Document:

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                                                                   EXHIBIT 10.13

                              EMPLOYMENT AGREEMENT

     This Employment Agreement (this "Agreement") is effective as of April 1,
2001, between ENCOMPASS MANAGEMENT CO., a Delaware corporation (the "Company")
and RAY NAIZER, a resident of __________ County, Texas ("Employee").  Encompass
Services Corporation, a Texas corporation ("Encompass") has joined herein solely
for the purpose of guaranteeing the performance by the Company of its
obligations hereunder, as provided in Section 28 of this Agreement.  In
consideration of the premises and the mutual covenants contained herein, the
parties agree as follows:

     1.   Employment.  The Company hereby agrees to employ Employee and Employee
hereby agrees to work for the Company as its President - Electrical Technologies
Group.  So long as Employee is employed by the Company, Employee shall devote
Employee's skill, energy and substantially all of his business-related efforts
to the faithful discharge of Employee's duties as an employee of the Company.
Employee will work from his offices in Dallas, Texas but will spend such time in
the Kansas City, Kansas office of Encompass as is required to effectively
discharge his responsibilities under this Agreement.  In providing services
hereunder, Employee shall comply with and follow all directives, policies,
standards and regulations from time to time established by the Board of
Directors of the Company or Encompass, which are applicable to the Company.  If
Employee is elected as a director or an officer of any of the Company's
Affiliates, Employee will fulfill his duties as such director or officer without
additional compensation.

     2.   Term of Employment.  Employee's employment by the Company pursuant to
this Agreement shall continue in effect for a term of two (2) years from the
date of this Agreement (the "Initial Period"), which shall be automatically
extended, without any action on the part of Employee or the Company, for
additional, successive one-year periods (each such one-year period, an
"Additional Period" and all of such one-year periods collectively, the
"Additional Periods") commencing on the second anniversary date of this
Agreement and on each anniversary date thereafter, unless either party gives
notice of non-renewal of this Agreement, as provided in Section 10(e) of this
Agreement, or otherwise terminates this Agreement, in accordance with the other
provisions of Section 10 hereof.

     3.  Representations and Warranties.  Employee represents and warrants that
Employee is under no contractual or other restrictions or obligations that will
limit in any way Employee's activities on behalf of the Company or its
Affiliates or will prohibit or limit the disclosure or use by Employee of any
information that directly or indirectly relates to the businesses of the Company
or its Affiliates, or the services to be rendered by Employee under this
Agreement.

     4.  Compensation.  Subject to the provisions of Section 10 of this
Agreement, Employee will be entitled to the compensation and benefits set forth
in this Section 4.
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     (a) During the Initial Period, the Company shall pay Employee an Annual
Base Salary, payable semi-monthly, in equal installments, at a rate equal to
$265,000 per year for the first calendar year or portion thereof occurring
during the term of this Agreement.  In each subsequent calendar year, or portion
thereof, occurring during the term of this Agreement, the Company shall pay to
Employee an Annual Base Salary determined by the Compensation Committee of
Encompass following its annual salary and performance review.  Employee's Annual
Base Salary for each succeeding calendar year (or portion thereof) occurring
during the term of this Agreement will be reviewed at least annually following
the fourth quarter of each calendar year of Employee's employment hereunder,
commencing after the fourth quarter of calendar year 2001.  Employee's Annual
Base Salary shall be pro-rated for any partial calendar year remaining following
the commencement of employment with the Company under this Agreement.  In the
event this Agreement is terminated or expires during any calendar year, the
amount of such Annual Base Salary owed by the Company to Employee, if any, will
be determined pursuant to Section 10 of this Agreement.

     (b) Employee shall be eligible to receive an annual bonus pursuant to the
incentive compensation program in effect, if any, from time to time for group
president level employees of the Company.  The target bonus of Employee under
such program shall not be less than 135% of Employee's Annual Base Salary in
effect for the calendar year with respect to which such bonus is earned (pro-
rated for any partial calendar year in which employment under his Agreement
commences).  The bonus, if any, will be earned for Employee's performance during
each calendar year (or portion thereof) occurring during the term of this
Agreement, but will be finally determined and paid following the closing of the
books and records of the Company for such calendar year and review of same by
the Compensation Committee of Encompass and the Company's independent auditors.
In the event this Agreement is terminated or expires during any calendar year,
the amount of such bonus, if any, owed by the Company to Employee will be
determined pursuant to Section 10 of this Agreement.

     (c) All payments of salary and other compensation to Employee shall be made
after deduction of any taxes required to be withheld with respect thereto under
applicable federal, state and local laws.

     5.   Fringe Benefits; Expenses.

     (a) During the term of employment of Employee hereunder, Employee shall
participate in all employee benefit plans sponsored by the Company for its group
president level employees, which may include, but will not be limited to, stock
purchase and stock option plans, sick leave and disability leave, health
insurance, dental insurance and pension and/or profit sharing plans; provided,
however, that except as provided below, the existence, nature, amount and
limitations of such plans shall be determined from time to time by the Board of
Directors of the Company or Encompass.

     (b) The Company will reimburse Employee for all reasonable business
expenses incurred by Employee in the scope of Employee's employment; provided,
however, that Employee must file expense reports with respect to such expenses
in accordance with the

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Company's policies as are in effect from time to time, and any expenses
requiring the approval of any officer or the Board of Directors of the Company
or Encompass pursuant to any policies of the Company then in effect shall have
been so approved.

     (c) During the term of employment of Employee hereunder, Employee shall be
entitled to a minimum of three weeks paid vacation during each calendar year and
to paid holidays and other paid leave set forth in the Company's policies in
effect from time to time.  Any vacation not used during a calendar year may not
be used during any subsequent period. Vacation time shall be prorated for any
partial calendar year of employment.

     (d) During the term of employment of Employee hereunder, the Company will
pay all license fees, occupation taxes and reasonable educational costs and
expenses necessary to maintain Employee's good standing under any professional
licenses required in connection with Employee's employment by the Company.

     (e) During the term of this Agreement, the Company shall use its reasonable
efforts to provide to Employee (i) life insurance payable to Employee's
designated beneficiary or beneficiaries in an amount at least three times
Employee's Annual Base Salary and (ii) to the extent provided to its other group
president level employees, as such coverage may change from time to time,
disability insurance on behalf of Employee which, as a goal, shall provide for
salary continuation in the event of permanent disability in an amount equal to
the lesser of (i) 60% of Employee's Annual Base Salary, or (ii) $10,000 per
month.

     6.  Indemnification and Insurance.  The Company shall indemnify Employee
with respect to matters relating to Employee's services as an officer and/or
director of the Company or any of its Affiliates, occurring during the course
and scope of Employee's employment with the Company, to the extent and pursuant
to the procedures set forth in the Company's By-laws, and in accordance with the
terms and procedures of any other indemnification which is generally applicable
to group president level employees of the Company and that may be provided by
the Company from time to time.  The foregoing indemnity is contractual and will
survive any adverse amendment to or repeal of the By-laws.  The Company will
also cover Employee under a policy of officers' and directors' liability
insurance providing coverage that is comparable to that provided now or
hereafter to any other group president level employee of the Company.  The
provisions of this Section 6 will survive the termination of this Agreement for
any reason.

     7.  Change in Control.  If a Change of Control occurs and if during the
Protected Period, Employee's employment is terminated or not renewed pursuant to
Section 10, whether by the Company or by Employee, then the Company shall
promptly pay or otherwise provide to Employee the benefits set forth below:

     (a) An amount equal to the sum of (i) Employee's Annual Base Salary then in
effect and (ii) an amount equal to the lesser of (a) Employee's actual bonus
earned with respect to the preceding calendar year and (b) the amount of
Employee's target bonus established by the Compensation Committee of Encompass
at the beginning of the calendar year in which the Employee's employment is
terminated or not renewed, which target bonus amount shall not be

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less that 135% of the Annual Base Salary for such year, payable in a single lump
sum by certified or bank cashier's check within 30 days of such termination; and

     (b) An amount equal to the product of (i) the maximum monthly premium
payment that may be charged to continue coverage for Employee and Employee's
dependents under the Company's health insurance plan under COBRA, and under all
life insurance and disability policies provided by the Company for Employee,
multiplied by (ii) 18.  Such amount shall be payable semi-monthly in accordance
with the Company's policies then in effect over a period of eighteen (18)
calendar months beginning in the first calendar month following the effective
date of such termination.  Any unpaid amounts under this clause (b) will cease
if Employee obtains substantially similar coverage under new employment.

Notwithstanding the foregoing, Employee shall not be entitled to any benefits
under this Section 7 if such termination is (i) due to Employee's death, (ii) by
the Company on account of Employee's disability as provided in Section 10(d)
below, (iii) by the Company for Cause or (iv) by Employee for other than Good
Reason as provided in Section 10 below.

     8.   Gross-Up of Parachute Payments.

     (a) To provide Employee with adequate protection in connection with
Employee's ongoing employment with the Company, this Agreement or other
incentive plans of the Company provide Employee with various benefits in the
event of termination of Employee's employment with the Company during the
Protected Period following a Change of Control.  If Employee's employment is
terminated or not renewed pursuant to Section 10 during a Protected Period
following a Change of Control, or otherwise in connection with a "change of
control" of Encompass, within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), a portion of those benefits could
be characterized as "excess parachute payments" within the meaning of Section
280G of the Code.  The parties hereto acknowledge that the protections set forth
in this Section 8 are important, and it is agreed that Employee should not have
to bear the full burden of the excise tax that might be levied under Section
4999 of the Code or any similar provision of federal, state of local law, in the
event that any portion of the benefits payable to Employee pursuant to this
Agreement or the other incentive plans of the Company are treated as an excess
parachute payment.  The parties, therefore, have agreed as set forth in this
Section 8.

     (b) Anything in this Agreement to the contrary notwithstanding, if it shall
be determined that any payment or distribution (including income recognized by
Employee upon the early vesting of restricted property or upon the exercise of
options whose exercise date has been accelerated) by the Company or any other
Person to or for the benefit of Employee (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
8) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any similar provision of any federal, state or local law or any
interest or penalties are incurred by Employee with respect to such excise tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Company shall

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pay an additional payment, not to exceed $250,000 in the aggregate (a "Gross-Up
Payment"), in an amount such that after payment by Employee of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment,
Employee retains an amount of the Gross-Up Payment equal to fifty percent (50%)
of the Excise Tax imposed on the Payments. Employee will bear the cost of the
remaining 50% until the aggregate Gross-Up Payments from the Company have
reached $250,000, and will thereafter bear all additional taxes, interest or
penalties.

     (c) In the event of any dispute as to the applicability or amount of any
Gross-Up Payment, all determinations required to be made under this Section 8,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the independent public accounting firm regularly
employed by the Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and to Employee within 15 business
days after the receipt of notice from Employee that there has been a Payment, or
such earlier time as is requested by the Company. All fees and expenses of the
Accounting Firm will be borne by the Company.  If the Accounting Firm determines
that no Excise Tax is payable by Employee, it shall furnish Employee with a
written statement that failure to report the Excise Tax on Employee's applicable
federal income tax return would not result in the imposition of a negligence or
similar penalty.  Any determination by the Accounting Firm shall be binding on
the Company and Employee unless and until a final determination is received from
the Internal Revenue Service indicating a contrary result.  As a result of
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments may not have been made by the Company that should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder.  If Employee thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of Employee, consistent with the maximum limitation stated in
Section 8(b) above.  In the event it is determined by the Accounting Firm that
the Gross Payments previously made by the Company exceeded the limitations
stated in Section 8(b) above, upon written notice from the Company, accompanied
by a copy of the Accounting Firm's calculation of same, the amount of such
overpayment shall be promptly paid by Employee to the Company.

     9.   Options and Other Stock-Related Plans.    Except to the extent
otherwise provided in this Section 9 below, the terms and conditions of any
option, stock bonus, restricted stock, stock award or other stock-related plan
or program with respect to capital stock of Encompass, which may be granted to
Employee, or in which Employee may participate, shall be governed by the
applicable Encompass or Company plan, if any, and/or separate agreement(s)
between the Company or Encompass, and Employee with respect thereto.

     (a) The exercise period for vested stock options held by Employee at the
time of any termination of this Agreement shall be the greater of (i) ninety
(90) days from the effective date of termination of employment other than under
Section 10(b) of this Agreement, (ii) thirty (30)

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days from the effective date of termination of employment under Section 10(b) of
this Agreement, (iii) the exercise period established in or under the terms of
the stock option plan or stock option agreement to which such stock options are
subject, or (iv) the exercise period established in or under the terms of any
other written agreement between Employee and Encompass or the Company with
respect to such stock options.

     10.  Termination or Non-Renewal of Employment.

     (a)  Termination by Either Party; General Provisions. Either the Company or
Employee may terminate this Agreement and Employee's employment hereunder at any
time during the term of this Agreement by delivery of written notice by the
terminating party to the other party at least thirty (30) days prior to the
effective date of such termination as set forth in such notice; provided that
notice under this Section 10(a) shall only be effective to terminate this
Agreement in situations not governed by Section 10(e) of this Agreement. Within
thirty (30) days after such termination is effective, in addition to any other
payments or benefits provided in this Section 10, the Company shall pay to
Employee an amount equal to the sum of (i) Employee's unpaid Annual Base Salary
prorated through the date of termination of this Agreement at the rate in effect
at the time of such termination, (ii) vacation pay earned pursuant to the
policies of the Company then in effect but not taken to the date of such
termination, and (iii) all other amounts previously deferred by Employee or
earned by Employee as reflected in the books and records of the Company but not
paid as of such date under all Company incentive or deferred compensation plans
or programs.

     (b)  Termination for Cause; Resignation without Good Reason. If the Company
terminates Employee's employment for Cause, or Employee terminates his
employment without Good Reason, the payments due to Employee shall be limited to
the amounts described in Section 10(a) of this Agreement.

     (c)  Termination Without Cause; Termination for Good Reason. If the Company
terminates Employee's employment without Cause (except as provided in Section
10(d) below), or if Employee terminates Employee's employment for Good Reason,
the Company shall promptly pay or otherwise provide to Employee the following
amounts in addition to those set forth in Section 10(a) of this Agreement:

          (i) An amount equal to the sum of (A) Employee's Annual Base Salary
     then in effect and (B) the lesser of (1) the amount of Employee's actual
     bonus earned with respect to the preceding calendar year and (2) the amount
     of Employee's target bonus established by the Compensation Committee of
     Encompass at the beginning of the calendar year in which such termination
     occurs, which target bonus amount shall not be less than 135% of the Annual
     Base Salary for such year, payable in a single lump sum by certified or
     bank cashier's check within 30 days of such termination; and

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          (ii) An amount equal to the product of (A) the maximum monthly premium
     payment that may be charged to continue coverage for Employee and
     Employee's dependents under the Company's health insurance plan under
     COBRA, and under all life insurance and disability policies provided by the
     Company for Employee multiplied by (B) 18.  Such amount shall be payable
     semi-monthly in accordance with the Company's policies then in effect over
     a period of eighteen (18) calendar months beginning in the first calendar
     month following the effective date of such termination.  Any unpaid amounts
     under this clause (ii) will cease if Employee obtains substantially similar
     coverage under new employment.

     (d)  Termination on Disability. If at any time during the term of
Employee's employment hereunder, Employee is unable to perform the essential
functions of Employee's job with or without reasonable accommodation, the
Company shall continue payment of Employee's compensation as provided in Section
4 of this Agreement during the first twelve (12) month period of such disability
to the extent not covered by the Company's disability insurance policies (the
Company may offset against its obligations in this sentence the amounts actually
received by Employee under such policies). Upon the expiration of such 12 month
period, the Company, at its sole option, may continue payment of Employee's
salary for such additional periods as the Company elects, or may terminate
Employee's employment hereunder without any further compensation obligations to
Employee hereunder. If Employee should die during the term of Employee's
employment hereunder, Employee's employment and the Company's obligations
hereunder for compensation payments shall terminate as of the end of the month
in which Employee's death occurs.

     (e)  Non-Renewal of Employment; General Provisions. Either the Company or
Employee may elect not to renew Employee's employment hereunder at the end of
the Initial Period, or at the end of any Additional Period thereafter, by
delivery of written notice by the electing party to the other party at least
sixty (60) days prior to the effective date of such termination, as set forth in
such notice. Within thirty (30) days after the expiration of the employment term
(in addition to any other amounts provided in Section 10(f) below in the case of
a non-renewal by the Company), the Company shall pay to Employee an amount equal
to the sum of (i) Employee's unpaid Annual Base Salary, if any, prorated through
the date of termination of this Agreement at the rate then in effect at the time
of such non-renewal and (ii) vacation pay earned pursuant to the policies of the
Company then in effect but not taken to the date of such non-renewal. In the
event of a non-renewal by Employee, the amounts due Employee shall be limited to
the amounts specified in clause (i) and (ii) of the preceding sentence.

     (f)  Non-Renewal by the Company at End of Initial Period or Additional
Period. If the Company elects not to continue this Agreement and renew
Employee's employment as of the end of the Initial Period or an Additional
Period, and provided in the Company's reasonable good faith determination,
Employee continues to perform Employee's duties and responsibilities through the
end of such Initial Period or Additional Period, as the case may be, then the
Company shall promptly pay or otherwise provide to Employee the following
amounts in addition to those set forth in Section 10(a):

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          (i)  An amount equal to Employee's Annual Base Salary then in effect,
     payable in a single lump sum by certified or bank cashier's check within 30
     days of such non-renewal; and

          (ii) An amount equal to the product of (A) the maximum monthly
     premium payment that may be charged to continue coverage for Employee and
     Employee's dependents under the Company's health insurance plan under
     COBRA, and under all life insurance and disability policies provided by the
     Company for Employee multiplied by (B) 12. Such amount shall be payable
     semi-monthly in accordance with the Company's policies then in effect over
     a period of twelve (12) calendar months beginning in the first calendar
     month following the effective date of such non-renewal. Any unpaid amounts
     under this clause (ii) will cease if Employee obtains substantially similar
     coverage under new employment.

     (g)  Waiver of Claims.  In the event this Agreement expires as a result of
non-renewal by the Company, or is terminated by the Company without Cause or
because Employee is unable to perform the essential functions of his or her job,
with or without reasonable accommodation, in accordance with Section 10(d)
hereof, or is terminated by Employee with Good Reason, Employee agrees to
accept, in full settlement of any and all claims, losses, damages and other
demands that Employee may have arising out of such termination or non-renewal,
as liquidated damages and not as a penalty, the payments, benefits and vesting
of rights set forth in this Agreement. Employee waives any and all rights
Employee may have to bring any cause of action or proceeding contesting any such
termination or non-renewal. Under no circumstances shall Employee be entitled to
any compensation or confirmation of any benefits under this Agreement for any
period of time following Employee's date of termination if Employee's
termination is for Cause, or Employee's election to not renew this Agreement at
the end of the Initial Period or any Additional Period, or Employee's election
to terminate his or her employment without Good Reason.

     (h)  Lock-ups, etc.  During the one (1) year period after Employee
receives the lump sum payments as provided in Section 10(c) or (f) above,
Employee shall sign any lock-up letters, standstill agreements, or other similar
documentation specifically required by an underwriter from such Employee in
connection with a public offering of securities by the Company or Encompass or
take other actions reasonably related thereto as requested by the Board of
Directors of the Company or Encompass; provided, however, that equivalent
agreements are being required of Company management and the period of any such
lock-up or standstill agreements shall not exceed the shorter of (i) 180 days or
(ii) the balance of the one (1) year period. In the event Employee fails to sign
any such letters, agreements or similar documentation or take any such action,
the Company may seek and obtain specific performance of such covenant,
including, without limitation, any injunction requiring execution thereof or the
taking of any such actions, and Employee hereby appoints the then president of
the Company in office from time to time to sign any such documents on Employee's
behalf so long as such documents are prepared on the same basis as other
shareholders generally or as all Company management shareholders.

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     11.  No Mitigation Obligation.  All amounts paid to Employee under this
Agreement following Employee's termination of employment and this Agreement
are acknowledged by the Company and Employee to be reasonable and to be
liquidated damages, and Employee will not be required to reduce the amount of
such payments by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever (including from
other employment) create any mitigation, offset, reduction or any other
obligation on the part of Employee under this Agreement.

     12.  Covenant Not to Compete.

     (a)  During Employee's employment with the Company or any of its
Affiliates, and thereafter during the Restricted Period, in order to help, among
other things, ensure the security of the Company's Confidential Information,
regardless of the reason for the termination of Employee's employment and this
Agreement, Employee will not engage in or carry on, directly or indirectly,
either for himself or as a member of a partnership or as a shareholder,
investor, owner, officer or director of a company or other entity, or as an
employee, agent, associate or consultant of any person, partnership, corporation
or other entity, any business in any State of the United States or in any other
part of the world that directly competes with any services or products produced,
sold, conducted, developed, or in the process of development by the Company or
its Affiliates on the date of termination of Employee's employment.

     (b)  Notwithstanding the foregoing, Employee shall not be deemed to be
in violation of Section 12(a) based solely on the ownership of less than one
percent of any class of securities of a publicly-held company whose gross assets
exceed $100,000,000.

     (c)  Employee acknowledges that (i) during the term of this Agreement,
Employee will be provided training by the Company or its Affiliates and access
to certain Confidential Information related to the business and operations of
the Company and its Affiliates and (ii) the limitations set forth herein on
Employee's rights to compete with the Company and its Affiliates are reasonable
and necessary for the protection of the Company and its Affiliates. In this
regard, Employee specifically agrees that the limitations as to period of time
and geographic area, as well as all other restrictions on Employee's activities
specified herein, are reasonable and necessary for the protection of the Company
and its Affiliates.  In particular, Employee acknowledges that the parties
anticipate that Employee will be actively seeking markets for the products and
services of the Company and its Affiliates throughout the United States and
elsewhere in the world during Employee's employment with the Company.

     (d)  Employee further agrees that during Employee's employment with
the Company or any of its Affiliates, and thereafter during the Restricted
Period, Employee shall not (i) request, induce or attempt to influence any
supplier of goods or services to the Company or any of its Affiliates to curtail
or cancel any business they may transact with the Company or any of its
Affiliates, (ii) request, induce or attempt to influence any customers or
potential customers of the Company or any of its Affiliates to curtail or cancel
any business they may transact with the Company or any of its Affiliates, or
(iii) request, induce or attempt to influence any employee of

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the Company or any of its Affiliates to terminate his or her employment with the
Company or any of its Affiliates.

     (e)  In the event that there shall be any violation of the covenant
not to compete set forth in this Section 12, then the time limitation thereof
shall be extended for a period of time equal to the period of time during which
such violation continues; and in the event the Company is required to seek
relief from such violation in any court, board of arbitration or other tribunal,
then the covenant shall be extended for a period of time equal to the pendency
of such proceedings, including all appeals.

     (e)  In the event Employee should violate any of the terms of this
Section 12, the Company shall have the right, in addition to pursuing damages
resulting from such violation, to reimbursement of all amounts paid to Employee,
if any, pursuant to Section 10(c),  Furthermore, Employee agrees that the remedy
at law for any breach by Employee of this Section 12 will be inadequate and that
the Company shall also be entitled to injunctive relief.

     13.  Confidential Information.  During the term of Employee's
employment hereunder, and for five (5) years after Employee's termination of
employment, Employee shall not use or disclose, without the prior written
consent of the Company, Confidential Information relating to the Company or any
of its Affiliates, and upon termination of Employee's employment will return to
the Company all written materials in Employee's possession embodying such
Confidential Information.  Employee will promptly disclose to the Company all
Confidential Information, as well as any business opportunity related to the
Company which comes to Employee's attention during the term of Employee's
employment with the Company.  Employee will not take advantage of or divert any
such business opportunity for the benefit of Employee or any other Person
without the prior written consent of the Company. Employee agrees that the
remedy at law for any breach by Employee of this Section 13 will be inadequate
and that the Company shall also be entitled to injunctive relief.

     14.  Intellectual Property.

     (a)  To the extent they relate to, or result from, directly or indirectly,
the actual or anticipated operations of the Company or any of its Affiliates, or
the activities of Employee in the course and scope of his employment, Employee
hereby agrees that all patents, trademarks, copyrights, trade secrets, and other
intellectual property rights, all inventions, whether or not patentable, and any
product, drawing, design, recording, writing, literary work or other author's
work, in any other tangible form developed in whole or in part by Employee
during the term of this Agreement, or otherwise developed, purchased or acquired
by the Company or any of its Affiliates ("Intellectual Property"), shall be the
exclusive property of the Company or such Affiliate, as the case may be.

     (b)  Employee will hold all Intellectual Property in trust for the
Company and will deliver all Intellectual Property in Employee's possession or
control to the Company upon request and, in any event, at the end of Employee's
employment with the Company.

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     (c)  Employee shall assign and does hereby assign to the Company all
property rights that Employee may now or hereafter have in the Intellectual
Property. Employee shall take such action, including, but not limited to, the
execution, acknowledgment, delivery and assistance in preparation of documents,
and the giving of testimony, as may be requested by the Company to evidence,
transfer, vest or confirm the Company's right, title and interest in the
Intellectual Property.

     (d)  Employee will not contest the validity of any invention, any
copyright, any trademark or any mask work registration owned by or vesting in
the Company or any of its Affiliates under this Agreement.

     15.  Definitions.  As used in this Agreement, the terms defined in
Exhibit A have the meaning assigned to such terms in such exhibit.

     16.  Notices. All notices, requests, demands and other communications
required by or permitted under this Agreement shall be in writing and shall be
sufficiently delivered if delivered by hand, by courier service, or sent by
registered or certified mail, postage prepaid, to the parties at their
respective addresses listed below:

     (a)  If to Employee:
          __________________
          __________________
          __________________

     (b)  If to the Company:
          Encompass Management Co.
          3 Greenway Plaza, Suite 2000
          Houston, Texas 77046
          Attention:  Corporate Secretary
          Facsimile:  713-626-4788

Any party may change such party's address by such notice to the other parties.

     17.  Set-off Rights.  The Company's obligations to make the payments and
provide the benefits required by this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set off, counterclaim,
recoupment, defense or other claim, right or action that the Company may have
against Employee or others, unless such amount is a determinable liability of
Employee to the Company.

     18.  Assignment.  This Agreement is personal to Employee, and Employee
shall not assign any of Employee's rights or delegate any of Employee's duties
hereunder without the prior written consent of the Company.  Neither Employee
nor Employee's spouse will have the right to commute, encumber, or otherwise
dispose of any payments under this Agreement.  The Company shall have the right
to assign this Agreement to a successor in interest in connection with a merger,
sale of substantially all assets, or the like; provided however, that an
assignment of this

                                      -11-
<PAGE>

Agreement to an entity with operations, products or services outside of the
industries in which the Company or its Affiliates is then active shall not be
deemed to expand the scope of Employee's covenant not to compete with such
operations, products or services without Employee's written consent. As used in
this Agreement, the term "Company" means the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, written agreement, or
otherwise.

     19.  Survival.  The provisions of this Agreement shall survive the
termination of Employee's employment hereunder in accordance with their terms.

     20.  Governing Law.  This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Texas without regard to
the choice-of-law principles thereof.

     21.  Binding Upon Successors.  This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.

     22.  Entire Agreement.  This Agreement constitutes the entire agreement
between the Company and Employee with respect to the terms of employment of
Employee by the Company and supersedes all prior agreements and understandings,
whether written or oral, between them concerning such terms of employment.

     23.  Amendments and Waivers.  This Agreement may be amended, modified or
supplemented, and any obligation hereunder may be waived, only by a written
instrument executed by the parties hereto.  The waiver by either party of a
breach of any provision of this Agreement shall not operate as a waiver of any
subsequent breach.  No failure on the part of any party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a waiver
hereof, nor shall any single or partial exercise of any such right or remedy by
such party preclude any other or further exercise thereof or the exercise of any
other right or remedy.

     24.  Cumulative Rights And Remedies.  All rights and remedies hereunder are
cumulative and are in addition to all other rights and remedies provided by law,
agreement or otherwise.  Employee's obligations to the Company and the Company's
rights and remedies hereunder are in addition to all other obligations of
Employee and rights and remedies of the Company created pursuant to any other
agreement.

     25.  Construction.  Each party to this Agreement has had the opportunity to
review this Agreement with legal counsel.  This Agreement shall not be construed
or interpreted against any party on the basis that such party drafted or
authored a particular provision, parts of or the entirety of this Agreement.

     26.  Severability.  In the event that any provision or provisions of this
Agreement is held to be invalid, illegal or unenforceable by any court of law or
otherwise, the remaining

                                      -12-
<PAGE>

provisions of this Agreement shall nevertheless continue to be valid, legal and
enforceable as though the invalid or unenforceable parts had not been included
therein. In addition, in such event the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible with respect to those provisions that were held
to be invalid, illegal or unenforceable.

     27.  Attorneys' Fees and Costs.  If any action at law or in equity is
brought to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which it may be entitled.

     28.  Encompass Performance Guarantee.  Encompass shall cause the Company to
perform each and every obligation to be performed by the Company hereunder.

     IN WITNESS WHEREOF, the Company and Employee have executed this Agreement
on the date first above written.

                              COMPANY:

                              ENCOMPASS MANAGEMENT CO.

                              By:   /s/ Hank Holland
                                 --------------------------------------
                                    Hank Holland
                                    Executive Vice President

                              EMPLOYEE:

                              /s/ Ray Naizer
                              _______________________________________
                              Ray Naizer

     IN WITNESS WHEREOF, Encompass Services Corporation has executed this
Agreement on the date first above written solely for the purpose of guaranteeing
the performance by the Company of its obligations hereunder, as provided in
Section 28 of this Agreement.

ENCOMPASS SERVICES CORPORATION

By: /s/ Hank Holland
   ----------------------------
     Hank Holland
     Executive Vice President

                                      -13-
<PAGE>

                                                                      EXHIBIT  A

                                  DEFINITIONS

     "Annual Base Salary" means the salary of Employee in effect at the relevant
time determined in accordance with Section 4(a) hereof.

     "Affiliate" means, with respect to any Person, each other Person who
controls, is controlled by, or is under common control with the Person
specified.

     "Cause", when used in connection with the termination of employment with
the Company, means: (i) Employee's breach of his or her obligations under this
Agreement after Employee has been given notice specifying such breach and a
reasonable opportunity to cure such breach; (ii) Employee's failure to adhere to
any written Company policy after the Employee has been given notice specifying
the failure and a reasonable opportunity to comply with such policy or cure his
or her failure to comply, or (whether with or without notice and opportunity to
cure) the engagement by the Employee in any activity which would constitute a
material violation of the provisions of the Company's or Encompass' Insider
Trading Policy, Business Ethics Policy or Communications Policy then in effect;
(iii) the conviction of, indictment for or the entering of a guilty plea or plea
of no contest with respect to, a felony, the equivalent thereof, or any other
crime with respect to which imprisonment is a possible punishment (but excluding
minor and irregular traffic violations); (iv) the commission by the Employee of
an act of fraud upon the Company or any of its Affiliates; (v) the
misappropriation (or attempted misappropriation) of any funds or property of the
Company or any of its Affiliates by the Employee; (vi) the engagement by the
Employee, without the written approval of the Board of Directors of the Company,
in any activity which competes with the business of the Company or any of its
Affiliates or which would result in a material injury to the Company or any of
its Affiliates; (vii) the failure by the Employee to sign any lock-up letters,
standstill agreements, or other similar documentation required by an underwriter
in connection with a public offering of securities by the Company or Encompass
or to take other actions reasonably related thereto as requested by the Board of
Directors of Encompass or the Company, or (viii) any act or omission by the
Employee that, in the judgment of the Board of Directors of the Company has or
could have a material adverse effect on (a) the Company's properties, operations
or public image, or (b) the health, safety or morale of any of the Company's
suppliers, employees or customers.

     "Change of Control" means:

          (i) the acquisition by any individual, entity or group (within the
     meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Designated
     Person") of beneficial ownership (within the meaning of Rule 13d-3
     promulgated under the Securities Exchange Act of 1934, as amended, (the
     "Exchange Act")) of 30% or more of either (1) the then outstanding shares
     of Common Stock of Encompass (the "Outstanding Encompass Common Stock") or
     (2) the combined voting power of the then outstanding voting

                                      -14-
<PAGE>

     securities of Encompass entitled to vote generally in the election of
     directors (the "Outstanding Encompass Voting Securities"); provided,
     however, that the following acquisitions shall not constitute a Change of
     Control: (a) any acquisition of Common Stock of Encompass or voting
     securities of Encompass directly from Encompass (excluding an acquisition
     by virtue of the exercise of a conversion privilege), (b) any acquisition
     of Common Stock of Encompass or voting securities of Encompass by
     Encompass, (c) any acquisition of Common Stock of Encompass or voting
     securities of Encompass by any employee benefit plan(s) (or related
     trust(s)) sponsored or maintained by the Company or Encompass or any other
     corporation controlled by Encompass and approved by the Incumbent Board,
     (d) any acquisition by any corporation pursuant to a reorganization, merger
     or consolidation, if, immediately following such reorganization, merger or
     consolidation, the conditions described in clauses (1), (2) and (3) of
     paragraph (iii) below of this definition are satisfied, or (e) an
     acquisition by Apollo Management L.P. and/or one or more of its affiliates
     resulting in an ownership of no more than 40% of the Common Stock of
     Encompass (for this purpose, any securities convertible into Common Stock
     held by Apollo Management L.P. and its affiliates will be treated as if
     they have been converted for purposes of determining the percentage of
     ownership held on an "as-converted basis"); or

          (ii) individuals who, as of the date hereof, constitute the entire
     Board of Directors of Encompass (the "Incumbent Board") cease for any
     reason to constitute at least a majority of the Board of Directors of
     Encompass (the "Board"); provided, however, that any individual becoming a
     director subsequent to the date hereof whose election, or nomination for
     election by Encompass shareholders, was approved by a vote of at least a
     majority of the directors then comprising the Incumbent Board shall be
     considered as though such individual were a member of the Incumbent Board,
     but excluding, for this purpose, any such individual whose initial
     assumption of office occurs as a result of either (1) an actual or
     threatened election contest (as such terms are used in Rule 14a-11 of the
     Regulation 14A promulgated under the Exchange Act), or an actual or
     threatened solicitation of proxies or consents by or on behalf of a Person
     other than the Board or (2) a plan or agreement to replace a majority of
     the members of the Board then comprising the Incumbent Board; or

          (iii)  approval by the shareholders of Encompass of a reorganization,
     merger or consolidation, in each case unless, immediately following such
     reorganization, merger or consolidation, (1) more than 50% (or such greater
     percentage as may be approved by the Incumbent Board) of the then
     outstanding shares of common stock of the corporation resulting from such
     reorganization, merger or consolidation (including, without limitation, a
     corporation which as a result of such transaction owns Encompass through
     one or more subsidiaries) and the combined voting power of the then
     outstanding voting securities of such corporation entitled to vote
     generally in the election of directors is then beneficially owned, directly
     or indirectly, by all or substantially all of the individuals and entities
     who were the beneficial owners, respectively, of the Outstanding Encompass

                                      -15-
<PAGE>

     Common Stock and Outstanding Encompass Voting Securities immediately prior
     to such reorganization, merger or consolidation in substantially the same
     proportions as their ownership immediately prior to such reorganization,
     merger or consolidation, of the Outstanding Encompass Common Stock or
     Outstanding Encompass Voting Securities, as the case may be, (2) no
     Designated Person (excluding Encompass, any employee benefit plan(s) (or
     related trust(s)) of Encompass and/or its subsidiaries or any Person
     beneficially owning, immediately prior to such reorganization, merger or
     consolidation, directly or indirectly, 30% (or such lesser percentage as
     may be approved by the Incumbent Board) or more of the Outstanding
     Encompass Common Stock or Outstanding Encompass Voting Securities, as the
     case may be) beneficially owns, directly or indirectly, 30% (or such lesser
     percentage as may be approved by the Incumbent Board) or more of,
     respectively, the then outstanding shares of common stock of the
     corporation resulting from such reorganization, merger or consolidation or
     the combined voting power of the then outstanding voting securities of such
     corporation entitled to vote generally in the election of directors, and
     (3) at least a majority of the members of the board of directors of the
     corporation resulting from such reorganization, merger or consolidation
     were members of the Incumbent Board at the time of the execution of the
     initial agreement providing for such reorganization, merger or
     consolidation; or

          (iv) approval by the shareholders of Encompass of (1) a complete
     liquidation or dissolution of Encompass or (2) the sale or other
     disposition of all or substantially all of the assets of Encompass, other
     than to a corporation, with respect to which immediately following such
     sale or other disposition, (A) more than 50% (or such greater percentage as
     may be approved by the Incumbent Board) of the then outstanding shares of
     common stock of such corporation and the combined voting power of the then
     outstanding voting securities of such corporation entitled to vote
     generally in the election of directors is then beneficially owned, directly
     or indirectly, by all or substantially all of the individuals and entities
     who were beneficial owners, respectively, of the Outstanding Encompass
     Common Stock and Outstanding Encompass Voting Securities immediately prior
     to such sale or other disposition in substantially the same proportion as
     their ownership, immediately prior to such sale or other disposition, of
     the Outstanding Encompass Common Stock and Outstanding Encompass Voting
     Securities, as the case may be, (B) no Designated Person (excluding
     Encompass and any employee benefit plan (or related trust) of Encompass
     and/or its subsidiaries or such corporation and any Person beneficially
     owning, immediately prior to such sale or other disposition, directly or
     indirectly, 30% (or such lesser percentage as may be approved by the
     Incumbent Board) or more of the Outstanding Encompass Common Stock or
     Outstanding Encompass Voting Securities, as the case may be) beneficially
     owns, directly or indirectly, 30% (or such lesser percentage as may be
     approved by the Incumbent Board) or more of, respectively, the then
     outstanding shares of common stock of such corporation or the combined
     voting power of the then outstanding voting securities of such corporation
     entitled to vote generally in the election of directors, and (C) at least a
     majority of the members of the board of directors of such corporation were
     members of the Incumbent

                                      -16-
<PAGE>

     Board at the time of the execution of the initial agreement or action of
     the Board providing for such sale or other disposition of assets of
     Encompass.

     "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985.

     "Confidential Information" includes information conveyed or assigned to the
Company or any of its Affiliates by Employee or conceived, compiled, created,
developed, discovered or obtained by Employee from and during Employee's
employment relationship with the Company, whether solely by Employee or jointly
with others, which concerns the affairs of the Company or its Affiliates and
which the Company or Encompass could reasonably be expected to desire be held in
confidence, or the disclosure of which would likely be embarrassing, detrimental
or disadvantageous to the Company or its Affiliates and without limiting the
generality of the foregoing includes information relating to inventions, and the
trade secrets, technologies, algorithms, products, services, finances, business
plans, marketing plans, legal affairs, supplier lists, client lists, potential
clients, business prospects, business opportunities, personnel assignments,
contracts and assets of the Company or any of its Affiliates and information
made available to the Company or any of its Affiliates by other parties under a
confidential relationship.  Confidential Information, however, shall not include
information (a) which is, at the time in question, in the public domain through
no wrongful act of Employee, (b) which is later disclosed to Employee by one not
under obligations of confidentiality to the Company or any of its Affiliates or
Employee, (c) which is required by court or governmental order, law or
regulation to be disclosed, or (d) which the Company has expressly given
Employee the right to disclose pursuant to written agreement.

     "Good Reason" means the occurrence of any of the following events:

     (a)  Employee is assigned duties, taken as a whole, that are materially
inconsistent with, or materially diminished from, Employee's positions, duties,
responsibilities and status with the Company immediately prior to such action,
or Employee's status, reporting responsibilities, titles or offices are
materially diminished from those in effect immediately prior to such action, or
Employee's duties and responsibilities are materially increased without a
corresponding reasonable increase in Employee's compensation (provided that in
the case of such a change within a Protected Period, such increase must be
satisfactory to Employee in Employee's sole reasonable judgment), except in each
case in connection with the termination of Employee's employment by the Company
for Cause or on account of disability, or as a result of Employee's death, or by
Employee for other than Good Reason; provided, however, that Good Reason shall
not be triggered under this subsection (a) by an immaterial action not taken in
bad faith or by an action that is remedied by the Company promptly after receipt
of written notice from Employee; or

     (b)  Employee's Annual Base Salary is reduced (i) within a Protected
Period, from that in effect immediately prior to the commencement of a Protected
Period or as the same may be increased from time to time thereafter, or (ii)
other than within a Protected Period, from that

                                      -17-
<PAGE>

which was in effect prior to such action unless such reduction is part of a
general reduction in compensation within the officer ranks due to economic or
company-wide considerations; or

     (c)  The Company (i) within a Protected Period, fails to continue in
effect any benefit or compensation plan, including, but not limited to, the
annual bonus plan, qualified retirement plan, executive life insurance plan
and/or health and accident plan, in which Employee is participating immediately
prior to the commencement of the Protected Period, or plans providing, in the
sole reasonable judgment of Employee, Employee with substantially similar
benefits, or the Company takes any action that would adversely affect Employee's
participation in or reduce Employee's benefits under any of such plans
(excluding any such action by the Company that is required by law), or (ii)
other than within a Protected Period, takes any action to materially reduce or
eliminate Employee's participation in the Company's benefit or compensation
plans unless such reduction or elimination is part of a general reduction in
benefits within the officer ranks due to economic or company-wide
considerations; or

     (d)  The amendment, modification or repeal of any provision of the
Certificate of Incorporation or Bylaws of the Company that was in effect
immediately prior to the commencement of a Protected Period, if such amendment,
modification or repeal would materially adversely affect Employee's rights to
indemnification by the Company; or

     (e)  The Company shall violate or breach any obligation of the Company
(regardless whether such obligation be set forth in the Bylaws of the Company
and/or in this Agreement or any other separate agreement entered into between
the Company and Employee) to indemnify Employee against any claim, loss, expense
or liability sustained or incurred by Employee by reason, in whole or in part,
of the fact that Employee is or was an officer or director of the Company; or

     (f)  The Company shall violate or breach any other material obligation of
the Company owing to Employee relating to Employee's employment with the
Company, provided that in the event of a violation or breach that is reasonably
subject to being cured by the Company, Good Reason shall only occur if the
Company shall fail or refuse to commence a cure within 15 days after written
notice thereof is given by Employee to the Company or shall thereafter fail to
diligently prosecute such cure to completion; or

     (g)  The Company shall fail to keep in force, for the benefit of Employee,
directors' and officers' insurance policy with coverage amounts and scope at
least equal to the coverage amounts in effect on the date hereof; or

     (h)  The Company shall fail to obtain from a successor (including a
successor to a material portion of the business or assets of the Company) a
satisfactory assumption in writing of the Company's obligations under this
Agreement; or

                                      -18-
<PAGE>

     (i)  The Company shall fail to provide Employee with office space, related
facilities and support personnel (including, but not limited to, administrative
and secretarial assistance) that are both commensurate with Employee's position
and Employee's responsibilities to and position with the Company and not
materially dissimilar to the office space, related facilities and support
personnel provided to other executive officers of the Company; or

     (j)  The Company notifies Employee of the Company's intention not to
observe or perform one or more of the material obligations of the Company under
this Agreement.

     "Person" means any individual, corporation, trust, partnership, limited
partnership, foundation, association, limited liability company, joint stock
association or other legal entity.

     "Protected Period" means the period of time beginning with a Change of
Control and ending 6 months following such Change of Control; provided, however,
that if any event has occurred which could reasonably be expected to result in a
Change of Control and a Change of Control occurs within six months after such
event, then the Protected Period will begin on the date of such event.

     "Restricted Period" means the period beginning on the date of the
termination or resignation of Employee's employment with the Company and its
Affiliates and ending as follows, as applicable:

          (i)  one year after the termination of Employee's employment if
     Employee is not entitled to benefits under Section 7 or 10(c); or;

          (ii) two years after the termination of Employee's employment, if
     Employee receives all of the benefits under Section 7 or 10(c) (after
     giving effect to any permissible setoff).

                                      -19-QuickLinks
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EXHIBIT 10.3  

 
 

AMENDED AND RESTATED PAYPAL, INC.
  
    2001 EMPLOYEE STOCK PURCHASE PLAN    
  

        PayPal, Inc., a Delaware corporation (the "Company"), hereby adopts the Amended and Restated PayPal, Inc. 2001 Employee Stock Purchase Plan (the
"Plan"), effective as of the Effective Date (as defined herein). 

        1.    Purpose.    The purposes of the Plan are as follows: 

        (a)  To
assist employees of the Company and its Designated Subsidiaries (as defined below) in acquiring a stock ownership interest in the Company pursuant to a plan which is
intended to qualify as an "employee stock purchase plan" within the meeting of Section 423(b) of the Internal Revenue Code of 1986, as amended. 

        (b)  To
help employees provide for their future security and to encourage them to remain in the employment of the Company and its Designated Subsidiaries. 

        2.    Definitions.    

        (a)  "Administrator" shall mean administrator of the Plan, as determined pursuant to Section 14 hereof. 

        (b)  "Board" shall mean the Board of Directors of the Company. 

        (c)  "Code" shall mean the Internal Revenue Code of 1986, as amended. 

        (d)  "Committee" shall mean the committee appointed to administer the Plan pursuant to Section 14 hereof. 

        (e)  "Common Stock" shall mean the common stock of the Company. 

        (f)    "Company" shall mean PayPal, Inc., a Delaware corporation, and any successor by merger, consolidation or
otherwise. 

        (g)  "Compensation" shall mean all base straight time gross earnings, commissions, bonuses and overtime payments, exclusive of
payments for shift premium, incentive compensation, incentive payments, expense reimbursements, fringe benefits and other compensation. 

        (h)  "Designated Subsidiary" shall mean any Subsidiary which has been designated by the Administrator from time to time in its
sole discretion as eligible to participate in the Plan. The Administrator may designate, or terminate the designation of, a subsidiary as a Designated Subsidiary without the approval of the
stockholders of the Company. 

        (i)    "Effective Date" shall mean the date on which the Company's Registration Statement on Form S-8 filed
with respect to the Plan becomes effective. 

        (j)    "Eligible Employee" shall mean an Employee of the Company or a Designated Subsidiary: (i) who does not,
immediately after the Option is granted, own stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company, a Parent or a Subsidiary (as
determined under Section 423(b)(3) of the Code); (ii) whose customary employment is for more than twenty (20) hours per week; and (iii) whose customary employment is for
more than five (5) months in any calendar year. For purposes of clause (i), the rules of Section 424(d) of the Code with regard to the attribution of stock ownership shall apply
in determining the stock ownership of an individual, and stock which an employee may purchase under outstanding options shall be treated as stock owned by the employee. For purposes of the Plan, the
employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company or Designated Subsidiary and meeting the
requirements of Treasury Regulation Section 1.421-7(h)(2). Where the period of leave 

 

exceeds ninety (90) days and the individual's right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the
ninety-first (91st) day of such leave. 

        (k)  "Employee" shall mean any person who renders services to the Company or a Subsidiary in the status of an employee within
the meaning of Code Section 3401(c). "Employee" shall not include any director of the Company or a Subsidiary who does not render services to the Company or a Subsidiary in the status of an
employee within the meaning of Code Section 3401(c). 

        (l)    "Enrollment Date" shall mean the first Trading Day of each Offering Period. 

        (m)  "Exercise Date" shall mean the last Trading Day of each Purchase Period. 

        (n)  "Fair Market Value" shall mean, as of any date, the value 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 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 purchase, 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 of the closing
bid and asked prices for the Common Stock on the date prior to the purchase as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; 

        (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; or 

        (iv)  For
purposes of the first Offering Period under the Plan, the Fair Market Value shall be the initial price to the public as set forth in the final prospectus included
within the registration statement in Form S-1 filed with the Securities and Exchange Commission for the initial public offering of the Company's Common Stock (the "Registration
Statement"). 

        (o)  "Offering Period" shall mean (i) the period commencing on the Effective Date and ending on the last Trading Day on
or before the February 1 or August 1 following the Effective Date that is at least eighteen (18) months but not more than twenty-four (24) months following the
Effective Date, and (ii) subject to Section 24, each twenty-four (24) month period commencing on any February 1 or August 1 thereafter following the
termination of the preceding Offering Period and terminating on the last Trading Day in the periods ending twenty-four (24) months later. The duration and timing of Offering Periods
may be changed pursuant to Section 4 of this Plan. 

        (p)  "Parent" means any corporation, other than the Company, in an unbroken chain of corporations ending with the Company if,
at the time of the determination, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other
corporations in such chain. 

        (q)  "Plan" shall mean this Amended and Restated PayPal, Inc. 2001 Employee Stock Purchase Plan. 

        (r)  "Purchase Period" shall mean the approximately six (6) month period commencing after one Exercise Date and ending
with the next Exercise Date, except that the first Purchase Period of any Offering Period shall commence on the Enrollment Date and end with the next Exercise Date. Notwithstanding the foregoing, the
first Purchase Period with respect to the initial Offering Period 

2

 

under the Plan shall end on the last Trading Day on or before the next occurring February 1 or August 1 following the Effective Date and such period may be less than
six-months in duration. 

        (s)  "Purchase Price" shall mean 85% of the Fair Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower; provided, however, that the Purchase Price may be adjusted by the Administrator pursuant to Section 20. 

        (t)    "Subsidiary" shall mean any corporation, other than the Company, in an unbroken chain of corporations beginning with the
Company if, at the time of the determination, each of the corporations other than the last corporation in an unbroken chain owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain. 

        (u)  "Trading Day" shall mean a day on which national stock exchanges and the Nasdaq System are open for trading. 

        3.    Eligibility.    

        (a)  Any
Eligible Employee who shall be employed by the Company or a Designated Subsidiary on a given Enrollment Date for an Offering Period shall be eligible to participate
in the Plan during such Offering Period, subject to the requirements of Section 5 and the limitations imposed by Section 423(b) of the Code. 

        (b)  Each
person who, during the course of an Offering Period, first becomes an Eligible Employee subsequent to the Enrollment Date will be eligible to become a participant
in the Plan on the first day of the first Purchase Period following the day on which such person becomes an Eligible Employee, subject to the requirements of Section 5 and the limitations
imposed by Section 423(b) of the Code. 

        (c)  No
Eligible Employee shall be granted an option under the Plan which permits his rights to purchase stock under the Plan, and to purchase stock under all other employee
stock purchase plans of the Company, any Parent or any Subsidiary subject to the Section 423, to accrue at a rate which exceeds $25,000 of fair market value of such stock (determined at the
time the option is granted) for each calendar year in which the option is outstanding at any time. For purpose of the limitation imposed by this subsection, the right to purchase stock under an option
accrues when the option (or any portion thereof) first becomes exercisable during the calendar year, the right to purchase stock under an option accrues at the rate provided in the option, but in no
case may such rate exceed $25,000 of the fair market value of such stock (determined at the time such option is granted) for any one calendar year, and a right to purchase stock which has accrued
under an option may not be carried over to any option. This limitation shall be applied in accordance with Section 423(b)(8) of the Code and the Treasury Regulations thereunder. 

        4.    Offering Periods.    Subject to Section 24, the Plan shall be implemented by consecutive, overlapping
Offering Periods which shall continue until the Plan expires or is terminated in accordance with Section 20 hereof. The Administrator shall have the power to change the duration of Offering
Periods (including the commencement dates thereof) with respect to future offerings without shareholder approval if such change is announced at least five (5) days prior to the scheduled
beginning of the first Offering Period to be affected thereafter. 

        5.    Participation.    

        (a)  Each
Eligible Employee who is employed by the Company or a Designated Subsidiary on the calendar day immediately preceding the Effective Date shall automatically become
a participant in the Plan with respect to the first Offering Period. Each such participant shall be granted an option to purchase shares of Common Stock and shall be enrolled in such first Offering
Period to the extent of twenty percent (20%) of his or her Compensation for the pay days during 

3

 

the first Offering Period (or, if less, the maximum amount of contributions permitted to be made by such participant for such Offering Period by payroll deduction under the terms of this Plan).
Participants wishing to purchase shares of Common Stock during the first Offering Period shall do so
by making a lump sum cash payment to the Company not later than ten (10) calendar days before each Exercise Date of such Offering Period, and each such payment may be made in an amount not
exceeding twenty percent (20%) of such participant's Compensation for the pay days occurring during such Offering Period and occurring prior to such lump sum payment; provided,
however, that such participant shall not be required to make such lump sum cash payments, or exercise all or any portion of such option to purchase shares of Common Stock by
making such lump sum payments. Following the Effective Date, each such participant may, during the period designated from time to time by the Administrator for such purpose, elect to make such
contributions (or a lesser amount of contributions) for the first Offering Period by payroll deductions in accordance with Section 6, in lieu of making contributions in such lump sum cash
payments under this subsection (a), or may elect to make no contributions for such Offering Period; provided, however, that, to make contributions by
payroll deductions, such participant must complete the form of subscription agreement provided by the Company for the first Offering Period under this Plan. If (i) during such Offering Period,
such a participant elects to make contributions by payroll deduction, or elects to make no contributions for such Offering Period, or (ii) on or prior to the tenth (10th) calendar
day before the last Exercise Date of such Offering Period, such a participant fails to make any lump sum cash payment, such participant shall be deemed to have elected not to make contributions by
lump sum payment with respect to such first Offering Period. Except as described in subsection (e) below, a participant may not make
contributions by lump sum payment for any Offering Period other than the first Offering Period. 

        (b)  Following
the first Offering Period, an Eligible Employee may become a participant in the Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll office fifteen (15) days (or such shorter or longer period as may be determined by the Administrator, in its
sole discretion) prior to the applicable Enrollment Date. 

        (c)  Each
person who, during the course of an Offering Period, first becomes an Eligible Employee subsequent to the Enrollment Date will be eligible to become a participant
in the Plan on the first day of the first Purchase Period following the day on which such person becomes an Eligible Employee. Such person may become a participant in the Plan by completing a
subscription agreement authorizing payroll deductions in the form of Exhibit A to this Plan and filing it with the Company's payroll office fifteen (15) days (or such shorter or larger
period as may be determined by the Administrator, in its sole discretion) prior to the first day of any Purchase Period during the Offering Period in which such person becomes an Eligible Employee.
The rights granted to such participant shall have the same characteristics as any rights originally granted under during that Offering Period except that the first day of the Purchase Period in which
such person initially participates in the Plan shall be the "Enrollment Date" for all purposes for such person, including determination of the Purchase Price. 

        (d)  Except
as provided in subsection (a), payroll deductions for a participant shall commence on the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable, unless sooner terminated by the participant as provided in Section 10 hereof. 

        (e)  During
a leave of absence approved by the Company or a Subsidiary and meeting the requirements of Treasury Regulation Section 1.421-7(h)(2), a
participant may continue to participate in the Plan by making cash payments to the Company on each pay day equal to the amount of the participant's
payroll deductions under the Plan for the pay day immediately preceding the first day of such participant's leave of absence. If a leave of absence is unapproved 

4

 

or fails to meet the requirements of Treasury Regulation Section 1.421-7(h)(2), the participant will cease automatically to participate in the Plan. In such event, the company will
automatically cease to deduct the participant's payroll under the Plan. The Company will pay to the participant his or her total payroll deductions for the quarterly purchase period, in cash in one
lump sum (without interest), as soon as practicable after the participant ceases to participate in the Plan. 

        (f)    A
participant's completion of a subscription agreement will enroll such participant in the Plan for each successive Purchase Period and each subsequent Offering Period
on the terms contained therein until the participant either submits a new subscription agreement, withdraws from participation under the Plan as provided in Section 10 hereof or otherwise
becomes ineligible to participate in the Plan. 

        6.    Payroll Deductions.    

        (a)  At
the time a participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each pay day during the Offering Period in an
amount from one percent (1%) to twenty percent (20%) of the Compensation which he or she receives on each pay day during the Offering Period. 

        (b)  All
payroll deductions made for a participant shall be credited to his or her account under the Plan and shall be withheld in whole percentages only. Except as described
in Section 5(a) hereof, a participant may not make any additional payments into such account. 

        (c)  A
participant may discontinue his or her participation in the Plan as provided in Section 10 hereof, or may increase or decrease the rate of his or her payroll
deductions during the Offering Period by completing or filing with the Company a new subscription agreement authorizing a change in payroll deduction rate. The Administrator may, in its discretion,
limit the number of participation rate changes during any Offering Period. The change in rate shall be effective with the first full payroll period following five (5) business days after the
Company's receipt of the new subscription agreement unless the Company elects to process a given change in participation more quickly. 

        (d)  Notwithstanding
the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(c) hereof, a participant's payroll
deductions may be decreased to zero percent (0%) at any time during a Purchase Period. 

        (e)  At
the time the option is exercised, in whole or in part, or at the time some or all of the Company's Common Stock issued under the Plan is disposed of, the participant
must make adequate provision for the Company's federal, state, or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any
time, the Company may, but shall not be obligated to, withhold from the participant's compensation the amount necessary for the Company to meet applicable withholding obligations, including any
withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Employee. 

        7.    Grant of Option.    On the Enrollment Date of each Offering Period, each Eligible Employee participating in such
Offering Period shall be granted an option to purchase on each Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of shares of the Company's Common Stock
determined by dividing such participant's payroll deductions accumulated prior to such Exercise Date and retained in the participant's account as of the Exercise Date by the applicable Purchase Price;  provided,
however, that in no event shall a participant be permitted to purchase during each Offering Period more than 10,000 shares of the Company's
Common Stock (subject to any adjustment pursuant to Section 19) and during each Purchase Period more than 2,500 shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19); and provided, further, that such purchase shall be subject to the limitations set forth in Sections 3(c) and 13 

5

 

hereof. The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of the Company's Common Stock a participant may purchase
during each Purchase Period and Offering Period. Exercise of the option shall occur as provided in Section 8 hereof, unless the participant has withdrawn pursuant to Section 10 hereof or
otherwise becomes ineligible to participate in the Plan. The option shall expire on the last day of the Offering Period. 

        8.    Exercise of Option.    

        (a)  Unless
a participant withdraws from the Plan as provided in Section 10 hereof or otherwise becomes ineligible to participate in the Plan, his or her option for
the purchase of shares shall be exercised automatically on the Exercise Date, and the maximum number of full shares subject to the option shall be purchased for such participant at the applicable
Purchase Price with the accumulated payroll deductions in his or her account. No fractional shares shall be purchased; any payroll deductions accumulated in a participant's account which are not
sufficient to purchase a full share shall be retained in the participant's account for the subsequent Purchase Period or Offering Period. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her. 

        If
the Administrator determines that, on a given Exercise Date, the number of shares with respect to which options are to be exercised may exceed (i) the number of shares of
Common Stock that were available for sale under the Plan on the Enrollment Date of the applicable Offering Period, or (ii) the number of shares available for sale under the Plan on such
Exercise Date, the Administrator may in its sole discretion (x) provide that the Company shall make a pro rata allocation of the shares of Common
Stock available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such Exercise Date, and continue all Offering Periods then in effect, or (y) provide that the Company shall make a pro rata
allocation of the shares available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion
to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and terminate any or all Offering Periods then in effect pursuant to Section 20 hereof.
The Company may make pro rata allocation of the shares available on the Enrollment Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of
additional shares for issuance under the Plan by the Company's shareholders subsequent to such Enrollment Date. The balance of the amount credited to the account of each participant which has not been
applied to the purchase of shares of stock shall be paid to such participant in one lump sum in cash as soon as reasonably practicable after the Exercise Date, without any interest thereon. 

        9.    Deposit of Shares.    As promptly as practicable after each Exercise Date on which a purchase of shares occurs,
the Company may arrange for the deposit, into each participant's account with any broker designated by the Company to administer this Plan, of the number of shares purchased upon exercise of his or
her option. 

        10.    Withdrawal.    

        (a)  A
participant may withdraw all but not less than all of the payroll deductions credited to his or her account and not yet used to exercise his or her option under the
Plan at any time by giving written notice to the Company in the form of Exhibit B to this Plan. All of the participant's payroll deductions credited to his or her account during the Offering
Period shall be paid to such participant as soon as reasonably practicable after receipt of notice of withdrawal and such participant's option for the Offering Period shall be automatically
terminated, and no further payroll deductions for the purchase of shares shall be made for such Offering Period. If a participant withdraws from an Offering Period, payroll deductions shall not resume
at the 

6

 

beginning of the succeeding Offering Period unless the participant delivers to the Company a new subscription agreement. 

        (b)  A
participant's withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be
adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the participant withdraws. 

        11.    Termination of Employment.    Upon a participant's ceasing to be an Eligible Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll deductions credited to such participant's account during the Offering Period shall be paid to such participant or, in
the case of his or her death, to the person or persons entitled thereto under Section 15 hereof, as soon as reasonably practicable and such participant's option for the Offering Period shall be
automatically terminated. 

        12.    Interest.    No interest shall accrue on the payroll deductions or lump sum contributions of a participant in
the Plan. 

7

   
        13.    Shares Subject to Plan.    

        (a)  Subject
to adjustment upon changes in capitalization of the Company as provided in Section 19 hereof, the maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be Six Hundred Twenty-Five Thousand (625,000) shares, plus an annual increase to be added on each anniversary date of the
adoption of the Plan by the Board during the term of the Plan equal to the least of (i) One Million (1,000,000) shares, (ii) 1% of the Company's outstanding shares on such date or
(iii) a lesser amount determined by the Board. If any right granted under the Plan shall for any reason terminate without having been exercised, the Common Stock not purchased under such right
shall again become available for issuance under the Plan. The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 

        (b)  With
respect to shares of stock subject to an option granted under the Plan, a participant shall not be deemed to be a stockholder of the Company, and the participant
shall not have any of the rights or privileges of a stockholder, until such shares have been issued to the participant or his or her nominee following exercise of the participant's option. No
adjustments shall be made for dividends (ordinary or extraordinary, whether in cash securities, or other property) or distribution or other rights for which the record date occurs prior to the date of
such issuance, except as otherwise expressly provided herein. 

        14.    Administration.    

        (a)  The
Plan shall be administered by the Board unless and until the Board delegates administration to a Committee as set forth below. The Board may delegate administration
of the Plan to a Committee comprised of two or more members of the Board, each of whom is a "non-employee director" within the meaning of Rule 16b-3 which has been
adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and the term "Committee" shall apply to any 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
delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. Each member of the Committee shall serve for a term commencing on a date specified by the Board and continuing until the member dies or resigns or is removed
from office by the Board. References in this Plan to the "Administrator" shall mean the Board unless administration is delegated to a Committee or subcommittee, in which case references in this Plan
to the Administrator shall thereafter be to the Committee or subcommittee. 

        (b)  It
shall be the duty of the Administrator to conduct the general administration of the Plan in accordance with the provisions of the Plan. The Administrator shall have
the power to interpret the Plan and the terms of the options and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret,
amend or revoke any such rules. The Administrator at its option may utilize the services of an agent to assist in the administration of the Plan including establishing and maintaining an individual
securities account under the Plan for each participant. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Administrator under
the Plan. 

        (c)  All
expenses and liabilities incurred by the Administrator in connection with the administration of the Plan shall be borne by the Company. The Administrator may, with
the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Administrator, the Company and its officers and directors shall be entitled to rely
upon the advice, opinions or valuations of any such persons. All actions taken and all 

8

 

interpretations and determinations made by the Administrator in good faith shall be final and binding upon all participants, the Company and all other interested persons. No member of the Board shall
be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the options, and all members of the Board shall be fully protected by the Company in
respect to any such action, determination, or interpretation. 

        15.    Designation of Beneficiary.    

        (a)  A
participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant's account under the Plan in the
event of such participant's death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of such shares and cash. In addition, a participant may
file a written designation of a beneficiary who is to receive any cash from the participant's account under the Plan in the event of such participant's death prior to exercise of the option. If
a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective. 

        (b)  Such
designation of beneficiary may be changed by the participant at any time by written notice to the Company. In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of
the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. 

        16.    Transferability.    Neither payroll deductions credited to a participant's account nor any rights with regard
to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or
as provided in Section 15 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof. 

        17.    Use of Funds.    All payroll deductions received or held by the Company under the Plan may be used by the
Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions. 

        18.    Reports.    Individual accounts shall be maintained for each participant in the Plan. Statements of account
shall be given to participating Employees at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any. 

        19.    Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or Asset Sale.    

        (a)  Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of
Common Stock which have been authorized for issuance under the Plan but not yet placed under option, the maximum number of shares each participant may purchase each Purchase Period (pursuant to
Section 7), as well as the price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made 

9

 

by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an
option. 

        (b)  Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Offering Period
then in progress shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and shall terminate immediately prior to the consummation of such proposed dissolution or liquidation,
unless provided otherwise by the Administrator. The New Exercise Date shall be before the date of the Company's proposed dissolution or liquidation. The Administrator shall notify each participant in
writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10
hereof. 

        (c)  Merger or Asset Sale. In the event of a proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each outstanding option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to assume or substitute for the option, any Purchase Periods then in progress shall be shortened by setting a New Exercise
Date and any Offering Periods then in progress shall end on the New Exercise Date. The New Exercise Date shall be before the date of the Company's proposed sale or merger. The Administrator shall
notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date
and that the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in
Section 10 hereof. 

        20.    Amendment or Termination.    

        (a)  The
Board may at any time and for any reason terminate or amend the Plan. Except as provided in Section 19 hereof, no such termination can affect options
previously granted, provided that an Offering Period may be terminated by the Board if the Board determines that the termination of the Offering Period or the Plan is in the best interests of the
Company and its shareholders. Except as provided in Section 19 and this Section 20 hereof, no amendment may make any change in any option theretofore granted which adversely affects the
rights of any participant without the consent of such participant. To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable
law, regulation or stock exchange rule), the Company shall obtain stockholder approval in such a manner and to such a degree as required. 

        (b)  Without
stockholder consent and without regard to whether any participant rights may be considered to have been "adversely affected," the Administrator shall be entitled
to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency
other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's Compensation, 

10

 

and establish such other limitations or procedures as the Administrator determines in its sole discretion advisable which are consistent with the Plan. 

        (c)  In
the event the Board determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion
and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to: 

        (i)    altering
the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price; 

        (ii)  shortening
any Offering Period so that the Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Administrator action;
and 

        (iii)  allocating
shares. 

        Such
modifications or amendments shall not require stockholder approval or the consent of any Plan participants. 

        21.    Notices.    All notices or other communications by a participant to the Company under or in connection with the
Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 

        22.    Conditions To Issuance of Shares.    The Company shall not be required to issue or deliver any certificate or
certificates for shares of Stock purchased upon the exercise of options prior to fulfillment of all the following conditions: 

        (a)  The
admission of such shares to listing on all stock exchanges, if any, on which is then listed; and 

        (b)  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 absolute discretion, deem necessary or advisable; and 

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

        (d)  The
payment to the Company of all amounts which it is required to withhold under federal, state or local law upon exercise of the option; and 

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

        23.    Term of Plan.    The Plan shall become effective on the Effective Date. Subject to approval by the stockholders
of the Company in accordance with this Section, the Plan shall be in effect for a term of ten (10) years commencing on the date of the initial adoption of the Plan by the Board, unless sooner
terminated under Section 20 hereof. The Plan shall be submitted for the approval of the Company's stockholders within twelve (12) months after the date of the initial adoption of the
Plan by the Board. 

        24.    Automatic Transfer to Low Price Offering Period.    To the extent permitted by any applicable laws,
regulations, or stock exchange rules, if the Fair Market Value of the Common Stock on any Exercise Date in an Offering Period is lower than the Fair Market Value of the Common Stock on the Enrollment
Date of such Offering Period, then (i) a new twenty-four (24) month Offering Period will automatically begin on the first trading day following that Exercise Date, and
(ii) all participants in such Offering Period shall be automatically withdrawn from such Offering Period immediately after the 

11

 

exercise of their option on such Exercise Date and automatically re-enrolled in the immediately following Offering Period as of the first day thereof. 

        25.    Equal Rights and Privileges.    All Eligible Employees of the Company (or of any Designated Subsidiary) will
have equal rights and privileges under this Plan so that this Plan qualifies as an "employee stock purchase plan" within the meaning of Section 423 of the Code or applicable Treasury
regulations thereunder. Any provision of this Plan that is inconsistent with Section 423 or applicable Treasury regulations will, without further act or amendment by the Company, the Board or
the Administrator, be reformed to comply with the equal rights and privileges requirement of Section 423 or applicable Treasury regulations. 

        26.    No Employment Rights.    Nothing in the Plan shall be construed to give any person (including any Eligible
Employee or participant) the right to remain in the employ of the Company, a Parent or a Subsidiary or to affect the right of the Company, any Parent or any Subsidiary to terminate the employment of
any person (including any Eligible Employee or participant) at any time, with or without cause. 

        27.    Notice of Disposition of Shares.    Each participant shall give prompt notice to the Company of any disposition
or other transfer of any shares of stock purchased upon exercise of an option if such disposition or transfer is made: (a) within two (2) years from the Enrollment Date of the Offering
Period in which the shares were purchased or (b) within one (1) year after the Exercise Date on which such shares were purchased. Such notice shall specify the date of such disposition
or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the participant in such disposition or other transfer. 

12

QuickLinks

AMENDED AND RESTATED PAYPAL, INC. 2001 EMPLOYEE STOCK PURCHASE PLAN

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