretion, and shall be set forth in the
Restricted Stock purchase agreement. 


    (c) Other
Provisions. The Restricted Stock purchase agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator in its sole discretion. 


    (d) Rights
as a Shareholder. Once the Stock Purchase Right is exercised, the purchaser shall have rights equivalent to those of a shareholder and shall be a shareholder
when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior
to the date the Stock Purchase Right is exercised, except as provided in Section 15 of the Plan. 




    13.
Adjustments upon Changes in Capitalization, Merger or Asset Sale.  



    (a) In
the event that the Administrator determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other
property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale,
transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights
to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, in the Administrator's sole discretion, affects the Common Stock such that an adjustment
is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or
with respect to any Option, Stock Purchase Right or Restricted Stock, then the Administrator shall, in such manner as it may deem equitable, adjust any or all of: 



10





 


     (i) the
number and kind of shares of Common Stock (or other securities or property) with respect to which Options or Stock Purchase Rights may be granted or awarded
(including, but not limited to, adjustments of the limitations in Section 3 on the maximum number and kind of shares which may be issued and adjustments of the maximum number of Shares that may be
purchased by any Holder in any calendar year pursuant to Section 6(c)); 


    (ii) the
number and kind of shares of Common Stock (or other securities or property) subject to outstanding Options, Stock Purchase Rights or Restricted Stock; and 


    (iii) the
grant or exercise price with respect to any Option or Stock Purchase Right. 




    (b) In
the event of any transaction or event described in Section 15(a), the Administrator, in its sole discretion, and on such terms and conditions as it deems
appropriate, either by the terms of the Option, Stock Purchase Right or Restricted Stock or by action taken prior to the occurrence of such transaction or event and either automatically or upon the
Holder's request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Option, Stock Purchase Right or Restricted Stock granted or issued
under the Plan or to facilitate such transaction or event: 



     (i) To
provide for either the purchase of any such Option, Stock Purchase Right or Restricted Stock for an amount of cash equal to the amount that could have been
obtained upon the exercise of such Option or Stock Purchase Right or realization of the Holder's rights had such Option, Stock Purchase Right or Restricted Stock been currently exercisable or payable
or fully vested or the replacement of such Option, Stock Purchase Right or Restricted Stock with other rights or property selected by the Administrator in its sole discretion; 



    (ii) To
provide that such Option or Stock Purchase Right shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in the Plan or
the provisions of such Option or Stock Purchase Right; 


    (iii) To
provide that such Option, Stock Purchase Right or Restricted Stock be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the
number and kind of shares and prices; 


    (iv) To
make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Options and Stock Purchase Rights,
and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Options, Stock Purchase Rights or Restricted Stock or Options, Stock Purchase
Rights or Restricted Stock which may be granted in the future; and 


    (v) To
provide that immediately upon the consummation of such event, such Option or Stock Purchase Right shall not be exercisable and shall terminate;  provided, that for a specified period of time prior to
such event, such Option or Stock Purchase Right shall be exercisable as to all Shares covered
thereby, and the restrictions imposed under an Option Agreement or Restricted Stock purchase agreement upon some or all Shares may be terminated and, in the case of Restricted Stock, some or all
shares of such Restricted Stock may cease to be subject to repurchase, notwithstanding anything to the contrary in the Plan or the provisions of such Option, Stock Purchase Right or Restricted Stock
purchase agreement. 




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    (c) Subject
to Section 3, the Administrator may, in its sole discretion, include such further provisions and limitations in any Option, Stock Purchase Right, Restricted
Stock agreement or certificate, as it may deem equitable and in the best interests of the Company. 


    (d) If
the Company undergoes an Acquisition, then any surviving corporation or entity or acquiring corporation or entity, or affiliate of such corporation or entity,
may assume any Options, Stock Purchase Rights or Restricted Stock outstanding under the Plan or may substitute similar stock awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 15(d)) for those outstanding under the Plan. In the event any surviving corporation or entity or acquiring corporation or entity in an
Acquisition, or affiliate of such corporation or entity, does not assume such Options, Stock Purchase Rights or Restricted Stock or does not substitute similar stock awards for those outstanding under
the Plan, then with respect to (i) Options, Stock Purchase Rights or Restricted Stock held by participants in the Plan whose status as a Service Provider has not terminated prior to such event,
the vesting of such Options, Stock Purchase Rights or Restricted Stock (and, if applicable, the time during which such awards may be exercised) shall be accelerated and made fully exercisable and all
restrictions thereon shall lapse at least ten (10) days prior to the closing of the Acquisition (and the Options or Stock Purchase Rights terminated if not exercised prior to the closing of
such Acquisition), and (ii) any other Options or Stock Purchase Rights outstanding under the Plan, such Options or Stock Purchase rights shall be terminated if not exercised prior to the
closing of the Acquisition. 


    (e) The
existence of the Plan, any Option Agreement or Restricted Stock purchase agreement and the Options or Stock Purchase Rights granted hereunder shall not affect
or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any
merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior
to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 




    14.
Time of Granting Options and Stock Purchase Rights.  The date of grant of an Option or Stock Purchase Right shall, for all purposes, be the date on which the
Administrator makes the determination granting such Option or Stock Purchase Right, or such other date as is determined by the Administrator. Notice of the determination shall be given to each
Employee or Consultant to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant. 


    15.
Amendment and Termination of the Plan.  



    (a) Amendment
and Termination. The Board may at any time wholly or partially amend, alter, suspend or terminate the Plan. However, without approval of the Company's
stockholders given within twelve (12) months before or after the action by the Board, no action of the Board may, except as provided in Section 15, increase the limits imposed in
Section 3 on the maximum number of Shares which may be issued under the Plan or extend the term of the Plan under Section 7. 



    (b) Stockholder
Approval. The Board shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. 


    (c) Effect
of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Holder, unless mutually agreed
otherwise between the Holder and the Administrator, which agreement must be in writing and signed by the Holder and the Company. Termination of the Plan shall not affect the Administrator's ability to 



12





 


exercise the powers granted to it hereunder with respect to Options, Stock Purchase Rights or Restricted Stock granted or awarded under the Plan prior to the date of such termination. 




    16.
Stockholder Approval.  The Plan will be submitted for the approval of the Company's stockholders within twelve (12) months after the date of the Board's initial
adoption of the Plan. Options, Stock Purchase Rights or Restricted Stock may be granted or awarded prior to such stockholder approval, provided that such Options, Stock Purchase Rights and Restricted
Stock shall not be exercisable, shall not vest and the restrictions thereon shall not lapse prior to the time when the Plan is approved by the
stockholders, and provided further that if such approval has not been obtained at the end of said twelve-month period, all Options, Stock Purchase Rights and Restricted Stock previously granted or
awarded under the Plan shall thereupon be canceled and become null and void. 


    17.
Inability to Obtain Authority.  The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained. 


    18.
Reservation of Shares.  The Company, during the term of this Plan, shall at all times reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan. 


    19.
Information to Holders and Purchasers.  Prior to the Public Trading Date and to the extent required by Section 260.140.46 of Title 10 of the
California Code of Regulations, the Company shall provide to each Holder and to each individual who acquires Shares pursuant to the Plan, not less frequently than annually during the period such
Holder or purchaser has one or more Options or Stock Purchase Rights outstanding, and, in the case of an individual who acquires Shares pursuant to the Plan, during the period such individual owns
such Shares, copies of annual financial statements. Notwithstanding the preceding sentence, the Company shall not be required to provide such statements to key employees whose duties in connection
with the Company assure their access to equivalent information. 


    20.
Repurchase Provisions.  The Administrator in its sole discretion may provide that the Company may repurchase Shares acquired upon exercise of an Option or Stock
Purchase Right upon the occurrence of certain specified events, including, without limitation, a Holder's termination as a Service Provider, divorce, bankruptcy or insolvency;  provided, however, that
any such repurchase right shall be set forth in the applicable Option Agreement or Restricted Stock purchase agreement or in
another agreement referred to in such agreement and, provided further, that to the extent required by Section 260.140.41 and Section 260.140.42 of Title 10 of the California Code of
Regulations, any such repurchase right set forth in an Option or Stock Purchase Right granted prior to the Public Trading Date to a person who is not an Officer, Director or Consultant shall be upon
the following terms: (i) if the repurchase option gives the Company the right to repurchase the shares upon termination as a Service Provider at not less than the Fair Market Value of the
shares to be purchased on the date of termination of status as a Service Provider, then (A) the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness
for the shares within ninety (90) days of termination of status as a Service Provider (or in the case of shares issued upon exercise of Options or Stock Purchase Rights after such date of termination,
within ninety (90) days after the date of the exercise) or such longer period as may be agreed to by the Administrator and the Plan participant and (B) the right terminates when the shares
become publicly traded; and (ii) if the repurchase option gives the Company the right to repurchase the Shares upon termination as a Service Provider at the original purchase price for such
Shares, then (A) the right to repurchase at the original purchase price shall lapse at the rate of at least twenty percent (20%) of the shares per year over five (5) years from the date the
Option or Stock Purchase Right is granted (without respect to the date the Option or Stock Purchase Right was exercised or became exercisable) and (B) the right to repurchase shall be exercised 


13





 


for cash or cancellation of purchase money indebtedness for the shares within ninety (90) days of termination of status as a Service Provider (or, in the case of shares issued upon exercise of Options
or Stock Purchase Rights, after such date of termination, within ninety (90) days after the date of the exercise) or such longer period as may be agreed to by the Company and the Plan participant. 


    21.
Investment Intent.  The Company may require a Plan participant, as a condition of exercising or acquiring stock under any Option or Stock Purchase Right,
(i) to give written assurances satisfactory to the Company as to the participant's knowledge and experience in financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option or Stock Purchase Right; and (ii) to give written assurances satisfactory to the Company stating that the participant is acquiring
the stock subject to the Option or Stock Purchase Right for the participant's own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements,
and any assurances given pursuant to such requirements, shall be inoperative if (A) the issuance of the shares upon the exercise or acquisition of stock under the applicable Option or Stock
Purchase Right has been registered under a then currently effective registration statement under the Securities Act or (B) as to any particular requirement, a determination is made by counsel
for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of
the stock. 


    22.
Governing Law.  The validity and enforceability of this Plan shall be governed by and construed in accordance with the laws of the State of Delaware without regard
to otherwise governing principles of conflicts of law. 


*
* * * * * * 


    I
hereby certify that the Plan was duly adopted by the Board of Directors of PayPal, Inc. on                    
    , 2001. 


    Executed
at Palo Alto, California on this      day of                    , 2001. 













By: 


Name: 


Title: 













*
* * * * * * 


    I
hereby certify that the foregoing Plan was approved by the stockholders of PayPal, Inc. on                    
    , 200    . 


    Executed
at Palo Alto, California on this      day of                    ,
200    . 



	 	 	
 Secretary






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