Have you defined the server and its mapping in your web.xml? Make sure you have an entry similar to this:

<servlet>
 <servlet-name>PayPalNotificationServlet</servlet-name>
 <servlet-class>com.mycompany.web.servlet.PayPalNotificationServlet</servlet-class>
 <load-on-startup/>
</servlet>
 ...
<servlet-mapping>
 <servlet-name>PayPalNotificationServlet</servlet-name>
 <url-pattern>/paypal</url-pattern>
</servlet-mapping>

This means whenever someone hits /yourcontext/paypal, it maps to the servlet defined.

Alternatively, to access the servlet using the /example/servlet/* URL, I believe you need to use the full classname, i.e., /example/servlet/com.foo.testServlet