# EDGAR Filing Document

**Accession Number:** 0001416265
**File Stem:** 0001416265-23-000011
**Filing Date:** 2023-3
**Character Count:** 1358383
**Document Hash:** 4763c003ca451febeae87a6b0c24fb92
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001416265-23-000011.hdr.sgml**: 20230329

**ACCESSION NUMBER**: 0001416265-23-000011

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 125

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230329

**DATE AS OF CHANGE**: 20230329

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** PROSPER MARKETPLACE, INC
- **CENTRAL INDEX KEY:** 0001416265
- **STANDARD INDUSTRIAL CLASSIFICATION:** FINANCE SERVICES [6199]
- **IRS NUMBER:** 731733867
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 333-225797-01
- **FILM NUMBER:** 23775124

**BUSINESS ADDRESS:**
- **STREET 1:** 221 MAIN STREET
- **STREET 2:** 3RD FLOOR
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94105
- **BUSINESS PHONE:** 415-593-5400

**MAIL ADDRESS:**
- **STREET 1:** 221 MAIN STREET
- **STREET 2:** 3RD FLOOR
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94105

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** PROSPER MARKETPLACE INC
- **DATE OF NAME CHANGE:** 20071025
**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Prosper Funding LLC
- **CENTRAL INDEX KEY:** 0001542574
- **STANDARD INDUSTRIAL CLASSIFICATION:** FINANCE SERVICES [6199]
- **IRS NUMBER:** 454526070
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 333-225797
- **FILM NUMBER:** 23775125

**BUSINESS ADDRESS:**
- **STREET 1:** 221 MAIN STREET
- **STREET 2:** 3RD FLOOR
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94105
- **BUSINESS PHONE:** 415-593-5400

**MAIL ADDRESS:**
- **STREET 1:** 221 MAIN STREET
- **STREET 2:** 3RD FLOOR
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94105

?xml version="1.0" ? prosper-20221231

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K**

**☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the fiscal year ended December 31, 2022**

**OR**

 **☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from ______ to ______** 

![prosper-20221231_g1.jpg](prosper-20221231_g1.jpg)

---

| | | |
|:---|:---|:---|
| **333-179941-01 333-204880 333-225797-01 333-257739**<br>**333-179941**<br>**333-204880-01 333-225797**<br>**333-257739-01** | **PROSPER MARKETPLACE, INC.**<br>a Delaware corporation<br>221 Main Street, 3rd Floor<br>San Francisco, CA 94105<br>Telephone: (415) 593-5400<br>**PROSPER FUNDING LLC**<br>a Delaware limited liability company<br>221 Main Street, 3rd Floor<br>San Francisco, CA 94105<br>Telephone: (415) 593-5400 | **73-1733867**<br>**45-4526070** |
| Commission File Number | Exact Name of Registrant as Specified in its Charter<br>State or Other Jurisdiction of Incorporation or Organization<br>Address of Principal Executive Offices, Zip Code<br>Registrant's Telephone Number (Including Area Code) | I.R.S. Employer Identification Number |

---

---

| | | | |
|:---|:---|:---|:---|
| Securities registered pursuant to Section 12(b) of the Act: | Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
| &nbsp;&nbsp;&nbsp;&nbsp;Prosper Marketplace, Inc. |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Prosper Funding LLC |  |  |  |
| Securities registered pursuant to Section 12(g) of the Act: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Prosper Marketplace, Inc. |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Prosper Funding LLC |  |  |  |

---

Indicate by check mark if each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Prosper Marketplace, Inc. Yes ◻No 🗷 <br> Prosper Funding LLC Yes ◻No 🗷

Indicate by check mark if each registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Prosper Marketplace, Inc. Yes ◻No 🗷 <br> Prosper Funding LLC Yes ◻No 🗷

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

&nbsp;&nbsp;&nbsp;&nbsp;

Prosper Marketplace, Inc. Yes 🗷 No ◻ <br> Prosper Funding LLC Yes 🗷 No ◻

Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

&nbsp;&nbsp;&nbsp;&nbsp;

Prosper Marketplace, Inc. Yes 🗷 No ◻ <br> Prosper Funding LLC Yes 🗷 No ◻

------

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | Large<br> Accelerated<br> Filer | Accelerated<br> Filer | Non-accelerated Filer | Smaller<br> Reporting<br> Company | Emerging Growth Company |
| &nbsp;&nbsp;&nbsp;&nbsp;Prosper Marketplace, Inc. | ☐ | ☐ | ⌧ | ☐ | ☐ |
| &nbsp;&nbsp;&nbsp;&nbsp;Prosper Funding LLC | ☐ | ☐ | ⌧ | ☐ | ☐ |

---

If an emerging growth company, indicate by check mark if each registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Prosper Marketplace, Inc. ◻ <br> Prosper Funding LLC ◻

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.

&nbsp;&nbsp;&nbsp;&nbsp;

Prosper Marketplace, Inc. ◻ <br> Prosper Funding LLC ◻

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant

included in the filing reflect the correction of an error to previously issued financial statements.

Prosper Marketplace, Inc. &nbsp;&nbsp;&nbsp;&nbsp;Yes ☐ No 🗷 <br> Prosper Funding LLC &nbsp;&nbsp;&nbsp;&nbsp;Yes ☐ No 🗷

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based

compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Prosper Marketplace, Inc. &nbsp;&nbsp;&nbsp;&nbsp;Yes ☐ No 🗷 <br> Prosper Funding LLC &nbsp;&nbsp;&nbsp;&nbsp;Yes ☐ No 🗷

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Act).

Prosper Marketplace, Inc. &nbsp;&nbsp;&nbsp;&nbsp;Yes ☐ No 🗷 <br> Prosper Funding LLC &nbsp;&nbsp;&nbsp;&nbsp;Yes ☐ No 🗷

**Prosper Funding LLC** meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Annual Report on Form 10-K with the reduced disclosure format specified in General Instruction I(2) of Form 10-K.

---

| | | |
|:---|:---|:---|
| | Aggregate Market Value of Voting and Non-Voting Common Equity Held by Non-Affiliates of the Registrant at<br>June 30, 2022 | Number of Shares of Common Stock of the Registrant Outstanding at<br>March 27, 2023 |
| Prosper Marketplace, Inc. | (a) | 75218262 |
| Prosper Marketplace, Inc. | (a) | ($0.01 par value) |
| Prosper Funding LLC | (a)(b) |  |
| (a) Not applicable |  |  |
| (b) All voting and non-voting common equity is owned by Prosper Marketplace, Inc. | (b) All voting and non-voting common equity is owned by Prosper Marketplace, Inc. |  |

---

THIS COMBINED FORM 10-K IS SEPARATELY FILED BY PROSPER MARKETPLACE, INC. AND PROSPER FUNDING LLC. INFORMATION CONTAINED HEREIN RELATING TO ANY INDIVIDUAL REGISTRANT IS FILED BY SUCH REGISTRANT ON ITS OWN BEHALF. EACH REGISTRANT MAKES NO REPRESENTATION AS TO INFORMATION RELATING TO THE OTHER REGISTRANT.

------

---

| | | |
|:---|:---|:---|
|<br>**ITEM** | **TABLE OF CONTENTS** |<br>**Page** |
| **PART I** | **PART I** | |
| ITEM 1 | <u>[Business](#ib8e8259c7615433d9511e731d87713fc_16)</u> | <u>[6](#ib8e8259c7615433d9511e731d87713fc_16)</u> |
| ITEM 1A | <u>[Risk Factors](#ib8e8259c7615433d9511e731d87713fc_19)</u> | <u>[16](#ib8e8259c7615433d9511e731d87713fc_19)</u> |
| ITEM 1B | <u>[Unresolved Staff Comments](#ib8e8259c7615433d9511e731d87713fc_34)</u> | <u>[41](#ib8e8259c7615433d9511e731d87713fc_34)</u> |
| ITEM 2 | <u>[Properties](#ib8e8259c7615433d9511e731d87713fc_37)</u> | <u>[41](#ib8e8259c7615433d9511e731d87713fc_37)</u> |
| ITEM 3 | <u>[Legal Proceedings](#ib8e8259c7615433d9511e731d87713fc_40)</u> | <u>[41](#ib8e8259c7615433d9511e731d87713fc_40)</u> |
| ITEM 4 | <u>[Mine Safety Disclosures](#ib8e8259c7615433d9511e731d87713fc_43)</u> | <u>[42](#ib8e8259c7615433d9511e731d87713fc_43)</u> |
| **PART II** | **PART II** | |
| ITEM 5 | <u>[Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#ib8e8259c7615433d9511e731d87713fc_49)</u> | <u>[42](#ib8e8259c7615433d9511e731d87713fc_49)</u> |
| ITEM 6 | [<u>[Reserved\]](#ib8e8259c7615433d9511e731d87713fc_52)</u> | <u>[42](#ib8e8259c7615433d9511e731d87713fc_52)</u> |
| ITEM 7 | <u>[Management's Discussion and Analysis of Financial Condition and Results of Operations](#ib8e8259c7615433d9511e731d87713fc_58)</u> | <u>[43](#ib8e8259c7615433d9511e731d87713fc_58)</u> |
| ITEM 7A | <u>[Quantitative and Qualitative Disclosures About Market Risk](#ib8e8259c7615433d9511e731d87713fc_85)</u> | <u>[63](#ib8e8259c7615433d9511e731d87713fc_85)</u> |
| ITEM 8 | <u>[Financial Statements and Supplementary Data](#ib8e8259c7615433d9511e731d87713fc_88)</u> | <u>[65](#ib8e8259c7615433d9511e731d87713fc_88)</u> |
| ITEM 9 | <u>[Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](#ib8e8259c7615433d9511e731d87713fc_91)</u> | <u>[65](#ib8e8259c7615433d9511e731d87713fc_91)</u> |
| ITEM 9A | <u>[Controls and Procedures](#ib8e8259c7615433d9511e731d87713fc_94)</u> | <u>[65](#ib8e8259c7615433d9511e731d87713fc_94)</u> |
| ITEM 9B | <u>[Other Information](#ib8e8259c7615433d9511e731d87713fc_97)</u> | <u>[66](#ib8e8259c7615433d9511e731d87713fc_97)</u> |
| ITEM 9C | <u>[Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#ib8e8259c7615433d9511e731d87713fc_1318)</u> | <u>[66](#ib8e8259c7615433d9511e731d87713fc_1318)</u> |
| **PART III** | **PART III** | |
| ITEM 10 | <u>[Directors, Executive Officers and Corporate Governance](#ib8e8259c7615433d9511e731d87713fc_103)</u> | <u>[67](#ib8e8259c7615433d9511e731d87713fc_103)</u> |
| ITEM 11 | <u>[Executive Compensation](#ib8e8259c7615433d9511e731d87713fc_106)</u> | <u>[72](#ib8e8259c7615433d9511e731d87713fc_106)</u> |
| ITEM 12 | <u>[Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#ib8e8259c7615433d9511e731d87713fc_109)</u> | <u>[83](#ib8e8259c7615433d9511e731d87713fc_109)</u> |
| ITEM 13 | <u>[Certain Relationships and Related Transactions, and Director Independence](#ib8e8259c7615433d9511e731d87713fc_112)</u> | <u>[87](#ib8e8259c7615433d9511e731d87713fc_112)</u> |
| ITEM 14 | <u>[Principal Accounting Fees and Services](#ib8e8259c7615433d9511e731d87713fc_115)</u> | <u>[89](#ib8e8259c7615433d9511e731d87713fc_115)</u> |
| **PART IV** | **PART IV** | |
| ITEM 15 | <u>[Exhibits, Financial Statement Schedules](#ib8e8259c7615433d9511e731d87713fc_121)</u> | <u>[91](#ib8e8259c7615433d9511e731d87713fc_121)</u> |
| <u>[SIGNATURES](#ib8e8259c7615433d9511e731d87713fc_283)</u> | <u>[SIGNATURES](#ib8e8259c7615433d9511e731d87713fc_283)</u> |  |
| <u>[EXHIBIT INDEX](#ib8e8259c7615433d9511e731d87713fc_280)</u> | <u>[EXHIBIT INDEX](#ib8e8259c7615433d9511e731d87713fc_280)</u> | |
| XBRL Content | XBRL Content | |

---

------

Except as the context requires otherwise, as used herein, "Registrants" refers to Prosper Marketplace, Inc. ("PMI"), a Delaware corporation, and its wholly owned subsidiary, Prosper Funding LLC ("PFL"), a Delaware limited liability company; "we," "us," "our," "Prosper," and the "Company" refer to PMI and its wholly owned subsidiaries, PFL, BillGuard, Inc. ("BillGuard"), a Delaware corporation, Prosper Healthcare Lending LLC ("PHL"), a Delaware limited liability company, Prosper Warehouse I Trust ("PWIT"), a Delaware statutory trust, Prosper Warehouse II Trust ("PWIIT"), a Delaware statutory trust, Prosper Grantor Trust ("PGT"), a Delaware statutory trust, on a consolidated basis; and "Prosper Funding" refers to PFL and its wholly owned subsidiary, Prosper Depositor LLC, a Delaware limited liability company, on a consolidated basis. In addition, the unsecured personal loans originated through our marketplace are referred to as "Borrower Loans," and the borrower payment dependent notes issued through our marketplace, whether issued by PMI or PFL, are referred to as "Notes." Investors currently invest in Borrower Loans through two channels: (i) the "Note Channel," which allows investors to purchase Notes from PFL, the payments of which are dependent on the payments made on the corresponding Borrower Loan; and (ii) the "Whole Loan Channel," which allows accredited and institutional investors to purchase Borrower Loans in their entirety directly from PFL. The Notes available to Note Channel investors are distinguishable from notes held by certain third party investors pursuant to Prosper's securitization transactions, which are referred to herein as "Notes Issued by Securitization Trust." Finally, although historically the Company has referred to investors as "lender members," PFL calls them "investors" herein to avoid confusion since WebBank is the lender for Borrower Loans originated through our marketplace.

**Forward-Looking Statements**

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as "may," "believe," "expect," "project," "estimate," "intend," "anticipate," "plan," "continue" or similar expressions. These statements may appear throughout this Annual Report on Form 10-K, including the sections titled "Business," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, PFL or PMI expresses an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of their respective managements, expressed in good faith, and is believed to have a reasonable basis. Nevertheless, there can be no assurance that the expectation or belief will result or be achieved or accomplished.

The following include some, but not all, of the factors that could cause actual results or events to differ materially from those anticipated:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the performance of the Notes, which, in addition to being speculative investments, are special, limited obligations that are not guaranteed or insured;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• PFL's ability to make payments on the Notes, including in the event that borrowers fail to make payments on the corresponding Borrower Loans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to attract potential borrowers and investors to our personal loan marketplace;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the reliability of the information about borrowers that is supplied by borrowers including actions by some borrowers to defraud investors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to service the Borrower Loans, and our ability or the ability of a third party debt collector to pursue collection against any borrower, including in the event of fraud or identity theft;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• credit risks posed by the credit worthiness of borrowers and the effectiveness of our credit rating systems;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• potential efforts by state regulators or litigants to impose liability that could affect PFL's (or any subsequent assignee's) ability to continue to charge to borrowers the interest rates that they agreed to pay at origination of their loans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the impact of future economic conditions on the performance of the Notes and the loss rates for the Notes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the performance of the secured digital Home Equity Loan ("HELoan") product that was launched in 2022, the unsecured credit card ("Credit Card") product that was launched in 2021 and the growth of the secured digital Home Equity Line of Credit ("HELOC" and, together with HELoan, "Home Equity") product that was launched in 2019;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our compliance with applicable local, state and federal law, including the Investment Advisers Act of 1940, the Investment Company Act of 1940 and other laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our compliance with applicable regulations and regulatory developments or court decisions affecting our business;

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• potential efforts by state regulators or litigants to characterize PFL or PMI, rather than WebBank, as the lender of the loans originated through our marketplace;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the application of federal and state bankruptcy and insolvency laws to borrowers and to PFL and PMI;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the impact of borrower delinquencies, defaults and prepayments on the returns on the Notes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the impact of rising interest rates and inflation on our business, results of operations, financial condition and future prospects;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the lack of a public trading market for the Notes and the current lack of any trading platform on which investors can resell the Notes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal income tax treatment of an investment in the Notes and the PMI Management Rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to prevent security breaches, disruptions in service, and comparable events that could compromise the personal and confidential information held on our data systems, reduce the attractiveness of the platform or adversely impact our ability to service Borrower Loans; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the other risks discussed under the "Risk Factors" section of this Annual Report on Form 10-K.

There may be other factors that may cause actual results to differ materially from the forward-looking statements in this Annual Report on Form 10-K. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them does occur, what impact they will have on our results of operations and financial condition. You should carefully read the factors described in the "Risk Factors" section of this Annual Report on Form 10-K for a description of certain risks that could, among other things, cause our actual results to differ from these forward-looking statements.

All forward-looking statements speak only as of the date hereof and are expressly qualified in their entirety by the cautionary statements included in this Annual Report on Form 10-K. We undertake no obligation to update or revise forward-looking statements that may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.

------

**PART I**

**ITEM 1. BUSINESS**

**Overview**

Our vision is to transform lives by providing affordable financial solutions through the simplest and most trusted platform. We currently offer access to three lending products, each of which supports our vision: (i) unsecured personal loans through a personal loan marketplace which connects eligible consumer borrowers with individual and institutional investors, (ii) a Credit Card product available to eligible borrowers, and (iii) secured Home Equity products available to eligible homeowners.

***Personal Loan***

We are a pioneer of peer-to-peer lending in the U.S. and first launched our personal loan lending product in 2006. Our personal loan marketplace facilitated $3.3 billion in Borrower Loan originations during 2022 and $23.5 billion in Borrower Loan originations since launch.

We believe our business model has key advantages relative to traditional banks, including (i) an innovative marketplace model that efficiently connects qualified supply and demand of capital, (ii) online operations that substantially reduce the need for physical infrastructure and improve convenience, and (iii) use of advanced technology and machine learning to deliver simple, fast, personalized, and transparent solutions that can improve consumers' financial health as they move across the credit spectrum. We do not operate physical branches or incur expenses related to infrastructure like traditional banks or consumer finance institutions. As part of operating our marketplace, we verify the identity of borrowers and assess borrowers' credit risk profile using a combination of public and proprietary data. Our proprietary technology automates several loan origination and servicing functions, including the borrower application process, data gathering, underwriting, credit scoring, loan funding, investing and servicing, regulatory compliance and fraud detection.

To consumer borrowers, we believe that we offer generally better pricing, on average, than the pricing those loan borrowers would pay on outstanding credit card balances or unsecured installment loans from a traditional lender. To individual and institutional investors, we offer an asset class (personal loans) that we believe has attractive risk adjusted returns, transparency, and lower duration risk.

Our personal loan marketplace offers fixed rate, fully amortizing, unsecured personal loans ranging from $2,000 to $50,000 with no prepayment penalty. Loan terms of two, three, four and five years are available, depending in large part upon the Prosper Rating assigned to the borrower at issuance and loan amount being sought. All Borrower Loans are originated and funded by WebBank, an FDIC-insured, state chartered industrial bank organized under the laws of Utah. After origination, WebBank sells the Borrower Loans to PFL, which either holds them or sells them to accredited institutional investors.

Investors invest in Borrower Loans through two channels – (i) the "Note Channel," which allows investors to purchase Notes from PFL, the payments of which are dependent on PFL's receipt of payments made on the corresponding Borrower Loan; and (ii) the "Whole Loan Channel," which allows accredited institutional investors to purchase a Borrower Loan in its entirety directly from PFL. PFL continues to own the Borrower Loans originated through the Note Channel. We service all of the Borrower Loans made through our marketplace.

***Credit Card***

In December 2021, we launched our Prosper Credit Card product in partnership with Coastal Community Bank ("Coastal"), through which eligible consumers are extended unsecured credit through Prosper-branded Credit Cards. In accordance with our program agreement with Coastal, the receivables associated with these Credit Cards are maintained on the balance sheet of Coastal. Customer accounts are then randomly designated as either Prosper Allocations or Coastal Allocations on an approximate 90% to 10% split, respectively. Each party receives 100% of the interest income and is responsible for the credit losses on its allocated customer accounts. Credit Card receivables are not available for investment purposes.

***Home Equity***

We launched the HELOC product and the HELoan product in March 2019 and October 2022, respectively. Currently, we partner with Spring EQ, LLC ("Spring EQ") to provide a variety of Home Equity services, including accepting online applications, counseling and non-counseling services, and verification, technology and processing services. The HELOC product is available through our website in 31 states and the District of Columbia, and the HELoan product is available through our website in 29 states. Neither of our Home Equity products are available for investment purposes.

------

**Segment Reporting**

We have three reportable segments: Personal Loan, Home Equity and Credit Card.

**Company Background and History**

PMI was incorporated in the state of Delaware on March 22, 2005. PFL was formed as a limited liability company in the state of Delaware on February 17, 2012, and is a wholly-owned subsidiary of PMI.

PMI developed our personal loan marketplace and, until February 1, 2013, owned the proprietary technology that makes operation of our personal loan marketplace possible. On February 1, 2013, PMI transferred the personal loan marketplace to PFL. PFL has been organized and is operated in a manner that is intended (i) to minimize the likelihood that it will become subject to a voluntary or involuntary bankruptcy or similar proceeding, and (ii) to minimize the likelihood that, in the event of PMI's bankruptcy, PFL would be substantively consolidated with PMI and thus have its assets subjected to claims of PMI's creditors. We believe we have achieved this by imposing through PFL's organizational documents and covenants in the Amended and Restated Indenture (as defined below in Item 13, "Certain Relationships and Related Transactions, and Director Independence") certain restrictions on PFL's activities and certain formalities designed to reinforce PFL's status as a distinct entity from PMI. In addition, under the Administration Agreement, dated February 1, 2013, between PMI and PFL (as amended to date, the "Administration Agreement"), PMI has agreed, in its dealings with PFL and with third parties, to observe certain "separateness covenants" related to its corporate formalities. PMI has also adopted resolutions limiting its own activities and interactions with PFL in order to further reduce the likelihood that PFL would be substantively consolidated with PMI in the event of PMI's bankruptcy.

PFL has retained PMI, pursuant to the Administration Agreement, to provide certain administrative services relating to our personal loan marketplace. Specifically, the Administration Agreement contains a license granted by PFL to PMI that entitles PMI to use the marketplace for and in relation to: (i) PMI's performance of its duties and obligations under the Administration Agreement relating to corporate administration, loan platform services, loan and Note servicing, and marketing, and (ii) PMI's performance of its duties and obligations to WebBank in relation to loan origination and funding. The license is terminable in whole or in part upon the failure by PMI to pay PFL the licensing fee, or upon PMI's termination as the provider of some or all of the aforementioned services. See Item 13, "Certain Relationships and Related Transactions, and Director Independence—Prosper Marketplace, Inc.—Agreements with PFL" for more information.

**How our Personal Loan Marketplace Works**

Our personal loan marketplace is an online marketplace that matches individuals who wish to obtain unsecured personal loans with individuals and institutions who are willing to commit funds to those loans. A borrower who wishes to obtain a loan through our marketplace must apply and, if accepted, post a loan listing to our marketplace. Each time we post a group of listings on our personal loan marketplace, we determine the relative proportions of such listings that will be allocated to the Note Channel and the Whole Loan Channel, respectively, based on our estimate of the relative overall demand in each channel. We then use a random allocation methodology to allocate individual listings between the two channels based on those proportions. If a listing receives enough investor commitments, WebBank will originate the Borrower Loan requested and then sell it to PFL.

***Borrowers***

Any natural person at least 18 years of age who is a U.S. resident in a state where loans through our marketplace are available with a U.S. bank account and a social security number may apply to become a borrower. All potential borrowers are subject to anti-fraud, anti-terrorism and identity verification processes and a potential borrower cannot obtain a loan without passing those processes.

When a borrower requests a loan, we first evaluate whether the borrower meets the underwriting criteria required by WebBank. WebBank originates loans to borrowers and then sells and assigns the loans to PFL. The underwriting criteria apply to all Borrower Loans originated through our marketplace and may not be changed without WebBank's consent. For the Note Channel, all borrowers who request a loan are subject to the following minimum eligibility criteria: (1) have at least a 600 FICO 08 score, (2) have nine or fewer credit bureau inquiries (after excluding duplicate inquiries) within the last 6 months, (3) have an annual income greater than $0, (4) have a debt-to-income ratio of no more than 50%, (5) have at least two open trades reported on their credit report, and (6) have not filed for bankruptcy within the last 12 months.

We also allow two borrowers to apply together as joint applicants for a co-borrower loan. Each borrower applicant is held jointly and severally liable for the obligations under the loan. In the case of co-borrower loans, the primary (or "specified") borrower must satisfy the following minimum eligibility criteria: (1) have at least a 640 FICO 08 score, (2) have fewer than five credit bureau inquiries (after excluding duplicate inquiries) within the last 6 months, (3) have an annual income greater than $0, (4) have a debt-to-income ratio of no more than 50% (the debt-to-income ratio for joint loans is calculated using the combined

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debt-to-income ratio of the primary and secondary borrowers without duplication of combined debt), (5) have at least three open trades reported on their credit report, and (6) have not filed for bankruptcy within the last 12 months.

In addition, a borrower may have up to two loans through Prosper outstanding at one time, provided that (1) the first loan is current, (2) the aggregate outstanding principal balance of both loans does not exceed the then-current maximum allowable loan amount for loans (currently $50,000), (3) the borrower has held their first Borrower Loan for at least 6 months, and (4) the borrower complies with the prior-borrower constraints below. For co-borrower loans, the foregoing additional requirements will apply if either the primary or secondary borrower has a currently outstanding loan.

If a borrower has previously obtained a Borrower Loan through our marketplace, then in addition to the foregoing requirements (as applicable), the borrower must also (1) have no prior charge-offs on Borrower Loans originated through our marketplace, and (2) have never been more than 15 days delinquent on any Borrower Loan obtained through our marketplace within 12 months of their application.

From time to time, we have, with WebBank's consent, tested new products that include features which are outside the standard eligibility criteria discussed above. These products are available exclusively through our Whole Loan Channel.&nbsp;&nbsp;&nbsp;&nbsp;

***Investors***

Investors are individuals and institutions that have the opportunity to buy Notes or Borrower Loans after registering on our personal loan marketplace. However, investors do not have the ability to invest in the Credit Card and Home Equity products on our personal loan marketplace. An individual investor must be a natural person at least 18 years of age and a U.S. resident, must provide their social security number, and may be required to provide their state driver's license or state identification card number. An institutional investor must provide its taxpayer identification number and entity formation documentation. All potential investors are subject to anti-fraud, anti-terrorism and identity verification processes and a potential investor cannot invest in Notes or Borrower Loans without passing those processes.

At the time an individual investor registers to participate in the Note Channel, such investor must satisfy any minimum financial suitability standards established for the Note Channel by the state in which the investor resides. Investors who participate in the Note Channel must enter into an investor registration agreement, which governs all sales of Notes to such investors.

Only investors who are approved by us are eligible to participate in the Whole Loan Channel. At a minimum, to participate in the Whole Loan Channel, an investor must meet the definition of an "accredited investor" set forth in Regulation D under the Securities Act. Investors who participate in the Whole Loan Channel must enter into loan purchase and loan servicing agreements with us.

Individual investors can also create a Prosper IRA account to invest on our marketplace using tax-deferred funds from an individual retirement account ("IRA"). Prosper IRA accounts are not maintained on our personal loan marketplace. Rather, Prosper IRA accounts are managed by third-party custodians who direct Prosper to make deposits and withdrawals to the individual's Prosper IRA account on behalf of the investor and/or their beneficiaries and who ensure IRA accounts remain compliant with applicable U.S. Internal Revenue Service ("IRS") regulations. Investors have the ability to select their third-party custodian or utilize a Prosper preferred third-party custodian partner for account management purposes.

***Relationship with WebBank***

WebBank is an FDIC-insured, Utah-chartered industrial bank that originates all Borrower Loans made through our personal loan marketplace. WebBank and PMI are parties to an agreement under which PMI manages the operations of our marketplace that relate to the submission of loan applications by borrowers and the making of related Borrower Loans by WebBank in exchange for a fee. WebBank makes each Borrower Loan with its own funds. A joint WebBank-Prosper Credit Policy, which can be changed only with WebBank's approval, constitutes the policy we must follow in reviewing, approving and administering Borrower Loans made by WebBank through the marketplace. WebBank, PMI and PFL are parties to a Loan Sale Agreement, under which WebBank sells and assigns the promissory notes evidencing the Borrower Loans to PFL. As consideration for WebBank's agreement to sell and assign the promissory notes, PFL pays WebBank the purchase price of the promissory notes, as well as a monthly fee, which is partially tied to the terms and performance of the loans. PMI receives payments from WebBank as compensation for the activities it undertakes on WebBank's behalf.

***Risk Management***

Each loan listing is assigned a letter grade that indicates the expected level of risk associated with the listing, which we refer to as a Prosper Rating. Each Prosper Rating corresponds to an estimated average annualized loss rate range. The Prosper Rating associated with a loan listing reflects the loss expectations for that listing as of the time the rating is given. This means

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that otherwise similar borrowers may have different Prosper Ratings at different points in time as the Prosper Rating is updated to incorporate more recent information.

The estimated average annualized loss rate for each loan listing is based primarily on the historical performance of Borrower Loans with similar characteristics and is primarily determined by the following scores: (i) one or more custom Prosper scores ("Prosper Score"), as may be supplemented by additional proprietary scoring models, and (ii) a credit score obtained from a credit reporting agency. A Prosper Score is also updated periodically to include new information that is predictive of borrower risk as such information becomes available or as the evidence supporting a particular variable becomes strong enough to merit its inclusion in a Prosper Score.

To create a Prosper Score, we have developed and refined custom, machine learning driven risk models using our historical data as well as a data archive from a consumer credit bureau. We built the Prosper Score models on our borrower population, and included information provided directly by the borrowers as well as information from their credit reports and other data sources, so that the models would incorporate behavior that is unique to that population. In addition to a Prosper Score, another major element used to determine the Prosper Rating for a loan listing is a credit score from a consumer reporting agency. We currently use either or both of TransUnion's FICO08 score and VantageScore. We obtain a borrower's credit score at the time the loan listing is created, unless we already have a credit score on file that is not more than thirty days old.

***Sale of Notes and Borrower Loans***

If an investor successfully bids on a loan listing, the principal amount of the loan will be set aside in the investor's account and may not be used for other bids. In the event a listing does not result in a loan being originated, the funds are made available for bidding by the investor.

For loan listings allocated to the Note Channel, a bid on a listing is an investor's commitment to purchase a Note from PFL. PFL generally issues and sells a series of Notes for each Borrower Loan that is originated through the Note Channel. The Notes are sold to the investors who successfully bid on the corresponding loan listing in the principal amounts of their respective bids. Each series of Notes is dependent for payment on PFL's receipt of payments on the corresponding Borrower Loan. PFL uses the proceeds of each series of Notes to purchase the corresponding Borrower Loan from WebBank on the second business day after WebBank has originated the Borrower Loan. Each Note comes attached with an inseparable PMI Management Right issued by PMI. Each PMI Management Right constitutes an "investment contract," a concept under federal securities law that refers to an arrangement where investors invest money in a common enterprise with the expectation of profits, primarily from the efforts of others.

Generally, for listings allocated to the Whole Loan Channel, a bid on a listing is an investor's commitment to purchase the Borrower Loan from PFL after origination by WebBank and sale to PFL. On the second business day after WebBank has originated the Borrower Loan, PFL purchases the Borrower Loan from WebBank and re-sells the Borrower Loan that same day to the corresponding investor. In some cases, certain investors on the Whole Loan Channel purchase Borrower Loans that WebBank retains beyond the second business day. PFL records the investor as the owner of the Borrower Loan.

***Loan Servicing and Collection***

We are responsible for servicing the Borrower Loans made through our personal loan marketplace. We will pay each Note holder principal and interest on the Note in an amount equal to each such Note's pro-rata portion of the principal and interest payments, if any, which we receive on the corresponding Borrower Loan, net of our servicing fee. We will also pay Note holders their pro-rata portion of any other amounts we receive on the corresponding Borrower Loans, including late fees and prepayments, subject to our servicing fee; provided, that we will not pay Note holders any non-sufficient funds fees we receive for failed borrower payments. In addition, the funds available for payment on the Notes will be reduced by the amount of any attorneys' fees or collection fees we, a third-party servicer or a collection agency imposes in connection with collection efforts related to the corresponding Borrower Loan. We will have no further obligation to make payments on any Note after its final maturity date.

We will pay each investor who has purchased a Borrower Loan through the Whole Loan Channel principal and interest on the Borrower Loan purchased in an amount equal to the principal and interest payments, if any, that we receive, net of our servicing fee. We will also pay these investors any other amounts we receive on the Borrower Loans, including late fees and prepayments, subject to our servicing fee, provided that we will not pay these investors any non-sufficient funds fees we receive for failed borrower payments or any payment processing fees we may collect. In addition, the funds available for payment on the Borrower Loans will be reduced by the amount of any attorneys' fees or collection fees we, a third-party servicer or a collection agency imposes in connection with collection efforts related to the Borrower Loan.

If a Borrower Loan becomes past due, we may collect on it directly or refer it to a third-party collection agency. Our in-house collections department and third-party collection agencies are compensated by keeping a portion of the payments they collect based on a predetermined schedule.

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**Customers**

A relatively small number of investors provide the funding commitments for a large percentage of all listings that result in Borrower Loans originated through our personal loan marketplace. Of all Borrower Loans originated in the year ended December 31, 2022, the largest party purchased a total of 23.4% of those loans.

**Industry Background and Trends** 

According to the Board of Governors of the Federal Reserve System, as of December 2022, the balance of outstanding consumer credit (excluding loans secured by real estate) in the United States totaled $4.8 trillion. This amount included $1.2 trillion of revolving consumer credit, primarily credit card, and $3.6 trillion of non-revolving loans. A portion of the revolving balances are also refinanced by consumers at lower interest rates and fixed terms through personal loans.

The market for consumer lending is competitive and rapidly evolving, and there is an opportunity for our business model to transform the traditional lending process. We believe our marketplace offers a superior solution for both borrowers and investors.

For borrowers, we believe our marketplace offers the following principal competitive factors: better terms versus other alternatives; a simple, easy and intuitive customer experience; a fast and efficient process; and trust and transparency.

For investors, we believe our marketplace offers the following principal competitive factors: attractive risk-adjusted returns; low duration risk; diversification from other asset classes; a simple, easy and intuitive customer experience; and trust and transparency.

**Competition**

We compete for borrowers and investors against other financial products and companies. For borrowers, our competition includes banking institutions, credit unions, credit card issuers, mortgage and home equity lenders, and other online consumer lending companies, including publicly traded companies such as LendingClub Corporation, Social Finance Inc., and Upstart Holdings, Inc. For investors in our personal loan product, our competition includes other consumer lending platforms, alternative asset funds, and asset classes such as equities, bonds and commodities. We may also face potential competition from new market entrants, or business expansion from established companies. These companies may have significantly greater financial, technical, marketing and other resources and may be able to devote greater resources to the development, promotion, sale and support of their offerings.

**Our Competitive Strengths**

We believe the following strengths differentiate us from our competitors and provide us with sustainable competitive advantages:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Leading Online Personal Loan Marketplace*. Since inception, our personal loan marketplace has facilitated $23.5 billion in loan originations, of which $3.3 billion was for the year-ended December 31, 2022. As our business grows, our brand, reputation and scale strengthens. This allows us to attract top talent, speed up product innovation, launch additional consumer finance products, attract marketplace participants and drive down our cost structure, all of which further benefit borrowers and investors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Robust Network Effect*. The attractiveness of our personal loan marketplace increases as the number of participants on our marketplace increases, yielding a classic network effect. Our personal loan marketplace offers consumer borrowers access to affordable credit, and allows individual and institutional investors to invest in an asset class with attractive risk-adjusted returns. The diversity of investors brings scale and breadth of funding to our marketplace and makes credit more affordable. As both sides of the equation grow, the advantages (reduced risk, lower cost) scale accordingly, attracting even more borrowers and investors. The increased participant pool reduces costs and generates more data which we use to improve the effectiveness of our credit decisioning and scoring models. This enhances our aggregate loan performance and builds increased trust in our marketplace, which in turn attracts more borrowers and investors. We believe our strength in the personal loan marketplace will also attract customers to seek out the Credit Card and Home Equity products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Technology Platform*. Our technology platform automates key aspects of our operations, including the borrower application process, data gathering, underwriting, credit scoring, loan funding, investing and servicing, regulatory compliance and fraud detection. This provides a significant time and cost advantage over traditional consumer lending business models and, we believe, enables us to provide a superior user experience to our customers. Using our accumulated performance data, we continually invest in incremental improvements in our algorithms thus extending our technological advantage.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Proprietary Risk Management Capabilities*. We have developed machine learning driven proprietary risk models based on personal loan and credit card performance data, which we believe allows us to accurately assess the credit risk profile of borrowers and which we believe also allows investors to earn attractive risk-adjusted returns. We leverage the results from our growing data stream to continually refine these machine learning driven risk models and more accurately predict credit performance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• Unique Corporate Structure*. Our corporate structure was designed to offer our investors extra protection. The organization and operation of PFL and PMI as separate and distinct entities should serve to protect our Note investors in the event of a bankruptcy filing by or against PMI. This organizational structure, along with the federal and state registration process, is expensive and time consuming to undertake, and is not easily duplicated by competitors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** *Efficient and Attractive Financial Model*. We have multiple revenue streams and an efficient cost model. For personal loans, we generate revenue from transaction fees from our marketplace's role in matching borrowers with investors to enable loan originations, servicing fees related to Borrower Loans for which we retain the servicing rights, net interest income from Borrower Loans and Loans Held for Sale, credit referral fees and other ancillary revenue sources. We also earn revenue from transaction fees generated by our Home Equity products and interest income and a variety of fees provided under the Credit Card program, including interchange fees, annual fees and late fees, net of a program fee and a portion of the interchange fees that must be remitted to Coastal. Additionally, our technology platform significantly reduces the need for physical infrastructure and therefore allows our business to grow with a lower cost operating model, providing us with significant operating leverage.

**Sources of Revenues**

We earn revenue in a variety of ways from our personal loan, Credit Card, and Home Equity products. We have three primary sources of personal loan revenues: transaction fees, servicing fees, and net interest income. We earn transaction fees from WebBank by facilitating the origination of Borrower Loans through the personal loan marketplace, and we earn servicing fees from investors for processing principal and interest payments made by borrowers and passing such payments on to investors and also earn net interest income from Borrower Loans and Loans Held for Sale. We also earn revenue from interest income and various fees generated by our Credit Card program, including interchange fees, annual fees and late fees, net of program fees and a portion of the interchange fees that must be remitted to Coastal. Finally, we earn revenue from our Home Equity products through broker fees paid by Spring EQ.

**Sales and Marketing**

Our sales and marketing efforts are designed to attract individuals and institutions to our products, encourage their enrollment and participation as users, and facilitate and enhance their understanding and utilization of each product. We employ a wide range of marketing channels to reach potential customers and build our brand and value proposition. These channels include referrals, online marketing, direct mail, partner and affiliate introductions, and email. We are constantly seeking new methods to reach more potential members, while testing and optimizing the end-to-end customer experience.

**Origination and Servicing**

We have efficient and scalable systems for credit risk assessment, loan underwriting, and servicing. Our risk models take borrowers' supplied information and combine that information with public and proprietary data to make real time decisions. Our verification agents use several tools to efficiently verify borrower information. Our personal loan servicing platform calculates a loan's amortization and processes payments received from borrowers and passes such payments on to investors. In addition, we have a back-up servicing agreement with Vervent, Inc. ("Vervent") (f/k/a First Associates Loan Servicing, LLC), a loan servicing company that is willing and able to assume servicing responsibilities in the event that we are no longer able to service the Borrower Loans and Notes. Vervent is a financial services company that has entered into numerous successor loan servicing agreements.

**Technology**

We have made substantial investment in our customer acquisition capability, customer experience, and credit underwriting, loan servicing and payment systems. Our personal loan marketplace utilizes proprietary software to process electronic cash movements, record book entries and calculate cash balances in users' funding accounts. Electronic deposits and payments are mostly done via Automated Clearing House ("ACH") transactions. The technology platform allows us to economically acquire and service Borrower Loans and Notes and allows WebBank to efficiently originate and fund Borrower Loans.

The system hardware for our personal loan marketplace is located in hosting facilities in Scottsdale, Arizona, Las Vegas, Nevada, The Dalles, Oregon and Council Bluffs, Iowa. We own the hardware deployed in support of our personal loan

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marketplace. We continuously monitor the performance and availability of our marketplace. The infrastructure is scalable and utilizes standard techniques such as load-balancing and redundancies.

Key aspects of our technology include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** *Scalability*. Our personal loan marketplace is designed and built as a real-time, highly scalable, multi-tier, redundant system. It incorporates technologies designed to prevent any single point of failure within the data center from taking the entire system offline. This is achieved by utilizing load-balancing technologies at the front end and business layer tiers and clustering technologies in the back-end tiers to allow scaling both horizontally and vertically depending on marketplace utilization.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** *Data Integrity and Security*. We are committed to protecting our users' information and we take the integrity and security of the data provided by them very seriously. To that end, we have established data protection policies which are implemented and enforced using the latest technologies. All sensitive information is transmitted on secure channels using SSL technology, with SSL certificates issued by Symantec or DigiCert. We employ principles of least privilege and layered security to protect stored sensitive information. Sensitive information at rest is encrypted using industry standard encryption technologies with appropriate controls to access the data. We protect the network perimeter using the latest technologies including but not limited to firewall and anti-virus threat management techniques. We use strong multi-factor authentication to protect and monitor remote access. We back up all data securely and would expect to recover operations in a short period of time in the event of a disaster. Logging and monitoring of the systems and security controls are designed to ensure that the controls are functional and that alerts are triggered on security violations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** *Fraud Detection*. We employ a combination of proprietary technologies and commercially available licensed technologies and solutions to prevent and detect fraud. These include knowledge-based authentication, behavioral analytics and digital fingerprinting to prevent identity fraud. We use services from third-party vendors for user identification, credit checks and for checking customer names against the list of Specially Designated Nationals and other lists maintained by the Office of Foreign Assets Control ("OFAC"). In addition, we use specialized third-party software to augment the identity fraud detection systems. We also have a dedicated team which conducts additional investigations of cases flagged for high fraud risk. Finally, we enable users to report suspicious activity, which we may then evaluate further.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Targeted Risk Assessment*. Our machine learning driven risk models include flags and characteristics which are unique to our platform. We believe these models result in a risk assessment that is more targeted and accurate than traditional models, leading to higher approval rates and highly automated identity and income verification. We are continuing to enhance the technology embedded within our models to facilitate and improve access to credit and the application experience for borrowers. We have been building and enhancing our machine learning models since 2015 and currently have models for underwriting, early payment default, third party fraud, income verification, collections and our direct mail program.

**Intellectual Property**

We rely on a combination of copyright, patent, trade secret, trademark, and other rights, as well as confidentiality procedures and contractual provisions, to protect our proprietary technology, processes and other intellectual property. We enter into confidentiality and other written agreements with our employees, consultants and service providers, and through these and other written agreements, attempt to control access to and distribution of the software, documentation and other proprietary technology and information. We also utilize a robust multi-layered monitoring program, including third party domain monitoring services, web search engine alerts and our outside counsel, which we leverage to actively enforce our intellectual property rights. Despite these efforts to protect our proprietary rights, third parties may, in an authorized or unauthorized manner, attempt to use, copy or otherwise obtain and market or distribute our intellectual property rights or technology or otherwise develop a product with the same functionality. Policing all unauthorized use of intellectual property rights is nearly impossible. Therefore, we cannot be certain that the steps we have taken or will take in the future will prevent misappropriations of our technology or intellectual property rights.

We have invested in a research and development program and, as of December 31, 2022, we had three issued patents and five patent applications filed and pending before the United States Patent and Trademark Office. We may file additional patent applications or pursue additional patent protection in the future to the extent we believe it will be beneficial.

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**Human Capital Resources** 

***Employee Profile***

At Prosper, our mission is to advance financial well-being and our employees are critical to achieving this mission. We are committed to hiring and developing employees who embody our core values: accountability, collaboration, excellence, curiosity, diversity, simplicity, and integrity. As of December 31, 2022, we had 468 full-time employees, all of whom were based in the United States. Our employees are split into the following four functions: 166 in origination and servicing, 30 in sales and marketing, 104 in general and administrative – research and development, and 168 in general and administrative – other. In addition to being split based on the functions listed above, our employees are also classified as either "local" to either our San Francisco, California and Phoenix, Arizona offices or "remote national" if they work remotely. As of December 31, 2022, we had 321 local employees and 147 remote national employees. None of our employees are represented by labor unions. We have not experienced any work stoppages, and we believe that our relations with our employees are good.

***Employee Health & Wellness***

Our employees have access to several programs and benefits related to employee wellness including: traditional life and health (medical, dental, vision) insurance, flexible paid time off, free membership to physical, mental and emotional health resources, wellness reimbursement, and parental leave programs, among others. We have also introduced specific programs and benefits for caregivers during the pandemic including company credit to cover tutoring for school-aged children. We believe our progressive human resources policies, learning and development, talent acquisition, and community engagement and support activities enable us to attract and retain key personnel.

***Employee Recognition and Talent Development***

We understand that to attract and retain great people, we must listen to and engage them regularly. We conduct an anonymous, company-wide employee engagement survey twice a year to gauge our progress and identify the areas where we excel and areas for improvement in the employee experience. Following each survey, we identify areas where we would like to focus to support engagement within the company and create action plans to support those initiatives. We have implemented two award programs to recognize and honor our employees who exemplify our values.

Because we operate in a highly regulated industry, we require ongoing regulatory and compliance training for our employees. Additionally, we provide a series of leadership training for all people managers. We also offer employees free access to on-demand training on an array of subjects from technical to business management to build their skills and advance their careers as well as opportunities for employees to pursue their passion projects and leadership development in alignment with our values.

***Diversity, Equity, Inclusion and Belonging*** 

Diversity and collaboration are among our Company's core values and we believe our efforts in diversity, equity, inclusion and belonging ("DEIB") fuel our innovation and drive our success. Our goal is to foster a diverse and inclusive workplace where our employees feel that their identities and experiences are represented, embraced and celebrated. We are also committed to our efforts to increase diversity through our hiring practices by using gender-neutral job postings and recruiting policies that promote diverse candidates. We recruit the best people for the job regardless of differences that include gender, ethnicity and other protected traits and it is our policy to comply fully with all federal, state and local laws relating to discrimination in the workplace. We have several employee resource groups that help us to identify opportunities and actions related to DEIB and to better engage underrepresented populations. Our DEIB principles are also reflected in our employee training, and in particular with respect to our policies against harassment and bullying and the elimination of bias in the workplace. We continue to enhance our DEIB policies, with guidance from our executive leadership team.

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**Government Regulation**

***Overview***

The lending and securities industries are highly regulated. Each of the financial products offered by us are subject to extensive and complex rules and regulations. We also are subject to licensing and examination by various federal, state and local government authorities. These authorities impose obligations and restrictions on our activities, WebBank's activities and the Borrower Loans acquired and Notes issued through our marketplace, Coastal's activities and the Credit Card product, and Spring EQ and the Home Equity products. In particular, these rules may limit the fees that may be assessed, require extensive disclosure to, and consents from, borrowers, prohibit discrimination, and impose multiple qualification and licensing obligations on our activities. Failure to comply with these requirements may result in, among other things, revocation of required licenses or registrations, loss of approved status, voiding of loan contracts, indemnification liabilities to contract counterparties, class action lawsuits, administrative enforcement actions and civil and criminal liabilities. While compliance with such requirements is at times complicated by our novel business model, we believe we are in substantial compliance with these rules and regulations. These rules and regulations are subject to continuous change, however, and a material change could have an adverse effect on our compliance efforts and ability to operate.

From time to time, various types of federal and state legislation are proposed and new regulations are introduced that could result in additional regulation of, and restrictions on, the business of consumer lending. We cannot predict whether any such legislation or regulations will be adopted or how this would affect our business or our important relationships with third parties. In addition, the interpretation of existing legislation may change or may prove different than anticipated when applied to our novel business model. Compliance with such requirements could involve additional costs, which could have a material adverse effect on our business. As a consequence of the extensive regulation of consumer lending in the United States, our business is particularly susceptible to being affected by federal and state legislation and regulations that may increase the cost of doing business.

***Personal Loan State and Federal Laws and Regulations***

*State Licensing Requirements*. In most states we believe that WebBank, as originator of all Borrower Loans originated through our marketplace, satisfies any relevant licensing requirements with respect to the origination of such Borrower Loans. In addition, as needed, we seek licenses and/or authorizations of various types so that we may conduct activities such as servicing and marketing in all states and the District of Columbia, with the exceptions of Iowa and West Virginia. We are subject to supervision and examination by the state regulatory authorities that administer these state lending laws. The licensing statutes vary from state to state and prescribe or impose different requirements, including: restrictions on loan origination and servicing practices, limits on finance charges and the type, amount and manner of charging fees; disclosure requirements; requirements that licensees submit to periodic examination; surety bond and minimum specified net worth requirements; periodic financial reporting requirements; notification requirements for changes in principal officers, stock ownership or corporate control; restrictions on advertising; and requirements that loan forms be submitted for review.

*State Usury Laws*. Section 521 of the Depository Institution Deregulation and Monetary Control Act of 1980 (12 U.S.C. § 1831d) ("DIDA") and Section 85 of the National Bank Act ("NBA") (12 U.S.C. § 85), federal case law interpreting the NBA such as *Tiffany v. National Bank of Missouri* and *Marquette National Bank of Minneapolis v. First Omaha Service Corporation*, and FDIC advisory opinion 92-47 permit FDIC-insured depository institutions, such as WebBank, to "export" the interest rate permitted under the laws of the state where the bank is located, regardless of the usury limitations imposed by the state law of the borrower's state of residence unless the state has chosen to opt out of the exportation regime. WebBank is located in Utah, and Title 70C of the Utah Code does not limit the amount of fees or interest that may be charged by WebBank on loans of the type offered through our marketplace. Only Iowa and Puerto Rico have opted out of the exportation regime under Section 525 of DIDA and we do not operate in either jurisdiction. However, if a state in which we did operate opted out of rate exportation, we believe that judicial interpretations support the view that such opt outs only apply to loans "made" in those states.

In May 2015, the U.S. Court of Appeals for the Second Circuit issued a decision in *Madden v. Midland Funding, LLC* that interpreted the scope of federal preemption under the NBA and held that a nonbank assignee of a loan originated by a national bank was not entitled to the benefits of federal preemption of claims of usury. On November 10, 2015, the defendant in the *Madden* case filed a petition for a writ of certiorari with the United States Supreme Court for further review of the Second Circuit's decision. On June 27, 2016, the United States Supreme Court denied the petition and refused to review the case, leaving the decision of the Second Circuit intact and binding on federal courts in Connecticut, New York and Vermont. The *Madden* decision has created some uncertainty as to whether non-bank entities purchasing loans originated by a bank may rely on federal preemption of state usury laws, and may create an increased risk of litigation by plaintiffs challenging our ability to collect interest in accordance with the terms of Borrower Loans. While the decision specifically addressed preemption under the NBA, it could support future challenges to federal preemption for other institutions, including an FDIC-insured, state chartered industrial bank like WebBank. However, although there can be no assurances as to the outcome of any potential

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litigation, or the possible impact of the litigation on our marketplace, we believe the *Madden* case addressed facts that are not presented by our marketplace lending platform and thus would not apply to Borrower Loans.

In June 2020, the FDIC issued a final regulation entitled "Federal Interest Rate Authority" that, among other things, addressed the uncertainty resulting from the *Madden* decision, including uncertainty affecting marketplace lenders that partner with banks. Under the FDIC's rule, which applies to FDIC-insured state-chartered industrial banks such as WebBank, interest on a loan originated by WebBank that was permissible under DIDA at origination is not affected by WebBank's subsequent sale of the loan to PFL. Seven states and the District of Columbia sued the FDIC, however, seeking to have the regulation set aside on Administrative Procedure Act grounds. Three states brought a similar challenge in the same court to a similar regulation issued by the OCC under the NBA. Both suits were decided in February 8, 2022, with the United States District Court for the Northern District of California ruling that the FDIC and OCC had not exceeded their statutory authority when promulgating their respective rules. The court deferred to each federal agency's interpretation, and thus concluded that each agency's rule was not unreasonable or arbitrary or capricious. The states had until April 11, 2022 to appeal the rulings to the U.S. Court of Appeals for the Ninth Circuit and did not do so.

In January 2017, the Administrator of the Colorado Uniform Consumer Credit Code filed suits against online loan platforms Marlette Funding, LLC and Avant, Inc. The Administrator claimed that loans to Colorado residents facilitated through these platforms were required to comply with Colorado laws regarding interest rates and fees, and that such laws were not preempted by the federal laws that apply to loans originated by Cross River Bank and WebBank, the federally regulated issuing banks that originate loans through the platforms operated by Marlette and Avant, respectively. In response to the Colorado regulator's lawsuits, Cross River Bank and WebBank each intervened in the state court case filed against Marlette and Avant, respectively. On August 18, 2020, the parties reached a settlement that provides a safe harbor for the Marlette and Avant lending platforms, such that if the lending programs meet certain criteria related to oversight, disclosure, funding, licensing, consumer terms, and structure, the programs will be deemed to be in compliance with Colorado's usury limits. On November 9, 2020, we amended our agreements with WebBank to address the requirements of the safe harbor for extending credit to borrowers in Colorado.

If a Borrower Loan made through our marketplace was deemed to be subject to the usury laws of a state that has opted-out of the exportation regime or becomes bound by the Second Circuit's or a similar judicial decision (including a judicial decision setting aside the FDIC's regulation governing permissible interest on loans sold by banks to non-banks), we could become subject to fines, penalties, and possible forfeiture of amounts charged to borrowers, and we may decide not to originate Borrower Loans through our marketplace in that applicable jurisdiction, which may adversely impact our growth. For more information, see Item 1A, "Risk Factors—If our marketplace were found to violate a state's usury laws, we may have to alter our business model and our business could be harmed."

*State Securities Laws*. We are subject to the securities laws of each state in which the registration or qualification to offer and sell the Notes and PMI Management Rights has been approved. Certain of these state laws require us to renew the registration or qualification of Notes and PMI Management Rights on an annual basis.

*The Dodd-Frank Wall Street Reform and Consumer Protection Act.* The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") created many new restrictions and an expanded framework of regulatory oversight for the financial services industry. Among other things, the Dodd-Frank Act centralized responsibility for consumer financial protections by creating the Consumer Financial Protection Bureau (the "CFPB"), which has broad authority to write regulations under federal consumer financial protection laws, such as the Truth-in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act, and to enforce those laws against and examine large financial institutions, such as our issuing bank, for compliance. The CFPB is authorized to prevent "unfair, deceptive or abusive acts or practices" through its regulatory, supervisory and enforcement authority. We are subject to the CFPB's jurisdiction, including its enforcement authority and may become subject to their supervisory authority, as a servicer and acquirer of consumer credit. The CFPB may request reports concerning our organization, business conduct, markets and activities, and also conduct on-site examinations of our business on a periodic basis.

*Truth-in-Lending Act*. The federal Truth-in-Lending Act ("TILA"), and Regulation Z, which implements TILA, require creditors to provide consumers with uniform, understandable information concerning certain terms and conditions of their loan and credit transactions. These rules apply to WebBank as the creditor for Borrower Loans facilitated through our marketplace, but because the transactions are carried out on our hosted website, we facilitate compliance at WebBank's direction. For closed-end credit transactions of the type provided through our marketplace, these disclosures include providing the annual percentage rate, the finance charge, the amount financed, the number of payments and the amount of the monthly payment. The creditor must provide the disclosures before the Borrower Loan is closed. TILA also regulates the advertising of credit and gives borrowers, among other things, certain rights regarding updated disclosures and the treatment of credit balances. Our marketplace provides borrowers with a TILA disclosure prior to the time a Borrower Loan is originated. We also seek to comply with TILA's disclosure requirements related to credit advertising.

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*Equal Credit Opportunity Act*. The federal Equal Credit Opportunity Act ("ECOA") prohibits creditors from discriminating against credit applicants on the basis of race, color, sex, age, religion, national origin, marital status, or the fact that all or part of the applicant's income derives from any public assistance program or the fact that the applicant has in good faith exercised any right under the federal Consumer Credit Protection Act or any applicable state law. Regulation B, which implements ECOA, restricts creditors from requesting certain types of information from applicants and from making statements that would discourage on a prohibited basis a reasonable person from making or pursuing an application. These requirements apply both to lenders such as WebBank and other parties like us that regularly implement and communicate credit decisions. Investors may also be subject to the ECOA in their capacity as purchasers of Notes, if they are deemed to regularly participate in credit decisions. In the underwriting of Borrower Loans on our marketplace, both WebBank and we seek to comply with ECOA's provisions prohibiting discouragement and discrimination. ECOA also requires creditors to provide consumers with timely notices of adverse action taken on credit applications. WebBank and we provide prospective borrowers who apply for a Borrower Loan through our marketplace but are denied credit with an adverse action notice which is in compliance with applicable requirements (see also below regarding "Fair Credit Reporting Act").

*Fair Credit Reporting Act.* The federal Fair Credit Reporting Act ("FCRA") and its implementing regulations, including Regulation V, promote the accuracy, fairness and privacy of information in the files of consumer reporting agencies. FCRA requires a permissible purpose to obtain a consumer credit report, and requires persons to report loan payment information to credit bureaus accurately. FCRA also imposes disclosure requirements on creditors who take adverse action on credit applications based on information contained in a credit report. WebBank and we have a permissible purpose for obtaining credit reports on potential borrowers and WebBank and we also obtain explicit consent from borrowers to obtain such reports. As the servicer for the Borrower Loan, we have systems in place to report Borrower Loan payment and delinquency information to appropriate reporting agencies. We provide an adverse action notice to a rejected borrower on WebBank's behalf at the time the borrower is rejected that includes all the required disclosures. We have also implemented an identity theft prevention program as required by law.

*Fair Debt Collection Practices Act*. The federal Fair Debt Collection Practices Act ("FDCPA") and its implementing regulation, Regulation F, provide guidelines and limitations on the conduct of third-party debt collectors in connection with the collection of consumer debts. The FDCPA limits certain communications with third parties, imposes notice and debt validation requirements, and prohibits threatening, harassing or abusive conduct in the course of debt collection. We are not a "debt collector" under the FDCPA, which the statute defines as a person who regularly collects or attempts to collect, directly or indirectly, debts owed or due, or asserted to be owed or due, to another. The CFPB retained the statute's "debt collector" definition in its November 2020 final rules implementing the FDCPA. As the servicer for Borrower Loans originated by WebBank and owned by investors, we are not a debt collector based on our facilitation of loans in the origination process and/or its servicing of the Borrower Loans after the time of origination and prior to any default. While the FDCPA applies to third-party debt collectors, debt collection laws of certain states impose similar requirements on creditors who collect their own debts. Our agreement with our investors prohibits investors from attempting to collect directly on the Borrower Loan. We use our internal collection team and professional external debt collection agents to collect delinquent accounts. They are required to comply with all other applicable laws in collecting delinquent accounts of our borrowers.

*Servicemembers Civil Relief Act.* The federal Servicemembers Civil Relief Act ("SCRA") allows military members to suspend or postpone certain civil obligations so that the military member can devote their full attention to military duties. The SCRA, as well as certain state laws with similar protections for military members, require us to adjust the interest rate of borrowers who qualify for and request relief. If a borrower with an outstanding Borrower Loan qualifies for protection under the SCRA or similar state laws, we will reduce the interest rate on the Borrower Loan to 6% for the duration of the borrower's active duty. During this period, the investors who have invested in such Borrower Loan will not receive the difference between 6% and the Borrower Loan's original interest rate. For a borrower to obtain an interest rate reduction on a Borrower Loan due to military service, we require the borrower to send us a written request and written documentation of active duty. We do not take military service into account in assigning Prosper Ratings to borrower loan requests and we do not disclose the military status of borrowers to investors.

*Military Lending Act.* The federal Military Lending Act ("MLA") provides specific protections for active duty service members and their dependents (or covered borrowers) in consumer credit transactions. Although originally enacted in 2006, the MLA applies to persons engaged in the business of extending consumer credit subject to the disclosure requirements of the TILA and Regulation Z with respect to loans made on or after October 3, 2016. The MLA prohibits creditors from imposing a Military Annual Percentage Rate ("MAPR") greater than 36% in any consumer credit transaction involving a covered borrower. It also requires certain oral and written disclosures to be provided to covered borrowers. Additionally, the MLA prohibits creditors from requiring covered borrowers to waive rights to legal recourse, submit to arbitration, or pay a prepayment penalty or fee. Both we and WebBank have ensured that the loan program complies with the MLA requirements for covered borrowers, including but not limited to the restriction on MAPR, the delivery of required disclosures and the prohibition of mandatory arbitration and waiver of legal recourse.

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*Other Lending Regulations.* We are subject to and seek to comply with other state and federal laws and regulations applicable to consumer lending, including additional requirements relating to loan disclosure, credit discrimination, credit reporting, debt collection and unfair, deceptive or abusive business practices. These laws and regulations may be enforced by state consumer credit regulatory agencies, state attorneys general, the CFPB and private litigants, among others. Given our novel business model and the subjective nature of some of these laws and regulations, particularly laws regulating unfair, deceptive or abusive business practices, we may become subject to regulatory scrutiny or legal challenge with respect to our compliance with these requirements.

*Electronic Funds Transfer Act*. The federal Electronic Fund Transfer Act ("EFTA"), and Regulation E, which implements it, provide guidelines and restrictions on the electronic transfer of funds from consumers' bank accounts. In addition, transfers performed by ACH electronic transfers are subject to detailed timing and notification rules and guidelines administered by the National Automated Clearinghouse Association ("NACHA"). Most transfers of funds in connection with the origination and repayment of the Borrower Loans are performed by ACH. We obtain necessary electronic authorization from borrowers and investors for such transfers in compliance with such rules. Transfers of funds through our marketplace are currently executed by Wells Fargo and conform to the EFTA, its regulations and NACHA guidelines.

*Electronic Signatures in Global and National Commerce Act/Uniform Electronic Transactions Act*. The federal Electronic Signatures in Global and National Commerce Act ("ESIGN") and similar state laws, particularly the Uniform Electronic Transactions Act ("UETA"), authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures. ESIGN and UETA require businesses that want to use electronic records or signatures in consumer transactions to obtain the consumer's consent to receive information electronically. When a borrower or individual investor registers with our marketplace, we obtain their consent to transact business electronically and maintain electronic records in compliance with ESIGN and UETA requirements.

*Privacy and Data Security Laws*. The federal Gramm-Leach-Bliley Act ("GLBA") limits the disclosure of nonpublic personal information about a consumer to nonaffiliated third parties and requires financial institutions to disclose certain privacy policies and practices with respect to information sharing with affiliated and nonaffiliated entities as well as to safeguard personal customer information. Additional state and federal privacy and data security laws require safeguards to protect the privacy and security of consumers' personally identifiable information, require notification to affected customers in the event of a breach, and restrict certain sharing of nonpublic personal information about a consumer with affiliated entities. For example, the California Consumer Privacy Act ("CCPA"), which took effect on January 1, 2020, provides consumers in the state with rights to know about the use, to request deletion, and to opt out of the sale of their personal information by businesses that are a certain size or that generate at least half of their revenue by selling personal information. In turn, the CCPA requires subject businesses to notify consumers of their data collection practices and to implement procedures for timely responding to consumer requests submitted in exercise of their rights under the statute, although the CCPA includes certain exceptions for personal information that is protected under GLBA or other federal and state privacy laws. These provisions of the CCPA were further strengthened by provisions of the California Privacy Rights Act (the "CPRA"), which took effect on January 1, 2023. We maintain a detailed privacy policy that is accessible from our website and is designed to comply with GLBA, the CCPA and the CPRA as its enforcement provisions take effect on July 1, 2023. We maintain security measures designed to protect participants' personal information, and we do not sell, rent or share such information with nonaffiliated third parties for marketing purposes unless previously agreed to by the participant or otherwise permitted by applicable law. In addition, we take a number of measures to safeguard the personal information of our borrowers and investors and to protect it against unauthorized access.

*Bank Secrecy Act*. In cooperation with WebBank, we have implemented an anti-money laundering policy and various anti-money laundering procedures to comply with applicable federal law. With respect to new borrowers and investors, we apply the customer identification and verification program rules and screen names against the list of Specially Designated Nationals maintained by the U.S. Department of the Treasury Office of Foreign Asset Control's ("OFAC") pursuant to the USA PATRIOT Act amendments to the Bank Secrecy Act ("BSA") and its implementing regulation.

***Credit Card State and Federal Laws and Regulations***

The Credit Card product operates under a similar bank partnership model as our personal loan marketplace, whereby through the application of Section 521 of DIDA, Section 85 of the NBA, and federal case law, Coastal may "export" the interest rate permitted under the laws of the State of Washington, where Coastal is located, regardless of the usury limitations imposed by the state law of the cardholder's state of residence unless the state has chosen to opt out of the exportation regime. State privacy and data security laws, including the CCPA, also apply to the Credit Card product.

The Credit Card product is subject to the same federal laws and regulations applicable to our personal loan marketplace and as summarized above, including the Dodd-Frank Act, TILA, ECOA, FCRA, FDCPA, SCRA, MLA, EFTA, ESIGN, UETA, GLBA, BSA and OFAC. TILA and Regulation Z contain specific disclosure requirements for credit cards and advertising rules for credit cards. Please refer to the "Government Regulations—Personal Loan State and Federal Laws and

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Regulations" section above for a summary of these federal laws and regulations. Certain amendments to TILA also govern the Credit Card product, including the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the "CARD Act"), which amended TILA to prescribe, among other things, additional procedures, disclosures, fee limits, and other protections for consumers applying for or holding credit cards, and the Fair Credit Billing Act ("FCBA"), which governs creditor obligations with respect to billing complaints and errors. For the Credit Card product, we take a similar approach to compliance for our personal loan marketplace, with adjustments for application of the rules to open-ended, unsecured credit cards as opposed to closed-end personal loans. We work with Coastal to facilitate compliance.

***Home Equity State and Federal Laws and Regulations***

The Home Equity products are subject to many of the same federal laws and regulations as the personal loan marketplace, including the Dodd-Frank Act, TILA, ECOA, FCRA, ESIGN, GLBA, BSA and OFAC. TILA and Regulation Z contain specific disclosure requirements for the Home Equity products and mortgage advertising rules. State mortgage broker and mortgage lender licensing and registration requirements also apply to the Home Equity products, which must satisfy the minimum standards set forth in the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 and Regulation H, as well as state usury laws. State privacy and data security laws, including the CCPA, also apply to the Home Equity products.

The Home Equity products are also subject to the Real Estate Settlement Procedures Act ("RESPA") and its implementing regulation, Regulation X, as well as related guidance issued by the CFPB and the Department of Housing and Urban Development ("HUD"). RESPA, among other things, prohibits the payment or acceptance of referral fees or kickbacks, or any splitting of fees except for actual services performed. The TILA-RESPA Integrated Disclosure does not apply to HELOCs, but does apply to HELoans. Prosper does not service any of the Home Equity products.

Finally, the Home Equity products are subject to the data collection and reporting requirements of the Home Mortgage Disclosure Act (the "HMDA") and its implementing regulation, Regulation C. Prosper is not directly subject to the HMDA data collection and reporting requirements, but collects data to support the reporting requirements applicable to its lending partner.

***Foreign Laws and Regulations***

We do not permit non-U.S. based individuals to register as borrowers on our marketplace and the marketplace does not operate outside the United States. Therefore, we do not believe that our marketplace is subject to foreign laws or regulations.

**Summary of Risk Factors**

We are subject to various risks, the most significant of which are summarized below. For more information about these and other risks that may affect us, you should carefully read the factors described in the "Risk Factors" section below.

***Risks related to personal loan borrower default***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Notes are risky and speculative investments for suitable investors only.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Payments on the Notes depend entirely on payments PFL receives on corresponding Borrower Loans. If a borrower fails to make any payments on the corresponding Borrower Loan related to a Note, payments on such Note will be correspondingly reduced. If payments on the Borrower Loan corresponding to an investor's Note become more than 30 days overdue, such investor will be unlikely to receive the full principal and interest payments that were expected on the Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Borrowers may not view or treat their obligations to PFL as having the same significance as loans from traditional lending sources.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The credit information of an applicant may be inaccurate or may not accurately reflect the applicant's creditworthiness, which may cause an investor to lose all or part of the price paid for a Note. The fact that we have the exclusive right and ability to investigate claims of identity theft in the origination of Borrower Loans creates a significant conflict of interest between us and our investors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Borrower Loans are not secured by any collateral or guaranteed or insured by any third party, and investors must rely on us or a third-party collection agency to pursue collection against any borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Prosper Rating may not accurately set forth the risks of investing in the Notes, no assurances can be provided that actual loss rates for the Notes will come within the estimated average annualized loss rates indicated by the Prosper Rating, and investors have limited rights to cause Prosper to repurchase the Notes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We may not set appropriate interest rates for Borrower Loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Investors who use the Recurring Investment or Auto Invest tools may face additional risk of funding Borrower Loans that have been erroneously selected by the tool.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Borrower Loans do not restrict borrowers from incurring additional unsecured or secured debt, nor do they impose any financial restrictions on borrowers during the term of the Borrower Loan, which may reduce the likelihood that an investor will receive the full principal and interest payments that such investor expects to receive on a Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• In general, the Borrower Loans do not contain any cross-default or similar provisions. If a borrower defaults on any of their other debt obligations, our ability to collect on the Borrower Loan on which an investor's Note is dependent for payment may be substantially impaired.

***Risks Inherent in investing in the Notes***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Notes are special, limited obligations of PFL only and are not directly secured by any collateral or guaranteed or insured by PMI or any third party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• PFL is not obligated to indemnify Note holders or repurchase Notes except in limited circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our marketplace allows a borrower to prepay a Borrower Loan at any time without penalty. Borrower Loan prepayments will extinguish or limit an investor's ability to receive additional interest payments on a Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Notes will not be listed on any securities exchange and can be held only by registered Prosper investors. Further, no trading platform for the transfer of Notes exists. Therefore, investors should be prepared to hold the Notes they purchase until maturity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our participation in the funding of Borrower Loans could be viewed as creating a conflict of interest.

***Risks related to PFL and PMI, our marketplace and our ability to service the notes***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Human error in the operation of our platform has resulted in the allocation of Borrower Loans to our Note Channel which did not conform to the eligibility criteria applicable to Borrower Loans at the time of allocation. If we are unable to prevent the reoccurrence of similar errors, our business and investors could be adversely impacted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We have experienced errors on our platform that have resulted in incorrect reporting of performance returns to Note investors. If we are unable to prevent the reoccurrence of similar errors, investors could be adversely impacted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Arrangements for back-up servicing are limited. If PMI fails to maintain operations or the Administration Agreement is rejected or terminated (in bankruptcy or otherwise), investors may experience a delay and increased cost in respect of their expected principal and interest payments on Notes, and PFL may be unable to collect and process repayments from borrowers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• PMI, in its capacity as servicer, has the authority to waive or modify the terms of a Borrower Loan without the consent of the Note holders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We have incurred operating losses in prior years and may continue to incur net losses in the future.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Term Loan, and any additional indebtedness we incur in the future, could adversely affect our business and financial results.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• PFL relies on a third-party commercial bank to process transactions. If PFL is unable to continue utilizing these services, its business and ability to service the Notes may be adversely affected.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Any significant disruption in service in our marketplace or in PMI's computer systems could adversely affect PMI's ability to perform its obligations under the Administration Agreement. If the security of PFL's investors' and borrowers' confidential information stored in our systems is breached, users' secure information may be stolen, our reputations may be harmed, and we may be exposed to liability.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A rising rate of inflation and increase in interest rates could materially and adversely impact our business.

***Risks related to compliance and regulation***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our marketplace represents a novel approach to borrowing and investing that may fail to comply with federal and state securities laws, borrower protection laws and the state counterparts to such consumer protection laws. Borrowers may dispute the enforceability of their obligations under borrower or consumer protection laws after collection actions have commenced, or otherwise seek damages under these laws. Investors may attempt to rescind their Note purchases under securities laws. Regulatory agencies and their state counterparts may investigate our compliance with these regulatory obligations, and may take enforcement action with respect to alleged law violations. There continues to be uncertainty as to how the actions of the Consumer Financial Protection Bureau or any other new agency could impact our business or that of our issuing bank. If our marketplace were found to violate a state's usury laws, we may have to alter our business model and our business could be harmed. If one or both of PMI and PFL is required to register under the Investment Company Act or the Investment Advisers Act, either of our ability to conduct business could be materially adversely affected. Several lawsuits have sought to recharacterize certain loan marketers and other originators as lenders. If litigation or a regulatory enforcement action on similar theories were successful against one or both of PMI

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and PFL, Borrower Loans originated through our marketplace could be subject to state consumer protection laws and licensing requirements in a greater number of states.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We rely on agreements with WebBank, pursuant to which WebBank originates loans to qualified borrowers on a uniform basis throughout the United States and sells and assigns those loans to PFL. If our relationship with WebBank were to end, we may need to rely on individual state lending licenses to originate Borrower Loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• PMI's administration of Quick Invest under its previous offering and PFL's administration of Quick Invest, Recurring Investment, and Auto Invest under its current offering, could create additional liability for PFL and such liability could be material.

**Recent Developments**

***Home Equity Loan***

We launched our HELoan product in October 2022. Our HELoan product serves to complement our HELOC product and allows qualified applicants to borrow up to 90% of their home's value at a fixed rate with 5 to 30 year term options, up to a total of $249 thousand dollars. We partner with Spring EQ, who also serves as our partner for our HELOC product, to provide a variety of Home Equity services, including accepting online applications, counseling and non-counseling services, and verification, technology and processing services. The HELOC product is available through our website in 31 states and the District of Columbia, and the HELoan product is available through our website in 29 states. Neither of our Home Equity products are available for investment purposes.

***Credit Agreement***

In November 2022, we executed a Credit Agreement with a third-party financial institution which provides for a $75 million senior secured term loan ("Term Loan") which will mature in November 2026. We expect to utilize the Term Loan to fund our operations, including investments in our Credit Card product and Loans Held for Sale, as well as meeting our day-to-day obligations. Please refer to Note 10 of the accompanying consolidated financial statements for further details on the Credit Agreement and Term Loan.

**Available Information**

The following filings are available for download free of charge at *www.prosper.com* as soon as reasonably practicable after such filings are electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC"): Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports. Our SEC filings are also available to the public on the SEC's website, at *www.sec.gov*. The information contained on our website and our blog is not incorporated by reference into this Annual Report on Form 10-K.

**ITEM 1A. RISK FACTORS**

***You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, when evaluating our business. Any of the following risks, either alone or taken together, could materially and adversely affect our business, financial condition, operating results and prospects. While we believe the risks and uncertainties described below include all material risks currently known by us, it is possible that these may not be the only ones we face.***

**RISKS RELATED TO PERSONAL LOAN BORROWER DEFAULT**

***The Notes are risky and speculative investments for suitable investors only.***

Investors should be aware that the Notes offered through our marketplace are risky and speculative investments. The Notes are special, limited obligations of PFL and depend entirely for payment on PFL's receipt of payments under the corresponding Borrower Loans. Notes are suitable only for investors of adequate financial means. If an investor cannot afford to lose the entire amount of such investor's investment in the Notes, the investor should not invest in the Notes.

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***Payments on the Notes depend entirely on payments PFL receives on corresponding Borrower Loans. If a borrower fails to make any payments on the corresponding Borrower Loan related to a Note, payments on such Note will be correspondingly reduced.***

PFL will only make payments *pro-rata* on a series of Notes after it receives a borrower's payment on the corresponding Borrower Loan, net of servicing fees. PFL also will retain from the funds received from the relevant borrower and otherwise available for payment on the Notes any non-sufficient funds fees and the amounts of any attorneys' fees or collection fees our in-house collections department, a third-party servicer or collection agency imposes in connection with collection efforts. Under the terms of the Notes, if PFL does not receive any or all payments on the corresponding Borrower Loan, payments on the Note will be correspondingly reduced in whole or in part. If the relevant borrower does not make a payment on a specific monthly loan payment date, no payment will be made on the Note on the corresponding succeeding Note payment date.

***The Borrower Loans are not secured by any collateral or guaranteed or insured by any third party, and investors must rely on us or a third-party collection agency to pursue collection against any borrower.***

Borrower Loans are unsecured obligations of borrowers. They are not secured by any collateral, and they are not guaranteed or insured by PFL, PMI or any third party, or backed by any governmental authority in any way. We and our third-party collection agencies will, therefore, be limited in our ability to collect on Borrower Loans. Moreover, Borrower Loans are obligations of borrowers to PFL as successor to WebBank, not obligations to the holders of Notes. Holders of the Notes will have no recourse to the borrowers and no ability to pursue borrowers to collect payments under Borrower Loans. Holders of the Notes may look only to PFL for payment of the Notes. Furthermore, if a borrower fails to make any payments on the Borrower Loan, the holders of the Notes corresponding to that Borrower Loan will not receive any payments on their Notes. The holders of such Notes will not be able to pursue collection against the borrower and will not be able to obtain the identity of the borrower in order to contact the borrower about the defaulted Borrower Loan.

***The credit information of an applicant may be inaccurate or may not accurately reflect the applicant's creditworthiness, which may cause an investor to lose all or part of the price paid for a Note.***

We obtain applicant credit information from consumer reporting agencies, and assign Prosper Ratings to listings based in part on the applicant's credit score. A credit score that forms a part of the Prosper Rating assigned to a listing may not reflect the applicant's actual creditworthiness because the credit score may be based on outdated, incomplete or inaccurate consumer reporting data. Similarly, the credit data taken from the applicant's credit report and displayed in listings may also be based on outdated, incomplete or inaccurate consumer reporting data. We do not verify the information obtained from the applicant's credit report. Moreover, investors do not, and will not, have access to financial statements of applicants or to other detailed financial information about applicants.

***The Prosper Rating may not accurately set forth the risks of investing in the Notes, no assurances can be provided that actual loss rates for the Notes will come within the estimated average annualized loss rates indicated by the Prosper Rating, and investors have limited rights to cause Prosper to repurchase the Notes.***

The Prosper Rating assigned to a loan listing may not accurately reflect the risks of investing in the Notes, and is not a recommendation by us to buy or hold a Note. For example, the Prosper Rating for a listing could be inaccurate because the applicant's credit report contained incorrect information. Similarly, although some of the information provided by applicants that is relevant to the Prosper Rating is verified by us before calculating the Prosper Rating, we do not verify all such information. For example, we do not verify the income or employment information on all applications. Further, the Prosper Rating does not reflect PFL's credit risk as a debtor (such credit risk exists even though, as the debtor on the Notes, PFL's only obligation is to pay to the Note holders their pro-rata shares of collections received on the related Borrower Loans net of applicable fees). In addition, no assurances can be provided that actual loss rates for the Notes will fall within the expected loss rates indicated by the Prosper Rating. The interest rates on the Notes might not adequately compensate Note investors for these additional risks.

If we include in a listing a Prosper Rating that is different from the Prosper Rating calculated by us or calculate the Prosper Rating for a listing incorrectly, and such error materially and adversely affects a holder's interest in the related Note, PFL will indemnify the holder or repurchase the Note. PFL will not, however, have any indemnity or repurchase obligation under the Amended and Restated Indenture, the Notes, the Investor Registration Agreement or any other agreement associated with the Note Channel as a result of any other inaccuracy with respect to a listing's Prosper Score or Prosper Rating. PFL's contractual repurchase obligations do not affect a Note holder's rights under federal or state securities laws.

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***Investors who use the Recurring Investment or Auto Invest tools may face additional risk of funding Borrower Loans that have been erroneously selected by the tool.***

Since it was first implemented in July 2011 through December 31, 2022, the Recurring Investment (formerly known as Auto Quick Invest) tool has experienced programming errors that affected 8,630 Notes and PMI Notes out of the 13,058,213 Notes and PMI Notes purchased. The Auto Invest tool was first implemented on June 2, 2016. Since such time through December 31, 2022, the Auto Invest tool has experienced programming errors that affected 2 Notes out of the 15,245,653 Notes purchased.

In the event of any errors in Recurring Investment or Auto Invest that cause an investor to purchase a Note from PFL that such investor would not otherwise have purchased or that differs materially from the Note such investor would have purchased had there been no error, PFL will either repurchase the Note, indemnify the investor against losses suffered on that Note or cure such error. See "Risk Factors—Risks Related to PFL and PMI, Our Marketplace and Our Ability to Service the Notes" for more information.

***Some borrowers may use our marketplace to defraud investors, which could adversely affect investors' ability to recoup their investment.***

We use identity and fraud checks with external databases to authenticate each borrower's identity. There is a risk, however, that these checks could fail and fraud may occur. In addition, applicants may misrepresent their intentions regarding loan purpose or other information contained in listings, and we do not verify the majority of this information. While PFL will indemnify an investor or repurchase Notes in limited circumstances (including, e.g., a material payment default on the Borrower Loan resulting from verifiable identity theft), it is not obligated to indemnify an investor or repurchase a Note from an investor if the investment is not realized in whole or in part due to fraud (other than verifiable identity theft) in connection with a loan listing, or due to false or inaccurate statements or omissions of fact in a listing, whether in credit data, a borrower's representations, similar indicators of borrower intent and ability to repay the Borrower Loan. If PFL repurchases a Note, the repurchase price will be equal to the Note's outstanding principal balance and will not include accrued interest. If PFL repurchases any Notes, PMI will concurrently repurchase the related PMI Management Rights for zero consideration.

***The fact that we have the exclusive right and ability to investigate claims of identity theft in the origination of Borrower Loans creates a significant conflict of interest between us and our investors.***

We have the exclusive right to investigate claims of identity theft and determine, in our sole discretion, whether verifiable identity theft has occurred. Such a determination of verifiable identity theft may trigger an obligation by PFL to either repurchase the related Notes or Borrower Loans or indemnify the applicable Note holders. The denial of a claim under PFL's identity theft guarantee would save PFL from its indemnification or repurchase obligation. Because investors rely solely on us to investigate incidents that might require PFL to indemnify the applicable Note holders or repurchase the related Notes or Borrower Loans, a conflict of interest exists between us and such investors.

***If payments on the Borrower Loan corresponding to an investor's Note become more than 30 days overdue, such investor will be unlikely to receive the full principal and interest payments that were expected on the Note, and such investor may not recover the original purchase price on the Note.***

We may refer Borrower Loans that become past due to a third party collection agency for collection or we may collect on such Borrower Loans directly. If a borrower fails to make a required payment on a Borrower Loan within 30 days of the due date, we will pursue reasonable collection efforts in respect of the Borrower Loan. Referral of a delinquent Borrower Loan to a collection agency within five business days after it becomes 30 days past due will be considered reasonable collection efforts. If payment amounts on a delinquent Borrower Loan are received from a borrower after the loan has been referred to our in-house collections department or an outside collection agency, we or that collection agency may retain a percentage of that payment as a fee before any principal or interest becomes payable to an investor. Collection fees may be up to 40% of recovered amounts, in addition to any legal fees and transaction fees associated with accepting payments incurred in the collection effort.

For some non-performing Borrower Loans, we may not be able to recover any of the unpaid loan balance and, as a result, an investor who has purchased a corresponding Note may receive little, if any, of the unpaid principal and interest payable under the Note. In all cases, investors must rely on our collection efforts or the applicable collection agency to which such Borrower Loans are referred, and are not permitted to collect or attempt collection of payments on the Borrower Loans in any manner.

***Loss rates on the Borrower Loans may increase as a result of economic conditions beyond our control and beyond the control of the borrower.***

Borrower Loan loss rates may be significantly affected by economic downturns or general economic conditions beyond our control and beyond the control of individual borrowers. In particular, loss rates on Borrower Loans may increase due to factors such as prevailing interest rates, the rate of unemployment, the level of consumer confidence, residential real

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estate values, the value of the U.S. dollar, energy prices, changes in consumer spending, the number of personal bankruptcies, disruptions in the credit markets, natural disasters, pandemics, and other factors.

***The Borrower Loans do not restrict borrowers from incurring additional unsecured or secured debt, nor do they impose any financial restrictions on borrowers during the term of the Borrower Loan, which may reduce the likelihood that an investor will receive the full principal and interest payments that such investor expects to receive on a Note.***

If a borrower incurs additional debt after the date a loan listing is posted, the additional debt may impair the ability of that borrower to make payments on their Borrower Loan and, as such, reduce the likelihood that an investor will receive the principal and interest payments that such investor expects to receive on a corresponding Note. Moreover, the additional debt may adversely affect the borrower's creditworthiness generally, and could result in the financial distress, insolvency, or bankruptcy of the borrower. To the extent that the borrower has or incurs other indebtedness and cannot pay all of their indebtedness, the borrower may choose to make payments to other creditors, rather than to PFL.

To the extent borrowers incur other indebtedness that is secured, such as a mortgage, a home equity line or an auto loan, the ability of the secured creditors to exercise remedies against the assets of the borrower may impair the borrower's ability to repay the Borrower Loan on which an investor's Note is dependent for payment. Borrowers may also choose to repay obligations under secured indebtedness or other unsecured indebtedness before repaying Borrower Loans because there is no collateral securing the Borrower Loans. An investor will not be notified if a borrower incurs additional debt after the date a loan listing is posted.

***Borrowers may not view or treat their obligations to PFL as having the same significance as loans from traditional lending sources.***

The investment return on the Notes depends on borrowers fulfilling their payment obligations in a timely and complete manner under the corresponding Borrower Loan. Borrowers may not view marketplace lending obligations originated through our marketplace as having the same significance as other credit obligations arising under more traditional circumstances. If a borrower neglects their payment obligations on a Borrower Loan upon which payment of an investor's Note is dependent or chooses not to repay their Borrower Loan entirely, such investor may not be able to recover any portion of the investment in a Note.

***Our marketplace may fail to comply with applicable law, which could limit our ability to collect on Borrower Loans.***

The Borrower Loans are subject to federal and state consumer protection laws. Our marketplace may not always be, and may not always have been, in compliance with these laws. Failure to comply with the laws and regulatory requirements applicable to our marketplace may, among other things, limit our or a collection agency's ability to collect all or part of the principal of or interest on Borrower Loans.

We regularly review the requirements of these laws and take measures aimed at ensuring that the Borrower Loans originated through our marketplace meet the requirements of all applicable laws. However, determining compliance with all applicable laws is a complex matter and it is possible that our determination may be inaccurate or incorrect. Also, changes in law, either due to court decisions, regulatory interpretations or rulings, or new legislation, may adversely affect the collectability of a Borrower Loan.

***In general, the Borrower Loans do not contain any cross-default or similar provisions. If a borrower defaults on any of their other debt obligations, our ability to collect on the Borrower Loan on which an investor's Note is dependent for payment may be substantially impaired.***

The Borrower Loans do not contain cross-default provisions. A cross-default provision makes a default under certain debt of a borrower an automatic default on other debt of that borrower. Because the Borrower Loans do not contain cross-default provisions, a Borrower Loan will not be placed automatically in default upon that borrower's default on any of the borrower's other debt obligations. If a borrower defaults on debt obligations owed to a third party and continues to satisfy the payment obligations under the Borrower Loan, the third party may seize the borrower's assets or pursue other legal action against the borrower before the borrower defaults on the Borrower Loan, which may affect our ability to collect from the borrower when or if the Borrower Loan becomes delinquent.

***Borrowers may seek the protection of debtor relief under federal bankruptcy or state insolvency laws, which may result in the nonpayment of an investor's Notes.***

Borrowers may seek protection under federal bankruptcy law or similar laws. If a borrower files for bankruptcy (or becomes the subject of an involuntary petition), a stay will go into effect that will automatically put any pending collection actions on the Borrower Loan on hold and prevent further collection action absent bankruptcy court approval. If we receive notice that a borrower has filed for protection under the federal bankruptcy laws, or has become the subject of an involuntary bankruptcy petition, we will put the borrower's account into "bankruptcy status." When this occurs, we terminate automatic monthly ACH debits on the Borrower Loan and we will not undertake collection activity without bankruptcy court approval.

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Whether any payment will ultimately be made or received on a Borrower Loan after a bankruptcy status is declared depends on the borrower's particular financial situation. In most cases, however, unsecured creditors such as PFL receive nothing, or only a fraction of their outstanding debt and, as a result, an investor who has purchased a corresponding Note may receive none or very little of the unpaid principal and interest payable on the Note.

***Federal law entitles borrowers who enter active military service to an interest rate cap and certain other rights that may inhibit the ability to collect on Borrower Loans and reduce the amount of interest paid on the corresponding Notes.***

Federal law provides borrowers on active military service with rights that may delay or impair our ability to collect on a Borrower Loan corresponding to an investor's Note. The Servicemembers Civil Relief Act ("SCRA") and other similar state laws require that the interest rate on preexisting debts, such as Borrower Loans, be set at no more than 6% while the qualified service member or reservist is on active duty. A holder of a Note that is dependent on such a Borrower Loan for payment will not receive the difference between 6% and the original stated interest rate for the Borrower Loan during any such period. The SCRA also permits courts to stay proceedings and the execution of judgments against service members and reservists on active duty, which may delay recovery on any Borrower Loans in default, and, accordingly, payments on the corresponding Notes.

Beginning October 3, 2016, the Military Lending Act ("MLA") prohibits requiring covered borrowers, which include active military servicemembers and their dependents, to waive the right to legal recourse or to submit to arbitration. This may delay recovery on any relevant Borrower Loans in default, and, accordingly, payments on the corresponding Notes.

If there are any amounts under such a Borrower Loan still due and owing to PFL after the final maturity of the corresponding Notes, PFL will have no further obligation to make payments on such Notes, even if it receives payments on the Borrower Loan after the final maturity of such Notes. We do not take military service into account in assigning a Prosper Rating to loan listings. In addition, as part of the borrower registration process, we do not request borrowers to confirm if they are qualified service members or reservists within the meaning of the SCRA or the MLA. See Item 1, "Business—Government Regulation" for more information.

As of December 31, 2022, 102 Borrower Loans, with a total outstanding balance of $0.9 million are subject to the SCRA.

***The Federal Trade Commission's Holder in Due Course Rule may substantially impair an investor's ability to recoup the full purchase price of a Note or to receive the interest payments that such investor expects to receive on the Note.***

The Federal Trade Commission's Holder in Due Course Rule, which in certain circumstances permits borrowers to assert any claims and defenses that they would have had against a seller of goods or services obtained with the proceeds of a loan against an originator or subsequent purchaser of the loan, could allow certain borrowers to raise such defenses against PFL to the extent of the outstanding loan balance. If such defenses are successfully raised, PFL will be unable to collect on the loan and it is unlikely that any further payment will be made on the corresponding Notes.

***The death of a borrower may substantially impair an investor's ability to recoup the full purchase price of a Note or to receive the interest payments that such investor expects to receive on the Note.***

If a borrower dies with an outstanding Borrower Loan, PFL is required, upon receiving notice of the death, to stop accepting automatic loan payments and to refund any payments that were automatically debited after the borrower's date of death. Though we may seek to work with the executor of the borrower's estate to obtain repayment of the loan, the borrower's estate may not contain sufficient assets to repay the loan, or its executor may prioritize repayment of other creditors. In addition, if a borrower dies near the end of the term of their Borrower Loan, the time required for the probate of the borrower's estate will likely extend beyond the Notes' final maturity date, after which date PFL will cease to have any obligation to make payments on the Notes.

**RISKS INHERENT IN INVESTING IN THE NOTES**

***The Notes are special, limited obligations of PFL only and are not directly secured by any collateral or guaranteed or insured by PMI or any third party.***

The Notes will not represent an obligation of borrowers, PMI or any other party except PFL, and are special, limited obligations of PFL. The Notes are not guaranteed or insured by PMI, any governmental agency or instrumentality, or any third party. Although PFL has granted the indenture trustee, for the benefit of the Note holders, a security interest in the Borrower Loans corresponding to the Notes, the payments and proceeds that PFL receives on such Borrower Loans, the bank account in which such Borrower Loan payments are deposited, and the accounts in which investors' funding amounts are deposited, the Note holders do not themselves have a direct security interest in the Borrower Loans or the right to payment thereunder. If an event of default under the Amended and Restated Indenture were to occur, the Note holders would be dependent on the indenture trustee's ability to realize on the collateral and make payments on the Notes in the manner contemplated by the Amended and Restated Indenture. In addition, although PFL will take all actions that it believes are required under applicable

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law to perfect the security interest of the indenture trustee in the collateral, if its analysis of the required actions is incorrect or if it fails to take any required action in a timely manner, the indenture trustee's security interest may not be effective and holders of the Notes could be required to share the collateral (and any proceeds thereof) with PFL's other creditors, or, if a bankruptcy court were to order the substantive consolidation of PMI and PFL (as described below), PMI's creditors.

***PFL is not obligated to indemnify Note holders or repurchase Notes except in limited circumstances.***

PFL is only obligated to repurchase Notes or indemnify holders of Notes in limited circumstances. These circumstances include if (i) a material payment default under the corresponding Borrower Loan occurs as a result of verifiable identify theft; (ii) we include a Prosper Rating in a listing that is different from the Prosper Rating we calculated, or we calculate the Prosper Rating incorrectly; or (iii) any errors in Quick Invest, Recurring Investment, or Auto Invest cause an investor to purchase a Note from PFL that such investor would not otherwise have purchased or that differs materially from the Note, in which cases PFL also has the option to cure such error. PFL is not required to repurchase Notes or indemnify holders of Notes, however, if the Note holder's investment is not realized in whole or in part due to fraud other than verified identity theft, or due to other false or inaccurate statements or omissions of fact in a listing, whether in credit data, borrower representations or similar indicia of borrower intent and ability to repay the loan. Further, PFL is under no obligation to repurchase a Note or indemnify any holder of Notes if a correctly determined Prosper Rating fails to accurately predict the actual losses on a Borrower Loan.

***PFL might incur indemnification and repurchase obligations that exceed its projections, in which case it may not have sufficient liquidity to meet its indemnification and repurchase obligations.***

PFL believes its liquidity will be sufficient to meet its reasonably anticipated indemnification and repurchase obligations. In determining its expected liquidity needs with respect to indemnification and repurchase obligations, PFL considers the history of such obligations incurred by it and PMI. Nonetheless, there can be no assurance that if PFL is obligated to repurchase a Note or indemnify a Note holder, that it will be able to meet its repurchase or indemnification obligations. If PFL is unable to meet its indemnification and repurchase obligations with respect to a Note, the investor in such Note may lose all of such investor's investment in the Note. For more information about Prosper's existing repurchase and indemnification obligations, please see "Repurchase Obligations" in Note 16 of the accompanying consolidated financial statements.

***Our marketplace allows a borrower to prepay a Borrower Loan at any time without penalty. Borrower Loan prepayments will extinguish or limit an investor's ability to receive additional interest payments on a Note.***

Borrower Loan prepayment occurs when a borrower decides to pay some or all of the principal amount on a Borrower Loan earlier than originally scheduled. Borrowers may decide to prepay all or a portion of the remaining principal amount due under a Borrower Loan at any time without penalty. In the event of a prepayment of the entire remaining unpaid principal amount of a Borrower Loan, each of the holders of the Notes corresponding to the Borrower Loan will receive their share of such prepayment but further interest will not accrue on such Borrower Loan or on such Note after the date on which the payment is made. If the borrower prepays a portion of the remaining unpaid principal balance, the term of the Borrower Loan will not change, but interest will cease to accrue on the prepaid portion. If a borrower prepays a Borrower Loan in whole or in part, an investor will not receive all of the interest payments that such investor originally expected to receive on the Note corresponding to such Borrower Loan. In addition, such investor may not be able to find a similar rate of return on another investment at the time at which the Borrower Loan is prepaid. Prepayments are subject to PFL's servicing fee, even if the prepayment occurs immediately after issuance of a Note.

***Prevailing interest rates may change during the term of the Notes. If this occurs, investors may receive less value from the purchase of Notes in comparison to other ways they may invest their money. Additionally, borrowers may prepay their Borrower Loans due to changes in interest rates, and investors may not be able to redeploy the amounts received from prepayments in a way that offers the return expected from the Notes.***

The Borrower Loans on which the Notes are dependent for payment bear fixed, not floating, rates of interest. If prevailing interest rates increase, the interest rates on Notes investors purchase might be less than the rate of return they could earn if they had invested the purchase price in a different investment.

***We may not set appropriate interest rates for Borrower Loans.***

We set interest rates for all Borrower Loans based on Prosper Ratings, as well as additional factors such as Borrower Loan terms, the economic environment and competitive conditions. If we set interest rates for Borrower Loans too low, investors may not be compensated appropriately for the level of risk that they are assuming in purchasing Notes, while setting the interest rate too high may increase the risk of non-payment. In either case, a failure by us to set rates appropriately may adversely impact the ability of investors to receive returns on their Notes that are commensurate with the risks they have assumed in acquiring such Notes.

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***The Notes will not be listed on any securities exchange and can be held only by registered Prosper investors. Further, no trading platform for the transfer of Notes exists and there can be no assurance a trading platform for the transfer of Notes will develop in the future. Therefore, investors should be prepared to hold the Notes they purchase until maturity.***

The Notes and PMI Management Rights will not be listed on any securities exchange and all Notes and PMI Management Rights must be held by registered Prosper investors. Further, in connection with the termination of our relationship with FOLIO Investments, Inc. in October 2016, a trading platform for the transfer of Notes and PMI Management Rights no longer exists. While we may, in our sole discretion, permit the establishment of another platform on which a secondary market may be made with respect to the Notes, there can be no assurance a trading platform for the Notes and PMI Management Rights will develop in the future. Therefore, Note purchasers must be prepared to hold their Notes and PMI Management Rights to maturity.

***The U.S. federal income tax consequences of an investment in the Notes are uncertain.***

There are no statutory provisions, regulations, published rulings or judicial decisions that directly address the characterization of the Notes or instruments similar to the Notes for U.S. federal income tax purposes. However, although the matter is not free from doubt because payments on the Notes are dependent on payments on the corresponding Borrower Loan, PFL treats the Notes as debt instruments that have original issue discount ("OID") for U.S. federal income tax purposes. Where required, PFL intends to file informational returns with the IRS in accordance with such treatment unless there is a change or clarification in the law, by regulation or otherwise, that would require a different characterization of the Notes. Investors should be aware, however, that the IRS is not bound by PFL's characterization of the Notes and the IRS or a court may take a different position with respect to the Notes' proper characterization. For example, the IRS could determine that, in substance, each investor owns a proportionate interest in the corresponding Borrower Loan for U.S. federal income tax purposes or, for example, the IRS could instead treat the Notes as a different financial instrument (including an equity interest or a derivative financial instrument). Any different characterization could significantly affect the amount, timing, and character of income, gain or loss recognized in respect of a Note. For example, if the Notes are treated as PFL's equity, (i) PFL would be subject to U.S. federal income tax on income, including interest, accrued on the corresponding Borrower Loans but would not be entitled to deduct interest or OID on the Notes, and (ii) payments on the Notes would be treated by the Note holder for U.S. federal income tax purposes as dividends (that may be ineligible for reduced rates of U.S. federal income taxation or the dividends-received deduction) to the extent of PFL's earnings and profits as computed for U.S. federal income tax purposes. A different characterization may significantly reduce the amount available to pay interest on the Notes. Investors are strongly advised to consult their own tax advisor regarding the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership, and disposition of the Notes (including any possible differing treatments of the Notes).

***PFL's ability to pay principal and interest on a Note may be affected by its ability to match the timing of its income and deductions for U.S. federal income tax purposes.***

Investors should be aware that PFL's ability to pay principal and interest on a Note may be affected by its ability, for U.S. federal income tax purposes, to match the timing of income it receives from a corresponding Borrower Loan that it holds and the timing of deductions that it may be entitled to in respect of payments made on the Notes that it issues. For example, if the Notes are treated as contingent payment debt instruments for U.S. federal income tax purposes but the corresponding Borrower Loans are not, there could be a potential mismatch in the timing of PFL's income and deductions for U.S. federal income tax purposes, and PFL's resulting tax liabilities could affect its ability to make payments on the Notes.

***Our participation in the funding of Borrower Loans could be viewed as creating a conflict of interest.***

As is the practice with other marketplace lending companies, from time to time, we may fund portions of qualified loan requests in our marketplace and hold any Notes purchased as a result of such funding for our own individual accounts. Even though we will participate in funding Borrower Loans listed in our marketplace under the same terms and conditions and through the use of the same information that is made available to other potential investors in our marketplace, such participation may be perceived as involving a conflict of interest. For example, our funding of a Borrower Loan may cause the loan to fund, and in some cases, fund faster, than it would fund in the absence of our participation, which could benefit us to the extent that it ensures that we generate the revenue associated with the loan.

During the year ended December 31, 2022, we purchased $0.4 million in Notes for investment.

**RISKS RELATED TO PFL AND PMI, OUR MARKETPLACE AND OUR ABILITY TO SERVICE THE NOTES**

***Human error in the operation of our platform has resulted in the allocation of Borrower Loans to our Note Channel which did not conform to the eligibility criteria applicable to Borrower Loans at the time of allocation. If we are unable to prevent the reoccurrence of similar errors, our business and investors could be adversely impacted.***

In August 2022, we became aware of an error which resulted in the allocation of certain Borrower Loans intended for our Whole Loan Channel to our Note Channel. These Borrower Loans corresponded to Borrower Loan listings with attributes

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which, at the time of allocation, did not conform to the eligibility criteria applicable to Borrower Loans offered for investment in our Note Channel. The error impacted a total of approximately $14 million out of the approximately $182 million of Borrower Loans allocated to the Note Channel from January 2022 to August 2022. The error did not affect any other parts of Note investors' accounts or the platform, including the receipt and distribution of loan payments, the Note and loan level information provided to investors, or the enforceability of the Borrower Loans. Following discovery of the error, we repurchased the impacted Notes from investors for the full outstanding principal balance, allowing such investors to retain all interest, principal and other payments received on such Notes prior to their repurchase, and have implemented new measures designed to avoid similar issues in the future.

This error illustrates the risks of human error on our processes to allocate loan listings to the Note Channel. If similar errors were to occur in the future, it could result in repurchase or indemnification obligations, negative publicity and unfavorable media coverage, harm to our reputation, litigation, regulatory inquiries or proceedings, loss of or damage to our relationships with borrowers or investors, loss of income and/or liability for damages, any of which could adversely affect our business and financial results.

***We have experienced errors on our platform that have resulted in incorrect reporting of performance returns to Note investors. If we are unable to prevent the reoccurrence of similar errors, investors could be adversely impacted.***

In April 2017, we became aware of an error in the annualized net return and seasoned annualized net return numbers displayed to Note investors, which resulted from errors in the code forming part of our calculation framework. On average, the error resulted in Note investors being shown annualized net return information that was approximately 260 basis points higher than the actual performance of Notes in their accounts. The error did not affect any other part of Note investors' accounts, nor did it affect any other aspects of the platform, including the receipt and distribution of loan payments, deposits, monthly statements or tax documentation, or the Note and loan level information provided to investors. Following an SEC investigation, we entered into a settlement with the SEC to resolve the matter on April 19, 2019. Under the settlement, the SEC alleged a negligence-based violation of Section 17(a)(2) of the Securities Act and ordered PFL to cease and desist from any future violations of that provision. PFL neither admitted nor denied any wrongdoing, and agreed to pay a civil monetary penalty of $3.0 million. PFL paid the penalty in full on April 24, 2019.

The error reveals a risk associated with the complex programs, algorithms and inputs that support our platform. We depend on these programs, algorithms and inputs to store, retrieve, process and manage data, as well as to provide marketplace features such as our credit assessments and underwriting, the Prosper Rating, historical returns, and individual Note, Note portfolio and platform-wide performance data. Errors or other design defects within these programs, algorithms and inputs may result in a negative experience for borrowers and investors, delay introductions of new features or enhancements, or impact the information displayed on our website. They could also result in negative publicity and unfavorable media coverage, harm to our reputation, litigation, regulatory inquiries or proceedings, loss of or damage to our relationships with borrowers or investors, or loss of revenue or liability for damages, any of which could adversely affect our business and financial results.

***Arrangements for back-up servicing are limited. If PMI fails to maintain operations or the Administration Agreement is rejected or terminated (in bankruptcy or otherwise), investors may experience a delay and increased cost in respect of their expected principal and interest payments on Notes, and PFL may be unable to collect and process repayments from borrowers.***

If the Administration Agreement (or the loan servicing provisions thereof) are terminated for any reason (whether as a result of PMI's bankruptcy, non-performance or otherwise), PFL would attempt to transfer the loan servicing obligations on the Borrower Loans and Notes to a third party pursuant to its contractual agreements with investors.

PFL has entered into a back-up servicing agreement with a loan servicing company that is willing and able to transition servicing responsibilities from PMI. There can be no assurance, however, that this back-up servicer will be able to adequately perform the servicing of the outstanding Borrower Loans and Notes. If this back-up servicer assumes the servicing of the Borrower Loans and Notes, the back-up servicer may impose additional servicing fees (up to the maximums we have negotiated), reducing the amounts available for payments on the Notes. Additionally, transferring these servicing obligations to the back-up servicer may result in delays in the processing of collections on Borrower Loans and information with respect to amounts owed on Borrower Loans. If the back-up servicer is not able to service the Borrower Loans and Notes effectively, investors' ability to receive principal and interest payments on their Notes may be substantially impaired, even if their portfolio of Notes is well diversified and the corresponding Borrower Loans are paying on schedule.

In addition, it is unlikely that the back-up servicer would be able to perform functions other than servicing the outstanding Borrower Loans and Notes, such as facilitating the creation of new Borrower Loans through our marketplace, or managing PFL's marketing efforts. PFL believes that it could find one or more other parties who could perform these and any other functions necessary to fully operate our marketplace in the absence of PMI. However, this process, and any related onboarding of such party or parties, will take time. Any such delay or impairment that does not affect existing Note holders,

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because PFL or its back-up servicer proves able to continue servicing outstanding Borrower Loans and Notes, could nonetheless delay PFL's ability to facilitate the origination of new Borrower Loans and issue new Notes through our marketplace, which could adversely affect PFL's finances and customer relationships.

***A decline in economic conditions may adversely affect our customers, which may negatively impact our business and results of operations.***

As a lending marketplace, we believe our customers are highly susceptible to uncertainties and negative trends, real or perceived, in the markets driven by, among other factors, general economic conditions in the United States and abroad. These external economic conditions and resulting trends or uncertainties could adversely impact our customers' ability or desire to participate in our marketplace as borrowers or investors, and consequently could negatively affect our business and results of operations.

***A relatively small number of investors provide the funding for a large percentage of all Borrower Loans originated through our marketplace.***

A relatively small number of investors provide the funding for a large percentage of all Borrower Loans originated through our marketplace. If these investors cease or significantly decrease their investment in Borrower Loans through our personal loan marketplace and PFL is unable to attract sufficient investor purchase commitments from new and existing investors, then our business and results of operations may be adversely affected.

***Our business could be adversely affected by a weakening market for securities backed by consumer assets.***

PFL is involved in the securitization market through: (i) its business of selling loans to investors who, in turn, sell asset backed securities based on accumulated loan portfolios and (ii) securitization of loans retained by affiliates of PFL. If the market for asset backed securities based on consumer assets weakens, investors may cease or significantly decrease their funding of Borrower Loans through our marketplace and if PFL has been unable to attract sufficient investor purchase commitments from new and existing investors, then our business and results of operations may be adversely affected.

***Although PFL has been organized in a manner that is intended to minimize the likelihood that it will become subject to a bankruptcy proceeding, if this were to occur, the rights of holders of the Notes could be uncertain, and payments on the Notes may be limited, suspended or stopped. The recovery, if any, of a holder on a Note may therefore be substantially delayed and substantially less than the principal and interest due and to become due on the Note.***

Although PFL has been organized and is operated in a manner that is intended to minimize the likelihood that it will become subject to a bankruptcy or similar proceeding, if this were to occur, the recovery, if any, of a holder of a Note may be substantially delayed in time (for example, due to the imposition of a stay on payments by the bankruptcy court) and may be substantially less in amount than the principal and interest due and to become due on the Note even if a Note holder's portfolio of Notes is well diversified and the Borrower Loans are paying on schedule. Further, although PFL has granted the indenture trustee, for the benefit of the Note holders, a security interest in all of the Borrower Loans, in all payments and proceeds it receives on the corresponding Borrower Loans and in the bank account in which the Borrower Loan payments are deposited, the holders of the Notes would still be subject to risks associated with PFL's insolvency, bankruptcy or a similar proceeding.

***If PFL becomes subject to a bankruptcy or similar proceeding, borrowers may delay payments or cease making payments at all***.

Borrowers may delay or suspend making payments to PFL because of the uncertainties associated with PFL becoming subject to a bankruptcy or similar proceeding, even if the borrowers have no legal right to do so, and such delay would reduce, at least for a time, the funds that might otherwise be available to pay the Notes corresponding to those Borrower Loans. In addition, the commencement of the bankruptcy or similar proceeding may, as a matter of law, prevent PFL from making regular payments on the Notes, even if the funds to make such payments are available. Because the Indenture trustee would be required to enforce its security interest in the Borrower Loans in a bankruptcy or similar proceeding, the Indenture trustee's ability to make payments under the Notes would be delayed, which may effectively reduce the value of any recovery that a holder of a Note may receive (and no such recovery can be assured) by the time any recovery is available.

***If PFL becomes subject to a bankruptcy or similar proceeding, interest accruing on the Notes upon and following such bankruptcy or similar proceeding may not be paid***.

In a bankruptcy or similar proceeding of PFL, interest accruing on the Notes during the proceeding may not be part of the allowed claim of a holder of a Note. If the Note holder receives a recovery on the Note (and no such recovery can be assured), any such recovery may be based on, and limited to, the Note holder's claim for principal and for interest accrued up to the date of the bankruptcy or similar proceeding, but not thereafter. Because a bankruptcy or similar proceeding may take months or years to complete, a claim based on principal and on interest only up to the start of the bankruptcy or similar

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proceeding may be substantially less than a claim based on principal and on interest through the end of the bankruptcy or similar proceeding.

***If PFL becomes subject to a bankruptcy or similar proceeding, a Note holder may not have any priority right to payment from the corresponding Borrower Loan, may not have any right to payment from funds in the applicable servicing account, and may not have any ability to access funds in the applicable funding accounts (the "FBO Funding accounts").***

In a bankruptcy or similar proceeding, if PFL has failed to perfect the security interest in Borrower Loans, investors may be required to share the proceeds of the Borrower Loans upon which their Notes are dependent for payment with PFL's other creditors, including holders of other Notes or Borrower Loans. To the extent that proceeds of the Borrower Loans would be shared with PFL's other creditors, any secured or priority rights of such other creditors may cause the proceeds to be distributed to such other creditors before any distribution is made to investors on the corresponding Notes.

If a payment is made on a Borrower Loan corresponding to a Note before PFL's bankruptcy or similar proceeding is commenced, and those funds are held in the servicing account PFL maintains with Wells Fargo to collect borrower payments and have not been used by PFL to make payments on the Note as of the date the bankruptcy or similar proceeding is commenced, there can be no assurance that PFL will or will be able to use such funds to make payments on such Note. Other creditors of PFL (including holders of other Notes or Borrower Loans) may be deemed to have rights to such funds or interests in the applicable servicing account and monies credited thereto that are equal to or greater than the rights of the holder of such Note.

Although PFL believes that amounts funded by both Whole Loan Channel and Note Channel investors into the applicable FBO Funding accounts should not be subject to claims of its creditors other than the investors for whose benefit the funds are held, the legal title to the FBO Funding accounts, and the attendant right to administer the FBO Funding accounts, would be property of PFL's bankruptcy estate. As a result, if PFL were to file for bankruptcy protection, the legal right to administer the funds in the FBO Funding accounts would vest with the bankruptcy trustee or debtor in possession. In that case, while neither PFL nor its creditors should be able to reach those funds, the indenture trustee or the investors may have to seek a bankruptcy court order lifting the automatic stay and permitting them to withdraw their funds. Investors may suffer delays in accessing their funds in the FBO Funding accounts as a result. Moreover, United States bankruptcy courts have broad powers at law and in equity and, if PFL has failed to properly segregate or handle investors' funds, a bankruptcy court could determine that some or all of such funds were beneficially owned by PFL and should therefore be made available to PFL's creditors generally.

***In a bankruptcy or similar proceeding of PFL, a holder of a Note may be delayed or prevented from enforcing PFL's repurchase obligations with respect to such Note.***

In a bankruptcy or similar proceeding of PFL, any right of a Note holder to require PFL to repurchase the Note or indemnify such Note holder under the circumstances set forth in the Investor Registration Agreement or the Note might not be enforceable, and such holder's claim for such repurchase may be treated less favorably than a general unsecured obligation of PFL.

***Although PFL has been organized in a manner that is intended to prevent it from being substantively consolidated with PMI in the event of PMI's bankruptcy, if PFL were substantively consolidated in this manner, the rights of the holders of the Notes could be uncertain, and payments on the Notes may be limited, suspended or stopped. The recovery, if any, of a holder on a Note may therefore be substantially delayed and substantially less than the principal and interest due and to become due on the Note.***

Although PFL has been organized and is operated in a manner that is intended to prevent it from being substantively consolidated with PMI in the event of PMI's bankruptcy, if PMI became subject to a bankruptcy or similar proceeding and PFL were substantively consolidated with PMI, the risks described in the immediately preceding risk factors regarding (i) payment delays, (ii) uncollectability of interest accrued during the bankruptcy proceeding, (iii) being subordinated to the interests of PFL's other creditors, and (iv) the indenture trustee's inability to access funds in the deposit account or the FBO Funding accounts, would all be present and, in addition, the same considerations would apply in relation to the claims of creditors of PMI, including that such creditors of PMI may be determined to have perfected security interests or unsecured claims that take precedence over or are at least equal in priority to those of creditors of PFL (including holders of Notes).

In addition, in the event of a bankruptcy or similar proceeding of PMI, (i) the implementation of back-up servicing arrangements may be delayed or prevented, and (ii) PMI's ability to transfer its servicing obligations to a back-up servicer or its other corporate and marketplace administration services and marketing services to third parties may be limited and subject to the approval of the bankruptcy court or other presiding authority. The bankruptcy process may delay or prevent the implementation of back-up servicing, which may impair the collection on Borrower Loans to the detriment of Note holders.

PMI owns and did not transfer to PFL ownership of the computer hardware that it uses to host and maintain the website or agreements with third parties relating to the hosting and maintenance of the website. Although PMI's retention of

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such hardware and agreements should not bear on a bankruptcy court's analysis of the legal separateness of PMI and PFL (or their respective assets and liabilities), the cessation of or substantial reduction of the day-to-day operations of PMI (because of or during its bankruptcy or otherwise) would materially impair and delay the ability of PFL or a back-up service provider to retrieve data and information in the possession of PMI and to operate our marketplace or elements thereof relevant to Borrower Loan and Note servicing.

***PMI, in its capacity as servicer, has the authority to waive or modify the terms of a Borrower Loan without the consent of the Note holders.***

Pursuant to the Administration Agreement, PMI is obligated to use commercially reasonable efforts to service and collect on the Borrower Loans in accordance with industry standards. Subject to that obligation, the Administration Agreement grants PMI the authority to waive or modify any non-material term of a Borrower Loan, consent to the postponement of strict compliance with any such term, or in any manner grant a non-material indulgence to any borrower. In addition, if a Borrower Loan is in default, or PMI determines a default is reasonably foreseeable or that such action is consistent with its servicing obligation, the Administration Agreement grants PMI the authority to waive or modify a material term of a Borrower Loan, to accept payment of an amount less than the principal balance in final satisfaction of a Borrower Loan and to grant any indulgence to a borrower, *provided* that PMI has reasonably and prudently determined that such action will not be materially adverse to the interests of the relevant Note holders. If PMI approves a modification to the terms of any Borrower Loan it must promptly notify the corresponding Note holders in each Note holder's account.

There can be no assurance that PMI, in its capacity as servicer, will be able to collect the principal amount or interest rate agreed to and/or sell charged off Borrower Loans in the future as a result of business, regulatory or other considerations.

***We have incurred operating losses in prior years and may continue to incur net losses in the future.***

We have incurred operating losses in prior years and may continue to incur net losses in the future. For the years ended December 31, 2022 and 2021, we generated income of $70.6 million and incurred a loss of $138.3 million, respectively. Additionally, from our inception through December 31, 2022, we have had an accumulated deficit of $483.7 million.

We have financed our operations to date primarily with proceeds from the sale of equity securities. In addition, we borrowed $75 million under the Term Loan in November 2022. At December 31, 2022, we had approximately $83.4 million unrestricted cash and cash equivalents. PMI is dependent upon raising additional capital or debt financing to fund its current operating plan if it cannot generate sufficient positive cash flow from operations. PMI's failure to achieve positive cash flow from operations or obtain sufficient debt and equity financing, could adversely affect its ability to perform its obligations under the Administration Agreement and, in such event, PFL's ability to continue to make payments on the Notes could be materially impaired.

***The Term Loan, and any additional indebtedness we incur in the future, could adversely affect our business and financial results.***

In November 2022, we entered into the Term Loan, which provides for $75.0 million in debt financing that matures in November 2026.

Our ability to make payments on the Term Loan, to repay the Term Loan when due, and to fund our business, operations and significant planned capital expenditures will depend on our ability to pay with available cash or generate cash in the future. The Term Loan, and any additional indebtedness we may incur in the future, could require us to divert funds identified for other purposes to service the Term Loan. If we cannot generate sufficient cash flow from our operations to service the Term Loan, we may need to refinance the Term Loan, dispose of assets, or issue additional equity to obtain the necessary funds. If required to do so, we may be unable to take any of these actions on a timely basis, on terms satisfactory to us or at all.

In addition, the Term Loan contains certain financial covenants, including a minimum tangible net worth covenant, minimum net liquidity covenant, maximum leverage ratio, and minimum asset coverage ratio, together with other customary affirmative and negative covenants and events of default. The obligations under the Term Loan are also secured by assets of PMI and certain of its subsidiaries. Compliance with these covenants may require us to divert funds intended for other uses and limit our flexibility to take certain actions.

See Note 10 of the accompanying consolidated financial statements for more information about the Term Loan.

***Although our business has grown, we may be unable to manage our growth effectively and meet the demands that such growth places on our facilities, employees and infrastructure.***

As the number of borrowers, investors and Borrower Loans originated through our marketplace increases, PMI will need to increase its facilities, personnel and infrastructure in order to continue performing effectively its obligations under the Administration Agreement and to accommodate the effects that such growth will have on our servicing and marketplace needs.

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PMI must constantly add new hardware and update its software and our personal loan marketplace, expand customer support services, and add new employees to maintain the operations of our personal loan marketplace as well as to satisfy its servicing obligations on the Borrower Loans and the Notes and its other obligations under the Administration Agreement. If PMI is unable to increase the capacity of our marketplace and maintain the necessary infrastructure to perform its duties under the Administration Agreement, PFL, or one or more other third-party service providers engaged by PFL, will have to perform the duties otherwise performed by PMI, and investors may experience delays in receipt of payments on their Notes and periodic downtime of our marketplace.

***The Credit Card and Home Equity products are new products within a competitive market which are complex and require us to allocate significant resources to the development, launch and growth of these new products. If these new products are unable to attract borrowers and generate revenue, our business and results of operations could suffer.***

The HELOC product was launched in March 2019, the Credit Card product was launched in December 2021, and the HELoan product was launched in October 2022. The launch of these new and complex products requires us to allocate significant resources in hiring new employees to support each product, ensuring each product complies with applicable laws and regulations, and integrating the products into our online platform. See Item 1, "Business—Government Regulation" for more information about the laws and regulations which affect the Credit Card and Home Equity products. Our Home Equity and Credit Card products also face intense competition from other new market entrants or business expansion from established companies which may have more experience and resources operating these products. There is no guarantee that we will attract the borrowers necessary to generate sufficient revenue to recoup the investment of resources into the development, launch, and growth of these new products. The products may also divert management's time and effort from other initiatives.

The Credit Card and Home Equity products are not available on our personal loan marketplace for investment purposes.

***Our Credit Card product has a limited performance history and, as we are responsible for verified fraud losses and most straight charegeoffs across the portfolio and for credit losses on accounts allocated to us, any failure to accurately capture credit and market risks could have a negative impact on our business, operating results and financial condition.***

Our Credit Card product was launched in December 2021 and has a limited performance history. The performance of the Credit Card product is also significantly dependent on the ability of the application process and credit risk models we use for the Credit Card product to prevent fraud, evaluate an applicant's credit profile and determine the likelihood of default. There is no assurance that our Credit Card application process and credit risk models can accurately verify Credit Card applicants and predict repayment and loss profiles. Pursuant to our program agreement with Coastal, we are responsible for verified fraud losses and most straight chargeoffs across the entire Credit Card portfolio and for credit losses for approximately 90% of the Credit Card accounts. If our application process and risk models do not accurately prevent fraud or reflect credit risk on the Credit Card product, greater than expected losses may result and our business, operating results and financial condition could be materially and adversely affected.

Our Credit Card product is also currently focused on higher risk borrowers, who may have higher exposure to economic downturns and general economic conditions beyond our control and beyond the control of these borrowers. The risk of exposure faced by these borrowers may be even higher amidst recent market conditions, including a rising rate of inflation and increase in interest rates. See "A rising rate of inflation and increase in interest rates could materially and adversely impact our personal loan marketplace, our Credit Card program, and our investments in Borrower Loans" for more information about these recent market conditions.

The Credit Card and Home Equity products are not available on our personal loan marketplace for investment purposes.

***PFL's reliance on PMI or other third-party service providers, lack of employees, limited operating history, and capitalization levels could make it difficult to operate at a sustainable level.***

PFL was formed in 2012 as a limited purpose vehicle. Under the Administration Agreement, PFL receives a license fee from PMI for granting PMI a non-exclusive, worldwide license to access and use our marketplace. In addition, PFL earns servicing fees in relation to the servicing of the Borrower Loans and Notes that it retains from collections on the Borrower Loans. PFL believes this fee income is sufficient to cover its reasonably anticipated obligations. While PFL believes that it is adequately capitalized to meet its foreseeable obligations, and that its fee income is sufficient to meet its ongoing operating costs, its financial resources are limited and could prove to be insufficient. In addition, PFL has no employees and relies on PMI, as servicer, or other third-party service providers, to perform most of its day-to-day operations. The lack of PFL's own employees, its limited operating history, and capitalization that is less than that of PMI could make it difficult for PFL to operate at a level that will be sustainable. Absent the services to be provided to PFL by PMI pursuant to the Administration

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Agreement, PFL's risk management process, ability to predict loss rates and the general operation of our marketplace would have a smaller margin for error than does PMI.

***The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.***

The consumer lending market is competitive and rapidly changing. With the introduction of new technologies and the influx of new entrants, we expect competition to persist and intensify in the future, which could harm our ability to increase volume in our marketplace.

Our principal competitors include banking institutions, credit unions, credit card issuers, mortgage lenders, consumer finance companies, and online lending platforms. Competition could result in reduced volumes, reduced fees or the failure of our marketplace to achieve or maintain more widespread market acceptance, any of which could harm our business. In addition, in the future we may experience new competition including companies possessing large, existing customer bases, substantial financial resources and established distribution channels. If any of these companies or any major financial institution decides to enter our online lending sector, acquire one of our existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our operating results could be harmed.

Most of our current or potential competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their marketplaces and distribution channels. Our potential competitors may also have longer operating histories, more extensive customer bases, greater brand recognition and broader customer relationships than we have. These competitors may be better able to develop new products, to respond quickly to new technologies and to undertake more extensive marketing campaigns. Our industry is driven by constant innovation. If we are unable to compete with such companies and meet the need for innovation, the use of our marketplace could stagnate or substantially decline.

***If we fail to promote and maintain our brand in a cost-effective manner, we may lose market share and our revenue may decrease.***

To succeed, we must increase transaction volumes in our marketplace by attracting a large number of borrowers and investors in a cost-effective manner. If we are not able to attract qualified borrowers and sufficient investor purchase commitments, we will not be able to increase our transaction volumes. PFL believes that developing and maintaining awareness of its brand in a cost-effective manner is critical to achieving widespread acceptance of our marketplace and attracting new borrower and investors. Furthermore, we believe that the importance of brand recognition will increase as competition in our industry increases. Successful promotion of our brand will depend largely on the effectiveness of marketing efforts , the user experience on our marketplace and our ability to maintain and defend a differentiated brand identity. These brand promotion activities may not yield increased revenues. If we fail to successfully promote, defend, and maintain our brand, we may lose our existing users to competitors or be unable to attract new users, which would cause our revenue to decrease and may impair our ability to maintain our marketplace.

***The proprietary technology that makes operation of our marketplace possible is not fully protected by patents. It may be difficult and costly for PFL to protect its intellectual property rights in relation thereto, or to continue to develop or obtain new technologies, which could adversely affect its ability to operate competitively.***

On February 1, 2013, PMI transferred ownership of the marketplace, including the proprietary technology and all of the rights related to the operation of the marketplace, to PFL. PFL's ability to maintain our marketplace depends, in part, upon this proprietary technology. We have taken steps to protect our proprietary interests in such technology, including through patent filings, and intend to continue to vigorously protect these interests. Despite our best efforts, however, we may not protect the proprietary technology effectively, which would allow competitors to duplicate our products and adversely affect our ability to compete. A third party may attempt to reverse engineer or otherwise obtain and use the proprietary technology without PFL's consent. In addition, our marketplace may infringe upon claims of third-party patents and PFL or PMI may face intellectual property challenges from such other parties. PFL or PMI may not be successful in defending against any such challenges or in obtaining licenses to avoid or resolve any intellectual property disputes. Furthermore, the technology may become obsolete, and there is no guarantee that PFL will be able to successfully develop, obtain or use new technologies to adapt our marketplace to compete with other companies. If PFL cannot protect the proprietary technology embodied in and used by our marketplace from intellectual property challenges, or if our marketplace becomes obsolete, PFL's ability to maintain our marketplace and perform its servicing obligations could be adversely affected and, in such event, its ability to continue to make payments on the Notes could be materially impaired.

***PFL relies on a third-party commercial bank to process transactions. If PFL is unable to continue utilizing these services, its business and ability to service the Notes may be adversely affected.***

Because PFL is not a bank, it cannot belong to or directly access the Automated Clearing House (ACH) payment network. As a result, it currently relies on an FDIC-insured depository institution to process its transactions. If PFL cannot

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continue to obtain such services from this institution or elsewhere, or if it cannot transition to another processor quickly, its ability to process payments will suffer and investors' ability to receive principal and interest payments on the Notes will be delayed or impaired.

***If the security of PFL's investors' and borrowers' confidential information stored in our systems is breached or otherwise subjected to unauthorized access, users' secure information may be stolen, our reputations may be harmed, and we may be exposed to liability.***

As with any entity with a significant Internet presence, we and the third parties that we use for website hosting and mobile technologies occasionally have experienced cyber-attacks, breaches of our and their systems and other similar incidents, which to-date have not had a material effect on our business, operations or reputation. Future attacks are likely to occur. Our marketplace stores PFL's investors' and borrowers' bank information and other personally identifiable sensitive data. Any accidental or willful security breaches or other unauthorized access could cause users' secure information to be stolen and used for criminal purposes. Security breaches or unauthorized access to secure information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee or contractor error, malfeasance, faulty password management or otherwise, or if design flaws in the relevant software are exposed and exploited, and, as a result, a third party or disaffected employee obtains unauthorized access to any investors' or borrowers' data, PFL's relationships with its users could be severely damaged, and PFL (or PMI) could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we and PMI's third-party hosting facilities may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, many states have enacted laws requiring companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause our users to lose confidence in the effectiveness of PFL's and PMI's data security measures. Further, the CCPA, which was enacted in California, affords individuals in the state affected by data breaches a private right of action against companies that have allegedly been the target of such breaches due to a failure to implement and maintain appropriate cybersecurity policies and procedures. Any security breach, whether actual or perceived, would harm our reputations, and we could lose users.

We use industry standard technologies to maintain secure remote work protocols and protect sensitive data within our control, and we require employees to complete security awareness training at regular intervals. However, we are necessarily limited in our ability to control or ensure the security of networks that employees use to work remotely.

***Any significant disruption in service in our marketplace or in PMI's computer systems could adversely affect PMI's ability to perform its obligations under the Administration Agreement.***

PMI's ability to perform its obligations under the Administration Agreement could be materially and adversely affected by events outside of its control. The satisfactory performance, reliability and availability of PMI's technology and its underlying network infrastructure are important to our respective operations, level of customer service, reputation and ability to attract new users and retain existing users. PMI's system hardware is hosted in several hosting facilities located in Las Vegas, Nevada; Scottsdale, Arizona; The Dalles, Oregon; and Council Bluffs, Iowa. Our hosting facilities service providers do not guarantee that access to our marketplace or to PMI's own systems will be uninterrupted, error-free or secure. The operation of our marketplace and PMI's operation of its own systems depends on our service providers' ability to protect the relevant systems in their facilities against damage or interruption from natural disasters, power or telecommunications failures, air quality, temperature, humidity or other environmental concerns, computer viruses or other attempts to harm them, criminal acts and similar events. If PMI's arrangement with any hosting facilities service provider is terminated, or there is a lapse of service or damage to such provider's facilities, PMI could experience interruptions in providing its services under the Administration Agreement, PFL could experience interruptions in the operations of our marketplace, and both could experience delays and additional expense in arranging new facilities. Any interruptions or delays in PMI's performance of its services or in the functioning of and accessibility of our marketplace, whether as a result of a hosting facility service provider or other third-party error, PMI's error, natural disasters or security breaches, whether accidental or willful, could harm PFL's relationships with users and its reputation. Additionally, in the event of damage or interruption, PMI's insurance policies may not be sufficient for PMI to adequately compensate PFL for any losses that it may incur. PMI's disaster recovery plan has not been tested under actual disaster conditions, and PMI may not have sufficient capacity to recover all data and services in the event of an outage at one or more hosting facilities. These factors could prevent PMI from processing or posting payments on the Borrower Loans or the Notes, damage PFL's brand and reputation, divert the attention of PMI's employees, reduce PFL's revenue, subject PMI or PFL to liability and cause users to abandon our marketplace, any of which could adversely affect our respective businesses, financial condition and results of operations.

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***Our marketplace may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions.***

Our marketplace may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions. If a hacker were able to infiltrate our marketplace, users would be subject to the increased risk of fraud or borrower identity theft and may experience losses on, or delays in the recoupment of amounts owed on, a fraudulently induced purchase of a Note. Additionally, if a hacker were able to access our secure files, they might be able to gain access to users' personal information. While we have taken steps to prevent such activity from affecting our marketplace, if we are unable to prevent such activity, the value of investors' investment in the Notes could be adversely affected.

***Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees we need to perform under the Administration Agreement.***

Competition for highly skilled technical and financial personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we do and may be able to offer more attractive terms of employment.

In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements and the quality of our services and our ability to serve borrower and investors could diminish, resulting in a material adverse effect on PMI's ability to perform its obligations under the Administration Agreement and, in such event, PFL's ability to continue to make payments on the Notes could be materially impaired. See Item 1, "Business—Human Capital Resources" for more information about Prosper's employees.

***Purchasers of Notes will have no control over us and will not be able to influence our corporate matters.***

PFL is not offering and will not offer equity interests in its company. Investors who purchase Notes offered through our marketplace will have no equity interest in either of us and no ability to vote on or influence our decisions. As a result, PMI, which owns all of PFL's outstanding equity interests, will continue to have sole control over PFL's governance matters, subject to the presence of PFL's independent directors, whose consent will be required before PFL can take certain extraordinary actions, and subject to the limitations specified in PFL's organizational documents and the Amended and Indenture.

***PMI may enter into acquisitions that may be difficult to integrate, fail to achieve our strategic objectives, disrupt our business or divert management attention.***

PMI has entered, and may continue to enter, into acquisitions of businesses, technologies and products intended to complement its existing business, solutions, services and technologies. PMI cannot provide assurance that the acquisitions it has made or will make in the future will provide it with the benefits or achieve the results anticipated in entering into the transaction. Acquisitions are typically accompanied by a number of risks, including: difficulties assimilating and retaining the management and other personnel, culture and operations of the acquired businesses; potential disruption of ongoing business and distraction of management; difficulties in maintaining acceptable standards, controls, procedures and policies, including integrating financial reporting and operating systems, particularly with respect to foreign and/or public subsidiaries; potential loss of existing or acquired strategic operating partners, users and customers following an acquisition; difficulties in integrating acquired technologies and products into our solutions and services; and unexpected costs and expenses resulting from the acquisition, and potential unknown liabilities associated with acquired businesses.

In addition, acquisitions may result in the incurrence of debt, acquisition-related costs and expenses, restructuring charges and write-offs. Acquisitions may also result in goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges.

PMI may enter into negotiations for acquisitions that are not ultimately consummated. Those negotiations could result in diversion of management time and significant out-of-pocket costs. If PMI fails to evaluate and execute acquisitions successfully, PMI may not be able to achieve its anticipated level of growth and its business and operating results could be adversely affected.

***Events beyond our control may damage our ability to maintain adequate records, maintain our marketplace or perform the servicing obligations. If such events result in a system failure, investors' ability to receive principal and interest payments on the Notes would be substantially harmed.***

If a catastrophic event resulted in a marketplace outage and physical data loss and/or affected our electronic data storage and back-up storage systems, PFL's ability (and PMI's ability as servicer under the Administration Agreement) to perform its servicing obligations would be materially and adversely affected. Such events include, but are not limited to, fires, earthquakes, terrorist attacks, natural disasters, computer viruses and telecommunications failures. In the event of any marketplace outage or physical data loss described in this paragraph, PFL cannot guarantee that investors would be able to recoup their investment in the Notes.

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***Events beyond our control, such as public health emergencies, international conflicts, natural disasters, or other catastrophic events, may damage our ability to continue operations without disruptions, including our ability to attract new borrowers and investors, retain existing investors, as well as the ability of existing borrowers to repay their loans. If such events continued for an extended period of time and PFL is unable to attract sufficient investor purchase commitments from new and existing investors, our business and results of operations may be materially adversely affected.***

Our business is subject to the risk that external events, such as public health emergencies, natural disasters, or other catastrophic events, could disrupt our day-to-day operations and impair the activities of borrowers and investors on our marketplace. Unforeseen events, or the prospect of such events, including acts of war (including the invasion of Ukraine by Russia), terrorism and other international conflicts, public health issues including health epidemics or pandemics, and natural disasters such as fires, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our vendors or result in political or economic instability. These events could reduce demand for our products or make it difficult or impossible to receive services from our vendors. Any such disruption could also damage our reputation, which would further lower investor or borrower demand for our products. We could also be subject to claims or litigation with respect to losses caused by such disruptions. Our property and business interruption insurance may not cover a particular event at all or be sufficient to fully cover our losses.

Additionally, a potential recession or volatility in capital markets as a result of public health emergencies may cause existing investors to cease or significantly decrease their investment in Borrower Loans through our marketplace. For existing borrowers, any resulting work slowdowns or stoppages may directly result in the inability to make loan payments, and may impair investors' ability to receive principal and interest payments on the corresponding Notes. If such events continued for an extended period of time and PFL is unable to attract sufficient investor purchase commitments from new and existing investors, our business and results of operations may be materially adversely affected.

***A rising rate of inflation and increase in interest rates could materially and adversely impact our personal loan marketplace, our Credit Card program, and our investments in Borrower Loans.***

While interest rates have historically been low in recent years, various economic factors have recently resulted in a significant increase in the rate of inflation and interest rates. Such an increase could have a negative impact on our personal loan marketplace by decreasing the ability of borrowers to repay their current loan obligations on Borrower Loans, decreasing the ability of borrowers under our Credit Card program to repay the obligations on their Credit Card, and reducing Borrower Loan origination volume. Borrowers may also be more likely to incur additional unsecured or secured debt in an effort to mitigate the effects of inflation and increase in interest rates, which may further reduce their likelihood of repaying Borrower Loans. The increase in interest rates could also reduce investor demand for Borrower Loans, as investors may have less capital to invest in Borrower Loans. Although we have adjusted our pricing to account for the increase in the cost of funds and increased credit risk and may continue to do so in the future, we may not be able to fully offset higher costs through rate increases, which may affect the ability of our investors to generate the risk adjusted returns expected for their investment.

In addition, we also invest in Borrower Loans as Loans Held for Sale through our Warehouse Lines. Our investment in Borrower Loans is subject to the interest rate risk applicable to investors outlined above, and as a result our future investment income may fall short of expectations, or we may suffer a loss in principal if we are forced to sell Loans Held for Sale that have declined in market value due to changes in interest rates, loss assumptions or overall market conditions. To reduce the impact of large fluctuations in interest rates, we hedged a portion of our interest rate risk by entering into a derivative agreement with a financial institution in connection with one Warehouse Line. The derivative agreement that we use to manage the risk associated with fluctuations in interest rates may not be able to eliminate the exposure to these changes. Interest rates are sensitive to numerous factors outside of our control, such as government and central bank monetary policy in the United States. Depending on the size of the exposures and the relative movements of interest rates, if we choose not to hedge or fail to effectively hedge our exposure, our results of operations and financial condition could be adversely affected. The fair value of Loans Held for Sale was $499.8 million and $243.2 million as of December 31, 2022 and 2021, respectively.

See "Quantitative and Qualitative Disclosures about Market Risk" for more information regarding the potential impact of the various market risks on our business.

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**RISKS RELATED TO COMPLIANCE AND REGULATION** 

Our marketplace must comply with regulatory regimes applicable to consumer credit transactions as well as with regulatory regimes applicable to securities transactions. Certain state laws generally regulate interest rates and other charges and require certain disclosures, and also require licensing for certain activities. In addition, other state laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, servicing and collection of Borrower Loans in our marketplace. We are also subject to other laws, such as:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal Truth-in-Lending Act and Regulation Z promulgated thereunder, which require certain disclosures to borrowers regarding the terms of their loans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the Credit Card Accountability Responsibility and Disclosure Act of 2009, which amended the federal Truth-in-Lending Act and requires additional procedures, disclosures, fee limits and other protections for consumers applying for or holding open end credit cards;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the Fair Credit Billing Act, which amended the federal Truth-in-Lending Act and creates creditor obligations with respect to billing complaints and errors for credit card customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal Equal Credit Opportunity Act and Regulation B promulgated thereunder, which prohibit discrimination in the extension of credit on the basis of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal Fair Credit Reporting Act and Regulation V, which regulates the use, reporting and disclosure of information related to each applicant's credit history;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal Fair Debt Collection Practices Act and Regulation F, which regulates debt collection practices by "debt collectors" and prohibits debt collectors from engaging in certain practices in collecting, and attempting to collect, outstanding personal loans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• state counterparts to the above consumer protection laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• state and federal securities laws, which require that any non-exempt offers and sales of the Notes be registered;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive acts or practices in or affecting commerce, and Section 1031 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits unfair, deceptive or abusive acts or practices in connection with any consumer financial product or service;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal Gramm-Leach-Bliley Act, which includes limitations on financial institutions' disclosure of nonpublic personal information about a consumer to nonaffiliated third parties, in certain circumstances requires financial institutions to limit the use and further disclosure of nonpublic personal information by nonaffiliated third parties to whom they disclose such information and requires financial institutions to disclose certain privacy policies and practices with respect to information sharing with affiliated and nonaffiliated entities as well as to safeguard personal customer information, and other privacy laws and regulations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the California Consumer Privacy Act, which provides consumers in the state with extensive rights to know about the use, to request deletion, and to opt out of the sale of their personal information by certain businesses, and which obligates such businesses to notify consumers of their data collection practices and to implement procedures for addressing consumer requests regarding their personal data;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the Bankruptcy Code, which limits the extent to which creditors may seek to enforce debts against parties who have filed for bankruptcy protection;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal Servicemembers Civil Relief Act, which allows military members to suspend or postpone certain civil obligations so that the military member can devote their full attention to military duties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal Military Lending Act, which provides specific protections for active duty service members and their dependents (or covered borrowers) in consumer credit transactions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal Electronic Fund Transfer Act and Regulation E promulgated thereunder, which provide disclosure requirements, guidelines and restrictions on the electronic transfer of funds from consumers' bank accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal Electronic Signatures in Global and National Commerce Act and similar state laws, particularly the Uniform Electronic Transactions Act, which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal Bank Secrecy Act, which relates to compliance with anti-money laundering, customer due diligence and record-keeping policies and procedures;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal Real Estate Settlement Procedures Act and Regulation X, which applies to the Home Equity products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the federal Home Mortgage Disclosure Act and Regulation C, which applies to the Home Equity products; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• state mortgage broker and licensing and registration requirements that meet the minimum standards set forth in the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 and Regulation H.

We may not always be in compliance with these laws. Borrowers may make counterclaims regarding the enforceability of their obligations under borrower or consumer protection laws after collection actions have commenced, or otherwise seek damages under these laws. Investors may attempt to rescind their Note purchases under securities laws, and PFL or PMI's failure to comply with such laws could also result in civil or criminal liability. Compliance with these requirements is also costly, time-consuming and limits operational flexibility. See Item 1, "Business—Government Regulation" for more information.

***There continues to be uncertainty as to how the actions of the Consumer Financial Protection Bureau or any other new agency could impact our business or that of our issuing bank.***

The Consumer Financial Protection Bureau ("CFPB"), which commenced operations in July 2011, has broad authority over the businesses in which we engage. This includes authority to write regulations under federal consumer financial protection laws, such as the Truth in Lending Act and the Equal Credit Opportunity Act, and to enforce those laws against and examine large financial institutions for compliance. The CFPB is authorized to prevent unfair, deceptive or abusive acts or practices through its regulatory, supervisory, and enforcement authority. To assist in its enforcement, the CFPB maintains an online complaint system that allows consumers to log complaints with respect to various consumer finance products, including the loan products we facilitate. This system could inform future CFPB decisions with respect to its regulatory, enforcement or examination focus.

We are subject to the CFPB's jurisdiction, including its enforcement authority. The CFPB may therefore request reports concerning our organization, business conduct, markets and activities. In addition, the CFPB may conduct on-site examinations of our business on a periodic basis if the CFPB were to determine, based on, for example, consumer complaints, judicial opinions, or administrative decisions, that we are engaging in activities that pose risks to consumers. In addition, the CFPB has announced that it plans to make a rule for the direct supervision of nonbank installment lenders, which may permit the CFPB to conduct periodic examinations of our business.

There continues to be uncertainty as to how the CFPB's strategies and priorities, including in both its examination and enforcement processes, will impact our businesses and our results of operations going forward. Actions by the CFPB could result in requirements to alter or cease offering affected loan products and services, making them less attractive and restricting our ability to offer them.

Although we have committed resources to enhancing our compliance programs, actions by the CFPB or other regulators against us, our issuing banks or our competitors that discourage the use of the marketplace model or suggest to consumers the desirability of other loan products or services could result in reputational harm and a loss of borrowers or investors. Our compliance costs and litigation exposure could increase materially if the CFPB or other regulators enact new regulations, change regulations that were previously adopted, modify, through supervision or enforcement, past regulatory guidance, or interpret existing regulations in a manner different or stricter than have been previously interpreted.

***Noncompliance with laws and regulations may impair our ability to facilitate the origination of or service Borrower Loans.***

Generally, failure to comply with applicable laws and regulatory requirements may, among other things, limit our or a third party collection agency's ability to collect all or part of the principal amount of or interest on the Borrower Loans on which the Notes are dependent for payment. In addition, non-compliance could subject us to damages, revocation of required licenses, class action lawsuits, administrative enforcement actions, and civil and criminal liability, which may harm PFL's business and ability to maintain our marketplace and may result in borrowers rescinding their Borrower Loans.

Where applicable, we seek to comply with state lending, servicing and similar statutes, and we continually evaluate our licensing needs. In U.S. jurisdictions with licensing or other requirements that we believe may be applicable to our marketplace, we have obtained necessary licenses or comply with the relevant requirements. Nevertheless, if we are found to not comply with applicable laws, we could lose one or more of our licenses or face other sanctions, which may have an adverse effect on our ability to continue to facilitate the origination of Borrower Loans through our marketplace, and on our ability to perform servicing obligations or make our marketplace available to borrowers in particular states, which may impair investors' ability to receive the payments of principal and interest on the Notes that they expect to receive.

***If our marketplace were found to violate a state's usury laws, we may have to alter our business model and our business could be harmed.***

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If our marketplace were found to violate a state's usury laws, we may have to alter our business model and our business could be harmed. The interest rates that are charged to borrowers and that form the basis of payments to investors through our marketplace are based upon the ability under federal law of the issuing bank that originates the loan to export the interest rates of the state where it is located and on our ability to assist the bank in arranging such loans. WebBank, the bank that issues personal loans through our marketplace, exports the interest rates of Utah, which allows parties to generally agree by contract to any interest rate. The interest rates offered by WebBank through our marketplace for Borrower Loans as of December 31, 2022 range from 5.31% to 33.00%, which equate to interest rates for Note investors that range from 4.31% to 32.00%. Some states where borrowers are located, including Utah, have no statutory interest rate limitations on personal loans, while other jurisdictions have a maximum rate less than the current maximum rate offered by WebBank through our marketplace. If a borrower were to successfully bring claims against us for state usury or other state law violations, we could be subject to fines and penalties. Further, if the current structure under which WebBank makes personal loans through our marketplace were successfully challenged, we may have to substantially modify our business operations and may be required to maintain state-specific licenses and only provide a limited range of interest rates for Borrower Loans, all of which may substantially reduce our operating efficiency and attractiveness to investors and possibly result in a decline in our operating results. Recent litigation has successfully challenged lending arrangements in which banks or other exempt entities make loans and sell those loans to a third party charged with servicing the loans.

In addition, it is possible that state usury laws may impose liability that could affect an assignee's (i.e., PFL's and/or an investor who purchases Borrower Loans from PFL) ability to continue to charge to borrowers the interest rates that they agreed to pay at origination of their Borrower Loans.

As discussed in Part I, Item 1, "Business—Government Regulation—State Usury Laws" above, in *Madden v. Midland Funding, LLC*, in May 2015, the U.S. Court of Appeals for the Second Circuit issued a decision in *Madden v. Midland Funding, LLC* that interpreted the scope of federal preemption under the National Bank Act and held that a nonbank assignee of a loan originated by a national bank was not entitled to the benefits of federal preemption of claims of usury. On November 10, 2015, the defendant in the *Madden* case filed a petition for a writ of certiorari with the United States Supreme Court for further review of the Second Circuit's decision. On June 27, 2016, the United States Supreme Court denied the petition and refused to review the case, leaving the decision of the Second Circuit intact and binding on federal courts in Connecticut, New York and Vermont. The *Madden* decision has created some uncertainty as to whether non-bank entities purchasing loans originated by a bank may rely on federal preemption of state usury laws, and may create an increased risk of litigation by plaintiffs challenging our ability to collect interest in accordance with the terms of Borrower Loans. While the decision specifically addressed preemption under the National Bank Act, it could support future challenges to federal preemption for other institutions, including an FDIC-insured, state chartered industrial bank like WebBank. However, although there can be no assurances as to the outcome of any potential litigation, or the possible impact of the litigation on our marketplace, we believe the *Madden* case addressed facts that are not presented by our marketplace lending platform and thus would not apply to Borrower Loans.

In June 2020, the FDIC issued a final regulation entitled "Federal Interest Rate Authority" that, among other things, addressed the uncertainty resulting from the *Madden* decision, including uncertainty affecting marketplace lenders that partner with banks. Under the FDIC's rule, which applies to FDIC-insured state-chartered industrial banks such as WebBank, interest on a loan originated by WebBank that was permissible under DIDA at origination is not affected by WebBank's subsequent sale of the loan to PFL. Seven states and the District of Columbia sued the FDIC, however, seeking to have the regulation set aside on Administrative Procedure Act grounds. Three states brought a similar challenge in the same court to a similar regulation issued by the OCC under the NBA. Both suits were decided in February 8, 2022, with the United States District Court for the Northern District of California ruling that the FDIC and OCC had not exceeded their statutory authority when promulgating their respective rules. The court deferred to each federal agency's interpretation, and thus concluded that each agency's rule was not unreasonable or arbitrary or capricious. The states had until April 11, 2022 to appeal the rulings to the U.S. Court of Appeals for the Ninth Circuit and did not do so.

In January 2017, the Administrator of the Colorado Uniform Consumer Credit Code filed suits against online loan platforms Marlette Funding, LLC and Avant, Inc. The Administrator claimed that loans to Colorado residents facilitated through these platforms were required to comply with Colorado laws regarding interest rates and fees, and that such laws were not preempted by the federal laws that apply to loans originated by Cross River Bank and WebBank, the federally regulated issuing banks that originate loans through the platforms operated by Marlette and Avant, respectively. In response to the Colorado regulator's lawsuits, Cross River Bank and WebBank each intervened in the state court case filed against Marlette and Avant, respectively. On August 18, 2020, the parties reached a settlement that provides a safe harbor for the Marlette and Avant lending platforms, such that if the lending programs meet certain criteria related to oversight, disclosure, funding, licensing, consumer terms, and structure, the programs will be deemed to be in compliance with Colorado's usury limits. On November 9, 2020, we amended our agreements with WebBank to address the requirements of the safe harbor for extending credit to borrowers in Colorado.

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We had separately been in discussions with the Colorado Department of Law during the Marlette and Avant litigation regarding certain terms of Borrower Loans offered to Colorado residents. Effective as of July 30, 2019, we and the Administrator entered into a stipulation for the continued operation of the loan program in Colorado, subject to certain financing charge and late fee restrictions during the period that the stipulation is in effect. The stipulation remains in place but may be terminated with 21 days' notice by either party. No further assurance can be provided as to the timing or outcome of the stipulation.

We and our counsel are monitoring these matters closely and, as developments warrant, we will consider any necessary changes to our marketplace required to avoid the impact of these cases on our business model. Because of investor demand, the maximum annual percentage rates offered through our marketplace may be lower in some states than others.

***We rely on agreements with WebBank, pursuant to which WebBank originates personal loans on a uniform basis to qualified borrowers throughout the United States and sells and assigns those loans to PFL. If our relationships with WebBank were to end, we may need to rely on individual state lending licenses or partner with a different bank to offer Borrower Loans.***

Borrower Loan requests take the form of an application to WebBank submitted through our marketplace. WebBank currently makes all personal loans to borrowers through our marketplace, which allows our marketplace to be available to borrowers on a uniform basis throughout the United States. If our relationships with WebBank were to end or if WebBank were to cease operations, one or both of PMI and PFL may need to rely on individual state lending licenses or we would need to partner with a different bank to originate Borrower Loans. Because neither of us currently possesses all required licenses to lend in every state, we might be forced to limit the rates of interest charged on Borrower Loans in some states and we might not be able to originate personal loans in some states altogether. If we partner with a new bank, service on our marketplace could be disrupted and delayed as we transition to a different bank partner. We also may face increased costs and compliance burdens if the agreements with WebBank are terminated.

***Several lawsuits have sought to recharacterize certain loan marketers and other originators as lenders. If litigation or a regulatory enforcement action on similar theories were successful against one or both of PMI and PFL, Borrower Loans originated through our marketplace could be subject to state consumer protection laws and licensing requirements in a greater number of states.***

Several lawsuits in the lending industry primarily involving high-interest "payday loan" marketers have brought under scrutiny the association between those firms and out-of-state banks. These lawsuits assert the loan marketers use out-of-state lenders in order to evade the consumer protection laws imposed by the states where they do business. Such litigation has sought to re-characterize the loan marketer as the lender for purposes of state consumer protection law and usury restrictions. Similar civil actions have been brought in the context of gift cards and retail purchase finance. Although we believe that our activities are generally distinguishable from the activities involved in these cases, a court or regulatory authority could disagree.

Additional state consumer protection laws would be applicable to the Borrower Loans facilitated through our marketplace if one or both of us were re-characterized as a lender, and the Borrower Loans could be voidable or unenforceable. In addition, we could be subject to claims by borrowers, as well as enforcement actions by regulators. Even if we were not required to cease doing business with residents of certain states or to change our business practices to comply with applicable laws and regulations, we could be required to register or obtain licenses or regulatory approvals that could impose a substantial cost on us.

***As online commerce develops, federal and state governments may draft and propose new laws to regulate commerce over the Internet, which may negatively affect our businesses.***

As online commerce continues to evolve, increasing regulation by federal and state governments becomes more likely. Our businesses could be negatively affected by the application of existing laws and regulations or the enactment of new laws applicable to marketplace lending. The cost to comply with such laws or regulations could be significant and would increase our operating expenses, and we may be unable to pass along those costs to our users in the form of increased fees. In addition, federal and state governmental or regulatory agencies may decide to impose taxes on services provided online. These taxes could discourage the use of the Internet as a means of consumer lending, which would adversely affect the viability of our marketplace.

***If one or both of PMI and PFL is required to register under the Investment Company Act, either of our ability to conduct business could be materially adversely affected.***

The Investment Company Act of 1940 (the "Investment Company Act") contains substantive legal requirements that regulate the manner in which "investment companies" are permitted to conduct their business activities. PFL and PMI believe each has conducted its business in a manner that does not result in being characterized as an investment company. If, however, PFL is deemed to be an investment company under the Investment Company Act, it may be required to institute burdensome compliance requirements and its activities may be restricted, which would materially adversely affect its business, financial

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condition and results of operations. Any determination that PMI is an investment company under the Investment Company Act similarly could impair its ability to perform its obligations under the Administration Agreement and thereby impair PFL's ability to make payments on the Notes. If PFL or PMI were deemed to be an investment company, PFL or PMI may also attempt to seek exemptive relief from the SEC, which could impose significant costs and delays on their businesses.

***If one or both of PMI and PFL is required to register under the Investment Advisers Act, either of our ability to conduct business could be materially adversely affected.***

The Investment Advisers Act of 1940, or the "Investment Advisers Act," contains substantive legal requirements that regulate the manner in which "investment advisers" are permitted to conduct their business activities. PFL believes that its business consists of providing a platform for marketplace lending for which investment adviser registration and regulation do not apply under applicable federal or state law, and does not believe that it is required to register as an investment adviser with either the SEC or any of the various states. The SEC or a state securities regulator could reach a different conclusion, however. Registration as an investment adviser could adversely affect PFL's method of operation and revenues. For example, the Investment Advisers Act requires that an investment adviser act in a fiduciary capacity for its clients. Among other things, this fiduciary obligation requires that an investment adviser manage a client's portfolio in the best interests of the client, have a reasonable basis for its recommendations, fully disclose to its client any material conflicts of interest that may affect its conduct and seek best execution for transactions undertaken on behalf of its client. It could be difficult for PFL to comply with this obligation without meaningful changes to its business operations, and there is no guarantee that it could do so successfully. If PFL were ever deemed to be in non-compliance with applicable investment adviser regulations, it could be subject to various penalties, including administrative or judicial proceedings that might result in censure, fine, civil penalties (including treble damages in the case of insider trading violations), the issuance of cease-and-desist orders or other adverse consequences. Similarly, any determination by regulators that PMI must register as an investment adviser could materially adversely affect PMI and impair its ability to continue to administer our marketplace on PFL's behalf.

***PMI's administration of Quick Invest under its previous offering and PFL's administration of Quick Invest, Recurring Investment, and Auto Invest under its current offering, could create additional liability for PFL and such liability could be material.***

Quick Invest was a loan search tool that allowed investors to identify Notes that met their investment criteria. An investor using Quick Invest was asked to indicate (i) the Prosper Rating or Ratings they wished to use as search criteria, (ii) the total amount they wished to invest, and (iii) the amount they wished to invest per Note. Quick Invest then compiled a basket of Notes for their consideration that met their search criteria.

Recurring Investment (formerly known as Auto Quick Invest) is an automated loan search tool that allows investors to easily invest in Notes that meet their specific investment criteria by automatically bidding any available funds in their account on Notes that match their selected parameters, in accordance with their specified instructions. An investor using Recurring Investment is asked to indicate (i) the Prosper Rating or Ratings and term of the Notes they wish to use as search criteria, and (ii) the amount they wish to invest per Note. If they wish, the investor can further customize their investment criteria by applying one or more of several dozen additional search criteria, such as loan amount, debt-to-income ratio and credit score. The investor can also set aside a specific amount of their funds as a cash reserve that will not be invested by the Recurring Investment tool. After the investor has entered and saved the parameters of their search, Recurring Investment automatically (i) runs searches on the designated criteria as new listings are posted on the marketplace, and (ii) places bids on any Notes identified by each such search. Currently, the Recurring Investment tool is available only through our website, and is not available through our mobile app, Prosper Invest.

Auto Invest is an automated loan search tool that makes it easier for investors to build their desired portfolio of Notes by automatically investing any available funds in an investor's account in Notes that match the investor's specified investment criteria and allocation targets. An investor using Auto Invest is asked to select (i) a loan allocation target, or a target mix of loans based on Prosper Ratings, and (ii) the amount they wish to invest per Note. The investor has the option of selecting a target from Prosper's series of preset loan allocations based on the recent historical loan inventory on the marketplace, any of which may be customized by changing the individual allocation targets for each Prosper Rating, or they can create a custom loan allocation target across Prosper Ratings based on their specific risk tolerance. If they wish, the investor can further customize their investment criteria by applying additional filters, such as loan term and employment status. The investor can also set aside a percentage of their portfolio as a cash reserve that will not be invested by Auto Invest. Investors may update their target allocations, cash reserve and other investment criteria, and pause and restart Auto Invest, at any time. Once the investor turns on Auto Invest, the tool may immediately begin placing orders for Notes in accordance with the investor's current and target allocations and other criteria. The mix of Notes in any particular order may not match the investor's individual loan allocation targets, but over time Auto Invest will place orders so that the aggregate holdings in the investor's portfolio will approximate, to the extent possible, the allocation specified in their investment criteria.

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Since the Notes purchased through Recurring Investment, Auto Invest and Quick Invest are the same as Notes purchased manually, they present the same risks of non-payment as all Notes that may be purchased through our marketplace. For example, there is a risk that a Borrower Loan identified through Recurring Investment, Auto Invest or Quick Invest may become delinquent or default, and that the estimated return or historical return (as applicable) for that loan individually, or the estimated return or historical return (as applicable) for the allocation target or the basket of Notes selected by Recurring Investment, Auto Invest or Quick Invest as a whole, may not accurately reflect the actual return on such loan or Notes. If this were to occur, an investor who purchased a Note from PFL through Recurring Investment, Auto Invest or Quick Invest could pursue a claim against PFL in connection with its representations regarding the performance of the Borrower Loans bid upon through Recurring Investment, Auto Invest or Quick Invest, respectively. An investor could pursue such a claim under various anti-fraud theories under federal and state securities law.

***We may face liability under state and federal securities law for statements in our prospectus and in other communications that could be deemed to be an offer to the extent that such statements are deemed to be false or misleading.***

Loan listings and other borrower information available on PFL's website as well as in sales and listing reports are statements made in connection with the purchase and sale of securities that are subject to the antifraud provisions of the Exchange Act and the Securities Act. In general, these liability provisions provide a purchaser of the Notes with a right to bring a claim against one or both of us for damages arising from any untrue statement of material fact or failure to state a material fact necessary to make any statements made not misleading. Even though PFL and PMI have advised investors of what they believe to be the material risks associated with an investment in the Notes and PMI management rights, the SEC or a court could determine that they have not advised investors of all of the material facts regarding an investment in the Notes and PMI Management Rights, which could give investors the right to rescind their investment and obtain damages, and could subject PFL and PMI to civil fines or criminal penalties in addition to any such rescission rights or damages.

***PMI and PFL's activities in connection with the offer and sale of securities through our marketplace could result in potential violations of federal securities law and result in material liability to PFL and/or PMI.***

PFL and PMI's respective businesses are subject to federal and state securities laws that may limit the kinds of activities in which PFL and PMI may engage and the manner in which they engage in such activities. For example, changes to the manner in which PFL offers and sells Notes or other securities through our marketplace could be viewed by the SEC or a state securities regulator as involving the creation or sale of new, unregistered securities. In such circumstances, the failure to register such securities could subject PFL to liability and the amount of such liability could be meaningful. In addition, in 2008, PMI entered into a settlement with the SEC pursuant to which PMI agreed to cease and desist from committing or causing any violations or any future violations of Sections 5(a) and (c) of the Securities Act. Failure to comply with that order could result in material civil or criminal liability, which could materially adversely affect PMI's business and PFL's offering of Notes.

**ITEM 1B. UNRESOLVED STAFF COMMENTS**

Not applicable.

**ITEM 2. PROPERTIES**

Our corporate headquarters, including our principal administrative, marketing, technical support and engineering functions, is located in San Francisco, California, where we lease approximately 35,000 square feet of office space under leases that will expire May 31, 2028. We have also entered into leases for approximately 44,500 square feet of office space located in Arizona and Utah. We believe that our facilities are adequate to meet our current needs and that suitable additional alternative spaces will be available in the future on commercially reasonable terms.

**ITEM 3. LEGAL PROCEEDINGS**

Our disclosure set forth under Note 16, Commitments and Contingencies—West Virginia Matter, of the Notes to Consolidated Financial Statements under Part II, Item 8 of this Form 10-K is incorporated herein by reference.

Prosper Funding's disclosure set forth under Note 8, Commitments and Contingencies—West Virginia Matter, of the Notes to Consolidated Financial Statements under Part II, Item 8 of this Form 10-K is incorporated herein by reference.

In March 2021, PMI and PFL accepted service of a complaint via email. PMI, PFL and Velocity Investments, LLC, an accounts receivable management company ("Velocity"), were each named in a purported class action lawsuit brought by two individual plaintiffs in the Circuit Court for Montgomery County, Maryland, filed on February 3, 2021 (the "Jones Litigation"). The complaint asserts, on behalf of the plaintiffs and the class members, claims for violation of certain Maryland state laws and seeks damages. The plaintiffs also seek a declaration of requirement for Maryland licensure and that PMI, PFL, and Velocity did not have the right to collect money from the plaintiffs and the class members on the loan accounts. The Jones Litigation was accompanied by a related petition to stay arbitration and demand declaratory judgement in the Circuit Court for Montgomery

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County, Maryland (the "Jones Petition"). On April 8, 2021, the Jones Litigation was removed to the United States District Court for the District of Maryland (the "Federal District Court"). In March 2021, a similar class action lawsuit, *Khan v. Crown Asset Management LLC*, was filed in the Circuit Court for Montgomery County, Maryland (the "Khan Litigation") accompanied by a related petition to stay arbitration (the "Khan Petition"). Prosper was not a named defendant in the Khan Litigation or the Khan Petition. In May 2021, the Khan Litigation was removed to the Federal District Court. On July 15, 2021, plaintiff dismissed the Jones Petition but joined PMI, PFL, and Velocity to the Khan Petition (the "Combined Petition"). The Combined Petition was removed on July 29, 2021 to the Federal District Court. On March 21, 2022, the Federal District Court issued a ruling to compel arbitration in the Jones Litigation and the Khan Litigation, stay the Combined Petition, and combine all cases. At this time, we cannot predict the outcome of this matter or estimate the amount of damages, if any, that may be awarded.

**ITEM 4. MINE SAFETY DISCLOSURES**

Not applicable.

**PART II**

**ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES** 

**Market Information; Holders of Record**

There is no established public trading market for PMI's or PFL's common equity. As of December 31, 2022, there were approximately 447 holders of record of PMI's common stock. As of December 31, 2022, PMI owns 100% of PFL's membership interests.

**Dividend Policy** 

PMI has not paid cash dividends since inception and does not anticipate paying cash dividends in the foreseeable future.

**Securities Authorized for Issuance Under Equity Compensation Plans** 

See Item 12 in Part III of this Annual Report for information about securities authorized for issuance under our equity compensation plans.

**Recent Sales of Unregistered Securities** 

For the year ended December 31, 2020, PMI issued 687,471 shares of common stock upon the exercise of stock options at a weighted-average exercise price per share of $0.02. For the year ended December 31, 2021, PMI issued 3,014,622 shares of common stock upon the exercise of stock options at a weighted-average exercise price per share of $0.02. For the year ended December 31, 2022, PMI issued 2,133,921 shares of common stock upon the exercise of stock options at a weighted-average exercise price per share of $0.03. These securities were sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder relative to sales by an issuer not involving a public offering.

**Issuer Purchases of Equity Securities** 

During the year ended December 31, 2022, we did not repurchase any common or preferred stock.

**ITEM 6. [Reserved]**

------

**ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

***This management's discussion and analysis of financial condition and results of operations, or MD&A, contains forward-looking statements that involve risks and uncertainties. Please see "Forward-Looking Statements" in this Annual Report on Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements. This discussion should be read in conjunction with historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Annual Report on Form 10-K. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those included in the "Risk Factors" section and elsewhere in this Annual Report on Form 10-K. This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021, except for the material addition of the results of operations by segment, which was not presented in prior periods and now includes year-to-year comparisons between 2021 and 2020. For discussions related to other 2020 items and year-to-year comparisons between 2021 and 2020, see "Part II – Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report on Form 10-K for the year ended December 31, 2021.***

**PROSPER MARKETPLACE, INC.**

**Overview**

Our vision is to transform lives by providing affordable financial solutions through the simplest and most trusted platform. We currently offer access to three lending products, each of which supports our vision: (i) unsecured personal loans through a personal loan marketplace which connects eligible consumer borrowers with individual and institutional investors, (ii) a Credit Card product available to eligible borrowers, and (iii) Home Equity products available to eligible homeowners.

We believe our business model has key advantages relative to traditional banks, including (i) an innovative marketplace model that efficiently connects qualified supply and demand of capital, (ii) online operations that substantially reduce the need for physical infrastructure and improve convenience, and (iii) use of advanced technology and machine learning to deliver simple, fast, personalized, and transparent solutions that can improve consumers' financial health as they move across the credit spectrum. We do not operate physical branches or incur expenses related to infrastructure like traditional banks or consumer finance institutions. As part of operating our marketplace, we verify the identity of borrowers and assess borrowers' credit risk profile using a combination of public and proprietary data. Our proprietary technology automates several loan origination and servicing functions, including the borrower application process, data gathering, underwriting, credit scoring, loan funding, investing and servicing, regulatory compliance and fraud detection.

For the year ended December 31, 2022, our marketplace facilitated $3.3 billion in Borrower Loan originations, of which $3.1 billion were funded through our Whole Loan Channel, representing 92% of the total Borrower Loans originated through our marketplace during this period. For the quarter ended December 31, 2022, our marketplace facilitated $845 million in Borrower Loan originations, of which $774 million were originated through our Whole Loan Channel, representing 92% of the total Borrower Loans originated through our marketplace during this period. From inception through December 31, 2022 our marketplace has facilitated $23.5 billion in Borrower Loan originations, of which $21.1 billion were funded through our Whole Loan Channel, representing 90% of the total Borrower Loans originated through our marketplace during this period.

As a credit marketplace, we believe our customers are highly susceptible to uncertainties and negative trends, real or perceived, in the markets driven by, among other factors, general economic conditions in the United States and abroad. These external economic conditions and resulting trends or uncertainties could adversely impact our customers' ability or desire to participate on our marketplace as borrowers or investors and, consequently, could negatively affect our business and results of operations.

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**Key Operating and Financial Metrics (in thousands)**

The following table displays our key operating and financial metrics for the years ended December 31, 2022, 2021 and 2020:

---

| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| Loan Originations | $3340433 | $1946974 | $1486238 |
| Transaction Fees, Net | $162742 | $89364 | $67335 |
| Whole Loans Outstanding <sup>(1)</sup> | $3680855 | $2529814 | $2816586 |
| Servicing Fees, Net | $15113 | $15024 | $18517 |
| Total Net Revenues | $199881 | $144626 | $103236 |
| Net Income (Loss) | $70582 | $(138341) | $18551 |
| Adjusted EBITDA <sup>(2)</sup> | $(9056) | $12814 | $(8587) |
| <sup>(1)</sup> Balance as of December 31 |  |  |  |
| <sup>(2)</sup> Adjusted EBITDA is a non-GAAP Financial measure. For more information regarding this measure and the reconciliation of this measure to the most comparable GAAP measure, see "Non-GAAP Financial Measure". | <sup>(2)</sup> Adjusted EBITDA is a non-GAAP Financial measure. For more information regarding this measure and the reconciliation of this measure to the most comparable GAAP measure, see "Non-GAAP Financial Measure". | <sup>(2)</sup> Adjusted EBITDA is a non-GAAP Financial measure. For more information regarding this measure and the reconciliation of this measure to the most comparable GAAP measure, see "Non-GAAP Financial Measure". | <sup>(2)</sup> Adjusted EBITDA is a non-GAAP Financial measure. For more information regarding this measure and the reconciliation of this measure to the most comparable GAAP measure, see "Non-GAAP Financial Measure". |

---

***Loan Originations***

Total loan originations on the platform increased 72% for the year ended December 31, 2022 when compared to the year ended December 31, 2021, which resulted in an increase in Transaction Fees of $73.4 million, or 82%. The loan originations increase for the year ended December 31, 2022 versus the year ended December 31, 2021 was due primarily to an improved competitive and pricing environment, as well as more normalized underwriting requirements, which is also reflective of the general economic recovery since the start of the COVID-19 pandemic.

From inception of the Company through December 31, 2022, a total of 1,899,320 Borrower Loans, totaling $23.5 billion, were originated through our marketplace. For the year ended December 31, 2022, 305,123 Borrower Loans totaling $3.3 billion were originated through our marketplace, as compared to 183,041 Borrower Loans totaling $1.9 billion originated in 2021, which represented a unit increase of 67% and a dollar increase of 72%. For the year ended December 31, 2021, 183,041 Borrower Loans totaling $1.9 billion were originated through our marketplace compared to 119,711 Borrower Loans totaling $1.5 billion originated in 2020, which represented a unit increase of 53% and a dollar increase of 31%.

Loan origination volume by Prosper Rating was as follows for the periods presented (in millions, except percentage):

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| | **Amount** | **%** | **Amount** | **%** | **Amount** | **%** |
| AA | $460.3 | 14% | $246.2 | 13% | $269.8 | 18% |
| A | 507.0 | 15% | 373.8 | 19% | 437.0 | 29% |
| B | 601.3 | 18% | 318.8 | 16% | 311.2 | 21% |
| C | 410.0 | 12% | 245.8 | 13% | 210.9 | 15% |
| D | 300.2 | 9% | 104.0 | 5% | 59.5 | 4% |
| E | 338.3 | 10% | 35.7 | 2% | 15.9 | 1% |
| HR | 29.4 | 1% | 0.9 | —% | 2.2 | —% |
| Other <sup>(1)</sup> | 693.9 | 21% | 621.8 | 32% | 179.7 | 12% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $3340.4 | 100% | $1947.0 | 100% | $1486.2 | 100% |
| <sup>(1)</sup> Represents loans funded through the Prosper platform via the Whole Loan Channel but not assigned Prosper Ratings. These loans are sold only to institutional investors and based on specific underwriting criteria and custom risk models developed by these investors. | <sup>(1)</sup> Represents loans funded through the Prosper platform via the Whole Loan Channel but not assigned Prosper Ratings. These loans are sold only to institutional investors and based on specific underwriting criteria and custom risk models developed by these investors. | <sup>(1)</sup> Represents loans funded through the Prosper platform via the Whole Loan Channel but not assigned Prosper Ratings. These loans are sold only to institutional investors and based on specific underwriting criteria and custom risk models developed by these investors. | <sup>(1)</sup> Represents loans funded through the Prosper platform via the Whole Loan Channel but not assigned Prosper Ratings. These loans are sold only to institutional investors and based on specific underwriting criteria and custom risk models developed by these investors. | <sup>(1)</sup> Represents loans funded through the Prosper platform via the Whole Loan Channel but not assigned Prosper Ratings. These loans are sold only to institutional investors and based on specific underwriting criteria and custom risk models developed by these investors. | <sup>(1)</sup> Represents loans funded through the Prosper platform via the Whole Loan Channel but not assigned Prosper Ratings. These loans are sold only to institutional investors and based on specific underwriting criteria and custom risk models developed by these investors. | <sup>(1)</sup> Represents loans funded through the Prosper platform via the Whole Loan Channel but not assigned Prosper Ratings. These loans are sold only to institutional investors and based on specific underwriting criteria and custom risk models developed by these investors. |

---

For the year ended December 31, 2022, the mix of originations on the Prosper platform was generally reflective of more normalized underwriting standards as compared to the corresponding period in 2021, as the economy continued to recover from the COVID-19 pandemic. A significant number of loans are not assigned Prosper ratings as the Company continues to sell higher risk loans through the Whole Loan Channel to institutional investors that rely on their own custom risk models to underwrite the loans.

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***Whole Loans Outstanding***

We sell Borrower Loans through our Whole Loan Channel, and the outstanding balance of these loans serves as a primary driver of our Servicing Assets. Whole loans outstanding increased $1.2 billion, or 45%, from December 31, 2021 to December 31, 2022. This increase is primarily due to the increase in originations in the past year, driven by the factors described in the Loan Originations section, above. We have also continued to purchase and hold loans in consolidated warehouse trusts, increasing the overall balance of outstanding whole loans.

From December 31, 2020 to December 31, 2021, whole loans outstanding decreased $286.8 million, or 10%. This decrease was due primarily to the drop in originations during 2020 as a result of the economic impact of the COVID-19 pandemic, which continued to negatively impact the total of whole loans outstanding through 2021.

***Net Income (Loss)***

See the section titled "Results of Operations" below, for the discussion on significant changes in Net Income (Loss) year-over-year.

**Results of Operations**

***Overview***

The following table summarizes our net income (loss) for the years ended December 31, 2022, 2021 and 2020 (in thousands, except percentage):

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **Change** | **% Change** | **2021** | **2020** | **Change** | **% Change** |
| Total Net Revenues | $199881 | $144626 | $55255 | 38% | $144626 | $103236 | $41390 | 40% |
| Total Expenses | 129004 | 282896 | (153892) | (54)% | 282896 | 84669 | 198227 | 234% |
| &nbsp;&nbsp;Net Income (Loss) Before Income Taxes | 70877 | (138270) | 209147 | n/m | (138270) | 18567 | (156837) | n/m |
| Income Tax Expense | (295) | (71) | (224) | n/m | (71) | (16) | (55) | n/m |
| &nbsp;&nbsp;Net Income (Loss) | $70582 | $(138341) | $208923 | n/m | $(138341) | $18551 | $(156892) | n/m |

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n/m: not meaningful

Total Net Revenues for the year ended December 31, 2022 increased $55.3 million, or 38%, as compared to the year ended December 31, 2021. This increase was primarily attributable to a $73.4 million increase in Transaction Fees, Net, due to the increase in originations during this time, as discussed above. There was also a $2.5 million increase in Other Revenues, driven by additional credit referral and incentive fees due to increased personal loan application volume. These increases were partially offset by a $8.2 million decrease in (Loss) Gain on Sale of Borrower Loans, due primarily to incentive fees ("incentives") provided to whole loan investors driven by market volatility and incentives offered by competitors. There was also a $6.0 million decrease in Total Interest Income (Expense), Net, due primarily to the deconsolidation of securitized Borrower Loans in the third quarter of 2021, partially offset by additional interest income generated from loans held in consolidated warehouse trusts. Finally, there was also a $6.5 million decrease in Total Net Revenues from Change in Fair Value of Financial Instruments, Net, due primarily to volatility in the capital markets and higher interest rates, which led to negative fair value adjustments on the loans held in consolidated warehouse trusts. These negative fair value adjustments were partially offset by gains of $14.1 million on our Credit Card Derivative since the product launched at the end of 2021.

Total expenses for the year ended December 31, 2022 decreased $153.9 million as compared to the year ended December 31, 2021, which is primarily due to the Change in Fair Value of Convertible Preferred Stock Warrants, which is in turn driven by changes in the fair value of the underlying Convertible Preferred Stock. Specifically, the gain for the year ended December 31, 2022 totaled $84.6 million, which compared to a loss of $138.6 million for 2021, a change of $223.2 million. Total Expenses also decreased due to certain one-time transactions: (a) $8.6 million Gain on Forgiveness of PPP Loan in 2022, as the U.S. Small Business Administration ("SBA") formally forgave our Paycheck Protection Program ("PPP") loan in March 2022 (Note 10); and (b) $1.5 million Loss on Deconsolidation of VIEs in 2021 related to the deconsolidation of our securitization variable interest entities ("VIEs"). These decreases in Total Expenses were partially offset by a combined $78.8 million increase in Origination and Servicing, Sales and Marketing and General and Administrative expenses, as costs increased to support the higher originations and our continued investments in our Credit Card and Home Equity products in 2022. We also incurred $1.5 million in Interest Expense on the Term Loan we closed in November 2022 (Note 10). Accordingly, the net income for the year ended December 31, 2022 increased $208.9 million when compared to the net loss generated for the year ended December 31, 2021.

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***Revenues***

The following table summarizes our revenues for the years ended December 31, 2022, 2021 and 2020 (in thousands, except percentages):

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **Change** | **% Change** | **2021** | **2020** | **Change** | **% Change** |
| **Operating Revenues:** |  |  |  |  |  |  |  |  |
| Transaction Fees, Net | $162742 | $89364 | $73378 | 82% | $89364 | $67335 | $22029 | 33% |
| Servicing Fees, Net | 15113 | 15024 | 89 | 1% | 15024 | 18517 | (3493) | (19)% |
| (Loss) Gain on Sale of Borrower Loans | (1039) | 7196 | (8235) | n/m | 7196 | 4816 | 2380 | 49% |
| Other Revenues | 6452 | 3992 | 2460 | 62% | 3992 | 2711 | 1281 | 47% |
| &nbsp;&nbsp;**Total Operating Revenues** | 183268 | 115576 | 67692 | 59% | 115576 | 93379 | 22197 | 24% |
| **Interest Income (Expense):** |  |  |  |  |  |  |  |  |
| Interest Income on Borrower Loans and Loans Held for Sale | 86350 | 83107 | 3243 | 4% | 83107 | 104150 | (21043) | (20)% |
| Interest Expense on Notes and Warehouse Lines | (60025) | (50816) | (9209) | 18% | (50816) | (60127) | 9311 | (15)% |
| &nbsp;&nbsp;**Total Interest Income, Net** | 26325 | 32291 | (5966) | (18)% | 32291 | 44023 | (11732) | (27)% |
| Change in Fair Value of Financial Instruments | (9712) | (3241) | (6471) | (200)% | (3241) | (34166) | 30925 | 91% |
| &nbsp;&nbsp;**Total Net Revenues** | $199881 | $144626 | $55255 | 38% | $144626 | $103236 | $41390 | 40% |

---

n/a: not applicable

n/m: not meaningful

*Transaction Fees, Net*

We earn a transaction fee upon the successful origination of all Borrower Loans facilitated through our marketplace. Prosper receives payments from WebBank as compensation for the activities we perform on behalf of WebBank. Our fee is determined by the term and credit grade of the Borrower Loans that we facilitate on our marketplace and WebBank originates. We record the transaction fee revenue net of any fees paid by us to WebBank.

We also earn various program fees from our Credit Card product, such as interchange fees, annual fees and late fees, and broker fees from our Home Equity products. These program and broker fees are recorded within Transaction Fees, Net.

Transaction Fees increased by $73.4 million, or 82%, for the year ended December 31, 2022, as compared to 2021. This increase is generally consistent with the higher origination volume discussed above. We also recognized approximately $7.0 million in program fees under our Credit Card product for the year ended December 31, 2022.

*Servicing Fees, Net*

Investors who purchase Borrower Loans through the Whole Loan Channel typically pay us a servicing fee which is generally set at 1.0% per annum of the outstanding principal balance of the Borrower Loan prior to applying the current payment, plus an additional 0.075% per annum to cover the Loan Trailing Fee. The Servicing Fee compensates us for the costs incurred in servicing the Borrower Loan, including managing payments from borrowers, payments to investors and maintaining investors' account portfolios. We record Servicing Fees from investors as a component of operating revenues when received. We also include any collection fees received, net of collection agency expenses, in Servicing Fees.

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In addition, we are contractually obligated to service the entire portfolio under our Credit Card product. Our banking partner, Coastal, pays us a servicing fee of 1% per annum of the daily outstanding principal balance of all cards designated as Coastal allocations (approximately 10% of the portfolio). To the extent that these contractual fees are less than the market servicing rate that would be required by a market participant to service the entire portfolio, a servicing obligation is recorded. Changes to this servicing obligation are included in Servicing Fees, Net.

The increase of $0.1 million, or 1%, in Servicing Fees for the year ended December 31, 2022 as compared to 2021 was primarily due to an increase of $2.9 million in whole loan servicing revenues during this period, due to the increase in the balance of whole loans outstanding. There was also a $0.8 million combined increase in collection and debt sale fees, generally due to the increase in charge-offs as compared to the prior year. These increases were partially offset by a $3.7 million increase in the net Credit Card servicing obligation for the year ended December 31, 2022, due to the growth in the portfolio.

*(Loss) Gain on Sale of Borrower Loans*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Loss) Gain on Sale of Borrower Loans consists of net (losses) gains on Borrower Loans sold through the Whole Loan Channel, net of any incentives provided at the time of sale. In the second half of 2022, due to market volatility and incentives offered by competitors, we provided additional incentives to our whole loan investors. For the year ended December 31, 2022, these incentives increased approximately $13.2 million from the prior year. Excluding the impact of these incentives, the remaining increases in Gain on Sale of Borrower Loans for the year ended December 31, 2022, as compared to 2021, were primarily due to increases in the volume of whole loans sold due to higher originations, as discussed above.

*Other Revenues*

Other Revenues consists primarily of credit referral and incentive fees. Credit referral fees are earned from partner companies for the referral of customers on our platform, while incentive fees are earned from partner companies through our incentive programs. The $2.5 million, or 62%, increase in Other Revenues for the year ended December 31, 2022 as compared to 2021 was due primarily to $2.7 million in additional credit referral fees earned as a result of increased personal loan application volume directed to our credit referral partners.

*Interest Income on Borrower Loans and Loans Held for Sale and Interest Expense on Notes and Warehouse Lines*

We recognize Interest Income on Borrower Loans and Loans Held for Sale using the accrual method based on the stated interest rate to the extent we believe it to be collectible. We record interest expense on the corresponding Notes and Warehouse Lines based on the contractual interest rates. The interest rate on Notes is generally 1% lower than the interest rate on the corresponding Borrower Loans to compensate us for servicing the underlying Borrower Loans.

The decrease of $6.0 million, or 18%, in Total Interest Income (Expense) for the year ended December 31, 2022 as compared to 2021 was primarily due to the deconsolidation of securitized Borrower Loans, as well as the associated Notes and Certificates Issued by Securitization Trust, from our balance sheet on September 27, 2021. Net interest income from securitizations decreased approximately $8.3 million for the year ended December 31, 2022. This was partially offset by a $0.7 million increase in net interest income from Loans Held for Sale, as we increased the usage of our Warehouse Lines and the outstanding principal balance on those loans increased. The impact on net interest income from this increased usage was partially offset by a rise in market interest rates, which increased the cost of borrowing on the variable interest Warehouse Lines. Additionally, there was a $0.8 million increase in net interest income due to a decrease in the amortization of warehouse line and securitization setup costs, and a $0.7 million increase related to net interest income on Borrower Loans funded through the Note Channel.

*Change in Fair Value of Financial Instruments* 

We record Borrower Loans, Loans Held for Sale, Notes and the Credit Card Derivative (see Note 5 of the accompanying consolidated financial statements) at fair value. Prior to the deconsolidation of our securitization variable interest entities on September 27, 2021, we also recorded Certificates Issued by Securitization Trust at fair value. Changes in the fair value of Borrower Loans funded through the Note Channel are largely offset by the changes in fair value of the Notes due to their borrower payment-dependent structure. Our obligation to pay principal and interest on Notes is equal to the loan payments, if any, that are received on the corresponding Borrower Loan, net of the servicing fee, which is generally 1.0% of the outstanding balance.

We use Warehouse Lines to finance the purchase of Loans Held for Sale for the purpose of earning Net Interest Income and contributing to securitization transactions. Loans Held for Sale consist primarily of loans held in warehouse trusts. Changes in the fair value of Loans Held for Sale are not offset by changes in fair value of Warehouse Lines because Warehouse Lines are carried at amortized cost. See Note 10 of the accompanying consolidated financial statements for more details on Warehouse Lines.

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On September 27, 2021, we sold our interest in residual certificates issued by three consolidated securitizations and ceased to be the primary beneficiary. As a result, we deconsolidated these entities from our financial statements on that date, including the Borrower Loans and Certificates Issued by Securitization Trust that were carried at fair value. All necessary fair value adjustments were recorded up to the date of deconsolidation. Changes in the fair value of Borrower Loans held in consolidated securitization trusts were historically negative due to actual charge-offs but could be negative or positive due to changes in fair value adjustments that are attributable to changes in expected credit performance, prepayment rates and implied market discount rates.

We earn interest income on loans held in warehouse trusts during the period we own or consolidate the loans, which partially offsets changes in the fair value of those loans. The following table illustrates the composition of the loans held in warehouse trusts by Prosper Rating, which is an indicator of their credit quality:

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| | | |
|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** |
| **Loans Held for Sale**<sup>(1)</sup>**:** |  |  |
| AA | 25% | 22% |
| A | 28% | 33% |
| B | 23% | 28% |
| C | 16% | 14% |
| D | 6% | 3% |
| E | 2% | —% |
| HR | —% | —% |
| &nbsp;&nbsp;&nbsp;&nbsp;Grand Total | 100% | 100% |
| <sup>(1)</sup> The percentages are calculated as the weighted average of month-end principal balances of Loans Held for Sale by Prosper Rating. | <sup>(1)</sup> The percentages are calculated as the weighted average of month-end principal balances of Loans Held for Sale by Prosper Rating. | <sup>(1)</sup> The percentages are calculated as the weighted average of month-end principal balances of Loans Held for Sale by Prosper Rating. |

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Fair values of Borrower Loans, Loans Held for Sale and Notes are estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The key assumptions used include default and prepayment rates derived primarily from historical performance, and discount rates based on estimates of the rates of return that investors would require when investing in other financial instruments with similar characteristics. For the years ended December 31, 2022 and 2021, the Change in Fair Value of Financial Instruments, Net were losses of $9.7 million and $3.2 million, respectively.

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The increase in the loss for the year ended December 31, 2022 as compared to the prior year is largely driven by Loans Held for Sale. Capital markets volatility, benchmark interest rates and purchases of loans through our consolidated warehouse trusts all increased during the current period. Consistent with originations, warehouse purchases in the current period included a higher mix of loans rated C, D and E (based on Prosper Rating and as reflected in the table above) which have higher borrower rates and expected losses compared to loans rated AA, A or B, resulting in higher charge-offs and an overall greater impact on the change in fair value. Specifically, for Loans Held for Sale, the loss from changes in fair value for the year ended December 31, 2022, was $25.0 million, due to a $13.2 million loss on fair value and $11.8 million in net charge-offs. This compares to 2021, when there was a gain from changes in fair value of $0.4 million, due to fair value gains of $7.6 million, partially offset by $7.2 million in net charge-offs.

For Borrower Loans, the loss from changes in fair value was $30.4 million for the year ended December 31, 2022, which compared to a gain of $0.6 million in 2021. The loss in 2022 was attributable primarily to a $15.1 million loss on fair value and $14.8 million in net charge-offs, while the gain in 2021 was attributable primarily to a gain from fair value adjustments of $16.5 million, partially offset by net charge-offs of $15.6 million. In general, the losses in 2022 are reflective of increased capital markets volatility and benchmark interest rates during the period, while the gains recognized in the prior year were primarily due to the continued fair value recovery of Borrower Loans following the large negative adjustments recognized in 2020 as a result of the COVID-19 pandemic. In addition, the changes in fair value in 2021 were reflective of $1.7 million in gains related to securitized Borrower Loans, which were deconsolidated from our balance sheet on September 27, 2021, as discussed above.

The Credit Card Derivative is recorded at fair value and is primarily reflective of discounted future cash flows from certain features of our Credit Card program that were determined to meet the definition of freestanding derivatives, including interest income, program fees paid to our banking partner Coastal, credit losses and fraud losses. These cash flows are estimated based upon a set of valuation assumptions, including default and prepayment rates derived primarily from comparable companies and our own historical performance, and discount rates based on estimates of the rates of return that investors would require when investing in other financial instruments with similar characteristics. See Note 5 of the accompanying consolidated financial statements for further details. Fair value changes related to future cash flows underlying the Credit Card Derivative resulted in a gain of $9.8 million, and the net impact of realized transactions totaled $4.3 million for the year ended December 31, 2022. These increases were primarily due to the growth in the underlying portfolio since the Credit Card launched at the end of 2021.

We recognized a loss of $6.1 million in 2021 related to the Certificates Issued by Securitization Trust, which are no longer on our balance sheet. The gain on changes in fair value from Notes of $30.8 million for the year ended December 31, 2022 is generally consistent with the negative fair value adjustments and charge-offs related to the Borrower Loans, as discussed above.

We also hold a swaption to limit our exposure to fluctuations in LIBOR due to our PWIT Warehouse Line, which bears interest at LIBOR plus 2.75%. For the year December, 2022, the fair value of that swaption increased $0.8 million due to the increase in market interest rates. For the year ended December 31, 2021, the change in the fair value was immaterial.

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The following table details the change in fair value of our financial instruments for the years ended December 31, 2022, 2021 and 2020, respectively (in thousands):

---

| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| **Assets:** |  |  |  |
| Borrower Loans | $(30436) | $595 | $(48620) |
| Loans Held for Sale | (24967) | 422 | (11883) |
| Credit Card Derivative (includes gains from settled transactions) | 14079 |  |  |
| LIBOR rate swaption (included in Prepaid and Other Assets) | 782 | (58) | (6) |
| **Liabilities:** |  |  |  |
| Notes | 30830 | 1910 | 19664 |
| Certificates Issued by Securitization Trust |  | (6110) | 6679 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $(9712) | $(3241) | $(34166) |

---

***Expenses***

The following table summarizes our expenses for the years ended December 31, 2022, 2021 and 2020 (dollar amounts in thousands):

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **$ Change** | **% Change** | **2021** | **2020** | **$ Change** | **% Change** |
| **Expenses:** |  |  |  |  |  |  |  |  |
| Origination and Servicing | $56457 | $35056 | $21401 | 61% | $35056 | $29897 | $5159 | 17% |
| Sales and Marketing | 81896 | 35065 | 46831 | 134% | 35065 | 29259 | 5806 | 20% |
| General and Administrative - Research and Development | 20670 | 17172 | 3498 | 20% | 17172 | 14925 | 2247 | 15% |
| General and Administrative - Other | 62988 | 55950 | 7038 | 13% | 55950 | 48459 | 7491 | 15% |
| Change in Fair Value of Convertible Preferred Stock Warrants | (84595) | 138622 | (223217) | n/m | 138622 | (37677) | 176299 | n/m |
| Gain on Forgiveness of PPP Loan | (8604) |  | (8604) | n/a |  |  |  | n/a |
| Loss on Deconsolidation of VIEs |  | 1494 | (1494) | n/m | 1494 |  | 1494 | n/m |
| Impairment Expense |  |  |  | n/a |  | 445 | (445) | n/m |
| Interest Expense on Term Loan | 1527 |  | 1527 | n/a |  |  |  | n/a |
| Other Income, Net | (1335) | (463) | (872) | n/m | (463) | (639) | 176 | (28)% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Expenses** | $129004 | $282896 | $(153892) | (54)% | $282896 | $84669 | $198227 | 234% |

---

n/a: not applicable

n/m: not meaningful

The following table reflects full-time employees as of December 31, 2022, 2021 and 2020 by functional area:

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| | | | |
|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** |
| | **2022** | **2021** | **2020** |
| Origination and Servicing | 166 | 121 | 119 |
| Sales and Marketing | 30 | 20 | 15 |
| General and Administrative - Research and Development | 104 | 101 | 93 |
| General and Administrative - Other | 168 | 142 | 126 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Headcount** | 468 | 384 | 353 |

---

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*Origination and Servicing*

Origination and Servicing costs consist primarily of salaries, benefits and stock-based compensation expense related to our capital markets, collections, customer support and payment processing employees and vendor costs associated with facilitating and servicing loans and our Credit Card product. The increase for the year ended December 31, 2022 of $21.4 million, or 61%, as compared to 2021 was primarily due to a $18.1 million combined increase in loan servicing and origination costs, consistent with the increase in originations discussed above. Included in that increase is a $3.1 million increase in third-party servicing costs associated with our Credit Card product. Additionally, compensation expense increased $2.3 million, driven primarily by increased headcount, and internal-use software amortization increased $1.0 million due to the deployment of various marketplace features over the past two years.

Of the total Origination and Servicing costs for the years ended December 31, 2022 and 2021, approximately $7.9 million and $0.3 million, respectively related specifically to our Credit Card product.

*Sales and Marketing*

Sales and Marketing costs consist primarily of affiliate marketing, search engine marketing, online and offline campaigns, email marketing, public relations and direct mail marketing, as well as compensation expenses such as wages, benefits and stock-based compensation for the employees who support these activities. For the year ended December 31, 2022, the increase of $46.8 million, or 134%, from the prior year was due to an overall increase in marketing and advertising, including marketing partnership costs of $35.3 million, direct mail costs of $6.6 million and digital advertising spend of $2.7 million. Additionally, compensation expense increased $1.8 million, due primarily to increased headcount, and marketing consulting expenses increased $0.3 million.

Of the total Sales and Marketing costs for the years ended December 31, 2022 and 2021, approximately $12.6 million and $0.7 million, respectively, related specifically to our Credit Card product.

*General and Administrative – Research and Development*

General and Administrative – Research and Development costs consist primarily of salaries, benefits and stock-based compensation expense related to our engineering and product development employees, as well as related vendor costs. The increase in General and Administrative – Research and Development for the year ended December 31, 2022 of $3.5 million, or 20%, as compared to 2021 was due primarily to a $2.7 million increase in compensation expense and a $1.9 million increase in outsourced services, primarily related to headcount additions for the development of various platform features and our Credit Card product. These increases were partially offset by additional capitalized internal-use software and web development costs. Specifically, these capitalized costs were $11.0 million and $9.8 million for the years ended December 31, 2022 and 2021, respectively.

Of the total General and Administrative - Research and Development costs for the years ended December 31, 2022 and 2021, approximately $2.0 million and $1.5 million, respectively, related specifically to our Credit Card product. These amounts are presented net of $1.8 million and $2.6 million, respectively, of capitalized internal-use software and web development costs.

*General and Administrative – Other*

General and Administrative – Other expenses consist primarily of salaries, benefits and stock-based compensation expense related to our accounting and finance, risk, legal, compliance, human resources and facilities employees, professional fees related to legal and accounting and facilities expenses. The increase in General and Administrative - Other for the year ended December 31, 2022 of $7.0 million, or 13%, as compared to 2021 was due primarily to a $4.4 million increase in compensation expense, driven primarily by increased headcount. We also utilized additional outside contractors, resulting in a $0.3 million increase in outsourced services. There was also a $2.0 million increase in facilities and maintenance costs, due in part to our employees beginning to return to the office at the start of 2022, as well as increased usage of software licenses and subscriptions. Various other expenses generally related to the growth in the business and return to the office, such as travel, recruiting, office costs, insurance and state franchise taxes, increased a combined $1.2 million from the prior year. These increases were partially offset by a $1.2 million decrease in professional services, as there were additional initiatives in the prior year that did not recur in 2022, including those related to the launch of our Credit Card product.

Of the total General and Administrative - Other costs for the years ended December 31, 2022 and 2021, approximately $3.5 million and $1.4 million, respectively, related specifically to our Credit Card product.

*Change in Fair Value of Convertible Preferred Stock Warrants*

Change in Fair Value of Convertible Preferred Stock Warrants was a gain of $84.6 million for the year ended December 31, 2022 due to a decrease in the fair value of the underlying Convertible Preferred Stock in 2022.

------

Change in Fair Value of Convertible Preferred Stock Warrants was a loss of $138.6 million for the year ended December 31, 2021 due to an increase in the fair value of the underlying Convertible Preferred Stock in 2021.

*Gain on Forgiveness of PPP Loan*

As discussed in Note 10 of the accompanying consolidated financial statements, on March 21, 2022, we were notified by the SBA that all principal and interest under our PPP loan, totaling $8.6 million, was forgiven through a full forgiveness payment made on March 15, 2022 by the SBA to the lender of our PPP loan. As a result, we recognized the entire forgiven principal and interest as Gain on Forgiveness of PPP Loan for the year ended December 31, 2022.

*Loss on Deconsolidation of VIEs*

We sold our holdings of residual certificates issued by three consolidated securitization trust VIEs to an unrelated third party on September 27, 2021. As a result of that sale, we determined that we were no longer the primary beneficiary of those VIEs and they were deconsolidated on that date. We recognized a loss on deconsolidation totaling $1.5 million, which consisted of the $4.1 million in cash consideration received for the sale of the residual certificates, less net assets deconsolidated of $5.6 million.

*Interest Expense on Term Loan*

We incurred $1.5 million in interest costs for the year ended December 31, 2022 related to the Term Loan we closed with a third-party financial institution in November 2022. Refer to Note 10 of the accompanying consolidated financial statements for further information on the Term Loan, including details of the interest rates.

*Other Income, Net*

Other Income, Net was $1.3 million for the year ended December 31, 2022 and primarily consists of sublease income, interest income on cash and cash equivalents and other miscellaneous items. The increase of $0.9 million in Other Income, Net for the year ended December 31, 2022, as compared to 2021 was primarily due to a $0.4 million increase in sublease income, and a $0.5 million increase in interest income.

***Non-GAAP Financial Measure***

Adjusted EBITDA is a non-GAAP financial measure that we define as Net Income (Loss) adjusted for interest income on Cash and Cash Equivalents, Interest Expense on Term Loan, Income Tax Expense, depreciation and amortization, impairment of long-lived assets and Goodwill, stock-based compensation expense, Change in Fair Value of Convertible Preferred Stock Warrants and certain infrequent or unusual transactions. The presentation of non-GAAP financial measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

We consider Adjusted EBITDA to be a helpful indicator of the operational strength and performance of our business and a good measure of our historical operating trends. Management uses Adjusted EBITDA to, among other things, understand and compare operating results across accounting periods, evaluate our operations and financial performance and for internal planning and forecasting purposes. Inclusion of Adjusted EBITDA is intended to provide investors insight into the manner in which management views the performance of the Company, enhance investors' evaluation of our operating results, and to facilitate meaningful comparisons of our results between periods. This non-GAAP financial measure should not be considered an alternative to, or more meaningful than, the GAAP financial information provided herein.

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted EBITDA does not consider the potentially dilutive impact of equity-based charges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted EBITDA does not reflect interest and tax payments that may represent a reduction in cash available to us; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

The major non-GAAP adjustments, and our basis for excluding them, are outlined below:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Changes in the fair value of convertible preferred stock warrants liability*: We exclude these fair value changes primarily because they are non-cash items and the fair value varies based on the fair value of the underlying preferred stock, varying valuation methodologies and subjective assumptions. Their inclusion makes the comparison of our current financial results to previous and future periods difficult to evaluate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Stock-based compensation expense*: This consists of expenses for equity awards under our equity incentive plans. Although stock-based compensation is an important aspect of the compensation paid to our employees, the grant date fair value varies based on the stock price at the time of grant, varying valuation methodologies, subjective assumptions and the variety of award types. This makes the comparison of our current financial results to previous and future periods difficult to evaluate; therefore, we believe it is useful to exclude stock-based compensation. We also excluded these expenses because they are non-cash.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Amortization or impairment of acquired intangible assets and impairment of goodwill*: We incur amortization or impairment of acquired Intangible Assets and Goodwill in connection with acquisitions and therefore exclude these amounts from our non-GAAP measures. We exclude these items because management does not believe they are reflective of our ongoing operating results.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Gain on Forgiveness of PPP Loan*: We recorded a gain on forgiveness when our PPP loan was forgiven by the SBA in the first quarter of 2022. We exclude the impact of this gain because of the infrequent nature of the transaction. Management does not believe that it is reflective of our ongoing operating results.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Interest Expense on Term Loan*: We incur interest expense on the Term Loan we closed in November 2022, which is more fully described in Note 10 of the accompanying consolidated financial statements. Proceeds from the Term Loan are used to fund the operations of the business at our discretion, within certain limitations. This may include, but is not limited to, making investments in our Credit Card product, investing in loans held in our warehouse facilities or meeting operational obligations. We exclude this interest expense as it is based on the overall financing structure of PMI. This differs from Interest Expense on Notes and Warehouse Lines (part of Total Net Revenues), as the proceeds from those instruments are used exclusively for the purposes of purchasing loans on our marketplace.

The following table presents a reconciliation of Net (Loss) Income to Adjusted EBITDA for each of the periods indicated (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| Net Income (Loss) | $70582 | $(138341) | $18551 |
| Depreciation expense: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Origination and Servicing | 8132 | 7167 | 5830 |
| &nbsp;&nbsp;&nbsp;&nbsp;General and Administrative - Other | 2656 | 2501 | 2300 |
| Amortization of Intangibles | 136 | 172 | 219 |
| Stock-Based Compensation | 1326 | 1136 | 1913 |
| Change in Fair Value of Convertible Preferred Stock Warrants | (84595) | 138622 | (37677) |
| Gain on Forgiveness of PPP Loan | (8604) |  |  |
| Loss on Deconsolidation of VIEs |  | 1494 |  |
| Impairment Expense |  |  | 445 |
| Interest Income on Cash and Cash Equivalents | (511) | (8) | (184) |
| Interest Expense on Term Loan | 1527 |  |  |
| Income Tax Expense | 295 | 71 | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Adjusted EBITDA** | $(9056) | $12814 | $(8587) |

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The decrease in Adjusted EBITDA for the year ended December 31, 2022, as compared to 2021, is primarily reflective of (a) changes in the fair value of Loans Held for Sale due to capital markets volatility and higher interest rates, (b) incentives provided to whole loan investors driven by market volatility and incentives offered by competitors and (c) additional investments in our Credit Card product.

Expenses on the Consolidated Statement of Operations include the following amounts of stock-based compensation expense for the periods presented (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| Servicing and Origination | $134 | $123 | $35 |
| Sales and Marketing | 118 | 62 | 69 |
| General and Administrative | 1074 | 951 | 1809 |
| **&nbsp;&nbsp;&nbsp;&nbsp; Total Stock-Based Compensation Expense** | $1326 | $1136 | $1913 |

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***Segment Net Revenues and Segment Adjusted EBITDA***

Refer to Note 20 of the accompanying consolidated financial statements for information on our segment reporting. The following table summarizes our segment net revenues and segment Adjusted EBITDA for the years ended December 31, 2022, 2021 and 2020 (dollar amounts in thousands). For the year ended December 31, 2020, all net revenues and Adjusted EBITDA relate to our Personal Loan and Home Equity segments, as our Credit Card product was not launched until December 2021.

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **Change** | **% Change** | **2021** | **2020** | **Change** | **% Change** |
| **Segment Net Revenues** |  |  |  |  |  |  |  |  |
| Personal Loan | $180717 | $143670 | $37047 | 26% | $143670 | $102979 | $40691 | 40% |
| Home Equity | 2821 | 946 | 1875 | 198% | 946 | 257 | 689 | 268% |
| Credit Card | 16343 | 10 | 16333 | n/m | 10 |  | 10 | n/a |
| &nbsp;&nbsp;**Total Net Revenues** | $199881 | $144626 | $55255 | 38% | $144626 | $103236 | $41390 | 40% |
| **Segment Adjusted EBITDA** |  |  |  |  |  |  |  |  |
| Personal Loan | $2053 | $19219 | $(17166) | (89)% | $19219 | $(5106) | $24325 | n/m |
| Home Equity | (2163) | (2556) | 393 | 15% | (2556) | (3481) | 925 | 27% |
| Credit Card | (8946) | (3849) | (5097) | (132)% | (3849) |  | (3849) | n/a |
| &nbsp;&nbsp;**Total Adjusted EBITDA** | $(9056) | $12814 | $(21870) | n/m | $12814 | $(8587) | $21401 | n/m |

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n/a: not applicable

n/m: not meaningful

Segment Adjusted EBITDA is our primary segment profitability metric, and is calculated as segment revenue less operating expenses that are directly attributable to the segments' products. Refer to Note 20 of the accompanying consolidated financial statements for additional information on segments and a reconciliation of Segment Adjusted EBITDA to Net Income (Loss) Before Income Taxes.

**Comparison of 2022 and 2021**

***Personal Loan***

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Personal Loan segment net revenues increased 26% to $180.7 million in 2022 from $143.7 million in 2021, primarily as a result of a $64.4 million increase in Transaction Fees, Net, due to the increase in originations during this time, as discussed above. This increase was partially offset by a $8.2 million decrease in Gain on Sale of Borrower Loans, due primarily to additional incentives provided to whole loan investors driven by market volatility and incentives offered by competitors. There was also a $20.6 million decrease in net revenues from Change in Fair Value of Financial Instruments, Net, due primarily to volatility in the capital markets and higher interest rates, which led to negative fair value adjustments on the loans we hold in consolidated warehouse trusts.

Adjusted EBITDA associated with the Personal Loan segment decreased 89% to $2.1 million in 2022 from $19.2 million in 2021, which is primarily reflective of the net revenues discussed above and higher operating expenses to support the higher originations.

***Home Equity***

Home Equity segment net revenues increased 198% to $2.8 million in 2022 from $0.9 million in 2021 due to increased broker fees from our partner Spring EQ.

Home Equity Adjusted EBITDA was a loss of $2.2 million in 2022, which is reflective of the net revenues discussed above, offset by our continued investments in the Home Equity product, particularly with regards to operations and marketing. In 2021, Home Equity Adjusted EBITDA was a loss of $2.6 million and consisted primarily of the net revenues reflected above, offset by research and development expenses, operations costs and professional fees incurred to ramp up the product after establishing our partnership with Spring EQ in October 2020.

***Credit Card***

Credit Card net revenues in 2022 of $16.3 million are primarily reflective of (a) $14.1 million in fair value gains on our Credit Card Derivative and (b) $7.0 million in transaction fees, partially offset by (c) a $3.7 million increase in the servicing obligation related to the Credit Card portfolio. Because we launched our Credit Card product in December 2021, Credit Card segment net revenues were not material in 2021.

Adjusted EBITDA associated with Credit Card was a loss of $8.9 million in 2022, which is reflective of the net revenues discussed above, offset by our continued investments in the Credit Card product's success, particularly with regards to research and development expenses, operations and marketing. In 2021, Credit Card Adjusted EBITDA was a loss of $3.8 million and consisted primarily of research and development expenses and professional fees incurred to prepare the product for launch in December 2021.

**Comparison of 2021 and 2020**

***Personal Loan***

Personal Loan segment net revenues increased 40% to $143.7 million in 2021 from $103.0 million in 2020, primarily as a result of a $21.4 million increase in Transaction Fees, Net, due to an increase in originations during this time, as discussed in the 10-K for the year ended December 31, 2021. There was also a $30.9 million increase in net revenues attributable to Change in Fair Value of Financial Instruments, largely due to the recovery from the economic impact of the COVID-19 pandemic, which resulted in significant negative fair value adjustments to our borrower loans and other financial instruments in 2020. These increases were partially offset by a $11.7 million decrease in Total Interest Income (Expense), Net, due primarily to a lower outstanding principal balance of securitized Borrower Loans (prior to their deconsolidation from the balance sheet on September 27, 2021) year-over-year.

Adjusted EBITDA associated with the Personal Loan segment increased to $19.2 million in 2021 from a loss of $5.1 million in 2020, which is primarily reflective of the gains from Change in Fair Value of Financial Instruments discussed above, partially offset by an increase in Personal Loan operating expenses to support the higher originations.

***Home Equity***

Home Equity segment net revenues increased 268% to $0.9 million in 2021 from $0.3 million in 2020, as we established our partnership with Spring EQ in October 2020 and began to generate higher broker fees.

------

Adjusted EBITDA associated with Home Equity was a loss of $2.6 million and $3.5 million in 2021 and 2020, respectively, which are reflective of the net revenues discussed above, offset by investments made in the Home Equity product leading up to and following the start of the Spring EQ partnership, particularly with regards to research and development expenses, operations costs and professional fees.

***Credit Card***

Refer above for the discussion of Credit Card net revenues and Adjusted EBITDA in 2021. Because the product did not launch until December 2021, there was no activity in 2020.

**LIQUIDITY AND CAPITAL RESOURCES**

We believe our liquidity needs for the next twelve months, and for the foreseeable future beyond that period, can be met through transaction fees, servicing fees, net interest income, other revenue, proceeds from sales of loans, draws on warehouse lines, realized gains on the Credit Card Derivative, proceeds from our Term Loan and Cash and Cash Equivalents. For further details related to our Term Loan and warehouse lines, see Note 10 of the accompanying consolidated financial statements. The table in the section titled "Contractual Obligations" below summarizes our current and long-term material cash requirements as of December 31, 2022. Management monitors our financial results and operations. If the financial results anticipated are not achieved or we fail to maintain compliance with the debt covenants under our Term Loan, our sources of liquidity may not be sufficient to meet our operating and liquidity requirements without obtaining additional liquidity which may not be available on favorable terms or at all.

The following table summarizes our cash flow activities for the periods presented (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2022** | **2021** | **2020** |
| Net Income (Loss) | $70582 | $(138341) | $18551 |
| Net cash (used in) provided by operating activities | $(334902) | $113563 | $(32334) |
| Net cash (used in) provided by investing activities | (95865) | (7178) | 137655 |
| Net cash provided by (used in) financing activities | 391751 | (84628) | (111861) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net (decrease) increase in Cash, Cash Equivalents and Restricted Cash | (39016) | 21757 | (6540) |
| Cash, Cash Equivalents and Restricted Cash at the beginning of the period | 235625 | 213868 | 220408 |
| Cash, Cash Equivalents and Restricted Cash at the end of the period | $196609 | $235625 | $213868 |

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Cash, Cash Equivalents and Restricted Cash decreased by $39.0 million for the year ended December 31, 2022, based on the following components:

*Operating Activities*: $334.9 million in cash was used in operating activities, driven by (a) $279.8 million in net purchases of Loans Held for Sale, (b) $54.2 million in cash used for working capital, primarily due to the timing of payments to investors and third-party vendors and (c) $1.0 million in net income, net of non-cash items. Non-cash items include the $8.6 million Gain on Forgiveness of PPP Loan, which is more fully described in Note 10 of the accompanying consolidated financial statements.

*Investing Activities*: $95.9 million in cash was used in investing activities due to (a) $284.9 million in purchases of Borrower Loans, and (b) $13.1 million in purchases of property and equipment, primarily consisting of internal-use software, partially offset by (c) $202.1 million from sales and principal payments of Borrower Loans.

*Financing Activities*: $391.8 million in cash was provided by financing activities, due primarily to (a) $235.9 million in proceeds from Warehouse Lines, (b) $82.8 million in proceeds from issuance, net of payments, on Notes, at Fair Value and (c) $73.5 million in proceeds from the Term Loan (Note 10), partially offset by (d) $0.4 million in debt issuance costs associated with the Term Loan.

**Income Taxes**

We use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized by applying the statutory tax rates in effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities are expected to reverse. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance against our deferred tax assets.

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Based on the weight of available evidence, which includes our historical operating performance and the reported cumulative net losses in prior years, we have provided a full valuation allowance against our net deferred tax assets.

We report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. We are required to make subjective assumptions and judgments regarding our income tax exposures. Interpretations and guidance surrounding income tax laws and regulations change over time. As such, changes in our subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations.

The Inflation Reduction Act enacted on August 16, 2022 introduced new provisions including a corporate book minimum tax effective for us beginning in 2024 and an excise tax on net stock repurchases made after December 31, 2022. While we do not anticipate these changes to be significant, they could impact our consolidated financial position. We will continue to monitor as new information and guidance becomes available.

**Off-Balance Sheet Arrangements**

As a result of retaining servicing rights on the sale of Borrower Loans, we are an interest holder in certain special purpose entities that purchase these Borrower Loans. None of these special purpose entities are consolidated as we are not the primary beneficiary. Other than these special purpose entities, as of December 31, 2022, we did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other purposes.

**Contractual Obligations**

As of December 31, 2022, the following table summarizes our contractual obligations and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Payments Due by Period** | **Payments Due by Period** | **Payments Due by Period** | **Payments Due by Period** | **Payments Due by Period** |
| | **Total** | **Less Than 1 Year** | **1 - 3 Years** | **3 - 5 Years** | **More Than 5 Years** |
| Term Loan | $75193 | $— | $— | $75193 | $— |
| Operating lease obligations | 21777 | 3715 | 8908 | 7743 | 1411 |
| WebBank purchase obligations | 6000 | 6000 |  |  |  |
| WebBank minimum origination fees | 2500 | 1200 | 1300 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total contractual obligations** | $105470 | $10915 | $10208 | $82936 | $1411 |

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***Term Loan***

As discussed in Note 10 of the accompanying consolidated financial statements, the full principal balance and any unpaid interest on the Term Loan is payable upon maturity in November 2026. We incur daily interest that is payable at the end of each month, as well as payment-in-kind interest that is added to the outstanding principal balance if it remains unpaid at the end of the month.

***WebBank Purchase Obligations***

Under our loan account program with WebBank, a Utah-charted industrial bank that serves as our primary issuing bank, WebBank retains ownership of loans facilitated through our marketplace for two business days after origination. As part of this arrangement, we have committed to purchase the loans at the conclusion of the two business days.

***WebBank Minimum Origination Fees***

We are required to pay WebBank a minimum fee to the extent monthly loan originations due to not meet certain contractual thresholds. This obligation is more fully discussed in Note 16 of the accompanying consolidated financial statements.

**CRITICAL ACCOUNTING POLICIES**

The accounting policies discussed below reflect our most significant judgments, assumptions and estimates which we believe are critical in understanding and evaluating our reported financial results including fair value measurements of (i) Borrower Loans, Loans Held for Sale and Notes; (ii) Loan Servicing Asset and Credit Card Servicing Obligation; (iii) Credit Card Derivative and (iv) Convertible Preferred Stock Warrants. These judgments, estimates and assumptions are inherently

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subjective in nature and actual results may differ from these estimates and assumptions, and the differences could be material. For a full description of all accounting policies adopted by us, please see Note 2 to our consolidated financial statements.

**Valuation of Borrower Loans, Loans Held for Sale and Notes**

We have elected the fair value option for Borrower Loans, Loans Held for Sale and Notes. We primarily use a discounted cash flow model to estimate the fair value of Borrower Loans, Loans Held for Sale and Notes. The key assumptions used in the valuation include default rates and prepayment rates derived from historical performance and discount rates that reflect estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics. All these assumptions require significant management judgment. For further information on fair value measurement of Borrower Loans, Loans Held for Sale and Notes, refer to Note 7 - Fair Value of Assets and Liabilities of the accompanying notes to our consolidated financial statements.

**Valuation of Loan Servicing Asset and Credit Card Servicing Obligation**

We have elected to adopt the fair value method to measure the loan Servicing Asset for all classes of Servicing Assets subsequent to initial recognition. We use a discounted cash flow model to estimate the fair value of the loan Servicing Assets, which incorporates observable inputs such as the contractual servicing fee revenue that we earn on the Borrower Loans and the current principal balances of the loans, as well as significant unobservable inputs such as the estimated market servicing rate to service such loans, the prepayment rates, the default rates and the discount rate. For further information on fair value measurement of the loan Servicing Assets, refer to Note 6 - Servicing Assets and Note 7 - Fair Value of Assets and Liabilities of the accompanying notes to our consolidated financial statements.

Similarly, we are responsible for servicing the entire portfolio related to our Credit Card product, and recognize a servicing obligation liability to the extent servicing fees we expect to earn do not exceed the estimated market servicing rate a market participant would require to service the portfolio. We again use a discounted cash flow model to estimate the fair value of the Credit Card Servicing Obligation which incorporates observable inputs such as the contractual servicing fee revenue that we earn on the Credit Card portfolio and the current principal balances of the credit cards, as well as significant unobservable inputs such as the estimated market servicing rate to service such portfolio, the prepayment rates, the default rates and the discount rate. For further information on fair value measurement of the Credit Card Servicing Obligations, refer to Note 5 - Credit Card and Note 7 - Fair Value of Assets and Liabilities of the accompanying notes to our consolidated financial statements.

**Valuation of Credit Card Derivative**

We evaluated the terms of the Credit Card program agreement and determined that it contained features that met the definition of derivatives under U.S. GAAP. These features are freestanding financial instruments, and have been valued separately as derivatives. A right of offset exists between the derivatives, and they are presented net on the accompanying consolidated balance sheets. We use a discounted cash flow model to estimate the fair value of the various components of the Credit Card Derivative. The key assumptions used in the valuation include default and prepayment rates derived primarily from relevant market data and historical performance, adjusted as necessary based on the perceived credit risk of the underlying cardholder. In addition, discount rates based on estimates of the rates of return that investors would require when investing in similar credit card portfolios are applied to the individual freestanding derivatives. For further information on fair value measurement of the Credit Card Derivative, refer to Note 5 - Credit Card and Note 7 - Fair Value of Assets and Liabilities of the accompanying notes to our consolidated financial statements.

**Valuation of Convertible Preferred Stock Warrants** 

Convertible Preferred Stock Warrants primarily consist of warrants to purchase Series E and Series F Convertible Preferred Stock. Series F Warrants were issued to the Consortium and vested when the Consortium purchased whole loans under the Consortium Purchase Agreement, which ended in May 2019.

We estimate the fair value of the Series E and Series F Warrants using valuation methods appropriate at each balance sheet date. Generally, this includes determining the business enterprise value of the Company using methods that may include a discounted cash flow model, comparable public company analysis, and comparable acquisition analysis, which require significant management judgment. Additionally, we review and consider any recent transactions involving the Company's equity in determining whether such transactions should be considered in the valuation. Once the business enterprise value has been estimated, an option pricing model is used to allocate the value to the various classes of our equity. The concluded per share value for the Series E and Series F Convertible Preferred Stock Warrant is then determined using a Black-Scholes option pricing model that requires us to make key assumptions such as volatility and expected warrant term. For further information on fair value measurement of the Convertible Preferred Stock Warrants, refer to Note 7 - Fair Value of Assets and Liabilities and

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Note 12 - Convertible Preferred Stock, Convertible Preferred Stock Warrant Liability and Common Stock of the accompanying notes to our consolidated financial statements.

**PROSPER FUNDING LLC**

**Overview**

Prosper Funding was formed in the state of Delaware in February 2012 as a limited liability company with PMI as its sole equity member. Prosper Funding was formed by PMI to hold Borrower Loans originated through the Note Channel and issue related Notes. Although Prosper Funding is consolidated with PMI for accounting and tax purposes, Prosper Funding has been organized and is operated in a manner that is intended to minimize the likelihood that it would be substantively consolidated with PMI in a bankruptcy proceeding. Prosper Funding's intention is to minimize the likelihood that its assets would be subject to claims by PMI's creditors if PMI were to file for bankruptcy, as well as to minimize the likelihood that Prosper Funding will become subject to bankruptcy proceedings directly. Prosper Funding seeks to achieve this by placing certain restrictions on its activities and by implementing certain formal procedures designed to expressly reinforce its status as a distinct corporate entity from PMI.

As a credit marketplace, we believe our customers are more highly susceptible to uncertainties and negative trends, real or perceived, in the markets driven by, among other factors, general economic conditions in the United States and abroad. These external economic conditions and resulting trends or uncertainties could adversely impact our customers' ability or desire to participate in our marketplace as borrowers or investors, and consequently could negatively affect our business and results of operations.

**Results of Operations**

***Overview***

The following table summarizes Prosper Funding's net income for the years ended December 31, 2022, December 31, 2021 and December 31, 2020 (in thousands):

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2022** | **2021** | **Change** | **% Change** | **2021** | **2020** | **Change** | **% Change** |
| Total Net Revenues | $86987 | $62757 | $24230 | 39% | $62757 | $52153 | $10604 | 20% |
| Total Expenses | 83464 | 59547 | 23917 | 40% | 59547 | 50752 | 8795 | 17% |
| &nbsp;&nbsp;&nbsp;&nbsp;Net Income | $3523 | $3210 | $313 | 10% | $3210 | $1401 | $1809 | 129% |

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Total revenues for the year ended December 31, 2022 increased $24.2 million, or 39%, from the year ended December 31, 2021, primarily due to increased administration fee revenue driven by an increase in the number of loan listings on our marketplace during the period, as well as an increase in incentives provided to whole loan investors (for which PFL bills PMI). Because of the growth in our servicing book (in line with the increase in whole loan originations from the prior year), there was a resulting increase in Servicing Fees, Net. Additionally, we reduced spend on external collection agencies, reflecting the general economic recovery since the start of the COVID-19 pandemic, which also resulted in an increase in Servicing Fees, Net. These increases were partially offset by a decrease in the Gain on Sale of Borrower Loans, due to the increase in incentives provided to whole loan investors. Because these incentives are reimbursed through the administration fee revenue, there is no net impact on total net revenues. Finally, due to volatility in the capital markets and an increase in benchmark interest rates, total net revenues from Change in Fair Value of Financial Instruments, Net decreased as compared to the prior year by approximately $0.4 million. Total expenses for the year ended December 31, 2022 increased $23.9 million, or 40%, from 2021, primarily due to an increase in the number of loans funded during the period, which resulted in increased administration fee expense. The increases in loan listings and originations are due to an improved competitive and pricing environment, as well as more normalized underwriting requirements, reflecting the general economic recovery since the start of the COVID-19 pandemic.

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***Revenues***

The following table summarizes Prosper Funding's revenue for the years ended December 31, 2022, 2021 and 2020 (dollars in thousands):

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2022** | **2021** | **Change** | **% Change** | **2021** | **2020** | **Change** | **% Change** |
| **REVENUES:** |  |  |  |  |  |  |  |  |
| **Operating Revenues:** |  |  |  |  |  |  |  |  |
| Administration Fee Revenue – Related Party | $60256 | $34017 | $26239 | 77% | $34017 | $21618 | $12399 | 57% |
| Servicing Fees, Net | 20641 | 15770 | 4871 | 31% | 15770 | 20791 | (5021) | (24)% |
| Gain on Sale of Borrower Loans | 1678 | 8450 | (6772) | (80)% | 8450 | 6430 | 2020 | 31% |
| Other Revenue | 894 | 1312 | (418) | (32)% | 1312 | 552 | 760 | 138% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Operating Revenues** | 83469 | 59549 | 23920 | 40% | 59549 | 49391 | 10158 | 21% |
| Interest Income on Borrower Loans | 45289 | 36952 | 8337 | 23% | 36952 | 36765 | 187 | 1% |
| Interest Expense on Notes | (42165) | (34514) | (7651) | 22 | (34514) | (34457) | (57) | —% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Interest Income (Expense), Net** | 3124 | 2438 | 686 | 28% | 2438 | 2308 | 130 | 6% |
| Change in Fair Value of Financial Instruments, Net | 394 | 770 | (376) | (49)% | 770 | 454 | 316 | 70% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Net Revenues** | $86987 | $62757 | $24230 | 39% | $62757 | $52153 | $10604 | 20% |

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*Administration Fee Revenue - Related Party*

We primarily generate revenues through license fees we earn under our Administration Agreement with PMI. The Administration Agreement contains a license we grant to PMI that entitles PMI to use the marketplace for, and in relation to: (i) PMI's performance of its duties and obligations under the Administration Agreement, and (ii) PMI's performance of its duties and obligations to WebBank under the Loan Account Program Agreement. The Administration Agreement requires PMI to pay us a monthly license fee that is partially based on the number of loan listings posted on the marketplace in that month, as well as a fee based on incentives provided to investors to incentivize the purchase of Borrower Loans from PFL. The increase in Administrative Fee Revenue of $26.2 million for the year ended December 31, 2022 as compared to in 2021 was primarily due to an increase in loan listings generated on the marketplace, as well as an increase in incentives provided to whole loan investors, as discussed above.

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*Servicing Fees, Net*

Investors who purchase Borrower Loans through the Whole Loan Channel typically pay us a servicing fee which is currently set at 1.0% per annum of the outstanding principal balance of the Borrower Loan prior to applying the current payment, plus an additional 0.075% per annum to cover the Loan Trailing Fee. The Servicing Fee compensates us for the costs incurred in servicing the Borrower Loan, including managing payments from borrowers, managing payments to investors and maintaining investors' account portfolios. We record Servicing Fees from investors as a component of operating revenues when received. We also include any collection fees received, net of collection agency expenses, in Servicing Fees, Net.

The increase in Servicing Fees of $4.9 million in the year ended December 31, 2022 as compared to 2021 was largely due to the growth of the servicing book as compared to the prior year, which resulted in approximately $3.1 million in additional Servicing Fees. This is generally in line with the increase in originations during this time. In addition, approximately $1.0 million of the increase was also due to our reduced spend on external collection agencies. We utilized these agencies more in the prior year to address enhanced collection efforts required due to the COVID-19 pandemic. Finally, $0.7 million of the increase related to collection and debt sale fees, due primarily to an increase in charge-offs from the prior year.

*Gain on Sale of Borrower Loans*

Gain on Sale of Borrower Loans consists of gains on Borrower Loans sold through the Whole Loan Channel, net of any incentives provided to investors at the time of sale. For the year ended December 31, 2022, PFL recognized a gain of $1.7 million, a decrease of $6.8 million from 2021. This decrease was primarily due to additional incentives provided to whole loan investors, due to market volatility and incentives offered by competitors. These incentives resulted in a $13.2 million decrease in Gain on Sale of Borrower Loans as compared to 2021, which was partially offset by a $6.6 million increase due to net gains recognized on whole loan originations.

*Other Revenues*

Other Revenues consists primarily of incentive fees, which are earned from partner companies through our incentive programs. The $0.4 million decrease in Other Revenues for the year ended December 31, 2022, as compared to 2021, is primarily due to a decrease in these incentive fees, as we terminated an incentive program at the end of June 2022.

*Interest Income on Borrower Loans and Interest Expense on Notes*

We recognize Interest Income on Borrower Loans using the accrual method based on the stated interest rate to the extent we believe it to be collectible. We record Interest Expense on the corresponding Notes based on the contractual interest rates. The interest rate on Notes is generally 1% lower than the interest rate on the corresponding Borrower Loans to compensate us for servicing the underlying Borrower Loans.

Overall, the $0.7 million increase in net interest income for the year ended December 31, 2022, as compared to 2021, was due to an increase in the outstanding principal balance of Borrower Loans and Notes during these periods.

*Change in Fair Value of Financial Instruments, Net*

Change in Fair Value of Financial Instruments, Net captures gains (losses) in fair value estimates using discounted cash flow methodologies that are based upon a set of valuation assumptions. The key assumptions used in valuations include default and prepayment rates derived from historical performance and discount rates that reflect estimates of the rates of return that investors would require when investing in other financial instruments with similar characteristics. Changes in fair value of Borrower Loans funded through the Note Channel are largely offset by the changes in fair value of the corresponding Notes due to the borrower payment-dependent structure, though differences will arise due to the actual and projected impact of cash flows related to charge-offs, debt sales and miscellaneous fees.

The following table summarizes the fair value adjustments for the years ended December 31, 2022, 2021 and 2020 respectively (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2022** | **2021** | **2020** |
| Borrower Loans | $(30436) | $(1141) | $(19210) |
| Notes | 30830 | 1911 | 19664 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $394 | $770 | $454 |

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In general, the decrease in the gain on Change in Fair Value of Financial Instruments, Net for the year ended December 31, 2022, is reflective of increased capital markets volatility and benchmark interest rates during the period, while

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the gains recognized in the prior year were primarily due to the continued fair value recovery of Borrower Loans following the large negative adjustments recognized in 2020 as a result of the COVID-19 pandemic.

***Expenses***

The following table summarizes Prosper Funding's expenses for the years ended December 31, 2022, 2021 and 2020 (in thousands):

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2022** | **2021** | **Change** | **% Change** | **2021** | **2020** | **Change** | **% Change** |
| **Expenses:** |  |  |  |  |  |  |  |  |
| Administration Fee – Related Party | $74382 | $52641 | $21741 | 41% | $52641 | $45472 | $7169 | 16% |
| Servicing | 8472 | 6409 | 2063 | 32% | 6409 | 4900 | 1509 | 31% |
| General and Administrative | 610 | 497 | 113 | 23% | 497 | 380 | 117 | 31% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Expenses** | $83464 | $59547 | $23917 | 40% | $59547 | $50752 | $8795 | 17% |

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*Administration Fee Expense - Related Party*

Pursuant to our Administration Agreement with PMI, PMI manages the marketplace on our behalf. Accordingly, each month we are required to pay PMI (a) a corporate administration fee of $500,000 per month, (b) a fee for each Borrower Loan originated through the marketplace, (c) 62.5% of all Servicing Fees collected by us or on our behalf, and (d) all nonsufficient funds fees collected by us or on our behalf. The increase in Administration Fee expense of $21.7 million for the year ended December 31, 2022, as compared to 2021, was due to increased origination volume of Borrower Loans for the current periods. In general, the Administrative Fee Expense will not fluctuate directly in line with the Administrative Fee Revenue due to both the flat corporate administrative fee, as well as the fact that we pay fees for three different services, but receive a fee based only the number of loans listed on the platform.

*Servicing*

Servicing costs consist primarily of vendor and borrower costs, as well as depreciation of internal-use software associated with servicing Borrower Loans. The increase in Servicing costs for the year ended December 31, 2022, as compared to 2021, was primarily driven by the increase in originations and the depreciation of internal-use software during this time.

*General and Administrative*

General and Administrative costs consist primarily of bank service charges and professional fees. The change in General and Administrative costs for the year ended December 31, 2022, as compared to 2021 was not significant.

**LIQUIDITY AND CAPITAL RESOURCES**

We anticipate that our available funds and cash flow from operations will be sufficient to meet our operational cash needs for at least the next 12 months.

The following table summarizes our cash flow activities for the years ended December 31, 2022, 2021 and 2020 (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| Net Income | $3523 | $3210 | $1401 |
| Net cash (used in) provided by operating activities | $(57439) | $32685 | $30750 |
| Net cash (used in) provided by investing activities | (90345) | (65416) | 12994 |
| Net cash provided by (used in) financing activities | 77757 | 59683 | (20681) |
| Net (decrease) increase in Cash, Cash Equivalents and Restricted Cash | (70027) | 26952 | 23063 |
| Cash, Cash Equivalents and Restricted Cash at the beginning of the period | 167876 | 140924 | 117861 |
| Cash, Cash Equivalents and Restricted Cash at the end of the period | $97849 | $167876 | $140924 |

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Cash, Cash Equivalents and Restricted Cash decreased by $70.0 million for the year ended December 31, 2022, based on the following components:

*Operating Activities*: $57.4 million in cash was used in operating activities, driven by cash used in working capital of $61.1 million, primarily due to the timing of payments to PMI and investors, partially offset by net income, net of non-cash adjustments of $3.7 million.

*Investing Activities*: $90.3 million net cash used in investing activities, due to $284.9 million in purchases of Borrower Loans and $7.5 million in purchases of property and equipment, partially offset by $202.1 million of principal payments under Borrower Loans.

*Financing Activities*: $77.8 million net cash was provided by financing activities, due to $285.1 million in proceeds from the issuance of Notes, at Fair Value, and a $0.7 million cash contribution from our parent PMI, partially offset by $202.3 million in payments for Notes, at Fair Value and $5.7 million in distributions to PMI.

**Income Taxes**

We incurred no income tax provision for the years ended December 31, 2022 and 2021. We are a US disregarded entity for income tax purposes and our income and loss is included in the return of our parent, PMI. Given PMI's history of taxable losses, it is difficult to accurately forecast how Prosper's and our results will be affected by the realization and use of net operating loss carry forwards.

**Off-Balance Sheet Arrangements**

As a result of retaining servicing rights on the sale of Borrower Loans, we are a variable interest holder in certain special purposes entities that purchase these Borrower Loans. None of these special interest entities are consolidated as we are not the primary beneficiary. Otherwise as of December 31, 2022, we have not engaged in any off-balance sheet financing activities.

**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**PROSPER MARKETPLACE, INC.**

**Market Risk**

Market risk is the risk of loss to future earnings, values, or future cash flows that may result from changes in financial market prices and interest rates.

Through the Warehouse Lines we invest in Loans Held for Sale. Investments in interest-earning instruments carry a degree of interest rate risk. Changes in U.S. interest rates affect the market value of these Loans Held for Sale on our balance sheet. Our future investment income may fall short of expectations, or we may suffer a loss in principal if we are forced to sell Loans Held for Sale that have declined in market value due to changes in interest rates, loss assumptions or overall market conditions. Recent interest rate increases, due in part to ongoing inflation and the Russia-Ukraine conflict, may increase the risks of our investments in Loans Held for Sale, and additional fluctuations in the interest rates may exacerbate such risks. Changes in the market value of Loans Held for Sale are recorded on the Consolidated Statement of Operations. The fair value of Loans Held for Sale was $499.8 million and $243.2 million as of December 31, 2022 and 2021, respectively.

The fair values of Borrower Loans, Loans Held for Sale, and Notes are determined using discounted cash flow methodologies based upon a set of valuation assumptions such as default rate, prepayment rate and discount rate. Default rate,

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prepayment rate and discount rate may change due to expected loan performance or changes in the expected returns of similar financial instruments available in the market. We are exposed to the risk of decrease in the fair value of loans held in the warehouse trusts. For Borrower Loans and Notes presented on our Balance Sheet on behalf of our Note Channel investors, the fair value adjustments for Borrower Loans are largely offset by the fair value adjustments of the Notes due to the borrower payment dependent design of the Notes and due to the total principal balances of the Borrower Loans being very close to the total principal balances of the Notes.

We are also exposed to variable interest rate risk under the debt from the Warehouse Lines, which had an outstanding balance of $446.8 million and $209.3 million as of December 31, 2022 and 2021, respectively. To reduce the impact of large fluctuations in interest rates, we hedged a portion of our interest rate risk by entering into a derivative agreement with a financial institution, which is currently in the money. The derivative agreement that we use to manage the risk associated with fluctuations in interest rates may not be able to eliminate the exposure to these changes. Interest rates are sensitive to numerous factors outside of our control, such as government and central bank monetary policy in the United States. Depending on the size of the exposures and the relative movements of interest rates, if we choose not to hedge or fail to effectively hedge our exposure, we could experience a material adverse effect on our results of operations and financial condition.

We had cash and cash equivalents of $83.4 million and $67.7 million as of December 31, 2022 and 2021, respectively. These amounts were held in various unrestricted deposits with highly rated financial institutions and short-term, highly liquid marketable securities which may include money market funds, U.S. Treasury securities, and U.S. agency securities. Cash and Cash Equivalents are held for working capital purposes. Due to their short-term nature, Prosper believes that it does not have any material exposure to changes in the fair value of these liquid investments as a result of changes in interest rates. Decreases in short-term interest rates will moderately reduce interest income on these Cash and Cash Equivalents. Increases in short-term interest rates will moderately increase the interest income earned on the Cash and Cash Equivalents.

**Interest Rate Sensitivity**

As more fully described in Note **7,** Fair Value of Assets and Liabilities, of our financial statements attached to this Annual Report on Form 10-K, the combined fair value of Borrower Loans and Loans Held for Sale is $820.4 million as of December 31, 2022, determined using a weighted-average discount rate of 6.72%. The combined fair value of Borrower Loans (including securitized Borrower Loans, which were deconsolidated from our balance sheet on September 27, 2021) and Loans Held for Sale was $510.8 million as of December 31, 2021, determined using a weighted-average discount rate of 5.64%. A hypothetical 100 basis point increase in interest rates would result in a decrease of approximately $8.3 million and $5.1 million in the fair value of PMI's investment in Borrower Loans and Loans Held for Sale as of December 31, 2022 and 2021, respectively. A hypothetical 100 basis point decrease in interest rates would result in an increase of approximately $8.6 million and $5.3 million in the fair value of our investment in Borrower Loans and Loans Held for Sale as of December 31, 2022 and 2021, respectively. Any realized or unrealized gains or losses resulting from such interest rate change would be recorded in our statement of operations so long as we hold these Borrower Loans and Loans Held for Sale on our balance sheet.

A portion of the interest rate charged on our PWIT Warehouse Line is currently based on LIBOR. LIBOR has been the subject of reform and was expected to phase out by the end of fiscal 2021; however, on March 5, 2021, the ICE Benchmark Administration Limited ("ICE") delayed the phase out of LIBOR to June 30, 2023. The consequences of the discontinuation of LIBOR cannot be entirely predicted but could impact the interest expense incurred on these debt instruments. We have negotiated alternatives to LIBOR on the PWIT Warehouse Line, which we may renegotiate before LIBOR ceases to be a widely available reference rate.

**PROSPER FUNDING LLC**

**Market Risk**

Market risk is the risk of loss to future earnings, values, or future cash flows that may result from changes in financial market prices and interest rates.

Because balances, interest rates, and maturities of Borrower Loans are matched and offset by an equal balance of Notes with the exact same interest rates (net of our servicing fee) and initial maturities, we believe that we do not have any material exposure to changes in the net fair value of the combined Borrower Loan and Note portfolios as a result of changes in interest rates. We do not hold or issue financial instruments for trading purposes.

The fair values of Borrower Loans and the related Notes are determined using discounted cash flow methodologies based upon a set of valuation assumptions. The fair value adjustments for Borrower Loans are largely offset by the fair value adjustments of the Notes due to the borrower payment dependent design of the Notes and due to the total principal balances of the Borrower Loans being very close to the total principal balances of the Notes.

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Prosper Funding had Cash and Cash Equivalents of $6.3 million and $10.8 million as of December 31, 2022 and 2021, respectively. These amounts were held in various unrestricted deposits with highly rated financial institutions and short term, highly liquid marketable securities which may include money market funds, U.S. treasury securities and U.S. agency securities. Cash and cash equivalents are held for working capital purposes. Due to their short-term nature, Prosper Funding believes that it does not have any material exposure to changes in the fair value of these liquid investments as a result of changes in interest rates. Decreases in short-term interest rates will moderately reduce interest income on these cash and cash equivalents, while increases in short-term interest rates will moderately increase the interest income earned on these cash and cash equivalent balances.

**ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

**Prosper Marketplace, Inc.** 

<u>[Consolidated Balance Sheets](#ib8e8259c7615433d9511e731d87713fc_130)</u>

<u>[Consolidated Statements of Operations](#ib8e8259c7615433d9511e731d87713fc_133)</u>

<u>[Consolidated Statements of Comprehensive Income](#ib8e8259c7615433d9511e731d87713fc_136)</u>

<u>[Consolidated Statements of Convertible Preferred Stock and Stockholders' Deficit](#ib8e8259c7615433d9511e731d87713fc_139)</u>

<u>[Consolidated Statements of Cash Flows](#ib8e8259c7615433d9511e731d87713fc_142)</u>

<u>[Notes to Consolidated Financial Statements](#ib8e8259c7615433d9511e731d87713fc_145)</u>

**Prosper Funding LLC**

<u>[Consolidated Balance Sheets](#ib8e8259c7615433d9511e731d87713fc_229)</u>

<u>[Consolidated Statements of Operations](#ib8e8259c7615433d9511e731d87713fc_232)</u>

<u>[Consolidated Statements of Members' Equity](#ib8e8259c7615433d9511e731d87713fc_235)</u>

<u>[Consolidated Statements of Cash Flows](#ib8e8259c7615433d9511e731d87713fc_238)</u>

<u>[Notes to Consolidated Financial Statements](#ib8e8259c7615433d9511e731d87713fc_241)</u>

**ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

None.

**ITEM 9A. CONTROLS AND PROCEDURES**

**Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures**

In connection with the preparation of this Annual Report on Form 10-K, each Registrant's management, under the supervision and with the participation of such Registrant's Principal Executive Officer (PEO) and Principal Financial Officer (PFO), evaluated the effectiveness of the design and operation of such Registrant's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2022. Based upon this evaluation, the PEO and the PFO of each Registrant have concluded that these disclosure controls and procedures are effective to provide reasonable assurance that material information relating to each Registrant and its subsidiaries that is required to be disclosed in reports filed with, or submitted to, the SEC under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms, and (ii) is accumulated and communicated to management, including its PEO and PFO, as appropriate to allow timely decisions regarding required disclosure.

**Management's Report on Internal Control over Financial Reporting**

Under Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), each Registrant's management is required to assess the effectiveness of such Registrant's internal control over financial reporting as of the end of each fiscal year and report, based on that assessment, whether such Registrant's internal control over financial reporting is effective.

Management of each Registrant is responsible for establishing and maintaining adequate internal control over financial reporting. Each Registrant's internal control over financial reporting is designed to provide reasonable assurance as to the reliability of such Registrant's financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of effectiveness

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to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Registrants' management has assessed the effectiveness of the Registrants' internal control over financial reporting as of December 31, 2022. In making this assessment the Registrants used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in "Internal Control-Integrated Framework (2013)." These criteria are in the areas of control environment, risk assessment, control activities, information and communication, and monitoring. Each Registrant's assessment included documenting and evaluating the effectiveness of its internal control over financial reporting. Based on this evaluation, the person serving as each Registrant's PEO and PFO has concluded that such Registrant's internal controls were effective as of December 31, 2022.

**Changes in Internal Control over Financial Reporting**

During the fourth quarter of 2022, there were no changes in the internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

**Attestation Report of Registered Public Accounting Firm**

The Dodd-Frank Wall Street Reform and Consumer Protection Act exempts any company that is not a "large accelerated filer" or an "accelerated filer" (as defined by SEC rules) from the requirement that such company obtain an external audit of the effectiveness of its internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. As a result, the Registrants are exempt from the requirement that they include in their Annual Report on Form 10-K an attestation report on internal control over financial reporting by an independent registered public accounting firm; however, management's annual report on internal control over financial reporting, pursuant to Section 404(a) of the Sarbanes-Oxley Act, is still required with respect to the Registrants.

**ITEM 9B. OTHER INFORMATION**

In April 2020, we obtained an $8.4 million loan from the Paycheck Protection Program ("PPP"), which was established by the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and sponsored by the U.S. Small Business Administration ("SBA") in order to provide small businesses with assistance in covering qualified payroll costs, mortgage obligations, leases, and utilities during the economic downturn triggered by the COVID-19 pandemic. On March 21, 2022, we received notice from the SBA that our PPP loan was forgiven in full through a forgiveness payment made on March 15, 2022 by the SBA to Broadway National Bank, the lender of our PPP loan.

**ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS**

Not applicable.

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**PART III**

**ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

**Prosper Marketplace, Inc.**

***Executive Officers, Directors and Key Employees***

The following table sets forth information about PMI's current and imminent executive officers and directors as of the date of this Annual Report on Form 10-K:

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| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position(s)** |
| David Kimball | 52 | Chief Executive Officer and Chairman of the Board |
| Usama Ashraf | 46 | President and Chief Financial Officer |
| Edward R. Buell III | 43 | General Counsel, Secretary and Chief Compliance Officer |
| Pete Woodhouse | 57 | Chief Technology Officer |
| Jeff Killian | 50 | Executive Vice President of Operations |
| Claire A. Huang | 60 | Director |
| Thomas R. Kearney | 64 | Director |
| Peter J. deSilva | 61 | Director |

---

*David Kimball* has served as Chief Executive Officer and a director of PMI since December 2016. From March 2016 to February 2017, Mr. Kimball served as PMI's Chief Financial Officer. In May 2019, Mr. Kimball was appointed Chairman of the Board. He also currently serves as Chief Executive Officer and a director of PFL. Prior to joining PMI, Mr. Kimball was Senior Financial Officer of United Services Automobile Association's (USAA) Chief Operating Office, with financial responsibility for the real estate unit, the bank, the P&C and life insurance companies, the investment management company, and the call centers/distribution functions. Before his position as Senior Financial Officer of USAA's Chief Operating Office, Mr. Kimball spent eight years in various finance roles at USAA, including Senior Vice President of Corporate Finance; Corporate Treasurer; Chief Financial Officer of USAA Federal Savings Bank; and Assistant Vice President of Capital Markets. Prior to his time at USAA, Mr. Kimball spent ten years at Ford Motor Company and Ford Motor Credit Company in both the U.S. and U.K., working on their securitization programs, debt issuance, and a variety of financial planning and analysis positions. Mr. Kimball holds an M.B.A. and a B.A. in English from Brigham Young University. PMI believes that Mr. Kimball's financial and business expertise give him the qualifications and skills to serve as a director.

*Usama Ashraf* has served as PMI's President since March 2021 and as its Chief Financial Officer since February 2017. He is currently responsible for Prosper's finance, capital markets, risk and business intelligence functions. He also currently serves as President, Chief Financial Officer, Treasurer and a director of PFL. Prior to joining PMI, from February 2016 to February 2017, Mr. Ashraf served as Deputy Chief Financial Officer and Treasurer at Annaly Capital Management, Inc. ("Annaly"). Prior to his time at Annaly, Mr. Ashraf worked at United Services Automobile Association ("USAA"), where he served as Corporate Treasurer from November 2014 to February 2016 and Assistant Corporate Treasurer from January 2014 to October 2014. Before joining USAA, Mr. Ashraf spent 13 years at CIT Group, where he held various positions in the Treasury and Corporate M&A departments, most recently serving as Deputy Treasurer with responsibility for the firm's Treasury activities in the United States. He started his career in the investment banking division of Citigroup focused on M&A. Mr. Ashraf received a B.S. in Economics, with concentrations in Finance and Accounting, from The Wharton School of the University of Pennsylvania.

*Edward "Ted" R. Buell III* has served as PMI's General Counsel and Secretary since March 2021, and its Chief Compliance Officer since June 2018. Mr. Buell also currently serves as PFL's Secretary, a position he has held since March 2021. Prior to that, Mr. Buell served as PMI's Deputy General Counsel from June 2018 to March 2021, its Assistant General Counsel and Deputy Chief Compliance Officer from January 2017 to June 2018 and its Senior Corporate Counsel from September 2015 to January 2017. Before joining PMI in September 2015, Mr. Buell served as an attorney at Severson & Werson P.C., advising and representing financial services clients in regulatory matters and litigation, from April 2010 to September 2015. Prior to that, Mr. Buell served as Assistant General Counsel at GreenPoint Mortgage Funding, Inc., a national mortgage bank that originated, sold and serviced mortgage loans, from September 2005 to April 2010. Mr. Buell holds a J.D. from the University of Miami School of Law and a B.A. degree in Criminology, Law and Society from the University of California, Irvine.

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*Pete Woodhouse* has served as PMI's Chief Technology Officer since July 2021. Before joining PMI, Mr. Woodhouse was the Chief Technology Officer and Head of Product at Sibly, an employee mental health coaching text-based platform. Prior to his time at Sibly, Mr. Woodhouse spent 7 years in a variety of technology roles at PayPal, including as the Chief Technology Officer at PayPal Credit and as the Senior Director at PayPal Global Solutions Engineering. In Mr. Woodhouse's role as Chief Technology Officer at PayPal Credit, he was responsible for building and integrating multiple credit products into the PayPal platform structure. Prior to his time at PayPal, Mr. Woodhouse held various product development and technology roles at PRTM, a management consulting subsidiary of PwC, Agilent Technologies, an analytical instrumentation development and manufacturing company, and spent 10 years at Hewlett-Packard Company. Mr. Woodhouse also currently serves as an Engineering Leadership Mentor at Plato, a mentorship program that aims to build soft skills in engineering and product managers. Mr. Woodhouse holds an MBA from Santa Clara University and a Bachelor of Science in Electrical Engineering from the University of Plymouth (England).

*Jeff Killian* has served as PMI's Executive Vice President of Operations, since August 2022. Before joining PMI, Mr. Killian was the Vice President of Customer Success at Spot Insurance, an insurtech that provides on-demand injury insurance policies. Prior to his time at Spot Insurance, Mr. Killian led Customer Operations for North America and Australia for eBay Inc. At eBay, Mr. Killian led customer experience improvements, and customer channel strategy, while also supporting the company's changes to its payments processing platform. Prior to his time at eBay, Mr. Killian spent five years at New York Life Insurance Company as the Head of Service and Operations, a role in which he oversaw the company's shift to digital strategies and advancing the company's customer experience capabilities. Prior to his time at New York Life Insurance Company, Mr. Killian worked in a variety of service, sales, risk management, analytics, and strategy roles at Capital One. Mr. Killian also founded a digital consulting firm, Axeom Consulting, which he operated from 2019 to 2022. Mr. Killian holds an MBA from Southern Methodist University and a Bachelor of Business Administration (Finance) degree from Baylor University.

*Claire A. Huang* has served as a director of PMI since December 2017. Ms. Huang is currently a member of the board of directors of SigFig, a robo-investing and customer engagement software provider, Zions Bancorporation N.A., a regional bank, Filinvest Development Corporation, a Philippines-based real estate development company, and PODS, a leading storage and moving company. She is a member of the audit committee and compensation committee of Zions Bancorporation N.A. She is also a member of the corporate governance committee, the related-party transaction committee, and chairwoman of the digital committee of Filinvest Development Corporation. She previously served as a director of Mirador Financial, Inc., a small business lending platform, from 2017 to 2018, and Scottrade, a leading online brokerage firm, from 2015 to 2017. Ms. Huang has extensive experience in marketing and brand management. She served as the first global Chief Marketing Officer of JP Morgan Chase from 2012 to 2014, where she worked with the marketing teams across all Chase retail and JP Morgan wholesale businesses to build brands and businesses with a customer focus. Before joining JP Morgan Chase, from 2008 to 2012, Ms. Huang held global head of marketing positions at Bank of America Merrill Lynch, where she was responsible for a number of high profile marketing initiatives, including the integration of Merrill Lynch and Bank of America and the launch of Merrill Edge, the company's brokerage platform. Prior to her time at Bank of America Merrill Lynch, Ms. Huang held marketing leadership positions at Fidelity Investments, American Express Company, Wise Foods, and The Häagen-Dazs Company. Ms. Huang received a B.A. in Economics from De La Salle University in Manila, Philippines. PMI believes that Ms. Huang's marketing and brand management expertise, as well as her experience at several leading financial institutions, give her the qualifications and skills to serve as a director.

*Thomas R. Kearney* was appointed as a director of PMI in May 2020. Mr. Kearney is currently a member of the Board of Directors and Finance Committee of the Plattsburgh College Foundation, a non-profit organization affiliated with the State University of New York at Plattsburgh. Mr. Kearney is also a member of the Board of Directors of the YMCA of San Francisco, a non-profit organization ("YSF"). Additionally, he is YSF Finance Committee Chair and a member of the YSF Board Executive Committee. Mr. Kearney is a CPA with extensive technical accounting and auditing experience. He previously worked at PricewaterhouseCoopers LLP for nearly 35 years and served as Assurance Partner for 20 years. In this role, Mr. Kearney helped financial services clients navigate a wide range of complex financial instruments, credit arrangements and operational processes and controls. Prior to PwC, Mr. Kearney conducted periodic reserve reporting for the Federal Reserve Bank of San Francisco and assisted with the implementation of Regulation D and Contemporaneous Reserve Reporting. Mr. Kearney holds a B.S. in Accounting from State University of New York at Plattsburgh. PMI believes that Mr. Kearney's financial, business, and regulatory expertise give him the qualification and skills to serve as a director. Mr. Kearney qualifies as an "audit committee financial expert" under SEC guidelines.

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*Peter J. deSilva* was appointed as a director of PMI in April 2021. Mr. deSilva also currently serves as a director on the Board of Directors at IRALOGIX, Inc., an IRA financial technology company, at Edelman Financial Engines, a financial planning and investment advisory company, at Infosel Financiero SA de CV, a financial technological platform and business news agency that operates in Mexico and Latin America, at Fidelity Security Life Insurance Company, an insurance services provider, and at Fidelity Security Assurance Company, a subsidiary of Fidelity Security Life Insurance Company. In addition, Mr. deSilva serves as a director on the Board of Directors and as a member of the Compensation Committee of Onepak, Inc., a logistics technology company focused on return shipment tracking. Mr. deSilva previously served as the President of TD Ameritrade's retail business and as President of TD Ameritrade, Inc. the firms broker dealer from September 2017 to December 2020. In his role, Mr. deSilva directed all facets of the division's business strategy and operations, and integration with Scottrade Financial Services, another leading online brokerage firm. Prior to joining TD Ameritrade, from February 2015 to August 2017, Mr. deSilva served as the President of the Retail and Institutional divisions of Scottrade Financial Services, where he was responsible for the corporate strategy and distribution, sales, digital transformation, investment management, and institutional custody functions. Mr. deSilva also served on Scottrade, Inc.'s Board of Directors from February 2015 to August 2017. Before joining Scottrade Financial Services, from 2004 to 2015, Mr. deSilva served as the President and Chief Operating Officer of UMB Financial Corporation, a financial services provider. Mr. deSilva also served on UMB Financial Corporation's Board of Directors from February 2004 to December 2015. Prior to his time at UMB Financial Corporation, Mr. deSilva worked at Fidelity Investments, a leading online brokerage firm, where he held several leadership positions, including Senior Vice President and General Manager of Fidelity Investments' Retail division and Senior Vice President of Fidelity Brokerage Company. Mr. deSilva holds a B.S. in Business Administration and Management from the University of Massachusetts, Dartmouth. Mr. deSilva also holds Series 7, 24, 63 and 66 licenses from the Financial Industry Regulatory Authority. PMI believes that Mr. deSilva's financial, business and regulatory expertise give him the qualifications and skills to serve as a director.

***Election of Directors***

PMI's board of directors currently consists of eight seats, with one vacancy to be filled by a designee of the Series A Holders, one vacancy to be filled by a designee of the Series A-1 Holders, one vacancy to be filled by a designee of Francisco Partners III, L.P., and one vacancy to be filled by a designee of the Series F Holders. All of the current members of PMI's board of directors were elected as directors pursuant to the terms of a voting rights agreement entered into among certain of PMI's stockholders. In selecting the composition of its board of directors, PMI seeks to ensure that its board of directors collectively has a balance of expertise in the following areas: internet-based business, consumer financial products, business operations, and experience directing public and start-up companies. Based on these criteria, PMI believes that its board of directors has been effective in identifying diverse directors. The board of directors' composition provisions of PMI's voting rights agreement are still in effect. For more information regarding the terms of the voting rights agreement, see Item 13, "Certain Relationships and Related Transactions, and Director Independence." Holders of the Notes offered through our marketplace, and the accompanying PMI Management Rights, will have no ability to elect or influence PMI's directors or approve significant corporate transactions, such as a merger or other sale of PMI or its assets.

***Board Leadership***

Because PMI's common stock is not listed on a national exchange, PMI is not required to maintain a board of directors consisting of a majority of independent directors, or to maintain an audit, nominating or compensation committee. PMI does not have a lead independent director.

***Code of Ethics***

Our Board of Directors is committed to a high standard of corporate governance practices and, through its oversight role, believes that it has encouraged and promoted a requisite culture of ethical business conduct among PMI's officers and employees. To memorialize its commitment to these standards, the Board of Directors of PMI adopted a "Code of Ethics and Business Conduct" that applies to all of PMI's employees, directors and officers, including the Chief Executive Officer, Chief Financial Officer and other executive officers. A copy of the Code of Ethics and Business Conduct is available on our website at *www.prosper.com/plp/legal*. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, certain provisions of the Code of Ethics and Business Conduct by posting such information on our website or in public filings.

***Director Independence***

Because PMI's common stock is not listed on a national securities exchange or listed in an automated inter-dealer quotation system of a national securities association or to issuers of such securities, PMI is not required to maintain a board of directors consisting of a majority of independent directors or to maintain an audit committee, nominating committee or compensation committee consisting solely of independent directors. Nevertheless, PMI's board of directors has determined the

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independence of each director based on the independence criteria set forth in the listing standards of the New York Stock Exchange ("NYSE"). In making its determinations, the Board considered the current and prior relationships that each non-employee director has with us and all other facts and circumstances the board of directors deemed relevant in determining their independence, including any transactions between each director or any member of their family, and us, our senior management or our independent registered public accounting firm. Based upon information requested from and provided by each director concerning their background, employment and affiliations, including family relationships, the board of directors determined that Ms. Huang and each of Messrs. Kearney and deSilva do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is "independent" as that term is defined under the listing requirements and rules of the NYSE.

***Board Committees***

*Nominating Committee*

PMI is not a "listed issuer" as defined under Section 10A-3 of the Exchange Act. Therefore, PMI is not required to have a nominating committee comprised of independent directors. PMI currently does not have a standing nominating committee and accordingly, there are no charters for such committee. PMI believes that a nominating committee is not necessary for a company of its size with its type of business. PMI also believes that its directors collectively have the requisite background, experience, and knowledge to fulfill the limited duties and obligations that a nominating committee may have.

*Compensation Committee*

PMI's board of directors approved the formation of a Compensation Committee in August 2011. The current members of the Compensation Committee are Claire A. Huang (Chairwoman) and Thomas R. Kearney. The Compensation Committee oversees PMI's executive officer compensation arrangements, plans, policies and programs maintained by PMI and administers PMI's equity-based compensation plan for employees generally (including issuance of stock options, RSUs and other equity-based awards granted other than pursuant to a plan). The Compensation Committee meets at such times as determined appropriate by the Chair of the Compensation Committee.

The Compensation Committee is exempt from independence listing standards because PMI's common stock is not listed on a national securities exchange or listed in an automated inter-dealer quotation system of a national securities association or to issuers of such securities. Nevertheless, the board of directors of PMI has determined that each of the current members of PMI's Compensation Committee is independent under the applicable rules and regulations of the SEC and NYSE.

*Audit Committee*

PMI's board of directors approved the formation of an Audit Committee in January 2010. The current members of the Audit Committee are Thomas R. Kearney (Chairman) and Peter J. deSilva. The Audit Committee oversees financial risk exposures, including monitoring the integrity of PMI's consolidated financial statements, internal controls over financial reporting and the independence of PMI's Independent Registered Public Accounting Firm. The Audit Committee receives internal control related assessments and reviews and discusses PMI's annual and quarterly consolidated financial statements with management. In fulfilling its oversight responsibilities with respect to compliance matters, the Audit Committee meets at least quarterly with management, PMI's Independent Registered Public Accounting firm and PMI's internal legal counsel to discuss risks related to PMI's financial reporting function.

The Audit Committee is exempt from independence listing standards because PMI's common stock is not listed on a national securities exchange or listed in an automated inter-dealer quotation system of a national securities association or to issuers of such securities. Nevertheless, the board of directors of PMI has determined that each of the current members of PMI's Audit Committee is independent under the listing requirements and rules of the NYSE, and also satisfies the independence requirements of Section 10(m)(3) of the Exchange Act. Additionally, PMI's board of directors has determined that each of the current members of the Audit Committee is an audit committee financial expert as defined under SEC regulations and the listing requirements and rules of the NYSE.

***Limitations on Officers' and Directors' Liability and Indemnification Agreements***

As permitted by Delaware law, PMI's amended and restated certificate of incorporation and bylaws contain provisions that limit or eliminate the personal liability of its directors for breaches of duty to the corporation. PMI's amended and restated certificate of incorporation and bylaws limit the liability of directors to the fullest extent permitted under Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breaches of their fiduciary duties as directors, except liability for:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any breach of the director's duty of loyalty to PMI or PMI's stockholders;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any act or omission not in good faith, believed to be contrary to the interests of PMI or its shareholders, involving reckless disregard for the director's duty, for acts that involve an unexcused pattern of inattention that amounts to an abdication of duty, or that involves intentional misconduct or knowing or culpable violation of law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any unlawful payments related to dividends, unlawful stock repurchases, redemptions, loans, guarantees or other distributions; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any transaction from which the director derived an improper personal benefit.

These limitations do not affect the availability of equitable remedies, including injunctive relief or rescission. As permitted by Delaware law, PMI's amended and restated certificate of incorporation and bylaws also provide that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• PMI will indemnify its directors and officers to the fullest extent permitted by law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• PMI may indemnify its other employees and other agents to the same extent that PMI indemnifies its officers and directors; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• PMI will advance expenses to its directors and officers in connection with a legal proceeding, and may advance expenses to any employee or agent; provided, however, that such advancement of expenses shall be made only upon receipt of an undertaking by the person to repay all amounts advanced if it should be ultimately determined that the person was not entitled to be indemnified.

The indemnification provisions contained in PMI's amended and restated certificate of incorporation and bylaws are not exclusive.

In addition to the indemnification provided for in PMI's amended and restated certificate of incorporation and bylaws, PMI has entered into indemnification agreements with each of its directors and officers. The indemnification agreements require PMI, among other things, to indemnify such persons for all expenses, including attorneys' fees, judgments, fines and amounts paid in settlement (if such settlement is approved in advance by PMI) (collectively, "Expenses"), actually and reasonably incurred by such person in connection with the investigation, defense or appeal of any proceeding to which such person may be made a party, a potential party, a non-party witness, or otherwise by reason of: (i) such person's service as a director or officer of PMI; (ii) any action or inaction taken by such person or on such person's part while acting as director, officer, employee or agent of PMI; or (iii) such person's actions while serving at the request of PMI as a director, officer, employee, trustee, general partner, managing member, agent or fiduciary of PMI or any other entity, in each case, whether or not serving in any such capacity at the time any liability or expense is or was incurred. In addition, PMI is required to indemnify against any Expenses actually and reasonably incurred in connection with any action establishing or enforcing a right to indemnification or advancement of expenses under the indemnification agreement or under any directors' and officers' liability insurance policies maintained by PMI to the extent that such person is successful in such action. The indemnification agreements also provide that PMI agrees to indemnify such persons to the fullest extent permitted by law, even if such indemnification is not specifically authorized by the other provisions of the agreement or PMI's amended and restated certificate of incorporation or bylaws. Moreover, the indemnification agreements provide that any future changes under Delaware law that expand the ability of a Delaware corporation to indemnify its officers and directors are automatically incorporated into the agreements.

Under the indemnification agreements, PMI is not obligated to provide indemnification on account of any proceeding unless such person acted in good faith and in a manner reasonably believed to be in the best interests of PMI, and with respect to criminal proceedings, such person had no reasonable cause to believe their conduct was unlawful. The termination of a proceeding by judgment, settlement, or conviction or upon a plea of *nolo contendere* or its equivalent does not, by itself, create the presumption that such person did not satisfy the above standards. In addition, under the indemnification agreements, PMI is not obligated to provide indemnification for: (i) any proceedings or claims initiated or brought voluntarily by such person and not by way of defense, unless such indemnification is authorized by PMI, other than a proceeding to establish such person's right to indemnification; (ii) any expenses incurred by such person with respect to any proceeding instituted by such person to enforce and interpret the terms of their indemnification agreement, unless such person is successful in such action; (iii) which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid; (iv) an accounting or disgorgement of profits pursuant to Section 16(b) of the Exchange Act, as amended, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements); and (v) any reimbursement of PMI by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of PMI, as required in each case under the Exchange Act, as amended (including any such reimbursements that arise from an accounting restatement of PMI pursuant to Section 304 of the Sarbanes-Oxley Act, or the payment to PMI of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements).

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PMI also maintains an insurance policy that covers certain liabilities of its directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers.

PMI believes that these provisions and agreements are necessary to attract and retain qualified persons as directors and officers. To the extent these provisions permit PMI to indemnify its officers and directors for liabilities arising under the Securities Act, however, PMI has been informed by the SEC that such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

**ITEM 11. EXECUTIVE COMPENSATION** 

**Prosper Marketplace, Inc. - Compensation Discussion and Analysis**

***Overview***

This section describes PMI's executive compensation objectives, compensation-setting process, executive compensation components and significant 2022 compensation decisions for PMI's named executive officers ("NEOs"). The compensation provided to PMI's NEOs for 2022 is set forth in detail in the Summary Compensation Table and other tables and the accompanying footnotes and narrative that follow this section.

PMI's named executive officers for 2022 are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• David Kimball, our Chief Executive Officer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Usama Ashraf, our President and Chief Financial Officer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Pete Woodhouse, our Chief Technology Officer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Edward R. Buell III, our General Counsel, Secretary and Chief Compliance Officer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Jeff Killian, our Executive Vice President of Operations as of August 2022; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Ashish Agarwal, our Chief Marketing Officer through December 16, 2022.

***Executive Compensation Objectives***

The objectives of PMI's executive compensation are to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• attract, retain and motivate senior leaders who are capable of advancing PMI's mission and strategy and ultimately, creating and maintaining its long-term equity value;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• align the interests of PMI's executive officers with its stockholders' long-term interests; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reward executive officers for their contributions to PMI's overall performance as well as for their individual performance.

***Compensation-Setting Process*** 

*Role of Our Compensation Committee.* The Compensation Committee has primary responsibility for overseeing all aspects of our executive compensation program, including evaluating and approving executive salaries, annual bonus awards and the size and structure of equity awards for PMI's executive officers, including the NEOs.

*Role of Management.* In setting 2022 compensation, PMI's Chief Executive Officer worked closely with the Compensation Committee in making recommendations and attending Committee meetings. Because of his daily involvement with PMI's executive team, the Chief Executive Officer was involved in the determination of compensation for all of PMI's executive officers other than himself. The Compensation Committee also delegated to the Chief Executive Officer the authority to make compensation decisions for senior management and executive officers (other than the Chief Executive Officer, Chief Financial Officer and President), subject to certain compensation limits set by the Compensation Committee.

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***Executive Compensation Components***

PMI's executive compensation package includes: (1) base salary; (2) cash bonuses; and (3) long term incentives, generally in the form of cash and equity-based compensation, such as stock options and restricted stock units. PMI believes that this compensation mix supports its objective of attracting, motivating and retaining a talented and entrepreneurial executive team who will provide leadership for PMI's success in dynamic and competitive markets. PMI's compensation program is balanced among all three components in order to attract top talent and maximize retention, while ensuring that an appropriate portion of the executives' compensation is tied to the Company's and its stockholders' long-term interests.

*<u>Base Salary</u>* 

Base salary is a fixed amount and is not tied to any metric relating to the performance of PMI's business as a whole. The base salary of each executive officer is initially established in the executive officer's offer letter and reviewed annually by the Compensation Committee. In determining base salaries for 2022, PMI's Compensation Committee, together with the Chief Executive Officer, considered the individual executive officer's scope of responsibilities, contributions, prior salary level and position (in case of a promotion), and financial and market conditions.

The following table summarizes information regarding the base salaries for PMI's named executive officers for 2022:

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| | |
|:---|:---|
| | **2022 Base Salaries** |
| David Kimball <sup>1</sup> | $577500 |
| Usama Ashraf <sup>2</sup> | $469350 |
| Pete Woodhouse <sup>3</sup> | $384375 |
| Edward R. Buell III <sup>4</sup> | $351750 |
| Jeff Killian <sup>5</sup> | $330000 |
| Ashish Agarwal <sup>6</sup> | $350000 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.In March 2022, PMI's Compensation Committee reviewed executive base salaries and decided to increase Mr. Kimball's annual base salary from $550,000 to $577,500.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.In March 2022, PMI's Compensation Committee reviewed executive base salaries and decided to increase Mr. Ashraf's annual base salary from $447,000 to $469,350.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.In March 2022, Mr. Woodhouse's base salary was increased from $375,000 to $384,375.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.In March 2022, Mr. Buell's base salary was increased from $335,000 to $351,750.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.In August 2022, PMI hired Mr. Killian as its Executive Vice President of Operations, with an annual base salary of $330,000.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.In January 2022, PMI hired Mr. Agarwal as its Chief Marketing Officer, with an annual base salary of $350,000. Mr. Agarwal departed from his role as Chief Marketing Officer of PMI effective December 16, 2022.

*<u>Cash</u> <u>Bonuses</u>* 

PMI uses cash bonuses primarily to motivate and retain senior management leaders that are critical to advancing the Company's short-term and long-term strategic goals. In 2022, we based annual NEO bonuses on both the achievement of certain Board-approved financial, operational and strategic performance objectives as well as other factors.

In January 2023, the Compensation Committee reviewed the Company's performance and progress towards the established 2022 objectives, and approved a bonus award of up to 100% of the annual target bonus amount for each NEO.

The amounts and terms of the bonuses awarded to each of our NEOs for 2022 are disclosed below, in the sections titled "Summary Compensation Table" and "Narrative Discussion of the Summary Compensation Table and Grants of Plan-Based Awards Table."

*<u>Long-Term Incentives</u>* 

*Equity Compensation.* PMI has used stock options and restricted stock units ("RSUs") as the principal components of its executive long-term incentive equity compensation. Consistent with its compensation objectives, PMI believes this approach aligns the interests of its grantees with the long-term interests of PMI's stockholders. PMI believes that stock options and RSUs also serve as effective retention tools due to vesting requirements that are based on continued service with the company. In granting equity awards, PMI has customarily considered, among other things, the executive officers' cash compensation, the need to retain and motivate executive officers and to create a meaningful opportunity for reward predicated on the creation of

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long-term stockholder value, PMI's financial results, and each executive officer's individual contributions and responsibilities. The amounts and terms of the awards granted to each such NEO in 2022 are disclosed in the 2022 Grants of Plan-Based Awards table and accompanying footnotes to the table of Outstanding Equity Awards at 2022 Fiscal Year End.

*Long-Term Cash Incentive Compensation.* PMI's Long-Term Cash Incentive Plan ("LTCIP") is designed to reward our executives, including our named executive officers, for the achievement of strategic and operational objectives and the creation of long-term value. Under the LTCIP, eligible executive officers and vice presidents receive long-term cash incentive awards based on their performance during pre-established rolling two-year periods, the most recent of which ran from January 1, 2021 to December 31, 2022 (the "2021-2022 Performance Period"). Payments will be made by March 15, following the end of a performance period, unless otherwise determined by the Compensation Committee. The incentive targets range from 75% to 150% of the participant's base salary, unless otherwise determined by the Compensation Committee. PMI's executive officers and vice presidents are eligible to participate in the LTCIP if, as of the date the award is paid, they have been employed with PMI for at least three years, are currently full or part time employees of PMI, and are in good standing. PMI believes that the LTCIP will complement its annual equity awards by focusing its senior executives on specific long-term financial performance goals, while providing an opportunity for more immediate liquidity. In January 2023, the Compensation Committee considered the Company's performance and progress towards its established objectives during the 2021-2022 Performance Period, and approved a payout of up to 100% of the LTCIP incentive target amount for each NEO. The amounts of the LTCIP awards paid to eligible NEOs in connection with the 2021-2022 Performance Period are set forth in the "Summary Compensation Table" below.

***Employment Agreements***

PMI has entered into employment arrangements with each of its NEOs, which are comprised of an offer letter and an At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement. Each of these arrangements was approved or authorized on PMI's behalf by the Compensation Committee or, in certain instances, its Board of Directors.

Each of the offer letters provides for "at-will" employment and sets forth the initial compensation arrangements for the NEO, generally including an initial base salary, an annual cash bonus opportunity, and an equity award. Certain of the offer letters provide for payments or an acceleration of the executive's equity award grant upon termination of their employment in specified situations, including following a change in control. These arrangements (including potential payments and terms) are discussed in more detail in the "Narrative Discussion of the Summary Compensation Table" and "Grants of Plan-Based Awards Table" and the "Potential Payments Upon Termination or a Change In Control of PMI" sections and related tables below.

***Other Compensation Information***

*Benefits Programs*

PMI's employee benefit programs, including its 401(k) plan, health and welfare programs, and incentive programs, including the Amended and Restated 2005 Stock Option Plan, the 2015 Equity Incentive Plan and the Long-Term Cash Incentive Plan, are designed to provide a competitive level of benefits to PMI's employees generally, including its named executive officers and their families.

PMI's 401(k) plan covers all employees meeting certain eligibility requirements. The 401(k) plan is designed to provide tax-deferred retirement benefits in accordance with the provisions of Section 401(k) of the Internal Revenue Code. Eligible employees are allowed to contribute a percentage of their eligible compensation to the 401(k) plan, up to the annual maximum as determined by the Internal Revenue Service, and PMI may make discretionary matching contributions of a portion of the employees' eligible wage deferrals, subject to certain limitations and conditions. During the year ended December 31, 2022, PMI contributed $2.7 million to the 401(k) plan. The amount of PMI's matching contributions for each of our NEOs is set forth in footnotes to the "Summary Compensation Table" below.

All full-time employees, including PMI's named executive officers, may participate in its health and welfare benefit programs, including medical, dental and vision care coverage, disability insurance and life insurance.

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*Perquisites and Other Personal Benefits*

Currently, PMI does not view perquisites or other personal benefits as a significant component of its compensation. Accordingly, PMI does not generally provide perquisites, such as company cars and paid parking spaces, to its executive officers. PMI does reimburse its executive officers for certain relocation expenses, subject to the terms and conditions prescribed by the Compensation Committee.

In the future, PMI may provide additional perquisites or other personal benefits in limited circumstances, such as where PMI believes it is appropriate to assist an individual executive in the performance of their duties and for recruitment, motivation or retention purposes.

*Post-Employment Compensation* 

The Compensation Committee recognizes that a possible, threatened, or pending change of control transaction could result in the departure or distraction of PMI's senior executives. To establish a meaningful financial incentive for PMI's senior executive officers to work diligently through and beyond a proposed transaction that may involve a change in control of the company, certain of the stock options and restricted stock units granted to PMI's NEOs will fully vest upon a change in control of PMI, while others will fully vest in the event that, within 12 months after a change in control of PMI, such officer is subject to a termination of employment without cause or resigns for good reason (each as defined in the applicable option agreement).

In addition, PMI entered into severance and change in control agreements (the "severance agreements") with each of Messrs. Kimball and Ashraf in November 2020 and with Mr. Woodhouse in February 2022, the terms and conditions of which restate and replace any severance arrangements set forth in their respective offer letters. Under the severance agreements, each of Messrs. Kimball, Ashraf, and Woodhouse, would be entitled to the following in the event that such officer's employment is terminated by PMI without "cause" or by the applicable officer for "good reason" (each as defined in the severance agreement) and the officer meets certain tenure requirements as of the date of such termination: (i) a lump sum severance payment equal to one year base salary; (ii) any unpaid annual bonus and long-term cash incentive award for the year(s) preceding the year of termination; (iii) continued coverage for the participants and eligible dependents pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), for 12 months, unless such coverage is earlier terminated in accordance with the terms of the severance agreement; (iv) a pro-rated annual bonus payment for the year of termination; and (v) with respect to any long-term performance period under the LTCIP that commenced more than one year prior to the executive's termination date, a pro-rated long-term cash incentive payment for the performance period in which the termination occurs. In the event that Messrs. Kimball, Ashraf, or Woodhouse, is terminated by PMI or its successor without cause or by the applicable officer for good reason and such termination occurs within 24 months following a change in control of PMI, then, subject to certain tenure requirements, such officer would be entitled to receive the severance set forth in items (i) through (iii) above, as well as such officer's (x) target annual bonus for the year of termination; and (y) their target long-term cash incentive payment for the year of termination. Receipt of these severance benefits is conditioned on the officer's signing a release of claims in favor of PMI.

PMI also entered into a severance agreement with Mr. Agarwal in December 2021 which contained the same terms and conditions as the severance agreements signed by Messrs. Kimball, Ashraf, and Woodhouse, *provided that* under the terms of Mr. Agarwal's severance agreement, until certain tenure requirements were met, Mr. Agarwal would only be entitled to a lump sum severance payment equal to six months base salary in the event that his employment was terminated by PMI without "cause" or by him for "good reason" prior to the one year anniversary of his employment start date. Mr. Agarwal departed from his role as Chief Marketing Officer of PMI effective December 16, 2022 and as a result, the terms of his severance agreement are no longer applicable.

For additional information regarding these severance and change in control arrangements, see "Potential Payments Upon Termination or a Change in Control of PMI" below.

*Compensation Risk Assessment*

PMI's management evaluates and mitigates any risk that may exist relating to its compensation plans, practices and policies for all employees, including PMI's NEOs. PMI's management has concluded that PMI's compensation policies and practices do not create or promote inappropriate or excessive risk taking.

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***Summary Compensation Table***

The following table provides information regarding the compensation earned during the years ended December 31, 2022, 2021 and 2020 by each of PMI's named executive officers (in thousands):

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | Year | Salary ($) | | Bonus ($) | | Option Awards <br>($) <sup>1</sup> | | Non-Equity Incentive Plan Compensation ($) <sup>6</sup> | All Other<br>Compensation ($) <sup>2</sup> | Totals ($) |
| <u>Name and Principal Position</u> |  |  |  |  |  |  |  |  |  |  |
| **David Kimball** | 2022 | $573 |  | 574 |  |  |  | 825 | 15 | 1987 |
| &nbsp;&nbsp;&nbsp;Chief Executive Officer | 2021 | 550 |  | 550 |  |  |  | 731 | 13 | 1844 |
|  | 2020 | 498 | <sup>3</sup> | 427 | <sup>4</sup> | 220 | <sup>5</sup> |  | 12 | 1157 |
| **Usama Ashraf** | 2022 | 466 |  | 396 |  | 438 |  | 670 | 15 | 1985 |
| &nbsp;&nbsp;&nbsp;President and | 2021 | 447 |  | 373 |  | 69 |  | 600 | 13 | 1502 |
| &nbsp;&nbsp;&nbsp;Chief Financial Officer | 2020 | 409 | <sup>3</sup> | 268 | <sup>4</sup> | 42 | <sup>5</sup> |  | 14 | 733 |
| **Pete Woodhouse** <sup>7</sup> | 2022 | 383 |  | 287 |  |  |  |  | 15 | 685 |
| &nbsp;&nbsp;&nbsp;Chief Technology Officer | 2021 | 188 |  | 141 |  | 786 |  |  | 9 | 1124 |
| **Edward R. Buell III** <sup>8</sup> | 2022 | 349 |  | 227 |  |  |  | 315 | 15 | 906 |
| &nbsp;&nbsp;&nbsp;General Counsel, Secretary and | 2021 | 323 |  | 191 |  | 26 |  | 185 | 13 | 738 |
| &nbsp;&nbsp;&nbsp;Chief Compliance Officer | 2020 | 252 | <sup>3</sup> | 66 | <sup>4</sup> | 8 | <sup>5</sup> |  | 10 | 336 |
| **Jeff Killian** <sup>9</sup> | 2022 | 119 |  | 77 |  | 365 |  |  | 5 | 566 |
| &nbsp;&nbsp;&nbsp;Executive Vice President of |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Operations |  |  |  |  |  |  |  |  |  |  |
| **Ashish Agarwal** <sup>10</sup> | 2022 | 316 |  |  |  | 2447 | <sup>11</sup> |  | 15 | 2778 |
| &nbsp;&nbsp;&nbsp;Chief Marketing Officer |  |  |  |  |  |  |  |  |  |  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.The amounts reported represent the grant date fair value of the restricted stock units and stock options granted to the named executive officers as calculated in accordance with the Financial Accounting Board's Topic ASC 718, Compensation–Stock Compensation ("ASC 718") using a Black-Scholes model to purchase shares of PMI's common stock. The key assumptions used in PMI's ASC 718 calculation are discussed in Note 2 of PMI's consolidated financial statements, which are incorporated by reference into this Annual Report.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2."All Other Compensation" consists of compensation received from employer matching contributions to PMI's 401(k) plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.Reflects the temporary reductions in base salaries implemented in response to the COVID-19 pandemic.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.Bonus payouts for 2020 were calculated based on our NEOs' non-reduced base salaries and do not reflect the temporary reduction in base salaries implemented in response to the COVID-19 pandemic.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.Represents the incremental fair value of options that were granted in prior periods and repriced in connection with the stock option reprice implemented in 2020.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.The amount reported reflects non-equity incentive compensation earned under the Long Term Cash Incentive Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.Mr. Woodhouse joined PMI in July 2021 as its Chief Technology Officer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.Mr. Buell was promoted to General Counsel and Secretary of PMI in March 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. Mr. Killian joined PMI in August 2022 as its Executive Vice President of Operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.Mr. Agarwal joined PMI in January 2022 as its Chief Marketing Officer. Mr. Agarwal departed from his role as Chief Marketing Officer of PMI effective December 16, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.Mr. Agarwal's stock options were forfeited in their entirety in connection with his departure from PMI on December 16, 2022.

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***2022 Grants of Plan-Based Awards*** <sup>1 , 2</sup> 

The following table sets forth certain information regarding grants of plan-based awards to the listed PMI named executive officers during 2022 **(**dollar amounts in thousands, except per share information):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Grant Date** | **All Other Option Awards: Number of Securities Underlying Options**<br>**(#)** | **Exercise or Base Price of Option Awards**<br>**($/Sh)** | **Grant Date Fair Value of**<br>**Stock and Option Awards ($)** <sup>3</sup> |
| Usama Ashraf | 3/25/2022 | 1000000 | $0.71 | $438 |
| Jeff Killian | 11/9/2022 | 1675438 | $0.34 | $365 |
| Ashish Agarwal | 3/25/2022 | 5584793 | $0.71 | $2447 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.The following columns are intentionally omitted from this table: Estimated Future Payouts under Non-Equity Incentive Plan Awards, and Estimated Future Payouts under Equity Incentive Plan Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.The equity awards granted to NEOs in 2022 were granted under, and governed by the terms of, PMI's 2015 Equity Incentive Plan and the applicable award agreements. See the footnotes to the Outstanding Equity Awards at 2022 Fiscal Year-End table below for a description of the vesting schedule of the equity awards granted in 2022 and reported in the table above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.The amounts reported represent the grant date fair value of the stock options granted to the named executive officers as calculated in accordance with the Financial Accounting Board's Topic ASC 718, Compensation–Stock Compensation ("ASC 718") using a Black-Scholes model to purchase shares of PMI's common stock. The key assumptions used in PMI's ASC 718 calculation are discussed in Note 2 of PMI's consolidated financial statements, which are incorporated by reference into this Annual Report.

***CEO Pay Ratio***

In accordance with Item 402(u) of Regulation S-K, PMI is providing the following information for the year ended December 31, 2022:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The median of total compensation of all employees, excluding our CEO: $147,155;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The annual total compensation of our CEO: $1,987,001; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The ratio of CEO total compensation to median employee total compensation: 13.50 to 1.

Our CEO pay ratio information is a reasonable good faith estimate calculated in a manner consistent with the SEC pay ratio rules and methods for disclosure. In order to determine the median employee from a compensation perspective, PMI examined cash compensation (salary, wages and cash bonuses) paid for the 2022 calendar year for all employees, excluding our CEO, employed as of December 31, 2022 (the "Determination Date"). On the Determination Date, Prosper's employee population consisted of 468 individuals, all of whom were located in the United States. This population consisted of our full-time, part-time, and temporary employees. We did not include any contractors or workers employed through a third-party provider in our employee population.

To identify the "median employee," we utilized the amount of base salary, wages and cash bonus our employees received, as reflected in our payroll records through the Determination Date and annualized such amounts for any individual hired during 2022. Once we identified our median employee, we combined all of the elements of such employee's compensation for 2022 to determine the median employee total compensation in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K and compared such total compensation to the total compensation of PMI's CEO, as reported in the Summary Compensation Table.

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***Narrative Discussion of the Summary Compensation Table and Grants of Plan-Based Awards Table***

*Offer Letters and Arrangements* 

*David Kimball.* In November 2016, PMI entered into an offer letter with Mr. Kimball in connection with his appointment as its Chief Executive Officer. In addition to his initial base salary, Mr. Kimball's offer letter provided for (i) eligibility to receive an annual performance bonus in a target amount of 100% of his base salary, payable on a quarterly basis; (ii) reimbursement of certain relocation expenses; and (iii) eligibility to participate in the benefit programs generally available to employees of PMI. PMI also committed to grant Mr. Kimball an equity award of options exercisable into shares of PMI common stock representing up to 5% of PMI's capitalization on a fully diluted basis, subject to the terms and conditions of the offer letter.

Mr. Kimball's November 2016 offer letter replaced the offer letter PMI entered into with Mr. Kimball in March 2016 in connection with his appointment as its Chief Financial Officer. In addition to the severance, reimbursement and benefits arrangements included in the November 2016 offer letter, Mr. Kimball's March 2016 offer letter included his initial base salary and equity grant as CFO and provided for a one-time sign-on bonus of $125,000, subject to certain repayment requirements in the event of Mr. Kimball's termination from PMI within 12 months of his employment.

In November 2020, PMI and Mr. Kimball executed a severance and change in control agreement that replaced any prior agreements regarding severance set forth in Mr. Kimball's offer letter. The terms of Mr. Kimball's severance and change in control agreement are described under "Post-Employment Compensation" above.

*Usama Ashraf*. In February 2017, PMI entered into an offer letter with Mr. Ashraf in connection with his appointment as its Chief Financial Officer. In addition to his initial base salary and equity grant, Mr. Ashraf's offer letter provided for (i) a one-time sign-on bonus of $20,000, subject to certain repayment requirements in the event of Mr. Ashraf's termination from PMI within 12 months of his employment; (ii) eligibility to receive an annual performance bonus in a target amount of 50% of his base salary; (iii) reimbursement of certain relocation expenses; (iv) reimbursement of certain short-term housing expenses and (v) eligibility to participate in the benefit programs generally available to employees of PMI.

In addition to the terms of Mr. Ashraf's offer letter, in January 2018, the Compensation Committee approved a one-time retention bonus payment in an amount equal to 25% of his base salary. In August 2018, in connection with Mr. Ashraf's expanded scope of responsibilities in the role of Chief Financial Officer, the Compensation Committee increased his annual performance bonus target from 50% to 60% of his base salary. In March 2019, the Compensation Committee increased Mr. Ashraf's annual performance bonus target to 75% of his annual base salary. In March 2020, the Compensation Committee confirmed Mr. Ashraf's annual performance bonus target for 2020 would remain at 75% of his annual base salary. On February 24, 2021, Mr. Ashraf was appointed as President of PMI effective March 1, 2021. In connection with his appointment, Mr. Ashraf: (i) will be eligible to receive an annual performance bonus in a target amount of 85% of his base salary; and (ii) was granted an option to purchase 2,000,000 shares of PMI's common stock at an exercise price equal to the fair market value of the common stock on the grant date. The option will vest over a four year period, subject to and in accordance with the terms of the stock option agreement.

In November 2020, PMI and Mr. Ashraf executed a severance and change in control agreement that replaced any prior agreements regarding severance set forth in Mr. Ashraf's offer letter. The terms of Mr. Ashraf's severance and change in control agreement are described under "Post-Employment Compensation" above.

*Pete Woodhouse*. In May 2021, PMI entered into an offer letter with Mr. Woodhouse in connection with his appointment as its Chief Technology Officer. In addition to his initial base salary and equity grant, Mr. Woodhouse's offer letter provided for (i) eligibility to receive an annual performance bonus in a target amount of 75% of his base salary; (ii) eligibility to participate in PMI's Long Term Cash Incentive Plan, subject to the tenure and other requirements set forth therein; and (iii) eligibility to participate in the benefit programs generally available to employees of PMI. In February 2022, PMI and Mr. Woodhouse executed a severance and change in control agreement that replaces any prior agreements regarding severance set forth in Mr. Woodhouse's offer letter. The terms of Mr. Woodhouse's severance and change in control agreement are described under "Post-Employment Compensation" above.

*Edward R. Buell III.* In September 2015, PMI entered into an offer letter with Mr. Buell in connection with his appointment as Compliance Counsel. In addition to his initial base salary and equity grant, Mr. Buell's offer letter provided for (i) eligibility to receive an annual performance bonus in a target amount of 20% of his base salary; and (ii) eligibility to participate in the benefit programs generally available to employees of PMI. In June 2018, Mr. Buell was promoted to Chief Compliance Officer and Deputy General Counsel. In connection with this promotion, Mr. Buell's annual performance bonus target was increased to 30% of his annual base salary and Mr. Buell was granted an option to purchase 149,700 shares of PMI's common stock at an exercise price equal to the fair market value of the common stock on the grant date. In March 2021, Mr. Buell was appointed as General Counsel and Secretary of PMI. In connection with this appointment, Mr. Buell: (i) will be eligible to receive an annual performance bonus in a target amount of 65% of his base salary; and (ii) was granted options to

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purchase 756,638 shares of PMI's common stock at an exercise price equal to the fair market value of the common stock on the grant date.

*Jeff Killian*. In July 2022, PMI entered into an offer letter with Mr. Killian in connection with his appointment as its Executive Vice President of Operations. In addition to his initial base salary and equity grant, Mr. Killian's offer letter provided for (i) eligibility to receive an annual performance bonus in a target amount of 65% of his base salary (which will be prorated for the fiscal year ended December 31, 2022 equal to the period of his employment between his start date and December 31, 2022); (ii) eligibility to participate in PMI's Long Term Cash Incentive Plan, subject to the tenure and other requirements set forth therein; and (iii) eligibility to participate in the benefit programs generally available to employees of PMI.

*Ashish Agarwal*. In December 2021, PMI entered into an offer letter with Mr. Agarwal in connection with his appointment as its Chief Marketing Officer. In addition to his initial base salary and equity grant, Mr. Agarwal's offer letter provided for (i) eligibility to receive an annual performance bonus in a target amount of 75% of his base salary (which will be prorated for the fiscal year ended December 31, 2022 equal to the period of his employment between his start date and December 31, 2022); (ii) eligibility to participate in PMI's Long Term Cash Incentive Plan, subject to the tenure and other requirements set forth therein; and (iii) eligibility to participate in the benefit programs generally available to employees of PMI. In December 2021, PMI and Mr. Agarwal also executed a severance and change in control agreement. The terms of Mr. Agarwal's severance and change in control agreement are described under "Post-Employment Compensation" above. Mr. Agarwal departed from his role as Chief Marketing Officer of PMI, effective December 16, 2022.

*Equity Incentive Plans* &nbsp;&nbsp;&nbsp;&nbsp;

PMI grants equity awards primarily through its 2015 Equity Incentive Plan, which was approved by PMI's Board of Directors on April 7, 2015 and subsequently amended by an Amendment No. 1, Amendment No. 2, and Amendment No. 3, which were approved by PMI's Board of Directors on February 15, 2016, May 19, 2016, and January 23, 2018, respectively (as amended, the "2015 Plan"). PMI also previously granted equity awards through its Amended and Restated 2005 Stock Option Plan (the "2005 Plan"), which was approved as amended and restated by its stockholders on December 1, 2010, and expired in March 2015. The 2005 Plan and 2015 Plan are collectively referred to in this Annual Report as the "Equity Plans."

Any awards granted under the 2005 Plan prior to its expiration remain in effect pursuant to their terms. Unless sooner terminated by PMI's Board of Directors, the 2015 Plan will expire ten years from the date of its adoption. All stock options granted to NEOs are incentive stock options, to the extent permissible under the Internal Revenue Code, as amended. All equity awards to PMI's employees and directors were granted at no less than the fair market value of its common stock on the date of each award. In the absence of a public trading market for PMI common stock, PMI's Board of Directors, acting on its own or through the Compensation Committee, has determined the fair market value of its common stock in good faith based upon consideration of a number of relevant factors including the status of its development efforts, financial status and market conditions. See Item 15, "Notes to Consolidated Financial Statements."

The 2005 Plan provided for grants in the form of non-qualified stock options and stock purchase rights, which were available for grant to PMI's directors, consultants or employees, including officers, and incentive stock options, which were available for grant solely to its employees, including officers. The 2015 Plan provides for grants in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, and unrestricted stock. Under the 2015 Plan, incentive stock options may be granted solely to PMI's employees, including officers. Awards other than incentive stock options may be granted to its directors, consultants or employees, including officers. The Equity Plans are administered by PMI's Board of Directors, which in turn has delegated authority to administer the plans to the Compensation Committee.

Shares of PMI's common stock subject to options that have expired or otherwise terminate under the 2015 Plan or the 2005 Plan without having been exercised in full will become available for grant under the 2015 Plan. Shares of PMI's common stock issued under the 2015 Plan may include previously unissued shares or reacquired shares bought on the market or otherwise.

As of December 31, 2022, an aggregate of 94,721,992 options to purchase our common stock were outstanding or authorized for issuance under the Equity Plans. Of these outstanding and authorized options, a total of 77,727,763 options and 2,602,383 restricted stock units were outstanding under the Equity Plans and 14,391,846 equity awards were available for grant under the 2015 Plan. No equity awards are available for grant under the 2005 Plan. During the year ended December 31, 2022, an aggregate of 10,037,748 options and 271,965 RSUs granted under the Equity Plans either expired or were forfeited. As of December 31, 2022, 55,063,268 options under the Equity Plans were vested and outstanding and 52,021,630 were exercised.

The NEOs identified herein have been granted equity awards upon employment with PMI, for merit increases, and for retention purposes.

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***Outstanding Equity Awards at 2022 Fiscal Year End***

The following table sets forth certain information regarding outstanding equity awards granted to PMI's named executive officers ("NEOs") that remained outstanding as of December 31, 2022:

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Grant Date** | | **Vesting Commencement Date** | **Number of Securities Underlying Unexercised Options (#) Exercisable** | **Number of Securities Underlying Unexercised Options (#) Unexercisable** | **Option Exercise Price ($)** | **Option Expiration Date** | **Number of Shares or Units of Stock That Have Not Vested (#)** <sup>1</sup> |
| David Kimball | 5/3/2016 | *2* | 3/18/2016 | 1410925 |  | 0.02 | 5/3/2026 |  |
|  | 5/3/2016 | *3* | 3/18/2016 |  |  |  |  | 705465 |
|  | 6/17/2016 | *4* | 4/28/2016 | 2115703 |  | 0.02 | 6/17/2026 |  |
|  | 3/17/2017 | *5* | 12/1/2016 | 21156579 |  | 0.02 | 3/17/2027 |  |
|  | 3/20/2018 | *2* | 3/1/2018 | 2535292 |  | 0.02 | 3/20/2028 |  |
| Usama Ashraf | 3/17/2017 | *9* | 2/27/2017 | 3397242 |  | 0.02 | 3/17/2027 |  |
|  | 11/7/2017 | *9* | 2/27/2017 | 402758 |  | 0.02 | 11/7/2027 |  |
|  | 3/20/2018 | *6* | 3/1/2018 |  |  |  |  | 1784793 |
|  | 8/8/2018 | *9* | 7/1/2018 | 837719 |  | 0.02 | 8/8/2028 |  |
|  | 11/5/2019 | *9* | 11/5/2019 | 385416 | 114584 | 0.02 | 11/5/2029 |  |
|  | 3/10/2021 | *9* | 3/1/2021 | 875000 | 1125000 | 0.06 | 3/10/2031 |  |
|  | 3/25/2022 | *9* | 12/16/2021 | 125000 | 375000 | 0.71 | 3/25/2032 |  |
|  | 3/25/2022 | *9* | 2/3/2022 |  | 500000 | 0.71 | 3/25/2032 |  |
| Pete Woodhouse | 8/10/2021 | *9* | 7/1/2021 | 1977947 | 3606846 | 0.24 | 8/10/2031 |  |
| Edward R. Buell | 11/4/2015 | *7* | 9/28/2015 | 75000 |  | 0.02 | 11/4/2025 |  |
|  | 6/17/2016 | *8* | 4/28/2016 | 30325 |  | 0.02 | 6/17/2026 |  |
|  | 3/17/2017 | *7* | 1/1/2017 | 37800 |  | 0.02 | 3/17/2027 |  |
|  | 3/17/2017 | *8* | 1/1/2017 | 30250 |  | 0.02 | 3/17/2027 |  |
|  | 3/20/2018 | *7* | 3/1/2018 | 114875 |  | 0.02 | 3/20/2028 |  |
|  | 3/20/2018 | *7* | 3/1/2018 | 125000 |  | 0.02 | 3/20/2028 |  |
|  | 8/8/2018 | *7* | 6/1/2018 | 149700 |  | 0.02 | 8/8/2028 |  |
|  | 5/7/2019 | *7* | 3/1/2019 | 52359 | 3491 | 0.02 | 5/7/2029 |  |
|  | 11/5/2019 | *7* | 11/5/2019 | 231250 | 68750 | 0.02 | 11/5/2029 |  |
|  | 3/10/2021 | *9* | 3/15/2021 | 331029 | 425609 | 0.06 | 3/10/2031 |  |
| Jeff Killian | 11/9/2022 | *7* | 8/22/2022 |  | 1675438 | 0.34 | 11/9/2032 |  |
| Ashish Agarwal | 3/25/2022 | *9* | 1/24/2022 |  | 5584793 | 0.71 | 3/25/2032 |  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.RSUs in each case that remained unvested as of December 31, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.This option vests over four years, with 1/4 vesting on the first anniversary of the applicable vesting commencement date set forth in the table above (the "Vesting Commencement Date") and 1/48 vesting each month thereafter for the following three years, provided that, any unvested options will vest in full immediately prior to the effective time of a change in control of PMI, a sale of all or substantially all of PMI's assets, or a liquidation, dissolution or winding up of PMI (each, a "Corporate Transaction").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.These RSUs initially vest, if at all, when PMI files for an initial public offering and the lock-up period expires or there is a Corporate Transaction (which, as defined in the RSU grant notice, does not include a liquidation, dissolution or winding up of PMI), whichever occurs first (each, a "Triggering Event"). The RSUs will immediately and fully vest in connection with the occurrence of such Triggering Event.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.This option vests over three years, with 1/36 vesting on the one month anniversary of the applicable Vesting Commencement Date and 1/36 vesting each month thereafter for the following two years, provided that, any unvested options will vest in full immediately prior to the effective time of a Corporate Transaction.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.This option vests over three years, with 1/2 vesting on the first anniversary of the applicable Vesting Commencement Date and 1/48 vesting each month thereafter for the following two years, provided that, any unvested options will vest in full immediately prior to the effective time of the Corporate Transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.These RSUs initially vest, if at all, upon the occurrence of a Triggering Event. The number of RSUs that vest upon a Triggering Event will be equal to the number of RSUs that would have vested had the RSUs been subject to the four-year Time-Based Vesting Schedule (1/4 vesting on first-year anniversary of applicable Vesting Commencement Date and 1/48 vesting monthly thereafter). If the NEO provides continuous service through the Triggering Event, the remaining RSUs will vest pursuant to the Time-Based Vesting Schedule until the RSUs are fully vested.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.This option vests over four years, with 1/4 vesting on the first anniversary of the applicable Vesting Commencement Date and 1/48 vesting each month thereafter for the following three years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.This option vests over three years, with 1/36 vesting on the one month anniversary of the applicable Vesting Commencement Date and 1/36 vesting each month thereafter for the following two years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.This option vests over four years, with 1/4 vesting on the first anniversary of the applicable Vesting Commencement Date and 1/48 vesting each month thereafter for the following three years, except that, in the event the NEO is terminated without cause, or if Optionee resigns for Good Reason, in each case within 12 months of a Corporate Transaction, any unvested options will vest in full immediately.

The following table sets forth information regarding equity awards held by PMI's named executive officers that were exercised, vested or settled during 2022 (dollar amounts in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Option Awards** | **Option Awards** | **Stock Awards** | **Stock Awards** |
| | **Number of**<br>**Shares**<br>**Acquired on**<br>**Exercise**<br>**(#)** | **Value**<br>**Realized**<br>**on Exercise**<br>**($)** | **Number of**<br>**Shares**<br>**Acquired**<br>**on Vesting**<br>**(#)** | **Value**<br>**Realized on**<br>**Vesting/Settlement**<br>**($)**  |
| David Kimball |  |  |  |  |
| Usama Ashraf |  |  |  |  |
| Pete Woodhouse |  |  |  |  |
| Edward R. Buell III |  |  |  |  |
| Jeff Killian |  |  |  |  |
| Ashish Agarwal |  |  |  |  |

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***Potential Payments Upon Termination or a Change In Control of PMI*** 

The following table provides the estimated value of the payments that PMI would provide to its named executive officers in connection with a change in control of PMI and/or a termination of employment, including any options, RSUs and Stock Awards accelerated as a result of the change in control and/or termination. In determining amounts payable, we have assumed in all cases that the change in control or termination of employment, as applicable, occurred on December 31, 2022.

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With respect to a termination of employment, we have assumed in all cases that the termination was without cause.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Name** | **Cash Severance ($)** | **Number of Unvested Options (#)** | **Estimated Value of Unvested Options at December 31, 2022 ($)** | **Number of Unvested RSUs and Stock Awards (#)** | **Estimated Value of Unvested RSUs and Stock Awards at December 31, 2022 ($)** | **Healthcare Benefits ($)** | **Total Estimated Value ($)** |
|  | (dollar amounts in thousands) | (dollar amounts in thousands) | (dollar amounts in thousands) | (dollar amounts in thousands) | (dollar amounts in thousands) | (dollar amounts in thousands) | (dollar amounts in thousands) |
| David Kimball |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;*Involuntary Termination or Resignation for Good Reason* | 1975 |  |  |  |  | 29 | 2004 |
| *Change in Control* | 825 |  |  | 705 | 247 |  | 1072 |
| &nbsp;&nbsp;&nbsp;*Involuntary Termination or Resignation for Good Reason following Change in Control* | 2835 |  |  |  |  | 29 | 2864 |
| Usama Ashraf |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;*Involuntary Termination or Resignation for Good Reason* | 1536 |  |  |  |  | 29 | 1565 |
| *Change in Control* | 670 |  |  | 1785 | 625 |  | 1295 |
| &nbsp;&nbsp;&nbsp;*Involuntary Termination or Resignation for Good Reason following Change in Control* | 2234 | 2115 | 364 |  |  | 29 | 2627 |
| Pete Woodhouse |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;*Involuntary Termination or Resignation for Good Reason* | 384 |  |  |  |  |  | 384 |
| *Change in Control* |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;*Involuntary Termination or Resignation for Good Reason following Change in Control* | 384 | 3607 | 397 |  |  |  | 781 |
| Edward R. Buell III |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;*Involuntary Termination or Resignation for Good Reason* |  |  |  |  |  |  |  |
| *Change in Control* | 315 |  |  |  |  |  | 315 |
| &nbsp;&nbsp;&nbsp;*Involuntary Termination or Resignation for Good Reason following Change in Control* | 315 | 426 | 123 |  |  |  | 438 |
| Jeff Killian |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;*Involuntary Termination or Resignation for Good Reason* |  |  |  |  |  |  |  |
| *Change in Control* |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;*Involuntary Termination or Resignation for Good Reason following Change in Control* |  |  |  |  |  |  |  |
| Ashish Agarwal |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;*Involuntary Termination or Resignation for Good Reason* |  |  |  |  |  |  |  |
| *Change in Control* |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;*Involuntary Termination or Resignation for Good Reason following Change in Control* |  |  |  |  |  |  |  |

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***Compensation Committee Interlocks and Insider Participation***

During the fiscal year ended December 31, 2022, Claire A. Huang and Thomas R. Kearney served as members of the Compensation Committee. None of these directors is or has been an officer or employee of PMI at any time or had any relationship with PMI requiring disclosure by PMI under Item 404 of Regulation S-K. During the fiscal year ended

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December 31, 2022, none of PMI's executive officers served as a member of the Board of Directors or Compensation Committee (or other board committee serving an equivalent function) of any unrelated entity that had one or more of its executive officers serving on PMI's Board of Directors or Compensation Committee (or other board committee serving an equivalent function).

***Director Compensation***

The following table shows compensation for the year ended December 31, 2022 to PMI's directors who were not also named executive officers at the time they received compensation as directors (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Fees**<br>**earned or**<br>**paid in**<br>**cash ($)** | **Equity**<br>**awards ($)** | **Total ($)** |
| Claire A. Huang | $75 |  | $75 |
| Thomas R. Kearney (1) | $75 |  | $75 |
| Peter J. deSilva (2) | $75 |  | $75 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.Mr. Kearney held 354,167 unvested stock options at December 31, 2022. In addition, Mr. Kearney exercised 20,000 stock options on December 23, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Mr. deSilva was appointed as a director of PMI effective April 1, 2021. Mr. deSilva held 583,334 unvested stock options at December 31, 2022.

From time to time, PMI reimburses certain of its non-employee directors for travel and other expenses incurred in connection with attending board of directors meetings.

**Compensation Committee Report** 

The Compensation Committee of PMI has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and based on such review and discussions, the Compensation Committee recommended to PMI's Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

&nbsp;&nbsp;&nbsp;&nbsp;COMPENSATION COMMITTEE

Claire A. Huang, Chairwoman

Thomas R. Kearney

**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS** 

**Prosper Marketplace, Inc.** 

The following table sets forth information regarding the beneficial ownership of PMI's Common Stock as of March 1, 2023, by:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• each of PMI's directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• each of PMI's named executive officers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** each person, or group of affiliated persons, who is known by PMI to beneficially own more than 5% of PMI's Common Stock; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• all of PMI's directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. Except as otherwise indicated in the footnotes to the table below, all of the shares reflected in the table are shares of Common Stock and all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose.

Percentage ownership calculations are based on 275,843,168 shares of Common Stock outstanding as of March 1, 2023, assuming the conversion of all of PMI's convertible preferred stock, but excluding any outstanding stock options or

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warrants. Each share of PMI preferred stock is convertible at any time at the discretion of the holder. Shares of PMI's Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock convert into shares of PMI Common Stock at a ratio of 1 to 1. Shares of PMI's Series A-1 Preferred Stock convert into shares of PMI Common Stock at a ratio of 1,000,000 to 1. Shares of PMI's Series G Preferred Stock convert into shares of PMI common stock at a ratio of 1 to 1.36.

In computing the number of shares of Common Stock beneficially owned by a person or entity and the percentage ownership of that person or entity, PMI deemed outstanding all shares of Common Stock subject to options and warrants held by that person or entity that are currently exercisable or vesting within 60 days of March 1, 2023. PMI did not deem these shares outstanding for the purpose of computing the percentage ownership of any other person. Beneficial ownership representing less than 1.0% is denoted with an asterisk (\*). Except as otherwise indicated in the footnotes to the table below, addresses of named beneficial owners and officers are in care of Prosper Marketplace, Inc., 221 Main Street, 3rd Floor, San Francisco, CA 94105.

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Number of**<br>**Shares Owned**<sup>1</sup> | **Number of Shares Underlying Options, and Warrants Exercisable Currently or Within 60 Days**<sup>2</sup> | **Total Number of Shares Beneficially Owned**<sup>3</sup> | **Beneficial**<br>**Ownership**<br>**Percentage** |
| **Directors and Executive Officers** | | | | |
| Thomas R. Kearney | 20000 | 709166 | 729166 | \* |
| Claire A. Huang |  | 1000000 | 1000000 | \* |
| Peter J. deSilva |  | 500000 | 500000 | \* |
| David Kimball |  | 27218499 | 27218499 | 8.98% |
| Usama Ashraf |  | 6418967 | 6418967 | 2.27% |
| Pete Woodhouse |  | 2443346 | 2443346 | \* |
| Edward R. Buell III |  | 1269132 | 1269132 | \* |
| Jeff Killian |  |  |  |  |
| Ashish Agarwal |  |  |  |  |
| All directors and executive officers as a group<sup>4</sup> | 20000 | 39559110 | 39579110 | 12.55% |
| **5% Shareholders** |  |  |  |  |
| Francisco Partners<sup>5</sup> | 17413325 | 35544141 | 52957466 | 17.01% |
| Newport Trust Company<sup>6</sup> | 51247915 |  | 51247915 | 18.58% |
| LPG Capital GP Limited<sup>7</sup> | 50776886 |  | 50776886 | 18.41% |
| Soros Fund Management LLC<sup>8</sup> | 723902 | 51614124 | 52338026 | 15.98% |
| Accel Partners<sup>9</sup> | 24320667 |  | 24320667 | 8.82% |
| IDG Capital Partners<sup>10</sup> | 24320667 |  | 24320667 | 8.82% |
| JPF LLC<sup>11</sup> |  | 41833904 | 41833904 | 13.17% |
| New Residential Investment Corp.<sup>12</sup> | 1 | 41833904 | 41833905 | 13.17% |
| Third Point Ventures LLC<sup>13</sup> |  | 41833904 | 41833904 | 13.17% |
| \* Less than 1% |  |  |  |  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.Includes shares of Common Stock (including Common Stock issuable upon the conversion of preferred stock) owned directly or indirectly, but does not include shares subject to options and warrants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Includes shares subject to options or warrants owned directly or indirectly that are currently exercisable or will become exercisable within 60 days of March 1, 2023.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.The amounts and percentages of Common Stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Commission, a person is deemed to be a "beneficial owner" of a security if that person has or shares "voting power," which includes the power to vote or to direct the voting of such security, or "investment power," which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities for which that person has a right to acquire beneficial ownership within 60 days.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.Consists of 39,559,110 shares of Common Stock issuable upon the exercise of stock options.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.Represents 17,413,325 shares of Common Stock issuable upon the conversion of preferred stock held by Francisco Partners through certain of its affiliates and 35,544,141 shares of Common Stock issuable upon the exercise and conversion of the preferred stock warrant held by Francisco Partners through certain of its affiliates. Francisco Partners is deemed to have voting and investment power over these shares. The address for Francisco Partners is One Letterman Drive, Building C – Suite 410, San Francisco, CA 94129

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.Represents 51,247,915 shares of Common Stock issuable upon the conversion of preferred stock held by Prosper Grantor Trust. Prosper Grantor Trust is a wholly-owned subsidiary of Prosper Marketplace, Inc. and as such, Prosper Marketplace Inc. holds sole voting power over such shares. Newport Trust Company, as trustee for Prosper Grantor Trust, is deemed to be an indirect beneficial owner of such shares. The address for Newport Trust Company is 45 South 7th Street, Suite 2208, Minneapolis, MN 55402.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.Represents 50,776,886 shares of Common Stock issuable upon the conversion of preferred stock held by LPG Capital through certain of its affiliates. LPG Capital l is deemed to have voting and investment power over the shares. The address for LPG Capital is 199-203 Hennessy Road, Flat 1002, Hong Kong, China.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.Consists of (i) 2 shares of Common Stock issuable upon the conversion of preferred stock and 51,370,586 shares of Common Stock issuable upon the exercise and conversion of the preferred stock warrants, in each case, held by QPL Holdings (PF) LP, a Delaware limited partnership (the "QPL Shares"); (ii) 243,538 shares of Common Stock issuable upon the exercise and conversion of the preferred stock warrants held by QPB Holdings Ltd., a Cayman Islands exempted company (the "QPB Shares"); and (iii) 723,900 shares of Common Stock issuable upon the conversion of preferred stock held by Quantum Strategic Partners Ltd., a Cayman Islands exempted company (the "Quantum Strategic Shares").

Soros Fund Management LLC ("SFM LLC") serves as principal investment manager for QPL Holdings (PF) LP, QPB Holdings Ltd., and Quantum Strategic Partners Ltd. As such, SFM LLC has been granted investment discretion over the QPL Shares, the QPB Shares and the Quantum Strategic Shares. George Soros serves as Chairman of SFM LLC and has sole discretion to replace FPR Manager LLC, the Manager of SFM LLC. The business address of SFM LLC is 250 West 55th Street, 29th Floor, New York, NY 10019.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.Represents 5,703,470 shares of Common Stock and 7,245,859 shares of Common Stock issuable upon the conversion of preferred stock held by Accel Partners through certain of its affiliates (collectively, the "Accel Shares"); 3,498,765 shares of Common Stock and 4,722,733 shares of Common Stock issuable upon the conversion of preferred stock held by IDG Capital Partners through certain of its affiliates (the "IDG Shares"); and 877,185 shares of Common Stock and 2,272,655 shares of Common Stock issuable upon the conversion of preferred stock held by Breyer Capital, LLC and James W. Breyer 2005 Trust dated 2/25/2005 (collectively, the "Breyer Shares"). Accel Partners is deemed to have voting and investment power over the Accel Shares. Accel Partners is an affiliate of IDG Capital Partners and may also therefore be deemed to share voting and investment power over the IDG Shares. Mr. Breyer is a partner of Accel Partners and therefore Accel Partners may also be deemed to share voting and investment power over the Breyer Shares. Accel Partners disclaims beneficial ownership of the IDG Shares and Breyer Shares except to the extent of its pecuniary interest therein. The address of Accel Partners is 500 University Avenue, Palo Alto, California 94301.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.Represents 3,498,765 shares of Common Stock and 4,722,733 shares of Common Stock issuable upon the conversion of preferred stock held by IDG Capital Partners through certain of its affiliates ("IDG Shares"); 5,703,470 shares of common stock and 7,245,859 shares of common stock issuable upon the conversion of preferred held by Accel Partners through certain of its affiliates (collectively, the "Accel Shares"); and 877,185 shares of Common Stock and 2,272,655 shares of Common Stock issuable upon the conversion of preferred stock held by Breyer Capital, LLC and James W. Breyer 2005 Trust dated 2/25/2005 (collectively, the "Breyer Shares"). IDG Capital Partners is deemed to have voting and investment power over the IDG Shares. IDG Capital Partners is an affiliate of Accel Partners and may also therefore be deemed to share voting and investment power over the Accel Shares. Mr. Breyer is a partner of Accel Partners, which is an affiliate of IDG Capital Partners, and therefore IDG Capital Partners may also be deemed to share voting and investment power over the Breyer Shares. IDG Capital Partners disclaims beneficial ownership of the Accel Shares and Breyer Shares except to the extent of its pecuniary interest therein. The address for IDG Capital Partners is 99 Queen's Road Central, Unit 1509, The Center, Hong Kong, China.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.Represents 41,833,904 shares of common stock issuable upon the exercise and conversion of the preferred stock warrant held by JPF LLC. JPF LLC has shared votingb power and shared investment power with its parent, Jefferies Funding LLC, Jefferies Funding LLC's parent, Jefferies Group LLC, and Jefferies Group LLC's parent, Jefferies Financial Group Inc. The address for JPF LLC is 520 Madison Avenue, New York, NY 10022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.Consists of (i) 1 share of Common Stock issuable upon the conversion of preferred stock, held directly by New Residential Investment Corp.; and (ii) 41,833,904 shares of common stock issuable upon the exercise and conversion of the preferred stock warrant held by NRZ PRO Warrant LLC (the "NRZ Shares"). NRZ Pro Warrant LLC is an

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indirect, wholly-owned subsidiary of New Residential Investment Corp. New Residential Investment Corp. is deemed to have voting and investment power over the NRZ Shares. The address for New Residential Investment Corp. is 1345 Avenue of the Americas, 45th Floor, New York, NY 10105.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.Represents 41,833,904 shares of common stock issuable upon the exercise and conversion of the preferred stock warrant held by Third Point Ventures LLC. Third Point LLC, as investment manager of Third Point Ventures LLC, has voting power over such shares. The address for Third Point Ventures LLC is 55 Hudson Yards, 50th Floor, New York, NY 10001.

***Securities Authorized for Issuance under Equity Compensation Plans***

The following table sets forth information, as of December 31, 2022, with respect to shares of PMI Common Stock that may be issued under PMI's existing equity compensation plans.

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| | | | |
|:---|:---|:---|:---|
| | **Number of**<br>**shares of**<br>**common**<br>**stock to be**<br>**issued upon**<br>**exercise of**<br>**outstanding**<br>**options,**<br>**warrants, RSUs**<br>**and rights**<sup>1</sup> | **Weighted**<br>**average**<br>**exercise**<br>**price of**<br>**outstanding**<br>**options,**<br>**warrants**<br>**and rights** | **Number of**<br>**shares of**<br>**common**<br>**stock**<br>**remaining**<br>**available for**<br>**future**<br>**issuance**<br>**under equity**<br>**compensation**<br>**plans** |
| **Equity compensation plans approved by stockholders:** | | | |
| Prosper Marketplace, Inc. 2005 Stock Plan, as amended and restated | 1070715 | $0.02 |  |
| Prosper Marketplace, Inc. 2015 Equity Incentive Plan, as amended | 79259431 | 0.13 | 14391846 |
| **Equity compensation plans not approved by stockholders:** |  |  |  |
| Outstanding common stock warrants | 1080349 | 0.22 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total potential shares** | 81410495 | 0.13 | 14391846 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.Includes option and RSU issuances to employees, directors and certain consultants, advisors or vendors; however, it does not include warrants granted to outside individuals, consultants, advisors and vendors.

**Prosper Funding LLC**

PMI is the sole member of, and holds a 100% equity interest in, PFL. PFL does not have any equity compensation plans.

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**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**

**Prosper Marketplace, Inc.**

***Agreements with PFL***

On January 22, 2013, PMI entered into an Administration Agreement with PFL (as amended to date, the "PMI Administration Agreement"), pursuant to which PMI agreed to provide certain administrative services relating to the marketplace. Under the PMI Administration Agreement, PFL is required to pay PMI (a) an amount equal to one-twelfth (1/12) of the specified annual Corporate Administration Fees equal to 50% of finance and legal personnel costs, (b) a fee for each Borrower Loan originated through the marketplace, (c) 90% of all Servicing Fees collected by or on behalf of Prosper Funding, and (d) all nonsufficient funds fees collected by or on behalf of PFL. As of the most recent amendment of the PMI Administration Agreement, PFL is required to pay PMI (a) Corporate Administration Fees of $500 thousand per month, (b) a fee for each Borrower Loan originated through the marketplace, (c) 62.5% of all Servicing Fees collected by or on behalf of Prosper Funding, and (d) all nonsufficient funds fees collected by or on behalf of Prosper Funding.

Also on January 22, 2013, PFL and PMI entered into an Asset Transfer Agreement (the "Asset Transfer Agreement") pursuant to which PMI, effective February 1, 2013 (i) transferred the marketplace and substantially all of PMI's assets and rights related to the operation of the marketplace to PFL, and (ii) made a capital contribution to PFL in excess of $3 million. Under the Asset Transfer Agreement, PMI also transferred substantially all of its remaining assets to PFL, including (i) all outstanding Notes issued by PMI under the Indenture dated June 15, 2009 between PMI and Wells Fargo Bank, as trustee (the "Indenture"), (ii) all Borrower Loans corresponding to such Notes, (iii) all registration agreements related to such Notes and Borrower Loans, and (iv) all documents and information related to the foregoing. Certain hardware and agreements relevant to the development, maintenance and use of the marketplace, including in relation to the origination, funding and servicing of Borrower Loans, and the issuance, funding and payment of the Notes, were not transferred or assigned to PFL by PMI. In addition, PMI did not transfer to PFL (i) agreements with PMI's directors, officers or employees and PMI's financial, legal or other advisors or consultants, (ii) certain agreements with vendors to provide PMI with goods or services in the ordinary course of business (including software licensed pursuant to any "shrink wrap" or "click wrap" license), and (iii) certain cash and short-term investments.

In the Asset Transfer Agreement, PMI agreed, among other things, to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.fund any repurchase obligation with respect to the transferred Notes, and indemnify PFL for any other losses that arise out of any registration agreement related to the transferred Notes or Borrower Loans, including as a result of a breach by PMI of any of its representations or warranties made therein;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.fund any arbitration filing or administrative fees or arbitrator fees payable under any registration agreement related to the transferred Notes or Borrower Loans; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.fund any indemnification obligations that arise under any registration agreement entered into by PMI prior to the date of the asset transfer.

On August 17, 2021, PMI and PFL entered into an Asset Transfer and License Agreement (the "IP Asset Transfer and License Agreement"). The IP Asset Transfer and License Agreement, among other things, (i) transfers, assigns, and conveys certain intellectual property assets related to PMI's white label service and PMI's Credit Card product from PMI to PFL, and (ii) grants certain licenses and sublicenses related to the transferred intellectual property assets from PFL to PMI. PMI also agreed to make certain intellectual property filings to provide third parties with notice of the conveyance and to assist PFL with any additional intellectual property filings as may be required. PMI received a one-time fee of $10 from PFL in connection with the foregoing.

The foregoing description of the IP Asset Transfer and License Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the IP Asset Transfer and License Agreement, which is filed as an exhibit hereto and is incorporated herein by reference.

Holders of the transferred Notes are third party beneficiaries under the Asset Transfer Agreement and the Administration Agreement.

Under Section 4.1 of the Indenture, PMI could transfer substantially all of its assets to any person without the consent of the holders of the existing Notes, provided that the transferee expressly assumed all of PMI's obligations under the Indenture and the existing Notes. In that case, the transferee would succeed to and be substituted for PMI, and PMI would be discharged from all of its obligations and covenants, under the Indenture and the existing Notes. Accordingly, on January 22, 2013, PMI, PFL and Wells Fargo Bank, as trustee entered an Amended and Restated Indenture (the "Amended and Restated Indenture"), effective February 1, 2013, which (i) effected such assumption, substitution and discharge (the "Note Assumption"), and (ii) amended and restated the Indenture to reflect the Note Assumption and to make certain other amendments to the Indenture

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as permitted therein. Following the Note Assumption, PFL became the obligor with respect to the transferred Notes and the Amended and Restated Indenture, and PMI no longer has any obligations with respect thereto.

***Credit Agreement***

&nbsp;&nbsp;&nbsp;&nbsp;On November 14, 2022, PMI entered into a Credit Agreement (the "Credit Agreement") with a third-party financial institution, which provides for a $75 million Term Loan maturing on November 14, 2026. PMI's obligations under the Credit Agreement are secured by the assets of PMI and PMI's wholly-owned subsidiaries Prosper Healthcare Lending LLC and BillGuard, Inc. (together, the "Subsidiary Guarantors"), which includes pledges of equity interests of certain subsidiaries that are directly or indirectly owned by PMI, subject to customary exceptions. Under the terms of the Credit Agreement, PFL is also a non-guarantor restricted subsidiary (as defined in the Credit Agreement), pursuant to which PFL is restricted from incurring any indebtedness outside of the ordinary course of business of PMI and the Subsidiary Guarantors.

The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Credit Agreement, which is filed as an exhibit hereto and is incorporated herein by reference.

***Agreements with Significant Shareholders***

On February 27, 2017, PFL entered into a Loan Purchase Agreement (the "Purchase Agreement") with PF LoanCo Funding LLC, a Cayman limited liability company (the "Beneficiary"), and Wilmington Savings Fund Society, FSB, not in its individual capacity but solely in its capacity as trustee of PF LoanCo Trust, a New York common law trust (the "Trust"). The Purchase Agreement sets forth the terms and conditions pursuant to which PFL will sell eligible personal loans in an aggregate amount of up to $5.0 billion to the Purchaser for the benefit of the Beneficiary. As of December 31, 2019, an aggregate of $3.3 billion of loans were purchased under the Purchase Agreement, which does not include $0.3 billion of Whole Loan purchases by members of the Consortium prior to the signing of the Purchase Agreement. The Consortium Purchase Agreement ended in May 2019.

In connection with the Purchase Agreement, on February 27, 2017, PMI entered into a Warrant Agreement with PF WarrantCo Holdings, LP ("PF WarrantCo"), a Delaware limited partnership and an entity related to the Beneficiary, and, for certain limited purposes, New Residential Investment Corp. (the "Series F Warrant Agreement"). Pursuant to the Series F Warrant Agreement, PMI issued to PF WarrantCo three warrant certificates to purchase up to in aggregate 177,720,706 shares of PMI's Series F Preferred Stock at an exercise price of $0.01 per share (the "Warrant Shares").

During the term of the Consortium Purchase Agreement, PF WarrantCo was a beneficial owner of more than 5% of PMI's Common Stock as a result of the Warrant Shares vesting. The Beneficiary is an affiliate under common control with PF WarrantCo.

***Certain Relationships Among Directors and Officers***

None.

***Participation in the Marketplace***

PMI's executive officers, directors and certain affiliates, have opened investor accounts on the marketplace and have made deposits to and withdrawals from their accounts, and invested in portions of borrowers' loan requests from time to time in the past via purchases of Notes, and may do so in the future. The Notes and Borrower Loans were obtained on terms and conditions that were not more favorable than those obtained by other investors.

***Financing Arrangements with Significant Shareholders, Directors and Officers***

For further information regarding stock ownership for executive officers, directors and security holders owning greater than 5% ownership of all PMI classes of voting securities please see Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters—Prosper Marketplace, Inc."

Under the terms of the amended and restated voting agreement, dated April 7, 2015, certain investors in PMI's Convertible Preferred Stock, have each agreed, subject to maintaining certain ownership levels, to exercise their voting rights so as to elect one designee of Francisco Partners III, L.P., one designee of SC Prosper Holdings LLC, one designee of QPL Holdings (PF) LP, one designee of the Series A-1 Convertible Preferred Stock holders, PMI's Chief Executive Officer ("CEO"), one common director designated by the CEO, and two independent directors.

Under the terms of the amended and restated investor rights agreement, dated February 27, 2017, the holders of a majority of the registrable securities of PMI have the right to demand that PMI file a registration statement under the Securities Act, so long as the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $20

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million. These registration rights are subject to specified conditions and limitations. In addition, PMI is promptly required to give written notice to all holders of registrable securities prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of PMI. The amended and restated investor rights agreement also provides that if PMI registers any of its shares for public sale, stockholders with registration rights will have the right to include their shares in the registration statement, subject to specified conditions and limitations. Further, in the amended and restated investor rights agreement, if PMI receives from any holders of registrable securities a written request that PMI effect a registration on Form S-3 (or any successor to Form S-3) or any similar short-form registration statement, PMI is required to use reasonable best efforts to file a Form S-3 registration statement and to effect such registration as would permit or facilitate the sale and distribution of all or such portion of such holder's registrable securities as are specified in the request, so long as the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $2.5 million.

***Indemnification Agreements***

PMI's amended and restated certificate of incorporation provides that it will indemnify its directors and officers to the fullest extent permitted by Delaware law. In addition, PMI has entered into separate indemnification agreements with each of its directors and executive officers. For more information regarding these agreements, see Item 10, "Directors, Executive Officers and Corporate Governance—Prosper Marketplace, Inc.—Limitations on Officers' and Directors' Liability and Indemnification Agreements" for more information.

***Policies and Processes for Transactions Involving Related Parties***

PMI's board of directors has not adopted a formal policy or procedure that must be followed prior to any transaction, arrangement or relationship with a related person, as defined by SEC regulations.

PMI has adopted a corporate Code of Ethics and Corporate Governance (the "Code") that is enforced throughout all levels of management and deals with conflicts of interest, among other things. The Code requires PMI's directors, officers and employees to avoid any conduct or activities that conflict, or appear to conflict, with our interests, or that may make it difficult for the individual to perform their duties objectively. The Code also requires directors and executive officers to disclose any actual or potential conflict of interest to PMI's Chief Compliance Officer, who will report such conflicts to PMI's Audit Committee for review.

PMI's directors and executive officers are required each year to respond to a questionnaire regarding their independence. The questionnaire also requires each director and executive officer to identify if they or an immediate family member have been indebted to, or have been a participant in any material transactions with, PMI or any of its subsidiaries. Additionally, PMI's directors and executive officers are required to disclose on a quarterly basis whether they or an immediate family member had made any direct or indirect investments on our personal loan platform.

The standards applied pursuant to the above-described procedures are to provide comfort that potential conflicts of interest or related party transactions are identified and receive appropriate oversight and review.

***Director Independence***

For information regarding director independence, see Item 10, "Directors, Executive Officers, and Corporate Governance—Prosper Marketplace, Inc.—Director Independence."

**ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES** 

**Prosper Marketplace, Inc. and Prosper Funding LLC**

Deloitte & Touche LLP ("Deloitte") served as PMI and PFL's independent registered public accounting firm for the fiscal year ended December 31, 2022 and is serving in such capacity for the current fiscal year. Deloitte was engaged in October 2014.

The aggregate fees billed by Deloitte for professional services to PMI and PFL were $2,075 thousand and $1,836 thousand in December 31, 2022 and 2021, respectively.

**Audit Fees**

The aggregate fees billed by Deloitte for professional services rendered for PMI and PFL for the audit of annual financial statements, the review of the quarterly financial statements, and services that are normally provided in connection with statutory and regulatory filings or engagements were $1,818 thousand and $1,584 thousand in 2022 and 2021, respectively.

**Audit Related Fees** 

------

The aggregate fees billed by Deloitte for professional assurance and related services reasonably related to the performance of the audit of the PMI and PFL's financial statements, but not included under Audit Fees were $255 thousand and $250 thousand in 2022 and 2021, respectively. These fees are for service organization control assessment.

**Tax Fees**

The aggregate fees billed by Deloitte for 2022 and 2021 for professional services for tax compliance, tax advice and tax planning were zero in 2022 and 2021.

**All Other Fees**

Deloitte billed $2 thousand and $2 thousand, in 2022 and 2021, respectively, related to fees not included in "Audit", "Audit Related Fees" or "Tax Fees."

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**PART IV**

**ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES** 

**(a) Reports of Independent Registered Public Accounting Firms (PCAOB ID No. 34)**

**(a1) <u>[Report of Independent Registered Public Accounting Firm for PMI](#ib8e8259c7615433d9511e731d87713fc_124)</u>**

**(a2) <u>[Report of Independent Registered Public Accounting Firm for Prosper Funding LLC](#ib8e8259c7615433d9511e731d87713fc_223)</u>**

**(b) Documents List**

---

| | |
|:---|:---|
| **Financial Statements** | **Financial Statements** |
| **Prosper Marketplace, Inc.** | |
| <u>[Consolidated Balance Sheets as of December 31, 202](#ib8e8259c7615433d9511e731d87713fc_130)[2](#ib8e8259c7615433d9511e731d87713fc_130)[and 202](#ib8e8259c7615433d9511e731d87713fc_130)</u>1 | <u>[3](#ib8e8259c7615433d9511e731d87713fc_130)</u> |
| <u>[Consolidated Statements of Operations for the years ended December 31, 202](#ib8e8259c7615433d9511e731d87713fc_133)[2](#ib8e8259c7615433d9511e731d87713fc_133)[, 20](#ib8e8259c7615433d9511e731d87713fc_133)[21](#ib8e8259c7615433d9511e731d87713fc_133)[and 20](#ib8e8259c7615433d9511e731d87713fc_133)</u>20 | <u>[5](#ib8e8259c7615433d9511e731d87713fc_133)</u> |
| <u>[Consolidated Statement of Other Comprehensive Loss for the years ended December 31, 202](#ib8e8259c7615433d9511e731d87713fc_136)[2](#ib8e8259c7615433d9511e731d87713fc_136)[, 202](#ib8e8259c7615433d9511e731d87713fc_136)[1](#ib8e8259c7615433d9511e731d87713fc_136)[and 20](#ib8e8259c7615433d9511e731d87713fc_136)</u>20 | <u>[6](#ib8e8259c7615433d9511e731d87713fc_136)</u> |
| <u>[Consolidated Statements of Convertible Preferred Stock and Stockholders' Deficit for the years ended December 31, 202](#ib8e8259c7615433d9511e731d87713fc_139)[2](#ib8e8259c7615433d9511e731d87713fc_139)[, 202](#ib8e8259c7615433d9511e731d87713fc_139)[1](#ib8e8259c7615433d9511e731d87713fc_139)[and 20](#ib8e8259c7615433d9511e731d87713fc_139)</u>20 | <u>[7](#ib8e8259c7615433d9511e731d87713fc_139)</u> |
| <u>[Consolidated Statements of Cash Flows for the years ended December 31, 202](#ib8e8259c7615433d9511e731d87713fc_142)[2](#ib8e8259c7615433d9511e731d87713fc_142)[, 202](#ib8e8259c7615433d9511e731d87713fc_142)[1](#ib8e8259c7615433d9511e731d87713fc_142)[and 20](#ib8e8259c7615433d9511e731d87713fc_142)</u>20 | <u>[8](#ib8e8259c7615433d9511e731d87713fc_142)</u> |
| <u>[Notes to Consolidated Financial Statements](#ib8e8259c7615433d9511e731d87713fc_145)</u> | <u>[9](#ib8e8259c7615433d9511e731d87713fc_145)</u> |
| **Prosper Funding LLC** |  |
| <u>[Consolidated Balance Sheets as of December 31, 202](#ib8e8259c7615433d9511e731d87713fc_229)[2](#ib8e8259c7615433d9511e731d87713fc_229)[and 202](#ib8e8259c7615433d9511e731d87713fc_229)</u>1 | <u>[52](#ib8e8259c7615433d9511e731d87713fc_229)</u> |
| <u>[Consolidated Statements of Operations for the years ended December 31, 202](#ib8e8259c7615433d9511e731d87713fc_232)[2](#ib8e8259c7615433d9511e731d87713fc_232)[, 202](#ib8e8259c7615433d9511e731d87713fc_232)[1](#ib8e8259c7615433d9511e731d87713fc_232)[and 20](#ib8e8259c7615433d9511e731d87713fc_232)</u>20 | <u>[53](#ib8e8259c7615433d9511e731d87713fc_232)</u> |
| <u>[Consolidated Statements of Member's Equity for the years ended December 31, 202](#ib8e8259c7615433d9511e731d87713fc_235)[2](#ib8e8259c7615433d9511e731d87713fc_235)[, 202](#ib8e8259c7615433d9511e731d87713fc_235)[1](#ib8e8259c7615433d9511e731d87713fc_235)[and 20](#ib8e8259c7615433d9511e731d87713fc_235)[2](#ib8e8259c7615433d9511e731d87713fc_235)</u>0 | <u>[54](#ib8e8259c7615433d9511e731d87713fc_235)</u> |
| <u>[Consolidated Statements of Cash Flows for the years ended December 31, 202](#ib8e8259c7615433d9511e731d87713fc_238)[2](#ib8e8259c7615433d9511e731d87713fc_238)[, 202](#ib8e8259c7615433d9511e731d87713fc_238)[1](#ib8e8259c7615433d9511e731d87713fc_238)[and 20](#ib8e8259c7615433d9511e731d87713fc_238)</u>20 | <u>[55](#ib8e8259c7615433d9511e731d87713fc_238)</u> |
| <u>[Notes to Consolidated Financial Statements](#ib8e8259c7615433d9511e731d87713fc_241)</u> | <u>[56](#ib8e8259c7615433d9511e731d87713fc_241)</u> |

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** 

To the Stockholders and Board of Directors of Prosper Marketplace Inc.

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of Prosper Marketplace Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, other comprehensive loss, convertible preferred stock and stockholders' deficit, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matters**

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

**Valuation of Level 3 Financial Instruments and Unobservable Inputs Therein**

–Borrower Loans and Loans Held for Sale, at Fair Value – See *Note 4. Borrow loans, Loans Held for Sale and Notes, at Fair Value*

*–*Servicing Assets – See *Note 6. Servicing assets*

*–*Credit Card Derivative – *See Note 5. Credit Card* 

<u>Critical Audit Matter Description</u>

The Company measures financial instruments at fair value including borrower loans and loans held for sale, servicing assets, and credit card derivative. As of December 31, 2022, borrower loans were $320.6 million, loans held for sale were $499.8 million, servicing assets were $12.6 million, and credit card derivative was $10.8 million. The Company estimates the fair values using discounted cash flow valuation methodologies incorporating significant unobservable inputs and valuation assumptions that are reflective of management's own estimates of assumptions that market participants would use in pricing the instruments and requires

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significant management judgement or estimate. Significant unobservable inputs used in the valuation methodology include the market servicing rate, discount rates, default rates and prepayment rates.

Auditing the methodology and significant unobservable inputs used by management to estimate the fair values of these level 3 financial instruments required a high degree of auditor judgment and subjectivity and an increased extent of effort, including the need to involve our fair value specialists.

<u>How the Critical Audit Matter Was Addressed in the Audit</u>

Our audit procedures related to the valuation of these Level 3 financial instruments and unobservable inputs used by management to estimate the fair value included the following key procedures:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We gained an understanding of the significance of inputs and assumptions using sensitivity analysis, identifying relevant inputs and assumptions for further testing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• With the assistance of our fair value specialists, we developed independent estimates of fair value and compared our estimates to the Company's estimates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We tested the source information derived from the Company's data used in the valuation models.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We evaluated the reasonableness of the market servicing rate assumption used in developing the fair value estimate of the servicing assets.

**Valuation of Convertible Preferred Stock Warrant Liability – See Notes 2 and 12 to the financial statements**

<u>Critical Audit Matter Description</u>

Convertible preferred stock warrants are recorded at fair value and subject to remeasurement to fair value at each balance sheet date. As of December 31, 2022, convertible preferred stock warrant liability was $166.3 million. To estimate the fair value of the convertible preferred stock warrants, the Company determines the business enterprise value of the Company using a variety of valuation methods, including recent transactions in the Company's stock, discounted cash flow models and market based methods, as deemed appropriate under the circumstances applicable at the valuation date. Once the business enterprise value has been estimated, an option pricing model is used to allocate the value to the various classes of equity, including preferred stock. The concluded per share value for the convertible preferred stock warrants is then determined using a Black-Scholes option pricing model.

Auditing the valuation methods used by management to estimate the fair value of the convertible preferred stock warrant liability required a high degree of auditor judgment and subjectivity and an increased extent of effort, including the need to involve our fair value specialists.

<u>How the Critical Audit Matter Was Addressed in the Audit</u>

Our audit procedures related to the valuation of the convertible preferred stock warrant liability included the following key procedures, among others:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We performed inquiries with management and the Company's third-party valuation expert to understand the process for developing, and assumptions used in, the valuation model.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• With the assistance of our fair value specialists we evaluated the convertible preferred stock warrant valuation methodology, assumptions, and fair value results.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We evaluated whether management's assumptions were reasonable including comparing management's historical forecasts of future cash flows to actual results..

*/s/ DELOITTE & TOUCHE LLP*

San Francisco, CA

March 29, 2023

We have served as the Company's auditor since 2014.

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**Prosper Marketplace, Inc.**

**Consolidated Balance Sheets**

**(in thousands, except share and per share amounts)**

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| **Assets:** |  |  |
| &nbsp;&nbsp;Cash and Cash Equivalents | $83446 | $67700 |
| &nbsp;&nbsp;Restricted Cash (1) | 113163 | 167925 |
| &nbsp;&nbsp;Accounts Receivable | 3462 | 1054 |
| &nbsp;&nbsp;Loans Held for Sale, at Fair Value (1) | 499765 | 243170 |
| &nbsp;&nbsp;Borrower Loans, at Fair Value | 320642 | 267626 |
| &nbsp;&nbsp;Property and Equipment, Net | 38814 | 29714 |
| &nbsp;&nbsp;Prepaid and Other Assets (1) | 9208 | 6231 |
| &nbsp;&nbsp;Credit Card Derivative | 10782 | 7 |
| &nbsp;&nbsp;Servicing Assets | 12562 | 8761 |
| &nbsp;&nbsp;Goodwill | 36368 | 36368 |
| &nbsp;&nbsp;Intangible Assets, Net | 192 | 328 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Assets** | $1128404 | $828884 |
| **Liabilities, Convertible Preferred Stock and Stockholders' Deficit:** |  |  |
| &nbsp;&nbsp;Accounts Payable and Accrued Liabilities | $37254 | $25790 |
| &nbsp;&nbsp;Payable to Investors | 85312 | 152794 |
| &nbsp;&nbsp;Notes, at Fair Value | 318704 | 265985 |
| &nbsp;&nbsp;Warehouse Lines (1) | 446762 | 209275 |
| &nbsp;&nbsp;Term Loan | 73407 |  |
| &nbsp;&nbsp;Other Liabilities | 28258 | 23900 |
| &nbsp;&nbsp;Convertible Preferred Stock Warrant Liability | 166346 | 250941 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities** | $1156043 | $928685 |
| &nbsp;&nbsp;Commitments and Contingencies (see Note 16) |  |  |
| &nbsp;&nbsp;Convertible Preferred Stock – $0.01 par value; 444,760,848 shares authorized as of December 31, 2022 and December 31, 2021; 209,613,570 shares issued and outstanding as of December 31, 2022 and December 31, 2021. Aggregate liquidation preference of $370,456 as of December 31, 2022 and 2021. | $322748 | $322748 |
| &nbsp;&nbsp;Less: Convertible Preferred Stock Held by Consolidated VIE (Note 12), 51,247,915 shares issued and outstanding as of December 31, 2022 and December 31, 2021. | (2381) | (2381) |
| **Stockholders' Deficit:** |  |  |
| &nbsp;&nbsp;Common Stock – $0.01 par value; 625,000,000 shares authorized; 75,223,850 shares issued and 74,287,915 shares outstanding as of December 31, 2022; 73,089,929 shares issued and 72,153,994 shares outstanding as of December 31, 2021. | 267 | 245 |
| &nbsp;&nbsp;Additional Paid-In Capital | 158814 | 157256 |
| &nbsp;&nbsp;Less: Treasury Stock | (23417) | (23417) |
| &nbsp;&nbsp;Accumulated Deficit | (483670) | (554252) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Stockholders' Deficit** | $(348006) | $(420168) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities, Convertible Preferred Stock and Stockholders' Deficit** | $1128404 | $828884 |
| (1) Includes amounts in consolidated variable interest entities (VIEs) presented separately in the table below. | (1) Includes amounts in consolidated variable interest entities (VIEs) presented separately in the table below. |  |

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*The accompanying notes are an integral part of these consolidated financial statements.*

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The following table presents the assets and liabilities of consolidated variable interest entities (VIEs), which are included in the Consolidated Balance Sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. Additionally, the assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. On September 27, 2021, assets and liabilities held by the securitization trusts consolidated by PMI as VIEs were removed from the balance sheet as part of the deconsolidation of those entities. See Note 10 - Debt in the Notes to Consolidated Financial Statements for additional information.

---

| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| **Assets of consolidated VIEs, included in total assets above:** |  |  |
| &nbsp;&nbsp;Restricted Cash | $11838 | $5128 |
| &nbsp;&nbsp;Loans Held for Sale, at Fair Value | 499765 | 243170 |
| &nbsp;&nbsp;Prepaid and Other Assets | 3210 | 2846 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total assets of consolidated VIEs** | $514813 | $251144 |
| **Liabilities of consolidated VIEs, included in total liabilities above:** |  |  |
| &nbsp;&nbsp;Warehouse Lines | $446762 | $209275 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities of consolidated VIEs** | $446762 | $209275 |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

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**Prosper Marketplace, Inc.**

**Consolidated Statements of Operations**

**(in thousands, except share and per share amounts)**

---

| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| **Revenues:** |  |  |  |
| **Operating Revenues:** |  |  |  |
| Transaction Fees, Net | $162742 | $89364 | $67335 |
| Servicing Fees, Net | 15113 | 15024 | 18517 |
| (Loss) Gain on Sale of Borrower Loans | (1039) | 7196 | 4816 |
| Other Revenues | 6452 | 3992 | 2711 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Operating Revenues** | 183268 | 115576 | 93379 |
| **Interest Income (Expense):** |  |  |  |
| Interest Income on Borrower Loans and Loans Held for Sale | 86350 | 83107 | 104150 |
| Interest Expense on Notes and Warehouse Lines | (60025) | (50816) | (60127) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Interest Income, Net** | 26325 | 32291 | 44023 |
| Change in Fair Value of Financial Instruments | (9712) | (3241) | (34166) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Net Revenue** | 199881 | 144626 | 103236 |
| **Expenses:** |  |  |  |
| Origination and Servicing | 56457 | 35056 | 29897 |
| Sales and Marketing | 81896 | 35065 | 29259 |
| General and Administrative | 83658 | 73122 | 63384 |
| Change in Fair Value of Convertible Preferred Stock Warrants | (84595) | 138622 | (37677) |
| Gain on Forgiveness of PPP Loan | (8604) |  |  |
| Loss on Deconsolidation of VIEs |  | 1494 |  |
| Impairment Expense |  |  | 445 |
| Interest Expense on Term Loan | 1527 |  |  |
| Other Income, Net | (1335) | (463) | (639) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Expenses** | 129004 | 282896 | 84669 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Net Income (Loss) Before Income Taxes** | 70877 | (138270) | 18567 |
| Income Tax Expense | (295) | (71) | (16) |
| **Net Income (Loss)** | $70582 | $(138341) | $18551 |
| **Plus: Return on Share Purchase** |  |  | 2381 |
| **Less: Net Income Allocated to Participating Securities** | (47350) |  | (15172) |
| **Net Income (Loss) Attributable to Common Stockholders** | $23232 | $(138341) | $5760 |
| **Net Income (Loss) Per Share – Basic** | $0.32 | $(1.95) | $0.08 |
| **Net Income (Loss) Per Share – Diluted** | $0.07 | $(1.95) | $0.02 |
| **Weighted-Average Shares – Basic** | 73291714 | 70767275 | 68592557 |
| **Weighted-Average Shares – Diluted** | 348593594 | 70767275 | 306673586 |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

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**Prosper Marketplace, Inc.**

**Consolidated Statements of Other Comprehensive Income (Loss)**

**(in thousands)**

---

| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| **Net Income (Loss)** | $70582 | $(138341) | $18551 |
| &nbsp;&nbsp;Other Comprehensive Income (Loss), Net of Tax |  |  |  |
| **Comprehensive Income (Loss), Net of Tax** | $70582 | $(138341) | $18551 |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

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**Prosper Marketplace, Inc.**

**Consolidated Statements of Convertible Preferred Stock and Stockholders' Deficit**

**(in thousands, except share amounts)**

---

| | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Convertible Preferred Stock** | **Convertible Preferred Stock** | **Convertible Preferred Stock Held by Consolidated VIE** | **Convertible Preferred Stock Held by Consolidated VIE** | **Common Stock** | **Common Stock** | **Treasury Stock** | **Treasury Stock** | **Additional**<br>**Paid-In**<br>**Capital** | **Accumulated**<br>**Deficit** | **Total** |
| | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Additional**<br>**Paid-In**<br>**Capital** | **Accumulated**<br>**Deficit** | **Total** |
| **Balance at December 31, 2019** | **209613570** | $**322748** | **—** | $**—** | **73629136** | $**208** | **(5177235)** | $**(23417)** | $**151416** | $**(434462)** | $**(306255)** |
| Exercise of vested stock options |  |  |  |  | 687471 | 7 |  |  | 8 |  | 15 |
| Stock-based compensation expense |  |  |  |  |  |  |  |  | 2147 |  | 2147 |
| Purchase of Convertible Preferred Stock by consolidated VIE Prosper Grantor Trust (Note 12) |  |  | (51247915) | (2381) |  |  |  |  | 2381 |  | 2381 |
| Net Income |  |  |  |  |  |  |  |  |  | 18551 | 18551 |
| **Balance at December 31, 2020** | **209613570** | **322748** | **(51247915)** | **(2381)** | **74316607** | **215** | **(5177235)** | **(23417)** | **155952** | **(415911)** | **(283161)** |
| Exercise of vested stock options |  |  |  |  | 3014622 | 30 |  |  | 31 |  | 61 |
| Stock-based compensation expense |  |  |  |  |  |  |  |  | 1273 |  | 1273 |
| Net Loss |  |  |  |  |  |  |  |  |  | (138341) | (138341) |
| **Balance at December 31, 2021** | **209613570** | $**322748** | **(51247915)** | $**(2381)** | **77331229** | $**245** | **(5177235)** | $**(23417)** | $**157256** | $**(554252)** | $**(420168)** |
| Exercise of vested stock options |  |  |  |  | 2133921 | 22 |  |  | 32 |  | 54 |
| Stock-based compensation expense |  |  |  |  |  |  |  |  | 1526 |  | 1526 |
| Net Income |  |  |  |  |  |  |  |  |  | 70582 | 70582 |
| **Balance at December 31, 2022** | **209613570** | $**322748** | **(51247915)** | $**(2381)** | **79465150** | $**267** | **(5177235)** | $**(23417)** | $**158814** | $**(483670)** | $**(348006)** |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

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**Prosper Marketplace, Inc.**

**Consolidated Statements of Cash Flows** 

**(in thousands)**

---

| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| **Cash Flows from Operating Activities:** |  |  |  |
| Net Income (Loss) | $70582 | $(138341) | $18551 |
| Adjustments to Reconcile Net Income (Loss) to Net Cash (Used in) Provided by Operating Activities: | Adjustments to Reconcile Net Income (Loss) to Net Cash (Used in) Provided by Operating Activities: |  |  |
| &nbsp;&nbsp;Change in Fair Value of Financial Instruments | 9712 | 3241 | 34160 |
| &nbsp;&nbsp;Depreciation and Amortization | 10924 | 9839 | 8349 |
| &nbsp;&nbsp;Amortization of Operating Lease Right-of-Use Asset | 3545 | 3774 | 3487 |
| &nbsp;&nbsp;Gain on Termination of Operating Lease Right-of-Use Asset | (88) |  |  |
| &nbsp;&nbsp;Impairment of Operating Lease Right-of-Use Asset |  |  | 445 |
| &nbsp;&nbsp;Gain on Sale of Borrower Loans | (12957) | (7973) | (5830) |
| &nbsp;&nbsp;Change in Fair Value of Servicing Rights | 9157 | 8454 | 9189 |
| &nbsp;&nbsp;Stock-Based Compensation Expense | 1326 | 1136 | 1913 |
| &nbsp;&nbsp;Loss on Deconsolidation of VIEs |  | 1494 |  |
| &nbsp;&nbsp;Change in Fair Value of Convertible Preferred Stock Warrants | (84595) | 138622 | (37677) |
| &nbsp;&nbsp;Gain on Forgiveness of PPP Loan | (8604) |  |  |
| &nbsp;&nbsp;Other, Net | 12 | 2027 | 1675 |
| &nbsp;&nbsp;Changes in Operating Assets and Liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchase of Loans Held for Sale at Fair Value | (3063729) | (1712705) | (1338082) |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from Sales and Principal Payments of Loans Held for Sale at Fair Value | 2783971 | 1770822 | 1254474 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts Receivable | (2408) | (449) | 1090 |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid and Other Assets | (2194) | 639 | 498 |
| &nbsp;&nbsp;&nbsp;&nbsp;Credit Card Derivative | 3304 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts Payable and Accrued Liabilities | 11530 | 7776 | (2187) |
| &nbsp;&nbsp;&nbsp;&nbsp;Payable to Investors | (67482) | 28700 | 23002 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other Liabilities | 3092 | (3493) | (5391) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Cash (Used in) Provided by Operating Activities | (334902) | 113563 | (32334) |
| **Cash Flows from Investing Activities:** |  |  |  |
| Purchase of Borrower Loans Held at Fair Value | (284921) | (231998) | (133644) |
| Proceeds from Sales and Principal Payments of Borrower Loans Held at Fair Value | 202119 | 236861 | 279658 |
| Purchases of Property and Equipment | (13063) | (12041) | (8359) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Cash (Used in) Provided by Investing Activities | (95865) | (7178) | 137655 |
| **Cash Flows from Financing Activities:** |  |  |  |
| Proceeds from Issuance of Notes Held at Fair Value | 285115 | 231933 | 133228 |
| Payments of Notes Held at Fair Value | (202308) | (172250) | (149409) |
| Principal Payments on Notes Issued by Securitization Trust |  | (87700) | (192771) |
| Principal Payments on Certificates Issued by Securitization Trust |  | (14935) | (22136) |
| Net cash and restricted cash outflows from Deconsolidation of VIEs |  | (6821) |  |
| Proceeds from Warehouse Lines | 235870 | 68800 | 126149 |
| Principal payments on Warehouse Lines |  | (101900) | (15300) |
| Proceeds from Term Loan (Note 10) | 73500 |  |  |
| Principal payments on financing lease | (78) | (76) | (84) |
| Proceeds from PPP Loan |  |  | 8447 |
| Payment for Debt Issuance Costs | (402) | (1740) |  |
| Proceeds from Exercise of Stock Options | 54 | 61 | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Cash Provided by (Used in) Financing Activities | 391751 | (84628) | (111861) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash | (39016) | 21757 | (6540) |
| Cash, Cash Equivalents and Restricted Cash at Beginning of the Year | 235625 | 213868 | 220408 |
| Cash, Cash Equivalents and Restricted Cash at End of the Year | $196609 | $235625 | $213868 |
| **Supplemental Disclosure of Cash Flow Information:** |  |  |  |
| Cash Paid for Interest | $58114 | $49923 | $57697 |
| Cash paid for operating leases included in the measurement of lease liabilities | 5770 | 5381 | 5524 |
| Non-Cash Investing Activity - Accrual for Property and Equipment, Net | 1154 | 971 | 833 |
| Non-Cash Financing Activity - Forgiveness of PPP Loan | 8604 |  |  |
| Non-Cash Investing Activity - Deconsolidation of Borrower Loans, at Fair Value |  | 78361 |  |
| Non-Cash Financing Activity - Deconsolidation of Notes Issued by Securitization Trust |  | 69709 |  |
| Non-Cash Financing Activity - Deconsolidation of Certificates Issued by Securitization Trust, at Fair Value |  | 13979 |  |
| Right-of-use assets obtained in exchange for new financing lease obligation |  |  | 239 |
| **Reconciliation to Amounts on Consolidated Balance Sheets** |  |  |  |
| Cash and Cash Equivalents | $83446 | $67700 | $50145 |
| Restricted Cash | 113163 | 167925 | 163723 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Cash, Cash Equivalents and Restricted Cash | $196609 | $235625 | $213868 |

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*The accompanying notes are an integral part of these consolidated financial statements.*

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**PROSPER MARKETPLACE, INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE 1. ORGANIZATION AND BUSINESS**

Prosper Marketplace, Inc. ("PMI" or the "Company") was incorporated in the state of Delaware on March 22, 2005. Except as the context requires otherwise, as used in these notes to consolidated financial statements of PMI, "Prosper," "we," "us," and "our" refer to PMI and its wholly-owned subsidiaries, on a consolidated basis.

PMI developed a peer-to-peer online credit marketplace (the "marketplace"), and in February 2013, transferred ownership of the marketplace to Prosper Funding LLC ("PFL"), its wholly-owned subsidiary. All of the borrower payment dependent notes ("Notes") issued and sold through the marketplace today are issued and sold by PFL. PFL also operates the marketplace and facilitates the origination of unsecured, personal loans by WebBank ("Borrower Loans"), an FDIC-insured, Utah-chartered industrial bank, through the marketplace. Pursuant to a Loan Account Program Agreement between PMI and WebBank, PMI manages the operation of the marketplace as an agent of WebBank in connection with the submission of loan applications by potential borrowers. PMI also manages the origination of related loans by WebBank and the funding of such Borrower Loans by WebBank. On February 1, 2013, PFL entered into an Administration Agreement with PMI in its capacity as licensee, corporate administrator, loan marketplace administrator and loan and Note servicer, pursuant to which PMI provides certain back office support, loan platform administration and loan servicing to PFL.

A borrower who wishes to obtain a Borrower Loan through the marketplace must post a loan listing on the marketplace. Listings are allocated to one of two investor funding channels: (i) the "Note Channel," which allows investors to commit to purchase Notes from PFL, the payments of which are dependent on PFL's receipt of payments made on the corresponding Borrower Loan; and (ii) the "Whole Loan Channel," which allows investors to commit to purchase 100% of a Borrower Loan directly from Prosper. As of December 31, 2022, the marketplace is open to investors in 30 states and the District of Columbia. Additionally, as of December 31, 2022, the marketplace is open to borrowers in 48 states and the District of Columbia. Currently our marketplace does not operate internationally.

In December 2021, the Company launched its Prosper Credit Card product in partnership with Coastal Community Bank ("Coastal"), through which eligible consumers are extended unsecured credit through Prosper-branded Credit Cards. In accordance with our program agreement with Coastal, the receivables associated with these Credit Cards are maintained on the balance sheet of Coastal. Customer accounts are then randomly designated as either Prosper Allocations or Coastal Allocations on an approximate 90% to 10% split, respectively. Each party receives 100% of the interest income and is responsible for the credit losses on its allocated customer accounts. PMI is responsible for verified fraud losses across the entire portfolio and a portion of straight charge-off losses. Credit Card receivables are not available on the Company's personal loan marketplace for investment purposes.

**NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES**

**Basis of Presentation**

The accompanying consolidated financial statements include the accounts of PMI and its wholly owned subsidiaries including PFL, Prosper Healthcare Lending LLC ("PHL"), BillGuard, Inc. ("BillGuard"), and its consolidated VIEs including Prosper Warehouse I Trust ("PWIT"), Prosper Warehouse II Trust ("PWIIT") and Prosper Grantor Trust ("PGT"). All intercompany balances and transactions between PMI and its subsidiaries have been eliminated in consolidation. PMI and PFL's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP").

**Use of Estimates**

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures, including contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates, judgments and assumptions include but are not limited to the following: valuation of Loans Held for Sale, Borrower Loans and associated Notes, valuation of servicing rights, loan trailing fee liability and Credit Card Derivative, valuation allowance on deferred tax assets, stock-based compensation expense, Intangible Assets, Goodwill, Convertible Preferred Stock Warrant Liability, Repurchase Obligations and contingent liabilities. These judgments,

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estimates and assumptions are inherently subjective in nature and actual results may differ from these estimates and assumptions.

**Consolidation of Variable Interest Entities**

A variable interest entity (VIE) is a legal entity that has either a total equity investment that is insufficient to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. Prosper's variable interest arises from contractual, ownership or other monetary interests in the entity, which change with fluctuations in the fair value of the entity's net assets. A VIE is consolidated by its primary beneficiary, which is the party that has both the power to direct the activities that most significantly impact the VIE's economic performance, and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Prosper consolidates a VIE when it is deemed to be the primary beneficiary. Prosper assesses whether or not it is the primary beneficiary of a VIE on an ongoing basis.

**Transfers of Financial Assets**

Prosper accounts for transfers of financial assets as sales when it has surrendered control over the transferred assets. Control is generally considered to have been surrendered when the transferred assets have been legally isolated from Prosper, the transferee has the right to pledge or exchange the assets without any significant constraints, and Prosper has not entered into a repurchase agreement, does not hold unconditional call options and has not written put options on the transferred assets. In assessing whether control has been surrendered, Prosper considers whether the transferee would be a consolidated affiliate and the impact of all arrangements or agreements made contemporaneously with, or in contemplation of the transfer, even if they were not entered into at the time of transfer. Prosper measures gain or loss on sale of financial assets as the net proceeds received on the sale less the carrying amount of the loans sold. The net proceeds of the sale include the fair value of any assets obtained or liabilities incurred as part of the transaction, including, but not limited to Servicing Assets, retained securities, and recourse obligations.

**Fair Value Measurement**

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial instruments measured at fair value consist principally of Borrower Loans, Loans Held for Sale (Note 4), Servicing Assets (Note 6), Credit Card Derivative (Note 5), Loan Trailing Fee Liabilities (Note 9), Debt (Note 10) and Convertible Preferred Stock Warrant Liability (Note 12). The estimated fair values of other financial instruments, including Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable and Accrued Liabilities, and Payable to Investors approximate their carrying values because of their short-term nature. The estimated fair values of the Term Loan and Warehouse Lines (Note 10) do not approximate their carrying values due primarily to differences in the stated and market rates associated with these instruments.

The fair value hierarchy includes a three-level classification, which is based on whether the inputs to the valuation methodology used for measurement are observable:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly.

Level 3 — Unobservable inputs.

When developing fair value measurements, Prosper maximizes the use of observable inputs and minimizes the use of unobservable inputs. However, for certain instruments Prosper must utilize unobservable inputs in determining fair value due to the lack of observable inputs in the market, which requires greater judgment in measuring fair value. In instances where there is limited or no observable market data, fair value measurements for assets and liabilities are determined using assumptions that management believes a market participant would use in pricing the asset or liability.

As observable market prices are not available for the Borrower Loans, Loans Held for Sale, Notes, Servicing Assets and Credit Card Derivative, or for similar assets and liabilities, Prosper believes the Borrower Loans, Loans Held for Sale, Notes, Servicing Assets and Credit Card Derivative are considered level 3 financial instruments. Prosper primarily uses a discounted cash flow model to estimate their fair value, and key assumptions used in valuation include default rates and prepayment rates derived from market data and historical performance and discount rates based on estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics.

The obligation to pay principal and interest on any series of Notes is equal to the loan payments, if any, that are received on the corresponding Borrower Loan, net of our servicing fee which is 1.0% of the outstanding balance. The fair value election for Notes and Borrower Loans allows both the assets and the related liabilities to receive similar accounting treatment

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for expected losses which is consistent with the subsequent cash flows to investors that are dependent upon borrower payments. As such, the fair value of a series of Notes is approximately equal to the fair value of the corresponding Borrower Loan, adjusted for the 1.0% servicing fee and the timing of loan purchase, Note issuance and borrower payments. As a result, the valuation of the Notes uses the same methodology and assumptions as the Borrower Loans, except that the Notes incorporate the 1.0% servicing fee and any differences in timing in payments. The effective interest rate associated with a group of Notes is less than the interest rate earned on the corresponding Borrower Loan due to the 1.0% servicing fee.

Refer to Note 7 for additional fair value disclosures.

**Cash and Cash Equivalents**

Cash includes various unrestricted deposits with investment-grade rated financial institutions. Cash equivalents consist of highly liquid marketable securities with original maturities of three months or less at the time of purchase and consist primarily of money market funds, commercial paper, US treasury securities and US agency securities. Cash equivalents are recorded at cost, which approximates fair value.

At times, our cash balances may exceed federally insured amounts and potentially subject the Company to a concentration of credit risk. The Company believes that no significant concentration of credit risk exists with respect to these balances based on its assessment of the creditworthiness of these financial institutions.

**Restricted Cash**

Restricted cash consists primarily of cash deposits, money market funds and short term certificate of deposit accounts held as collateral as required for loan funding and servicing activities, and cash that investors or Prosper have on the marketplace that has not yet been invested in Borrower Loans or disbursed to the investor.

**Borrower Loans, Loans Held for Sale and Notes**

Borrower Loans are funded either through the Note Channel or through the Whole Loan Channel. Through the Note Channel, Prosper purchases Borrower Loans from WebBank, then issues Notes and holds the Borrower Loans until maturity. The obligation to repay a series of Notes issued through the Note Channel is dependent upon the repayment of the associated Borrower Loan. Borrower Loans funded and Notes issued through the Note Channel are carried on Prosper's consolidated balance sheets as assets and liabilities, respectively.

Prosper uses Warehouse Lines to purchase Loans Held for Sale that may be subsequently contributed to securitization transactions or sold to investors. Loans Held for Sale are included in "Loans Held for Sale, at Fair Value" in the Consolidated Balance Sheets. See Note 10 - Debt for more details on Warehouse Lines.

Borrower Loans and Loans Held for Sale are purchased from WebBank. Prosper places Borrower Loans and Loans Held for Sale on non-accrual status when they are 120 days past due. When a loan is placed on non-accrual status, Prosper stops accruing interest and reverses all accrued but unpaid interest as of such date. Additionally, Prosper charges-off Borrower Loans and Loans Held for Sale when they are 120 days past due. The fair value of loans 120 or more days past due generally consists of the expected recovery from debt sales in subsequent periods.

Prosper has elected the fair value option for Borrower Loans, Loans Held for Sale and Notes. Changes in fair value of Borrower Loans funded through the Note Channel are largely offset by the changes in fair value of Notes due to the borrower payment-dependent design of the Notes. Changes in fair value of Loans Held for Sale are recorded through Proper's earnings and Prosper collects interest on Loans Held for Sale. Changes in the fair values of Borrower Loans, Loans Held for Sale and Notes are included in Change in Fair Value of Financial Instruments on the accompanying Consolidated Statements of Operations.

Prosper primarily uses a discounted cash flow model to estimate the fair value of Borrower Loans, Loans Held for Sale and Notes. The key assumptions used in the valuation include default rates and prepayment rates derived primarily from historical performance, and discount rates based on estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics.

**Credit Card Derivative**

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The Company evaluated the terms of the Credit Card program agreement with Coastal and determined that it contained features that met the definition of derivatives under Accounting Standards Codification ("ASC") 815, *Derivatives and Hedging*. These features are freestanding financial instruments (as defined under ASC 480, *Distinguishing Liabilities from Equity*), and have been valued separately as derivatives. A right of offset exists between the derivatives, and they are presented net on the accompanying consolidated balance sheets. Changes in the fair value of the Credit Card Derivative are recorded in Change in Fair Value of Financial Instruments on the accompanying Consolidated Statements of Operations.

Refer to Note 5, Credit Card, for additional details on revenues and expenses related to the Credit Card product.

**Servicing Assets**

Prosper records Servicing Assets at their estimated fair values for servicing rights retained when Prosper sells Borrower Loans to unrelated third-party buyers. The change in fair value of Servicing Assets is recognized in Servicing Fees, Net. The gain or loss on a loan sale is recorded in (Loss) Gain on Sale of Borrower Loans while the fair value of the servicing rights, which is based on the degree to which the contractual loan servicing fee is above or below an estimated market servicing rate is recorded in Servicing Assets on the Consolidated Balance Sheets.

Prosper uses a discounted cash flow model to estimate the fair value of the loan Servicing Assets which considers the contractual servicing fee revenue that Prosper earns on the Borrower Loans, the estimated market servicing rates to service such loans, the prepayment rates, the default rates and the current principal balances of the Borrower Loans.

**Property and Equipment**

Property and Equipment consists of computer equipment, office furniture and equipment, leasehold improvements, software purchased or developed for internal use and web site development costs. Property and Equipment is stated at cost, less accumulated depreciation and amortization, and is computed using the straight-line method based upon estimated useful lives of the assets. Estimated useful lives of the assets are as follows:

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| | | | |
|:---|:---|:---|:---|
| Furniture and fixtures | | | 7 years |
| Office equipment | | | 5 years |
| Computers and equipment | | | 3 years |
| Leasehold improvements | 5 | - | 8 years |
| Software and website development costs | 1 | - | 5 years |

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The costs to develop software for the website and other internal uses are capitalized when management has authorized and committed project funding, when preliminary development efforts are successfully completed, and when it is probable that the project will be completed and the software will be used as intended. Capitalized software and website development costs primarily include software licenses acquired, fees paid to outside consultants and salaries and payroll-related costs for employees directly involved in the development efforts.

Costs incurred prior to meeting these criteria, together with costs incurred for training and maintenance, are expensed. Costs incurred for upgrades and enhancements that are considered to be probable to result in additional functionality are capitalized. Capitalized costs are included in Property and Equipment and amortized to expense using the straight-line method over their expected lives. Software and website development assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of software and website development assets to be held and used is measured by a comparison of the carrying amount of the asset group to the future net undiscounted cash flows expected to be generated by the asset group. If such software and website development assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software and website development asset group.

**Leases**

Management determines if an arrangement is a lease at inception. Operating lease right-of-use ("ROU") assets and operating lease liabilities are included on the Consolidated Balance Sheets in Property and Equipment, Net and in Other Liabilities, respectively. For certain leases with original terms of twelve months or less, PMI recognizes the lease expense as incurred and does not record ROU assets and lease liabilities.

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If a contract contains a lease, management evaluates whether it should be classified as an operating or finance lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most of PMI's leases do not provide an implicit rate, management uses an incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The operating lease ROU assets are evaluated for impairment utilizing the same impairment model used for Property and Equipment.

**Goodwill and Intangibles**

Goodwill associated with business combinations is computed by recognizing the portion of the purchase price that is not tied to individually identifiable and separately recognizable assets. Goodwill is assigned to the Company's reporting units at the acquisition date according to the expected economic benefits that the acquired business will provide to the reporting unit. A reporting unit is a business operating segment or a component of a business operating segment. The Company identifies its reporting units based on how the operating segments and reporting units are managed. Accordingly, the Company allocated the entire balance of goodwill to the Personal Loan reportable and operating segment. Refer to Note 20 for further information on the Company's reportable and operating segments.

Goodwill is not amortized but is tested for impairment annually or whenever indications of impairment exist. Annual impairment testing occurs on October 1. Impairment exists whenever the carrying value of Goodwill exceeds its implied fair value. Adverse changes in impairment indicators such as loss of key personnel, increased regulatory oversight or unplanned changes in operations could result in impairment. PMI did not recognize any Goodwill impairment during the years ended December 31, 2022, 2021 and 2020.

Costs of internally developing any intangibles is expensed as incurred. Intangible Assets identified through the acquisitions of American Healthcare Lending and BillGuard include customer relationships, technology and a brand name. The user base and customer relationship Intangible Assets are being amortized on an accelerated basis over a three to ten year period. The technology and brand name Intangible Assets were amortized on a straight-line basis over three to five years and one year, respectively.

**Payable to Investors**

Payable to Investors primarily represents the obligation to investors related to cash held in an account for the benefit of investors and payments-in-process received from borrowers.

**Term Loan**

Prosper entered into a Credit Agreement, which provided for a Term Loan with a third-party financial institution in November 2022, which is more fully described in Note 10. This Term Loan is carried at amortized cost, net of discounts and issuance costs, which are subsequently amortized to Interest Expense on Term Loan over the life of the underlying agreement.

**Warehouse Lines**

Warehouse Lines are carried at amortized cost. Prosper defers specific incremental costs directly related to entering into the Warehouse Lines and subsequently amortizes them into interest expense over the life of the arrangements.

**Convertible Preferred Stock Warrant Liability**

Prosper has entered into varying arrangements with investors to issue preferred stock warrants in exchange for their participation as a purchaser of Borrower Loans. In all cases, these warrants are free standing financial instruments due to their status as legally detached and separately exercisable warrants without conditions requiring Prosper to repurchase those warrants or the underlying preferred shares. These freestanding warrants are accounted for in accordance with ASC 480, *Distinguishing Liabilities from Equity*. Under ASC 480, vested freestanding warrants to purchase the Company's convertible redeemable preferred stock are classified as a liability on the Consolidated Balance Sheets and carried at fair value because the warrants may conditionally obligate the Company to transfer assets at some point in the future. The Company records the warrants at fair value on issuance. The warrants are subject to remeasurement to fair value at each balance sheet date, and any change in their fair value is recognized as "Change in Fair Value of Convertible Preferred Stock Warrants" in the Consolidated Statements of Operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants, the completion of a deemed liquidation event or the conversion of convertible redeemable preferred stock into Common Stock.

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**Loan Trailing Fee Liability**

On July 1, 2016, Prosper signed a series of agreements with WebBank which, among other things, includes an additional program fee (the "Loan Trailing Fee") paid to WebBank in connection with the performance of each loan sold to Prosper. These agreements became effective as of August 1, 2016. The Loan Trailing Fee is dependent on the amount and timing of principal and interest payments made by borrowers of the underlying loans, irrespective of whether the loans are sold by Prosper, and gives WebBank an ongoing financial interest in the performance of the loans it originates. This fee is paid by Prosper to WebBank over the term of the respective loans and is a function of the principal and interest payments made by borrowers of such loans. In the event that principal and interest payments are not made with respect to any loan, Prosper is not required to make the related Loan Trailing Fee payment. The obligation to pay the Loan Trailing Fee for any loan sold to Prosper is recorded at fair value at the time of the origination of such loan within Other Liabilities and recorded as a reduction of "Transaction Fees, net". Any changes in the fair value of this liability are recorded in "Servicing Fees, Net" on the Consolidated Statements of Operations. The fair value of the Loan Trailing Fee represents the present value of the expected monthly Loan Trailing Fee payments, which takes into consideration certain assumptions related to expected prepayment rates and defaults rates.

**Revenue Recognition**

Revenue primarily results from Transaction and Servicing Fees and Net Interest Income earned. Fees include Transaction Fees for our services performed on behalf of WebBank to originate a loan, as well as program fees and broker fees generated from our Credit Card product and Home Equity products, respectively. PMI also has other smaller sources of revenue reported as Other Revenues, including referral and incentive fees.

***Transaction Fees***

Prosper has a customer contract with WebBank to facilitate the origination of all Borrower Loans through Prosper's marketplace. In exchange for these services, Prosper earns a transaction fee from WebBank that is recognized when performance is complete and upon the successful origination of a Borrower Loan. The transaction fee Prosper earns is determined by the term and credit grade of the Borrower Loan that is facilitated on Prosper's marketplace, and ranges from 1.0% to 5.0% of the original principal amount of each Borrower Loan that WebBank originates. Prosper records the transaction fee net of any fees paid to WebBank because Prosper does not receive an identifiable benefit from WebBank other than the borrower loan that has been recognized at fair value.

The Company also generates various Credit Card program fees through its partnership with Coastal. These include interchange fees, annual fees and late fees, which compensate Prosper for its role in marketing and growing the Credit Card product. Interchange and late fees are recognized as they are generated each month, while annual fees received are deferred and recognized over the annual period to which they relate.

Additionally, the Company generates broker fees on Home Equity products through its partnership with Spring EQ.

***Servicing Fees***

Investors who purchase Borrower Loans from Prosper typically pay Prosper a servicing fee which is generally set at 1.0% per annum of the outstanding principal balance of the borrower loan prior to applying the current payment, plus an additional 0.075% per annum to cover the Loan Trailing Fee. The servicing fee compensates Prosper for the costs incurred in servicing the borrower loan, including managing payments from borrowers, managing payments to investors and maintaining investors' account portfolios. Prosper records Servicing Fees from investors as a component of operating revenue when received.

Under the Credit Card program agreement, Prosper is responsible for servicing the entire underlying Credit Card portfolio. Coastal pays the Company a 1% per annum servicing fee on the daily outstanding balance of receivables designated as Coastal Allocations. To the extent these servicing fees do not exceed the market servicing rate a market participant would require to service the entire Credit Card portfolio, the Company records a servicing obligation liability and measures it at fair value throughout the servicing period. Changes in the fair value of the servicing obligation liability are recorded in Servicing Fees.

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***(Loss) Gain on Sale of Borrower Loans***

Prosper recognizes gains or losses on the sale of Borrower Loans when it sells Borrower Loans to third parties. Prosper measures gain or loss on sale of Borrower Loans as the net proceeds received on a sale less the fair value of the Borrower Loans sold. The net proceeds of the sale represent the fair value of any assets obtained or liabilities incurred as part of the transaction, including, but not limited to Servicing Assets, retained securities, repurchase obligations and any incentives provided or received at the time of sale.

***Interest Income on Borrower Loans and Loans Held for Sale and Interest Expense on Notes and Warehouse Lines***

Prosper recognizes interest income on Borrower Loans and Loans Held for Sale using the accrual method based on the stated interest rate to the extent we believe it to be collectible. We record interest expense on the corresponding Notes, at Fair Value, Notes Issued by Securitization Trust, Certificates Issued by Securitization Trust, and Warehouse Lines based on the contractual interest rates.

***Other Revenues***

Other Revenues consist primarily of credit referral fees. These fees are earned from partner companies for the referral of customers on the Company's platform. The transaction price is a fixed amount per referral and is recognized by the Company upon a successful referral. Other revenues also include incentive fees earned from partner companies through established incentive programs and miscellaneous net fees related to the Company's Credit Card program.

As of December 31, 2022, Prosper had no contract assets, contract liabilities or deferred contract costs. As of December 31, 2022, Prosper had no unsatisfied performance obligations related to Transaction Fees or Other Revenues.

**Advertising Costs**

Advertising costs are expensed when incurred and are included in "Sales and Marketing" expense in the accompanying Consolidated Statements of Operations. Prosper incurred advertising costs of $15.0 million, $6.1 million and $6.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

**Stock-Based Compensation**

Management determines the fair value of the Company's stock options issued to employees on the date of grant using the Black-Scholes option pricing model, which is impacted by the fair value of Common Stock as well as by changes in assumptions that include, but are not limited to, the expected Common Stock price volatility over the term of the option awards, the expected term of the awards, risk-free interest rates and the expected dividend yield.

PMI recognizes compensation expense for stock-based awards on a straight-line basis over the period during which an employee is required to provide services in exchange for the award (the vesting period of the award). Stock-based compensation expense is recognized only for those awards expected to vest. PMI estimates future forfeitures at the date of grant and revises the estimates, if necessary, in subsequent periods if actual forfeitures differ from estimates.

Stock-based awards issued to non-employees are marked-to-market up until the point that the awards measurement period has been achieved. Compensation expense for stock options issued to non-employees is calculated using the Black-Scholes option pricing model and is recorded over the vesting period of the award.

**Income Taxes**

The asset and liability method is used to account for income taxes. Under this method, deferred income tax assets and liabilities are based on the differences between the financial statement carrying values and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Prosper's policy is to include interest and penalties related to gross unrecognized tax benefits within its provision for income taxes. U.S. Federal, California and other state income tax returns are filed. Prosper is not currently undergoing any income tax examinations. Due to the cumulative net operating loss, generally all tax years remain open.

Prosper recognizes benefits from uncertain tax positions only if management believes that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

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**Other Income, Net**

Other Income, Net consists primarily of interest income from Cash and Cash Equivalents and sublease income.

**Recent Accounting Pronouncements**

***Accounting Standards Issued, to be Adopted by the Company in Future Periods***

In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848)," which provides optional expedients and exceptions for applying GAAP on contract modifications and hedge accounting, in order to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative referenced rates, such as the Secured Overnight Financing Rate. The optional guidance, which became effective on March 12, 2020, could be applied through December 31, 2022. In December 2022, the FASB issued No 2022-06 extending the sunset date of the relief provided under ASU No. 2020-04 to December 31, 2024. The Company is currently evaluating the impact reference rate reform will have on its contracts that reference LIBOR in order to determine whether to adopt this guidance.

**NOTE 3. PROPERTY AND EQUIPMENT, NET**

Property and Equipment, Net consists of the following at the dates presented (in thousands):

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Internal-use software and website development costs | $49818 | $41816 |
| Operating lease right-of-use assets | 27051 | 17485 |
| Computer equipment | 13444 | 15090 |
| Office equipment and furniture | 2810 | 2961 |
| Leasehold improvements | 7157 | 7167 |
| Assets not yet placed in service | 5877 | 5224 |
| Property and equipment | 106157 | 89743 |
| Less: Accumulated depreciation and amortization | (67343) | (60029) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Property and Equipment, Net | $38814 | $29714 |

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Depreciation and amortization expense for Property and Equipment for the years ended December 31, 2022, 2021 and 2020 was $10.8 million, $9.7 million and $8.1 million, respectively. Prosper capitalized internal-use software and website development costs in the amount of $11.0 million, $9.8 million and $8.3 million for the years ended December 31, 2022, 2021 and 2020, respectively. Additionally, disclosures around the operating lease right-of-use assets are included in Note 15.

**NOTE 4. BORROWER LOANS, LOANS HELD FOR SALE AND NOTES, AT FAIR VALUE**

The fair value of the Borrower Loans originated and Notes issued through the Note Channel is estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The primary assumptions used to value such Borrower Loans and Notes include default rates, prepayment rates and recoveries derived from historical performance and discount rates applied to each credit grade based on the perceived credit risk of each credit grade. The obligation to pay principal and interest on any series of notes is equal to the payments, if any, received on the corresponding borrower loan, net of the servicing fee. As such, the fair value of the Notes is approximately equal to the fair value of the Borrower Loans originated through the Note Channel, adjusted for the servicing fee and the timing of borrower payments subsequently

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disbursed to the note holders. The effective interest rate associated with any series of notes will be less than the interest rate earned on the corresponding borrower loan due to the servicing fee.

The fair value of Borrower Loans is estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The primary assumptions used to value such borrower loans include default and prepayment rates derived from historical performance and discount rates based on the rates of return that investors would require when investing in financial instruments with similar characteristics.

Prosper Warehouse I Trust ("PWIT") and Prosper Warehouse II Trust ("PWIIT"), consolidated VIEs, purchase Loans Held for Sale (collectively "Warehouse Loans") from the Company through warehouse arrangements with national banking associations and an asset manager. See Note 10 - Debt for more details. Prosper utilizes Warehouse Lines to finance Loans Held for Sale that may be subsequently contributed to securitization transactions or sold to investors. The fair value of the Loans Held for Sale is estimated using the same methodology used to value Borrower Loans.

As of December 31, 2022 and 2021, Borrower Loans, Loans Held for Sale and Notes were as follows (in thousands):

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Borrower Loans** | **Borrower Loans** | **Loans Held for Sale** | **Loans Held for Sale** | **Notes** | **Notes** |
| | **2022** | **2021** | **2022** | **2021** | **2022** | **2021** |
| Aggregate principal balance outstanding | $333294 | $265232 | $512076 | $242278 | $336555 | $267415 |
| Fair value adjustments | (12652) | 2394 | (12311) | 892 | (17851) | (1430) |
| **Fair value** | $320642 | $267626 | $499765 | $243170 | $318704 | $265985 |

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**Borrower Loans** 

As of December 31, 2022, outstanding Borrower Loans had original terms to maturity of 24, 36, 48 or 60 months, had monthly payments with fixed interest rates ranging from 5.31% to 33.00% and had various original maturity dates through December 2027. At December 31, 2021, outstanding Borrower Loans had original terms to maturity of either 36 months or 60 months, had monthly payments with fixed interest rates ranging from 5.31% to 31.82% and had various original maturity dates through December 2026.

As of December 31, 2022, the Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of $2.7 million and a fair value of $0.3 million. As of December 31, 2021, the Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of $0.9 million and a fair value of $0.1 million. We place loans on non-accrual status when they are over 120 days past due. As of December 31, 2022 and 2021, Borrower Loans in non-accrual status had a fair value of $0.3 million and $0.1 million, respectively.

**Loans Held for Sale**

As of December 31, 2022, outstanding Loans Held for Sale had original terms to maturity of 24, 36, 48 or 60 months, had monthly payments with fixed interest rates ranging from 5.31% to 33.00% and had various original maturity dates through December 2027. At December 31, 2021, outstanding Loans Held for Sale had original terms to maturity of either 36 months or 60 months, had monthly payments with fixed interest rates ranging from 5.31% to 31.82% and had various original maturity dates through December 2026. The Company earned interest income earned on Loans Held for Sale of $41.0 million and $32.6 million for the years ending December 31, 2022 and 2021, respectively.

As of December 31, 2022, Loans Held for Sale that were 90 days or more delinquent, had an aggregate principal amount of $2.1 million and a fair value of $0.2 million. As of December 31, 2021, Loans Held for Sale that were 90 days or more delinquent, had an aggregate principal amount of $0.8 million and a fair value of $0.1 million. PMI places loans on non-accrual status when they are over 120 days past due. As of December 31, 2022 and December 31, 2021, Loans Held for Sale in non-accrual status had a fair value of $0.2 million and $0.1 million, respectively.

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**NOTE 5. CREDIT CARD**

Prosper recognizes gains and losses on the Credit Card Derivative within Change in Fair Value of Financial Instruments on the accompanying Consolidated Statement of Operations. For the year ended December 31, 2022 the Company recognized $9.8 million of unrealized gains from fair value changes on the Credit Card Derivative. Gains from settled transactions underlying the Credit Card Derivative were $4.3 million for the year ended December 31, 2022, and are also included in Change in Fair Value of Financial Instruments on the accompanying Consolidated Statements of Operations. The fair value of the Credit Card Derivative is $10.8 million as of December 31, 2022.

The Company records revenue from various fees earned from the Credit Card program, including interchange fees, annual fees and late fees, net of a portion of the interchange fees that must be remitted to Coastal. For the year ended December 31, 2022, these fees totaled $7.0 million and are included in Transaction Fees on the accompanying Consolidated Statement of Operations.

Under the program agreement, Prosper is responsible for servicing the entire underlying Credit Card portfolio. Coastal pays the Company a 1% per annum servicing fee on the daily outstanding balance of receivables designated as Coastal Allocations. To the extent these servicing fees do not exceed the market servicing rate a market participant would require to service the entire Credit Card portfolio, the Company records a servicing obligation liability and measures it at fair value through the servicing period. As of December 31, 2022, the net balance of this servicing obligation liability is $3.5 million and is included in Other Liabilities on the accompanying consolidated financial statements. Changes in the fair value of the servicing obligation liability are recorded in Servicing Fees, Net on the accompanying Consolidated Statement of Operations, and totaled $3.7 million for the year ended December 31, 2022.

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**NOTE 6. SERVICING ASSETS**

Prosper accounts for Servicing Assets at their estimated fair values with changes in fair values recorded in Servicing Fees, Net on the accompanying Consolidated Statements of Operations. The initial asset or liability is recognized when Prosper sells Borrower Loans to unrelated third-party buyers through the Whole Loan Channel and the servicing rights are retained. The Servicing Assets are measured at fair value throughout the servicing period. The total gains and losses recognized on the sale of such Borrower Loans on the Consolidated Statement of Operations were a loss of $1.0 million, a gain of $7.2 million and a gain of $4.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, Borrower Loans that were sold, but for which Prosper retained servicing rights, had a total outstanding principal balance of $3.2 billion, original terms to maturity of 24, 36, 48 or 60 months, monthly payments with fixed interest rates ranging from 5.31% to 33.00%, and various original maturity dates through December 2027. As of December 31, 2021, Borrower Loans that were sold, but for which Prosper retained servicing rights, had a total outstanding principal balance of $2.3 billion, original terms to maturity of either 36 months or 60 months, monthly payments with fixed interest rates ranging from 5.31% to 31.82%, and various original maturity dates through December 2026.

Contractually-specified servicing fees and ancillary fees totaling $28.9 million, $24.8 million and $28.9 million are included on the Consolidated Statements of Operations in Servicing Fees, Net for the years ended December 31, 2022, 2021 and 2020, respectively.

**Fair Value Valuation Method**

Prosper uses a discounted cash flow valuation methodology generally consisting of developing an estimate of future cash flows that are expected to occur over the life of a financial instrument and then discounts those cash flows at a rate of return that results in the fair value amount.

Significant unobservable inputs presented in the table within Note 7 below are those that Prosper considers significant to the estimated fair values of the Level 3 Servicing Assets. The following is a description of the significant unobservable inputs provided in the table.

***Market Servicing Rate***

Prosper estimates adequate market servicing rates that would fairly compensate a substitute servicer should one be required, which includes the profit that would be demanded in the marketplace. This rate is stated as a fixed percentage of outstanding principal balance on a per annum basis. With the assistance of a valuation specialist, Prosper estimates these market servicing rates based on observable market rates for other loan types in the industry and bids from subservicing providers, adjusted for the unique loan attributes that are present in the specific loans that Prosper sells and services and information from backup service providers.

***Discount Rate***

The discount rate is a rate of return used to discount future expected cash flows to arrive at a present value, which represents the fair value of the loan servicing rights. We use a range of discount rates for the Servicing Assets based on comparable observed valuations of similar assets and publicly available disclosures related to servicing valuations, with comparability adjustments made to account for differences with Prosper's servicing assets.

***Default Rate***

The default rate presented in Note 7 is an annualized, average estimate considering all Borrower Loan categories (i.e., risk ratings and duration), and represents an aggregate of conditional default rate curves for each credit grade or Borrower Loan category. Each point on a particular Borrower Loan category's curve represents the percentage of principal expected to default per period based on the term and age of the underlying Borrower Loans. The assumption regarding defaults directly reduces servicing revenues because the amount of servicing revenues received is based on the amount collected each period.

***Prepayment Rate***

The prepayment rate presented in Note 7 is an annualized, average estimate considering all Borrower Loan categories (i.e., risk ratings and duration), and represents an aggregate of conditional prepayment rate curves for each credit grade or Borrower Loan category. Each point on a particular Borrower Loan category's curve represents the percentage of principal expected to prepay per period based on the term and age of the underlying Borrower Loans. Prepayments reduce servicing revenues as they shorten the period over which we expect to collect fees on the Borrower Loans, which is used to project future servicing revenues.

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**NOTE 7. FAIR VALUE OF ASSETS AND LIABILITIES** 

For a description of the fair value hierarchy and Prosper's fair value methodologies, see Note 2 - Summary of Significant Accounting Policies. Prosper did not transfer any assets or liabilities in or out of Level 3 during the year ended December 31, 2022 or 2021.

**Financial Instruments Recorded at Fair Value**

The fair value of the Borrower Loans, Loans Held for Sale, Notes, Servicing Assets and Liabilities and loan trailing fee liability are estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The primary assumptions used in the discounted cash flow model include default and prepayment rates primarily derived from historical performance and discount rates applied to each credit grade based on the perceived credit risk of each credit grade.

The fair value of the Credit Card Derivative is also estimated using a discounted cash flow model using certain assumptions. The key assumptions used in the valuation include default and prepayment rates derived primarily from historical performance and relevant market data, adjusted as necessary based on the perceived credit risk of the underlying portfolio. In addition, discount rates based on estimates of the rates of return that investors would require when investing in similar credit card portfolios are applied to the individual freestanding derivatives.

When utilizing market data and bid-ask spreads, Prosper uses the price within the bid-ask spread that best represents fair value. When quoted prices do not exist, Prosper uses prices obtained from independent third-party pricing services to measure the fair value of investment assets. Prosper's primary independent pricing service provides prices based on observable trades and discounted cash flows that incorporate observable information, such as yields for similar types of securities (a benchmark interest rate plus observable spreads) and weighted-average maturity for the same or similar securities. The Company compares the prices obtained from its primary independent pricing service to the prices obtained from the additional independent pricing services to determine if the price obtained from the primary independent pricing service is reasonable. The Company does not adjust the prices received from independent third-party pricing services unless such prices are inconsistent with the definition of fair value and result in a material difference in the recorded amounts.

The Convertible Preferred Stock Warrant Liability is valued using a Black-Scholes option pricing model. Refer to Note 12 for additional information.

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The following tables present the fair value hierarchy for assets and liabilities measured at fair value (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| **Balance at December 31, 2022** | **Level 1 Inputs** | **Level 2 Inputs** | **Level 3 Inputs** | **Total** |
| **Assets:** | | | | |
| Borrower Loans, at Fair Value | $— | $— | $320642 | $320642 |
| Loans Held for Sale, at Fair Value |  |  | 499765 | 499765 |
| LIBOR rate swaption (Note 10) |  | 1289 |  | 1289 |
| Servicing Assets |  |  | 12562 | 12562 |
| Credit Card Derivative (Note 5) |  |  | 10782 | 10782 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Assets** | $— | $1289 | $843751 | $845040 |
| **Liabilities:** |  |  |  |  |
| Notes, at Fair Value | $— | $— | $318704 | $318704 |
| Convertible Preferred Stock Warrant Liability |  |  | 166346 | 166346 |
| Loan Trailing Fee Liability (Note 9) |  |  | 3290 | 3290 |
| Credit Card servicing obligation liability (Note 5) |  |  | 3720 | 3720 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities** | $— | $— | $492060 | $492060 |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Balance at December 31, 2021** | **Level 1 Inputs** | **Level 2 Inputs** | **Level 3 Inputs** | **Total** |
| **Assets:** | | | | |
| Borrower Loans, at Fair Value | $— | $— | $267626 | $267626 |
| Loans Held for Sale, at Fair Value |  |  | 243170 | 243170 |
| LIBOR rate swaption |  | 66 |  | 66 |
| Servicing Assets |  |  | 8761 | 8761 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Assets** | $— | $66 | $519557 | $519623 |
| **Liabilities:** |  |  |  |  |
| Notes, at Fair Value | $— | $— | $265985 | $265985 |
| Convertible Preferred Stock Warrant Liability |  |  | 250941 | 250941 |
| Loan Trailing Fee Liability (Note 9) |  |  | 2161 | 2161 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities** | $— | $— | $519087 | $519087 |

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As PMI's Borrower Loans, Loans Held for Sale, Notes, Convertible Preferred Stock Warrant Liability, Servicing Assets and Liability, Credit Card Derivative and loan trailing fee liability do not trade in an active market with readily observable prices, the Company uses significant unobservable inputs to measure the fair value of these assets and liabilities. Financial instruments are categorized in the Level 3 valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable and unobservable inputs. Prosper did not transfer any assets or liabilities in or out of Level 3 for the year ended December 31, 2022 and 2021.

**Significant Unobservable Inputs**

The following tables present quantitative information about the ranges of significant unobservable inputs used for the Company's Level 3 fair value measurements at December 31, 2022 and 2021:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2022** | **2022** | **2021** | **2021** |
| **Borrower Loans, Loans Held for Sale, and Notes:** |  |  |  |  |
| Discount rate | 5.4% | 13.2% | 4.2% | 14.3% |
| Default rate | 1.8% | 18.7% | 2.0% | 14.1% |

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At December 31, 2022 and 2021, the discounted cash flow methodology used to estimate the Note fair values used the same projected cash flows as the related Borrower Loans.

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| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2022** | **2022** | **2021** | **2021** |
| **Servicing Assets:** |  |  |  |  |
| Discount rate | 15.0% | 25.0% | 15.0% | 25.0% |
| Default rate | 2.0% | 19.3% | 1.5% | 14.1% |
| Prepayment rate | 14.2% | 28.0% | 10.2% | 32.3% |
| Market servicing rate <sup>(1)</sup> <sup>(2)</sup> | 0.648% | 0.842% | 0.648% | 0.842% |
| <sup>(1)</sup> Servicing assets associated with loans enrolled in a relief program offered by the Company in response to the COVID-19 pandemic as of December 31, 2022 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption of 64.8 basis points. | <sup>(1)</sup> Servicing assets associated with loans enrolled in a relief program offered by the Company in response to the COVID-19 pandemic as of December 31, 2022 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption of 64.8 basis points. | <sup>(1)</sup> Servicing assets associated with loans enrolled in a relief program offered by the Company in response to the COVID-19 pandemic as of December 31, 2022 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption of 64.8 basis points. | <sup>(1)</sup> Servicing assets associated with loans enrolled in a relief program offered by the Company in response to the COVID-19 pandemic as of December 31, 2022 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption of 64.8 basis points. | <sup>(1)</sup> Servicing assets associated with loans enrolled in a relief program offered by the Company in response to the COVID-19 pandemic as of December 31, 2022 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption of 64.8 basis points. |
| <sup>(2)</sup> Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2022 and 2021, the market rate for collection fees and non-sufficient fund fees was assumed to be 6 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 70.8 basis points to 90.2 basis points and 70.8 basis points to 90.2 basis points, respectively. | <sup>(2)</sup> Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2022 and 2021, the market rate for collection fees and non-sufficient fund fees was assumed to be 6 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 70.8 basis points to 90.2 basis points and 70.8 basis points to 90.2 basis points, respectively. | <sup>(2)</sup> Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2022 and 2021, the market rate for collection fees and non-sufficient fund fees was assumed to be 6 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 70.8 basis points to 90.2 basis points and 70.8 basis points to 90.2 basis points, respectively. | <sup>(2)</sup> Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2022 and 2021, the market rate for collection fees and non-sufficient fund fees was assumed to be 6 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 70.8 basis points to 90.2 basis points and 70.8 basis points to 90.2 basis points, respectively. | <sup>(2)</sup> Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2022 and 2021, the market rate for collection fees and non-sufficient fund fees was assumed to be 6 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 70.8 basis points to 90.2 basis points and 70.8 basis points to 90.2 basis points, respectively. |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2022** | **2022** | **2021** | **2021** |
| **Loan Trailing Fee Liability:** |  |  |  |  |
| Discount rate | 15.0% | 25.0% | 15.0% | 25.0% |
| Default rate | 2.0% | 19.3% | 1.5% | 14.1% |
| Prepayment rate | 14.2% | 28.0% | 10.2% | 32.3% |

---

Ranges of inputs are not applied to the Credit Card Derivative and Credit Card servicing obligation liability, as they are valued at the portfolio level. Refer below for a summary of the significant unobservable inputs associated with those Level 3 fair value measurements.

**Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis**

The following table presents additional information about Level 3 Loans Held for Sale, Borrower Loans, Notes and Certificates Issued by Securitization Trust measured at fair value on a recurring basis for the year ended December 31, 2022 and 2021 (in thousands):

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Assets** | **Assets** | **Liabilities** | **Liabilities** | |
| | **Borrower<br>Loans** | **Loans Held<br>for Sale** | **Notes** | **Certificates Issued by Securitization Trust** |<br>**Total** |
| **Fair Value at January 1, 2021** | $378263 | $274621 | $(208379) | $(22917) | $421588 |
| Purchase of Borrower Loans/Issuance of Notes | 232000 | 1712705 | (231933) |  | 1712772 |
| Principal repayments | (260689) | (164165) | 172250 | 14934 | (237670) |
| Borrower Loans sold to third parties | (2664) | (1580164) |  |  | (1582828) |
| Other changes | (1518) | (249) | 167 | 113 | (1487) |
| Change in fair value | 595 | 422 | 1910 | (6110) | (3183) |
| Deconsolidation of VIEs | (78361) |  |  | 13980 | (64381) |
| **Fair Value at December 31, 2021** | 267626 | 243170 | (265985) |  | 244811 |
| Purchase of Borrower Loans/Issuance of Notes | 284921 | 3063729 | (285115) |  | 3063535 |
| Principal repayments | (187599) | (184090) | 202308 |  | (169381) |
| Borrower Loans sold to third parties | (14520) | (2599881) |  |  | (2614401) |
| Other changes | 650 | 1804 | (742) |  | 1712 |
| Change in fair value | (30436) | (24967) | 30830 |  | (24573) |
| **Fair Value at December 31, 2022** | $320642 | $499765 | $(318704) | $— | $501703 |

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The following table presents additional information about the Level 3 Servicing Assets measured at fair value on a recurring basis for the year ended December 31, 2022 and 2021 (in thousands):

---

| | |
|:---|:---|
| | **Servicing Assets** |
| **Fair Value at January 1, 2021** | $9242 |
| Additions | 7973 |
| Recognition of Servicing Assets upon deconsolidation of VIEs | 215 |
| Less: Change in fair value | (8669) |
| **Fair Value at December 31, 2021** | $8761 |
| Additions | 12957 |
| Less: Change in fair value | (9156) |
| **Fair Value at December 31, 2022** | $12562 |

---

The following table presents additional information about the Level 3 Credit Card Derivative measured at fair value on a recurring basis for the year ended December 31, 2022 and 2021 (in thousands):

---

| | |
|:---|:---|
| | **Credit Card Derivative** |
| **Fair Value at December 31, 2020** | $— |
| Change in fair value | 7 |
| **Fair Value at December 31, 2021** | $7 |
| Change in fair value | 9784 |
| Gains from settled transactions | 4295 |
| Less: Net payments received | (3304) |
| **Fair Value at December 31, 2022** | $10782 |

---

The following table presents additional information about the Level 3 Credit Card servicing obligation liability measured at fair value on a recurring basis for the year ended December 31, 2022 (in thousands). There was no material activity related to this account for the year ended December 31, 2021.

---

| | |
|:---|:---|
| | **Credit Card Servicing Obligation Liability** |
| **Fair Value at December 31, 2021** | $— |
| Change in fair value | 3720 |
| **Fair Value at December 31, 2022** | $3720 |

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The following table presents additional information about the Level 3 Convertible Preferred Stock Warrant Liability measured at fair value on a recurring basis for the year ended December 31, 2022 and 2021 (in thousands):

---

| | |
|:---|:---|
| | **Convertible Preferred Stock Warrant Liability** |
| **Fair Value at January 1, 2021** | $112319 |
| Change in fair value | 138622 |
| **Fair Value at December 31, 2021** | $250941 |
| Change in fair value | (84595) |
| **Fair Value at December 31, 2022** | $166346 |

---

***Loan Trailing Fee***

The fair value of the Loan Trailing Fee represents the present value of the expected monthly Loan Trailing Fee payments, which takes into consideration certain assumptions related to expected prepayment rates and default rates using a discounted cash flow model. The assumptions used are the same as those used for the valuation of Servicing Assets, as described below.

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The following table presents additional information about Level 3 Loan Trailing Fee Liability measured at fair value on a recurring basis for the year ended December 31, 2022 and 2021 (in thousands):

---

| | |
|:---|:---|
| | **Loan Trailing Fee Liability** |
| **Balance at January 1, 2021** | $2233 |
| Issuances | 1775 |
| Cash payment of Loan Trailing Fee | (2100) |
| Change in fair value | 253 |
| **Balance at December 31, 2021** | $2161 |
| Issuances | 3070 |
| Cash payment of Loan Trailing Fee | (2245) |
| Change in fair value | 304 |
| **Balance at December 31, 2022** | $3290 |

---

**Significant Recurring Level 3 Fair Value Input Sensitivity**

Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2022 and 2021 for Borrower Loans and Loans Held for Sale are presented in the following table (in thousands, except percentages).

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| | | |
|:---|:---|:---|
| **Borrower Loans and Loans Held for Sale:** | **December 31, 2022** | **December 31, 2021** |
| Fair value, using the following assumptions: | $820407 | $510796 |
| &nbsp;&nbsp;&nbsp;&nbsp; Weighted-average discount rate | 6.72% | 5.64% |
| &nbsp;&nbsp;&nbsp;&nbsp; Weighted-average default rate | 9.31% | 10.08% |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point increase in discount rate | $812061 | $505732 |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point increase in discount rate | $803927 | 500763 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point decrease in discount rate | $828975 | $516064 |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point decrease in discount rate | $837773 | 521437 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.1 multiplier to default rate | $810657 | $506362 |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.2 multiplier to default rate | $800989 | 501921 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.9 multiplier to default rate | $830238 | $515326 |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.8 multiplier to default rate | $840156 | 519851 |

---

Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2022 and 2021 for Notes are presented in the following table (in thousands, except percentages).

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---

| | | |
|:---|:---|:---|
| **Notes:** | **December 31, 2022** | **December 31, 2021** |
| Fair value, using the following assumptions: | $318704 | $265985 |
| &nbsp;&nbsp;&nbsp;&nbsp; Weighted-average discount rate | 6.87% | 5.76% |
| &nbsp;&nbsp;&nbsp;&nbsp; Weighted-average default rate | 11.36% | 10.70% |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point increase in discount rate | $315456 | $263326 |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point increase in discount rate | $312291 | 260735 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point decrease in discount rate | $322037 | $268714 |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point decrease in discount rate | $325461 | 271516 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.1 multiplier to default rate | $314892 | $263644 |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.2 multiplier to default rate | $311112 | 261318 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.9 multiplier to default rate | $322547 | $268340 |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.8 multiplier to default rate | $326425 | 270711 |

---

Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2022 and 2021 for Servicing Assets is presented in the following table (in thousands, except percentages).

---

| | | |
|:---|:---|:---|
| **Servicing Assets:** | **December 31, 2022** | **December 31, 2021** |
| Fair value, using the following assumptions: | $12562 | $8761 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Weighted-average market servicing rate | 0.650% | 0.650% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Weighted-average prepayment rate | 18.47% | 20.82% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Weighted-average default rate | 13.38% | 12.54% |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market servicing rate increase of 0.025% | $11708 | $8203 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market servicing rate decrease of 0.025% | $13415 | $9320 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.1 multiplier to prepayment rate | $12286 | $8568 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.9 multiplier to prepayment rate | $12842 | $8957 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.1 multiplier to default rate | $12305 | $8646 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.9 multiplier to default rate | $12820 | $8878 |

---

Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2022 for the Credit Card Derivative is presented in the following table (in thousands, except percentages).

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---

| | |
|:---|:---|
| **Credit Card Derivative:** | **December 31, 2022** |
| Fair value, using the following assumptions: | $10782 |
| &nbsp;&nbsp;&nbsp;&nbsp;Discount rate on Prosper Allocations | 26.23% |
| &nbsp;&nbsp;&nbsp;&nbsp;Discount rate on Coastal Program Fee | 9.26% |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepayment rate applied to Credit Card portfolio | 10.08% |
| &nbsp;&nbsp;&nbsp;&nbsp;Default rate applied to Credit Card portfolio | 13.34% |
| Fair value resulting from: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point increase in both discount rates | $10699 |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point increase in both discount rates | $10618 |
| Fair value resulting from: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point decrease in both discount rates | $10866 |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point decrease in both discount rates | $10951 |
| Fair value resulting from: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.1 multiplier to prepayment rate | $10625 |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.9 multiplier to prepayment rate | $10942 |
| Fair value resulting from: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.1 multiplier to default rate | $8001 |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.9 multiplier to default rate | $13641 |

---

Key economic assumptions and the sensitivity of the fair value to immediate changes in those assumptions at December 31, 2022 for Credit Card servicing obligation liability is presented in the following table (in thousands, except percentages).

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| | |
|:---|:---|
| **Credit Card servicing obligation liability:** | **December 31, 2022** |
| Fair value, using the following assumptions: | 3720 |
| &nbsp;&nbsp;&nbsp;&nbsp;Discount rate on Credit Card portfolio servicing obligation | 9.26% |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepayment rate applied to Credit Card portfolio | 10.08% |
| &nbsp;&nbsp;&nbsp;&nbsp;Default rate applied to Credit Card portfolio | 13.34% |
| &nbsp;&nbsp;&nbsp;&nbsp;Market servicing rate | 2.00% |
| Fair value resulting from: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point increase in discount rate | $3677 |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point increase in discount rate | $3616 |
| Fair value resulting from: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point decrease in discount rate | $3774 |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point decrease in discount rate | $3830 |
| Fair value resulting from: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.1 multiplier to prepayment rate | $3662 |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.9 multiplier to prepayment rate | $3779 |
| Fair value resulting from: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.1 multiplier to default rate | $3636 |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.9 multiplier to default rate | $3806 |

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These sensitivities are hypothetical and should be evaluated with care. The effect on fair value of a variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.

**Assets and Liabilities Not Recorded at Fair Value**

The following tables present the fair value hierarchy for assets and liabilities not recorded at fair value (in thousands):

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Balance at December 31, 2022** | **Carrying Amount** | **Level 1 Inputs** | **Level 2 Inputs** | **Level 3 Inputs** | **Fair Value** |
| **Assets:** | | | | | |
| Cash and Cash Equivalents | $83446 | $83446 | $— | $— | $83446 |
| Restricted Cash - Cash and Cash Equivalents | 108284 | 108284 |  |  | 108284 |
| Restricted Cash - Certificates of Deposit | 4879 |  | 4879 |  | 4879 |
| Accounts Receivable | 3462 |  | 3462 |  | 3462 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Assets** | $200071 | $191730 | $8341 | $— | $200071 |
| **Liabilities:** |  |  |  |  |  |
| Accounts Payable and Accrued Liabilities | $37254 | $— | $37254 | $— | $37254 |
| Payable to Investors | 85312 |  | 85312 |  | 85312 |
| Warehouse Lines | 446762 |  | 444329 |  | 444329 |
| Term Loan (Note 10) | 73407 |  | 76191 |  | 76191 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities** | $642735 | $— | $643086 | $— | $643086 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Balance at December 31, 2021** | **Carrying Amount** | **Level 1 Inputs** | **Level 2 Inputs** | **Level 3 Inputs** | **Fair Value** |
| **Assets:** | | | | | |
| Cash and Cash Equivalents | $67700 | $67700 | $— | $— | $67700 |
| Restricted Cash - Cash and Cash Equivalents | 163047 | 163047 |  |  | 163047 |
| Restricted Cash - Certificates of Deposit | 4878 |  | 4878 |  | 4878 |
| Accounts Receivable | 1054 |  | 1054 |  | 1054 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Assets** | $236679 | $230747 | $5932 | $— | $236679 |
| **Liabilities:** |  |  |  |  |  |
| Accounts Payable and Accrued Liabilities | $25790 | $— | $25790 | $— | $25790 |
| Payable to Investors | 152794 |  | 152794 |  | 152794 |
| Warehouse Lines | 209275 |  | 211177 |  | 211177 |
| Paycheck Protection Program loan (Note 10) | 8590 |  | 8556 |  | 8556 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities** | $396449 | $— | $398317 | $— | $398317 |

---

The estimated fair values of Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable and Accrued Liabilities and Payable to Investors approximate their carrying values because of their short-term nature.

------

**NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS, NET** 

**Goodwill**

Prosper's goodwill balance of $36.4 million at December 31, 2022 did not change during the year ended December 31, 2022. The Company recorded no goodwill impairment for the years ended December 31, 2022, 2021 and 2020.

**Other Intangible Assets, Net** 

The following table presents the detail of other Intangible Assets subject to amortization as of the following dates (dollars in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| | **Gross**<br>**Carrying Value** | **Accumulated**<br>**Amortization** | **Net**<br>**Carrying Value** | **Remaining**<br>**Useful Life**<br>**(In Years)** |
| Developed technology | $3060 | $(3060) | $— |  |
| User base and customer relationships | 5050 | (4858) | 192 | 2.3 |
| Brand name | 60 | (60) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Intangible Assets subject to amortization** | $8170 | $(7978) | $192 |  |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| | **Gross**<br>**Carrying Value** | **Accumulated**<br>**Amortization** | **Net**<br>**Carrying Value** | **Remaining**<br>**Useful Life**<br>**(In Years)** |
| Developed technology | $3060 | $(3060) | $— |  |
| User base and customer relationships | 5050 | (4722) | 328 | 3.3 |
| Brand name | 60 | (60) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Intangible Assets subject to amortization** | $8170 | $(7842) | $328 |  |

---

The Company recorded no additional intangibles for the years ended December 31, 2022 and 2021. For the years ended December 31, 2022, 2021 and 2020, the Company recorded no intangible asset impairment. Prosper's intangible asset balance was $0.2 million and $0.3 million at December 31, 2022 and 2021, respectively. The user base and customer relationships intangible assets are being amortized on an accelerated basis over a three-to-ten year period.

Amortization expense for the years ended December 31, 2022, 2021 and 2020 was $0.1 million, $0.2 million and $0.2 million, respectively. Estimated amortization of purchased Intangible Assets for future periods is as follows (in thousands):

---

| | |
|:---|:---|
| | **Amounts** |
| Years Ending December 31, |  |
| 2023 | $107 |
| 2024 | 85 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Amortization Expenses** | $192 |

---

------

**NOTE 9. OTHER LIABILITIES**

Other Liabilities consists of the following (in thousands):

---

| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Operating lease liabilities (Note 15) | $16351 | $11026 |
| Deferred revenue | 3880 | 1196 |
| Credit Card servicing obligation liability (Note 5) | 3720 |  |
| Loan trailing fee liability | 3290 | 2161 |
| Deferred income tax liability | 658 | 560 |
| Financing lease liabilities |  | 78 |
| Paycheck Protection Program loan (Note 10) |  | 8590 |
| Other | 359 | 289 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Other Liabilities** | $28258 | $23900 |

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**NOTE 10. DEBT**

**Term Loan**

***Credit Agreement***

On November 14, 2022, the Company entered into a Credit Agreement with a third-party financial institution, which provides for a $75 million Term Loan maturing on November 14, 2026. Proceeds received from the Term Loan were net of an original issue discount and the Company also incurred approximately $0.4 million in debt issuance costs. Both the original issue discount and the debt issuance costs are being amortized over the life of the Term Loan to interest expense using the effective interest method.

***Interest***

Borrowings under the Term Loan accrue interest at the Secured Overnight Financing Rate ("SOFR") plus 9.0% per annum. In addition, all borrowings under the Term Loan accrue payment-in-kind ("PIK") interest at 2.0% per annum. Any accrued PIK interest that remains unpaid at the end of each month is added to the outstanding principal balance of the Term Loan.

***Guarantees and Collateral***

PMI's obligations under the Term Loan are guaranteed by PHL and BillGuard. All obligations under the Credit Agreement are secured by a first priority, perfected lien on substantially all of the assets of PMI (subject to exclusions such as certain cash amounts and deposit accounts), PHL and BillGuard, as well as equity interests in all of PMI's subsidiaries with the exception of PGT.

***Covenants and Other Matters***

The Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions and thresholds, restrict PMI's ability to incur certain new indebtedness; incur certain liens; sell or otherwise dispose of all or substantially all its assets; make loans, advances, and guarantees; and pay dividends or make other distributions on equity interests.

In addition, the Credit Agreement contains certain financial covenants with which the Company must remain in compliance as of the last business day of each month during the life of the Term Loan:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a minimum tangible net worth

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a minimum net liquidity

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a maximum leverage ratio

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a minimum asset coverage ratio

------

The Company is in compliance with all covenants as of December 31, 2022, as well as applicable monthly periods for the year then ended.

The Credit Agreement also contains certain customary representations and warranties and affirmative covenants, and certain reporting obligations. In addition, the Term Loan lender will be permitted to accelerate all outstanding borrowings and exercise other specified remedies upon the occurrence of certain events of default (subject to certain grace periods and exceptions), which include, among other things, payment defaults, breaches of representations and warranties, covenant defaults, certain cross-defaults to other indebtedness, certain events of bankruptcy and insolvency, certain judgments and changes of control.

**Prosper Warehouse Trust Agreements**

Prosper's consolidated VIEs, PWIT and PWIIT (together, "Warehouse VIEs"), each entered into an agreement (together, "Warehouse Agreements") with certain lenders for committed revolving lines of credit ("Warehouse Lines") during 2018 and 2019, respectively. In connection with the Warehouse Agreements, the Warehouse VIEs each entered into a security agreement with a bank as administrative agent and a national banking association as collateral trustee and paying agent. Proceeds under the Warehouse Lines may only be used to purchase certain unsecured consumer loans and related rights and documents from Prosper and to pay fees and expenses related to the Warehouse Lines. Both Warehouse VIEs are consolidated because Prosper is the primary beneficiary of the VIEs. The assets of the VIEs can be used only to settle obligations of the VIEs. Additionally, the creditors of the Warehouse Lines have no recourse to the general credit of Prosper. The loans held in the Warehouse VIEs are included in Loans Held for Sale, at Fair Value and Warehouse Lines are in Warehouse Lines in the consolidated balance sheets.

Both Warehouse Agreements contain the same certain covenants including restrictions on each Warehouse VIE's ability to incur indebtedness, pledge assets, merge or consolidate and enter into certain affiliate transactions. Each Warehouse Agreement also requires Prosper to maintain a minimum tangible net worth of $25 million, minimum net liquidity of $15 million and a maximum leverage ratio of 5:1. Tangible net worth is defined as the sum of (i) (A) Convertible Preferred Stock, (B) total Stockholders' Deficit and (C) Convertible Preferred Stock Warrant Liability, less the sum of (ii) (A) goodwill and (B) intangible assets. Net liquidity is defined as the sum of cash, cash equivalents and Available for Sale Investments. The leverage ratio is defined as the ratio of total consolidated indebtedness other than non-recourse securitization indebtedness, non-recourse or limited recourse warehouse indebtedness and borrower dependent notes, to tangible net worth. As of December 31, 2022, Prosper was in compliance with the covenants under each Warehouse Agreement.

***PWIT Warehouse Line***

On January 19, 2018, through PWIT, Prosper entered into a Warehouse Agreement for a Warehouse Line. Effective June 12, 2018, the Warehouse Agreement was amended. The amendments included increasing the committed line of credit from $100 million to $200 million, extending the term of the PWIT Warehouse Line (including the final maturity date), amending the monthly unused commitment fee and reducing the rate at which the PWIT Warehouse Line bears interest.

Subsequently the Warehouse Agreement was amended on June 20, 2019 to extend the facility, to reduce the interest rate and unused commitment fee and to expand the eligibility criteria for unsecured consumer loans that can be financed through the PWIT Warehouse Line. It was amended again on May 19, 2021 to extend the facility, to reduce the interest and advance rates and to include provisions for an alternative benchmark rate in light of the ongoing phaseout of LIBOR.

Under the amended agreement, proceeds of loans made under the PWIT Warehouse Line may be borrowed, repaid and reborrowed until the earlier of June 20, 2023 or the occurrence of any accelerated amortization event or event of default. Repayment of any outstanding proceeds will be made over the 24 month period ending June 20, 2025, excluding the occurrence of any accelerated amortization event or event of default.

Under the amended agreement, the PWIT Warehouse Line bears interest at a rate of an established benchmark rate (currently LIBOR) plus 2.75% and has an advance rate of 87% for the majority of collateral loans, with lower advance rates for certain collateral loans. Additionally, the PWIT Warehouse Line bears a monthly unused commitment fee of 0.50% per annum on the undrawn portion available under the PWIT Warehouse Line.

As of December 31, 2022, Prosper had $201.2 million in debt and accrued interest outstanding under the PWIT Warehouse Line. This debt is secured by an aggregate outstanding principal balance of $232.0 million included in Loans Held for Sale, at Fair Value on the Consolidated Balance Sheets. As of December 31, 2022 the Warehouse Line funds were drawn to the available limit. Prosper incurred $2.2 million of deferred debt issuance costs associated with the PWIT Warehouse Line, including $0.3 million from the amendment signed on May 19, 2021, which are included in "Prepaids and Other Assets" and amortized to interest expense over the term of the revolving arrangement.

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Prosper purchased a swaption to limit the Company's exposure to increases in LIBOR. The swaption is recorded on the consolidated balance sheet at fair value in Prepaids and Other Assets. Any changes in the fair value are recorded in the Change in Fair Value of Financial Instruments on the Consolidated Statement of Operations. The fair value of the swaption was $1.3 million at December 31, 2022, and the change in fair value was $0.8 million for the year ended December 31, 2022.

***PWIIT Warehouse Line***

On March 28, 2019, through PWIIT, Prosper entered into a second Warehouse Agreement for a $300 million Warehouse Line with a national banking association different than that of PWIT.

On March 4, 2021, PMI extended its $300 million PWIIT Warehouse Line ("PWIIT Extension"). The PWIIT Extension consists of a $230 million Class A loan with the existing PWIIT Warehouse Line national banking association and a $70 million Class B loan with an asset manager. The advance rate on the PWIIT Extension is 90%. Under the PWIIT Extension, proceeds of loans made under the PWIIT Warehouse Line may be borrowed, repaid and reborrowed until the earlier of March 3, 2023 or the occurrence of any accelerated amortization event or event of default. Repayment of any outstanding proceeds will be made over a 24-month period ending March 4, 2025, excluding the occurrence of any accelerated amortization event or event of default.

Under the PWIIT Extension, the Class A loan bears interest at a rate of the national banking association's asset-backed commercial paper rate, plus a spread of 2.05%. The spread increases by 0.375% during the first 12 months immediately following the termination of the revolving period with an additional increase of 0.375% one year later. Additionally, the Class A loan bears a monthly unused commitment fee of 0.50% per annum on the undrawn portion available under the Class A loan.

The Class B loan bears interest at a rate of one-month LIBOR, plus a spread of 8.75%. The spread increases by 0.375% during the first twelve months immediately following the termination of the revolving period with an additional increase of 0.375% one year later. Additionally, the Class B loan bears a monthly unused commitment fee of 0.50% or 1.00% per annum on the undrawn portion available under the Class B loan, depending on the Class B loan utilization percentage.

As of December 31, 2022, Prosper had $245.6 million in debt and accrued interest outstanding under the PWIIT Warehouse Line. This debt is secured by an aggregate outstanding principal balance of $276.3 million included in Loans Held for Sale, at Fair Value on the Consolidated Balance Sheets. At December 31, 2022 the undrawn portion available under the PWIIT Warehouse Line was $55.3 million. PMI incurred $1.3 million of debt issuance costs for the extension in March 2021, which are included in "Prepaids and Other Assets" and will be amortized to interest expense over the term of the revolving arrangement.

**Phaseout of LIBOR**

A portion of the interest rate charged on our PWIT Warehouse Line is currently based on LIBOR. LIBOR has been the subject of reform and was expected to phase out by the end of fiscal 2021; however, on March 5, 2021, the ICE Benchmark Administration Limited ("ICE") delayed the phase out of LIBOR to June 30, 2023. The consequences of the discontinuation of LIBOR cannot be entirely predicted but could impact the interest expense incurred on these debt instruments. We have negotiated alternatives to LIBOR on the PWIT Warehouse Line, which we may renegotiate before LIBOR ceases to be a widely available reference rate.

**Paycheck Protection Program Loan**

In April 2020, the Company obtained an $8.4 million loan under the PPP, established by the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and sponsored by the U.S. Small Business Administration ("SBA"). The loan accrued interest at one percent per annum and had a two-year term through April 2022, with payments deferred until such time as an approval or denial of forgiveness was received from the SBA. The Company used the PPP Loan proceeds to cover payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act.

On March 21, 2022, the Company was notified by the SBA that all principal and interest under the loan, totaling $8.6 million, was forgiven in full through a forgiveness payment made on March 15, 2022 by the SBA to the lender of the PPP loan. As a result, the Company recognized a "Gain on Forgiveness of PPP Loan" for this amount on its accompanying Consolidated Statement of Operations for the year ended December 31, 2022.

**NOTE 11. NET INCOME (LOSS) PER SHARE**

PMI computes its net income (loss) per share in accordance with ASC Topic 260, *Earnings Per Share* ("ASC Topic 260"). Under ASC Topic 260, basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities.

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PMI's net income (loss) per share is calculated using the two-class method in accordance with ASC Topic 260. The two-class method allocates earnings that otherwise would have been available to common shareholders to holders of participating securities. Management considers all series of our Convertible Preferred Stock to be participating securities due to their rights to participate in dividends with Common Stock. As such, earnings allocated to these participating securities, which include participation rights in undistributed earnings, are subtracted from net income to determine total undistributed earnings to be allocated to common stockholders.

All participating securities are excluded from basic weighted-average common shares outstanding. Prior to any conversion to common shares, each series of Prosper's Convertible Preferred Stock is entitled to participate on an if-converted basis in distributions of earnings, when and if declared by the board of directors, that are made to common stockholders and consequently, these shares were considered participating securities. During the year ended December 31, 2022, 2021 and 2020, certain shares issued as a result of the early exercise of stock options which are subject to a repurchase right by PMI were entitled to receive non-forfeitable dividends during the vesting period and consequently, are considered participating securities.

The weighted average shares used in calculating basic and diluted net income (loss) per share excludes certain shares that are disclosed as outstanding shares in the Consolidated Balance Sheets because such shares are restricted as they were associated with options that were early exercised and continue to remain unvested.

Basic and diluted net income (loss) per share were calculated as follows for the periods presented (in thousands, except share and per share amounts):

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| | | | |
|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** |
| | **2022** | **2021** | **2020** |
| **Numerator:** |  |  |  |
| Net Income (Loss) | $70582 | $(138341) | $18551 |
| Plus: Return on Share Purchase |  |  | 2381 |
| Less: Net Income Allocated to Participating Securities | (47350) |  | (15172) |
| Net Income (Loss) Attributable to Common Stockholders | $23232 | $(138341) | $5760 |
| **Denominator:** |  |  |  |
| Weighted average shares used in computing basic and diluted Net Income (Loss) Per Share | 73291714 | 70767275 | 68592557 |
| Effect of dilutive securities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Stock options | 61466722 |  | 24816184 |
| &nbsp;&nbsp;&nbsp;&nbsp;Warrants | 570313 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Convertible preferred stock warrants | 213264845 |  | 213264845 |
| Weighted average shares used in computing diluted net income (loss) per share - diluted | 348593594 | 70767275 | 306673586 |
| Net Income (Loss) Per Share – Basic | $0.32 | $(1.95) | $0.08 |
| Net Income (Loss) Per Share – Diluted | $0.07 | $(1.95) | $0.02 |

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The following common stock equivalents were excluded from the computation of diluted net income (loss) per share for the periods presented because including them would have been anti-dilutive (number of shares):

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| | | | |
|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** |
| | **2022** | **2021** | **2020** |
| **Excluded Securities:** |  |  |  |
| Convertible Preferred Stock issued and outstanding | 158365655 | 158365655 | 158365655 |
| Stock options issued and outstanding | 17703550 | 72756708 | 48265056 |
| Warrants issued and outstanding | 510036 | 1080349 | 1080349 |
| Series E-1 Convertible Preferred Stock warrants |  | 35544141 |  |
| Series F Convertible Preferred Stock warrants |  | 177720704 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Excluded Securities** | 176579241 | 445467557 | 207711060 |

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**NOTE 12. CONVERTIBLE PREFERRED STOCK, CONVERTIBLE PREFERRED STOCK WARRANT LIABILITY AND COMMON STOCK**

**Convertible Preferred Stock** 

Under PMI's amended and restated certificate of incorporation, preferred stock is issuable in series and the Board of Directors is authorized to determine the rights, preferences, and terms of each series.

In January 2013, PMI issued and sold 69,340,760 shares of Series A Convertible Preferred Stock in a private placement at a purchase price of $0.29 per share for $19.8 million, net of issuance costs. In connection with that sale, PMI issued 25,585,910 shares at par value $0.01 per share of Series A-1 Convertible Preferred Stock to the holders of shares of PMI's Convertible Preferred Stock that was outstanding immediately prior to the sale ("Old Preferred Shares") in consideration for such stockholders participating in the sale. In connection with the Series A sale, Old Preferred Shares were converted into shares of Common Stock at a ratio of 1:1 if the holder of the Old Preferred Shares participated in the Series A sale or at a 10:1 ratio if the holder of the Old Preferred Shares did not so participate. In addition, each such participating holder received a share of Series A-1 Convertible Preferred Stock for every dollar of liquidation preference associated with an Old Preferred Share held by such holder. Each share of Series A-1 preferred stock has a liquidation preference of $2.00 and converts into Common Stock at a ratio of 1,000,000:1. The Series A and Series A-1 Convertible Preferred Stock were sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) of the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving a public offering.

In September 2013, PMI issued and sold 41,443,670 shares of Series B Convertible Preferred Stock in a private placement at a purchase price of $0.60 per share for approximately $24.9 million, net of issuance costs. The Series B Convertible Preferred Stock was sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) of the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving a public offering.

In May 2014, PMI issued and sold 24,404,770 shares of Series C Convertible Preferred Stock in a private placement at a purchase price of $2.87 per share for approximately $69.9 million, net of issuance costs. The Series C Convertible Preferred Stock was sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) of the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving a public offering. The purpose of the Series C private placement was to raise funds for general corporate needs and for the tender offer discussed below.

On June 18, 2014, PMI issued a Tender Offer Statement to purchase up to 6,963,785 shares, in the aggregate, of its Series A Convertible Preferred Stock and Series B Convertible Preferred Stock at a price equal to $2.87 per share. Upon closure of the tender offer on July 16, 2014, 782,540 shares of Series A Convertible Preferred Stock and 5,667,790 shares of Series B Convertible Preferred Stock were purchased for an aggregate price of $18.5 million.

In April 2015, PMI issued and sold 23,888,640 shares of Series D Convertible Preferred Stock in a private placement at a purchase price of $6.91 per share for proceeds of approximately $164.8 million, net of issuance costs. The Series D Convertible Preferred Stock was sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) of the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving a public offering. The purpose of the Series D private placement was to raise funds for general corporate needs and for the share repurchase discussed below.

In December 2016, PMI authorized 40,000,000 shares of Series E Convertible Preferred Stock. These shares are reserved for the Convertible Preferred Stock warrants that were also issued in December 2016

On December 16, 2016, PMI issued a warrant to purchase 20,267,135 shares of Series E-1 Convertible Preferred Stock of PMI at an exercise price of $0.01 per share (the "First Series E-1 Warrant") to Pinecone Investments LLC ("Pinecone"), an affiliate of Colchis Capital Management, L.P. ("Colchis").

On February 27, 2017, PMI issued to Pinecone Investments LLC a second warrant (the "Second Series E-1 Warrant," and together with the First Series E-1 Warrant, the "Series E-1 Warrants") to purchase 15,277,006 shares of Series E-1 Convertible Preferred Stock at an exercise price of $0.01 per share. The Series E-1 Warrants are immediately exercisable, in whole or in part, by paying in cash the full purchase price payable in respect of the number of shares purchased. The Series E-1 Warrants were issued pursuant to the Warrant Agreement dated December 16, 2016 between PMI and Colchis, as previously described in PMI's Current Report on Form 8-K as filed with the SEC on December 22, 2016.

In connection with the Consortium Purchase Agreement entered into with affiliates of the Consortium ("Warrant Holders") a warrant agreement was signed (the "Series F Warrant Agreement"). Pursuant to the Series F Warrant Agreement, PMI issued to the Consortium three warrants (together, the "Series F Warrant") to purchase up to an

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aggregate 177,720,706 shares of PMI's Series F Convertible Preferred Stock at an exercise price of $0.01 per share (the "Series F Warrant Shares").

The Warrant Holders' right to exercise the Series F Warrant was subject to monthly vesting during the term of the Consortium Purchase Agreement based upon the volume of loans the Consortium elected to purchase (if any) in each month, subject to certain cure rights such as offering additional loans for sale in subsequent periods. Under the terms of the Series F Warrant Agreement, the Series F Warrant Shares may also vest in full upon a change of control of PMI, insolvency of PMI or PFL, certain breaches of contract by PMI or PFL that are not cured within a defined cure period and upon the occurrence of certain events set forth in the Warrant Agreement.

The Series F Warrant will be exercisable with respect to vested Series F Warrant Shares, in whole or in part, at any time prior to the tenth anniversary of its date of issuance. The number of shares underlying the Series F Warrant may be adjusted following certain events such as stock splits, dividends, reclassifications and certain other issuances by PMI.

On September 20, 2017, Prosper issued and sold 37,249,497 shares of Series G Convertible Preferred Stock in a private placement at a purchase price of $1.34 per share for proceeds of approximately $47.9 million, net of issuance costs. The Series G Convertible Preferred Stock was sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(a)(2) of the Securities Act regarding sales by an issuer not involving a public offering. The purpose of the Series G private placement was to raise funds for general corporate purposes.

On December 23, 2019, Prosper entered into a Stock Repurchase Agreement with an investor to repurchase 7,221,020 shares, in the aggregate, of Series A, Series A-1, and Series B Convertible Preferred Stock and Common Stock for nominal consideration. Upon execution of the Agreement, 2,130,035 shares of Series A Convertible Preferred Stock, 2,245,600 shares of Series A-1 Convertible Preferred Stock, 648,720 shares of Series B Convertible Preferred Stock and 2,196,665 shares of Common Stock were repurchased. Upon repurchase of Convertible Preferred Stock, the difference between repurchase price and the carrying amount of the Convertible Preferred Stock was recognized in Additional Paid-In Capital. Additionally, the difference between the repurchase price and par value of the Common Stock was recorded through Additional Paid-In Capital.

**Prosper Grantor Trust**

On July 13, 2020, the Company established Prosper Grantor Trust ("PGT"), a revocable grantor trust administered by an independent trustee, with the intention of contributing assets to PGT for the benefit of PMI employees in the event of a change in control through an Eligible Employee Retention Plan. PGT was determined to be a VIE and PMI was determined to be its primary beneficiary due to the fact that the Company, through its role as the grantor, has both (a) the power to direct the activities that most significantly affect the VIE's economic performance, including its funding decisions and investment strategy, and (b) the obligation to absorb losses that could be potentially significant to the economic performance of the VIE by virtue of the Company's requirement to fund PGT in the event that it is unable to meet its obligations to PMI's employees. PMI also maintains a contingent call liability on PGT's assets in the event of a bankruptcy. As a result, PGT is fully consolidated into PMI's consolidated financial statements.

On July 21, 2020, PGT entered into a Stock Transfer Agreement with a PMI investor to purchase 34,670,420 shares of Series A Convertible Preferred Stock and 16,577,495 shares of Series B Convertible Preferred Stock for nominal consideration. Upon execution of the Stock Transfer Agreement, these shares were purchased by a consolidated VIE of the Company, and thus the difference between the fair value of the repurchased stock and the purchase price is included in Convertible Preferred Stock Held by Consolidated VIE on PMI's accompanying consolidated balance sheet as of December 31, 2022. These shares remain outstanding for legal purposes and retain their voting rights, but are excluded from the earnings per share calculation.

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The number of authorized, issued and outstanding shares, their par value and liquidation preference for each series of Convertible Preferred Stock as of December 31, 2022 are disclosed in the table below (amounts in thousands, except share and par value amounts):

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Par Value** | **Authorized**<br>**Shares** | **Outstanding and Issued**<br>**Shares** | | **Liquidation**<br>**Preference, Outstanding Shares** |
| Series A | $0.01 | 68558220 | 66428185 | \* | $19160 |
| Series A-1 | $0.01 | 24760915 | 22515315 |  | 45031 |
| Series B | $0.01 | 35775880 | 35127160 | \* | 21190 |
| Series C | $0.01 | 24404770 | 24404770 |  | 70075 |
| Series D | $0.01 | 23888640 | 23888640 |  | 165000 |
| Series E-1 | $0.01 | 35544141 |  |  |  |
| Series E-2 | $0.01 | 16858078 |  |  |  |
| Series F | $0.01 | 177720707 | 3 |  |  |
| Series G | $0.01 | 37249497 | 37249497 |  | 50000 |
| &nbsp;&nbsp;&nbsp;&nbsp; **Total** |  | 444760848 | 209613570 |  | $370456 |

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\* Series A and Series B Convertible Preferred Stock totals are inclusive of 34,670,420 and 16,577,495 shares, respectively, held by PGT, a consolidated VIE.

***Dividends***

Dividends on shares of the Series A, Series B, Series C, Series D, Series E-1, Series E-2, Series F, and Series G Convertible Preferred Stock are payable only when, as, and if declared by the Board of Directors. No dividends will be paid with respect to the Common Stock until any declared dividends on the Convertible Preferred Stock have been paid or set aside for payment to the preferred stockholders. After payment of any such dividends, any additional dividends or distributions will be distributed among all holders of Common Stock and preferred stock in proportion to the number of shares of Common Stock that would be held by each such holder if all shares of preferred stock were converted to Common Stock at the then effective conversion rate. The Series A-1 convertible preferred shares have no dividend rights. To date, no dividends have been declared on any of PMI's preferred stock or Common Stock.

***Conversion***

Under the terms of PMI's amended and restated certificate of incorporation, the holders of preferred stock have the right to convert such preferred stock into Common Stock at any time. In addition, all preferred stock automatically converts into Common Stock (x) immediately prior to the closing of an initial public offering that values Prosper at least at $2 billion and that results in aggregate proceeds to Prosper of at least $100 million or (y) upon a written request from the holders of at least 60% of the voting power of the outstanding preferred stock (on an as-converted basis, provided that: (i) the Series A-1 Convertible Preferred Stock shall not be converted without at least 14% of the voting power of the outstanding Series A-1 Convertible Preferred Stock; (ii) the Series D shall not be converted without at least 60% of the voting power of the outstanding Series D; (iii) the Series E-1 and Series E-2 shall not be converted without at least 60% of the voting power of the outstanding Series E-1 and Series E-2, voting together as a single class; (iv) the Series F shall not be converted without at least 60% of the voting power of the outstanding Series F, and (v) the shares of Series G Preferred Stock will not be automatically converted unless the holders of at least 60% of the outstanding shares of Series G Preferred Stock approve such conversion). In addition, if a holder of the Series A Convertible Preferred Stock has converted any of the Series A Convertible Preferred Stock, then all of such holder's shares of Series A-1 Convertible Preferred Stock also will be converted upon a liquidation event (as defined under the certificate of incorporation). In lieu of any fractional shares of Common Stock to which a holder would otherwise be entitled, PMI shall pay such holder cash in an amount equal to the fair market value of such fractional shares, as determined by its Board of Directors. At present, each of the Series A, Series B, Series C, Series D, Series E-1, Series E-2, and Series F Convertible Preferred Stock converts into PMI Common Stock at a 1:1 ratio. The Series A-1 Convertible Preferred Stock converts into Common Stock at a 1,000,000:1 ratio and the Series G Convertible Preferred Stock converts into Common Stock at a 1:1.36 ratio. The Series G Convertible Preferred Stock conversion ratio reflects the Series G true-up that occurred at end of the vesting period for the Series E-2 and Series F Preferred Stock warrants.

For the Series G true-up, the conversion price of the Series G Convertible Preferred Stock was reduced to a number equal to the Series G Preferred Stock original issuance price, divided by the quotient obtained by dividing the Series G true-up amount by the total number of Series G Preferred Stock issued as of the Series G closing date. The Series G true-up amount means the aggregate number of shares of Series G Preferred Stock that would have been issued to the purchasers of the Series G Preferred Stock on the Series G closing date, if warrants to purchase shares of Series E-2 Preferred Stock or Series F Preferred

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Stock that were exercisable or exercised as of the true-up time (end of vesting period) had been exercisable or exercised as of such Series G closing date.

***Liquidation Rights***

PMI's Convertible Preferred Stock has been classified as temporary equity on the consolidated balance sheet. The preferred stock is not redeemable; however, in the event of a voluntary or involuntary liquidation, dissolution, change in control or winding up of PMI, holders of the Convertible Preferred Stock may have the right to receive its liquidation preference under the terms of PMI's certificate of incorporation.

Each holder of Series E-1, Series E-2 and Series F Convertible Preferred Stock is entitled to receive prior and in preference to any distribution of proceeds from a liquidation event (as defined under the certificate of incorporation) to the holders of Series A, Series B, Series C, Series D, Series G and Series A-1 Convertible Preferred Stock or Common Stock, an amount per share for (i) each share of Series E-1 Convertible Preferred Stock equal to the sum of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share, (ii) each share of Series E-2 Convertible Preferred Stock equal to the sum of two-thirds the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share, and (iii) each share of Series F Convertible Preferred Stock equal to the sum of two-thirds of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share.

After the payment or setting aside for payment to the holders of Series E-1, Series E-2, and Series F Convertible Preferred Stock each holder of Series A, Series B, Series C and Series D, Series E-2, Series F and Series G Convertible Preferred Stock is entitled to receive, on a pari passu basis, prior to and in preference to any distribution of proceeds from a liquidation event (as defined under the certificate of incorporation) to the holders of Series A-1 Convertible Preferred Stock or Common Stock, (i) an amount per share for each share of Series E-2 and Series F Convertible Preferred Stock equal to the sum of one-third of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share, and (ii) an amount per share for each share of Series A, Series B, Series C, Series D and Series G Convertible Preferred Stock equal to the sum of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share.

After the payment or setting aside for payment to the holders of Series A, Series B, Series C, Series D, Series E-1, Series E-2, Series F and Series G Convertible Preferred Stock, the holders of Series A-1 Convertible Preferred Stock are entitled to receive, prior and in preference to any distribution of proceeds to the holders of Common Stock, an amount per share for each such share of Series A-1 Convertible Preferred Stock equal to the sum of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share.

After the payment or setting aside for payment to the holders of Series A, Series B, Series C, Series D, Series E-1, Series E-2, Series F, Series G and Series A-1 Convertible Preferred Stock, the entire remaining proceeds legally available for distribution will be distributed pro-rata to the holders of Series A Convertible Preferred Stock and Common Stock in proportion to the number of shares of Common Stock held by them assuming the Series A Convertible Preferred Stock has been converted into shares of Common Stock at the then effective conversion rate, provided that the maximum aggregate amount per share of Series A Convertible Preferred Stock which the holders of Series A Convertible Preferred Stock shall be entitled to receive is three times the original issue price for the Series A Convertible Preferred Stock.

At present, the liquidation preferences are equal to $0.29 per share for the Series A Convertible Preferred Stock, $2.00 per share for the Series A-1 Convertible Preferred Stock, $0.60 per share for the Series B Convertible Preferred Stock, $2.87 per share for the Series C Convertible Preferred Stock, $6.91 per share for the Series D Convertible Preferred Stock, $0.84 per share for the Series E-1 Convertible Preferred Stock, $0.84 per share for the Series E-2 Convertible Preferred Stock, $0.84 per share for the Series F Convertible Preferred Stock and $1.34 per share for the Series G Convertible Preferred Stock.

***Voting***

Each holder of shares of Convertible Preferred Stock is entitled to the number of votes equal to the number of shares of Common Stock into which such shares of Convertible Preferred Stock could be converted and each has voting rights and powers equal to the voting rights and powers of the Common Stock. The holders of Convertible Preferred Stock and the holders of Common Stock vote together as a single class (except with respect to certain matters that require separate votes or as required by law), and are entitled to notice of any stockholders' meeting in accordance with the Bylaws of PMI.

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**Convertible Preferred Stock Warrant Liability** 

***Series E-1 Warrants***

In connection with the Settlement and Release Agreement dated November 17, 2016 among PMI, its wholly owned subsidiary PFL and Colchis, on December 16, 2016, PMI issued the First Series E-1 Warrant. The Second Series E-1 Warrant for an additional 15,277,006 shares of Series E-1 Convertible Preferred Stock was granted on the signing of the Consortium Purchase Agreement on February 27, 2017. The warrants expire ten years from the date of issuance. Prosper recognized $13.5 million of income and $21.3 million of expense from the re-measurement of the fair value of the warrants for the years ended December 31, 2022 and 2021, respectively. The income or expense resulted from remeasurement of the fair value of the warrants is recorded in Change in Fair Value of Convertible Preferred Stock Warrants on the Consolidated Statements of Operations.

To determine the fair value of the Series E-1 Warrants, the Company first determined the value of a share of a Series E-1 Convertible Preferred Stock. To determine the fair value of the Convertible Preferred Stock, the Company first derived the business enterprise value ("BEV") of the Company using a variety of valuation methods, including discounted cash flow models and market based methods, as deemed appropriate under the circumstances applicable at the valuation date. Once the Company determined an estimated BEV, the option pricing method ("OPM") was used to allocate the BEV to the various classes of our equity, including our preferred stock. The concluded per share value for the Series E-1 Convertible Preferred Stock was utilized as an input to the Black-Scholes option pricing model.

The Company determined the fair value of the outstanding Series E-1 preferred stock warrants utilizing the following assumptions as of December 31, 2022 and 2021:

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Volatility | 72.0% | 63.0% |
| Risk-free interest rate | 4.30% | 0.90% |
| Expected term (in years) | 2.75 | 2.75 |
| Dividend yield | —% | —% |

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The above assumptions were determined as follows:

*Volatility:* The volatility is derived from historical volatilities of several unrelated publicly listed peer companies over a period approximately equal to the term of the warrant as the Company has limited information on the volatility of its preferred stock since there is currently no trading history. When making the selections of industry peer companies to be used in the volatility calculation, the Company considered the size, operational, and economic similarities to the Company's principal business operations.

*Risk-Free Interest Rate:* The risk-free interest rate is based on the U.S. Treasury yield in effect as of December 31, 2022, and for zero coupon U.S. Treasury notes with maturities approximately equal to the term of the warrant.

*Expected Term:* The expected term is the period of time for which the warrants are expected to be outstanding.

*Dividend Yield:* The expected dividend assumption is based on the Company's current expectations about the Company's anticipated dividend policy.

***Series F Warrants***

In connection with the Consortium Purchase Agreement on February 27, 2017, PMI issued warrants to purchase up to 177,720,706 shares of PMI's Series F Convertible Preferred Stock at $0.01 per share. The warrants expire ten years from the date of issuance. Prosper recognized $71.1 million of income and $117.3 million of expense from the re-measurement of the fair value of the warrants for the years ended December 31, 2022 and 2021, respectively. The income or expense resulting from changes in the fair value of the warrant is recorded through Change in Fair Value of Convertible Preferred Stock Warrants on the Consolidated Statements of Operations.

To determine the fair value of the Series F Warrants, the Company first determined the value of a share of a Series F Convertible Preferred Stock. To determine the fair value of the Convertible Preferred Stock, the Company first derived the BEV using valuation methods, including a combination of methods, as deemed appropriate under the circumstances applicable at the valuation date. Once the Company determined an estimated BEV, the OPM was used to allocate the BEV to the various classes of Prosper's equity, including our preferred stock. The concluded per share value for the Series F Convertible Preferred Stock warrants utilized the Black-Scholes option pricing model.

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The Company determined the fair value of the outstanding Series F Warrants utilizing the following assumptions as of December 31, 2022 and 2021:

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Volatility | 72.00% | 63.0% |
| Risk-free interest rate | 4.30% | 0.90% |
| Expected term (in years) | 2.75 | 2.75 |
| Dividend yield | —% | —% |

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The above assumptions were determined using the same criteria described above for the Series E-1 Warrants.

The combined activity of the Convertible Preferred Stock Warrant Liability for the years ended December 31, 2022 and 2021 are presented in Note 7, Fair Value of Assets and Liabilities.

***Common Stock***

PMI, through its Amended and Restated Certificate of Incorporation, is the sole issuer of Common Stock and related options, RSUs and warrants. On February 16, 2016, PMI amended and restated its Certificate of Incorporation to, among other things, effect a 5-for-1 forward stock split. On September 20, 2017, PMI further amended its Amended and Restated Certificate of Incorporation to increase the number of shares of Common Stock authorized for issuance. The total number of shares of stock which PMI has the authority to issue is 1,069,760,848, consisting of 625,000,000 shares of Common Stock, $0.01 par value per share, and 444,760,848 shares of preferred stock, $0.01 par value per share. As described above, the Company repurchased 2,196,665 shares of Common Stock on December 23, 2019. As of December 31, 2022, 75,223,850 shares of Common Stock were issued and 74,287,915 shares of Common Stock were outstanding. As of December 31, 2021, 73,089,929 shares of Common Stock were issued and 72,153,994 shares of Common Stock were outstanding. Each holder of common stock is entitled to one vote for each share of common stock held.

*Common Stock Issued upon Exercise of Stock Options*

During the year ended December 31, 2022 and 2021, PMI issued 2,133,921 and 3,014,622 shares of Common Stock, respectively, upon the exercise of vested options for cash proceeds of $54 thousand and $61 thousand, respectively.

*Common Stock Issued upon Exercise of Warrants*

For the year ended December 31, 2022 and 2021, PMI issued zero shares of Common Stock upon the exercise of warrants.

**NOTE 13. STOCK-BASED COMPENSATION**

PMI grants equity awards primarily through its Amended and Restated 2005 Stock Option Plan (the "2005 Plan"), which was approved as amended and restated by its stockholders on December 1, 2010; and its 2015 Equity Incentive Plan, which was approved by its stockholders on April 7, 2015 and subsequently amended by an Amendment No. 1, Amendment No. 2 and Amendment No. 3, which were approved by PMI's stockholders effective as of February 15, 2016, May 31, 2016, and September 5, 2018 respectively (as amended, the "2015 Plan"). In March 2015, the 2005 Plan expired, except that any awards granted under the 2005 Plan prior to its expiration remain in effect pursuant to their terms. As of December 31, 2022, under the 2015 Plan, options to purchase up to 94,721,992 shares of PMI's Common Stock are reserved and may be granted to employees, directors, and consultants by PMI's Board of Directors and stockholders to promote the success of Prosper's business. Options generally vest 25% one year from the vesting commencement date and 1/48th per month thereafter or vest 50% two years from

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the vesting commencement date and 1/48 per month thereafter or vest 1/36th per month from the vesting commencement date. In no event are options exercisable more than ten years after the date of grant.

***Stock Option Repricings***

On May 3, 2016, March 17, 2017 and August 11, 2020, the Compensation Committee of the Board of Directors of PMI approved three separate stock option repricing programs (collectively, the "Repricings") authorizing PMI's officers to reprice certain outstanding stock options held by employees and directors that had exercise prices above the current fair market value of PMI's common stock on those respective dates.

PMI believes that the Repricings encourage the continued service of valued employees and directors and motivate such service providers to perform at high levels, both of which are critical to the Company's continued success. PMI expects to incur additional stock based compensation charges as a result of the Repricings.

The financial statement impact of the above Repricings was not material for the years ended December 31, 2022 and 2021, and $0.4 million for the year ended December 31, 2020. As of December 31, 2022, the unamortized Repricings expense (net of forfeitures) is not material.

***Stock Option Activity***

Stock option activity under the 2005 Plan and 2015 Plan is summarized for the year ended December 31, 2022 below:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Options**<br>**Issued and**<br>**Outstanding** | **Weighted-**<br>**Average**<br>**Exercise**<br>**Price** | **Weighted-Average**<br>**Contractual Term**<br>**(in years)** | **Aggregate intrinsic value**<sup>1</sup><br>**(in thousands)** |
| **Balance as of January 1, 2022** | 72186151 | $0.07 | 6.72 | $46458 |
| &nbsp;&nbsp;&nbsp;&nbsp; Options granted | 17713281 | $0.59 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Options exercised | (2133921) | $0.03 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Options forfeited | (10031923) | $0.49 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Option expirations | (5825) | $0.02 |  |  |
| **Balance as of December 31, 2022** | 77727763 | $0.13 | 6.22 | $19450 |
| Options vested and expected to vest as of December 31, 2022 | 70664163 | $0.13 | 6.22 | $18733 |
| Options vested and exercisable at December 31, 2022 | 55063268 | $0.04 | 5.14 | $17149 |

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<sup>1.</sup> Aggregate intrinsic value represents the excess of the fair value of our Common Stock as of December 31, 2022 over the exercise price of the outstanding in-the-money options.

Additional information pertaining to PMI's Common Stock option activities is as follows:

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| | | | |
|:---|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** | **2020** |
| Weighted-average grant date fair value of options granted (per share) | $0.37 | $0.13 | $0.04 |

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***Other Information Regarding Stock Options***

The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock based compensation expense requires PMI to make assumptions and judgments about the variables used in the calculation, including the fair value of PMI's Common Stock, the expected term (the period of time that the options granted are expected to be outstanding), the volatility of PMI's Common Stock, a risk-free interest rate, and expected dividends. Given the absence of a publicly traded market, the Company considered numerous objective and subjective factors to determine the fair value of PMI's Common Stock at each grant date. These factors included, but were not limited to: (i) contemporaneous valuations of Common Stock performed by unrelated third-party specialists, (ii) the prices for PMI's preferred stock sold to outside investors, (iii) the rights, preferences and privileges of PMI's preferred stock relative to PMI's Common Stock; (iv) the lack of marketability of PMI's Common Stock, (v) developments in the business, (vi) secondary transactions of PMI's common and preferred shares, and (vii) the likelihood of achieving a liquidity event, such as an initial public offering or a merger or acquisition of Prosper, given prevailing market conditions. As PMI's stock is not publicly traded, volatility for stock options is based on an average of the historical volatilities of the Common Stock of several entities with

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characteristics similar to those of PMI. The expected term assumptions were determined based on the vesting terms, exercise terms and contractual lives of the options using the simplified method. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. PMI uses an expected dividend yield of zero as it does not anticipate paying any dividends in the foreseeable future.

PMI also estimates forfeitures of unvested stock options. Expected forfeitures are based on the Company's historical experience. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. No compensation cost is recorded for options that do not vest.

The fair value of PMI's stock option awards granted during the years ended December 31, 2022, 2021 and 2020 was estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions:

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| | | | |
|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** |
| | **2022** | **2021** | **2020** |
| Volatility of common stock | 67.19% | 64.22% | 52.62% |
| Risk-free interest rate | 2.95% | 1.02% | 0.51% |
| Expected life | 6.0 years | 6.0 years | 6.0 years |
| Dividend yield | —% | —% | —% |

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PMI did not grant any performance-based options in 2022, 2021, or 2020.

***Restricted Stock Unit Activity***

For the years ended December 31, 2022, 2021 and 2020, PMI did not grant any RSUs.

The following table summarizes the number of PMI's RSU activity for the year ended December 31, 2022:

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| | | |
|:---|:---|:---|
| | **Number of Shares** | **Weighted-Average Grant Date Fair Value** |
| **Unvested at January 1, 2022** | 2874348 | $1.14 |
| Forfeited | (33960) | $2.18 |
| Expired | (238005) | $2.14 |
| **Unvested at December 31, 2022** | 2602383 | $1.04 |

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***Stock Based Compensation***

The following table presents the amount of stock-based compensation related to stock-based awards granted to employees recognized in the Company's Consolidated Statements of Operations for the periods presented (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| Origination and Servicing | $134 | $123 | $35 |
| Sales and Marketing | 118 | 62 | 69 |
| General and Administrative | 1074 | 951 | 1809 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Stock-Based Compensation** | $1326 | $1136 | $1913 |

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For the years ended December 31, 2022, 2021 and 2020, Prosper capitalized $200 thousand, $137 thousand and $234 thousand, respectively, of stock-based compensation as internal use software and website development costs. As of December 31, 2022, the unamortized stock-based compensation expense adjusted for forfeiture estimates related to Prosper's employees' unvested stock-based awards was approximately $2.8 million, which will be recognized over a remaining weighted-average vesting period of approximately 2.9 years.

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**NOTE 14. INCOME TAXES**

The components of the Company's Income Tax Expense are as follows for the periods presented (in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| Current: |  |  |  |
| &nbsp;&nbsp;Federal | $— | $— | $— |
| &nbsp;&nbsp;State | 197 |  |  |
| &nbsp;&nbsp;Foreign |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Current Income Tax Expense (Benefit) | 197 |  |  |
| Deferred: |  |  |  |
| &nbsp;&nbsp;Federal | 47 | 47 | 47 |
| &nbsp;&nbsp;State | 51 | 24 | 38 |
| &nbsp;&nbsp;Foreign |  |  | (69) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Deferred Income Tax Expense | 98 | 71 | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Income Tax Expense | $295 | $71 | $16 |

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Income Tax Expense differed from the amount computed by applying the U.S. federal income tax rate of 21% to pretax income (loss) as a result of the following for the periods presented:

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| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| Federal tax at statutory rate | 21% | 21% | 21% |
| State tax at statutory rate (net of federal benefit) | 6% | 8% | 8% |
| Incentive stock options | 1% | (5)% | 2% |
| Preferred Stock Warrants | (36)% | (29)% | (64)% |
| Change in valuation allowance | 15% | 6% | 37% |
| Return-to-provision | (2)% | —% | —% |
| State tax rate changes | (5)% | —% | —% |
| Other | —% | (1)% | (4)% |
| &nbsp;&nbsp;&nbsp;&nbsp;Income Tax Expense | —% | —% | —% |

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Temporary items that give rise to significant portions of deferred tax assets and liabilities are as follows for the periods presented (in thousands):

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Net operating loss carry forwards | $85330 | $91793 |
| Research and other credits | 3438 | 307 |
| Stock compensation | 4025 | 4272 |
| Accrued liabilities | 5159 | 4357 |
| Lease liabilities | 4798 | 3266 |
| Property and equipment | 1214 |  |
| Section 174 R&D capitalization | 11204 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax assets | 115168 | 103995 |
| Net servicing rights | (2040) | (1898) |
| Property and equipment |  | (1873) |
| Intangible assets | (2129) | (1770) |
| Right-of-use assets | (4147) | (2264) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax liabilities | (8316) | (7805) |
| Total net deferred tax asset | 106852 | 96190 |
| Less: Valuation allowance | (107512) | (96750) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net deferred tax liability | $(660) | $(560) |

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Under ASC 740, *Accounting for Income Taxes*, a valuation allowance must be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The amount of valuation allowance is based upon management's best estimate of Prosper's ability to realize the net deferred tax assets. A valuation allowance can subsequently be reduced when management believes that the assets are realizable on a more-likely-than-not basis. As of December 31, 2022, the Company continues to record a valuation allowance against its net deferred tax asset. The valuation allowance as of December 31, 2022, increased by $10.8 million to $107.5 million from the prior year.

The Internal Revenue Code imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of an "ownership change" of a corporation. Accordingly, Prosper's ability to utilize net operating losses and credit carryforwards may be limited in the future as the result of such an "ownership change."

Prosper files federal and various state income tax returns, and has net operating loss carryforwards available to reduce future taxable income, if any, for both federal and state income tax purposes of approximately $307.9 million and $372.3 million, respectively, as of December 31, 2022. The state net operating loss carryforwards are primarily related to California. The federal and state net operating loss carryforwards will begin to expire in 2027 and 2023, respectively. All net operating loss carryforwards are subject to a full valuation allowance. Prosper has federal and California research and development tax credits of approximately $2.8 million and $2.8 million, respectively. The federal research credits will begin to expire in 2034 and the California research credits have no expiration date.

The following table summarizes Prosper's activity related to its unrecognized tax benefits (in thousands):

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| | |
|:---|:---|
| **Balance at December 31, 2019** | $112 |
| Change related to 2020 tax year position |  |
| **Balance at December 31, 2020** | $112 |
| Change related to 2021 tax year position |  |
| **Balance at December 31, 2021** | $112 |
| Increase related to prior year tax position | 1179 |
| **Balance at December 31, 2022** | $1291 |

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None of the unrecognized tax benefits would affect Prosper's effective tax rate if these amounts are recognized due to the full valuation allowance.

Prosper's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of Income Tax Expense. As of December 31, 2022, Prosper has not incurred significant interest or penalties.

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All tax returns will remain open for examination by federal and most state taxing authorities for three and four years, respectively, from the date of utilization of any net operating loss carryforwards or research and development credits.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures and requires U.S. taxpayers to amortize them over five years pursuant to Internal Revenue Code Section 174, effective for tax year 2022. The enactment of IRC 174 did not have a material impact on the Company's income tax liabilities.

**NOTE 15. LEASES**

Prosper has operating leases for corporate offices and datacenters. These leases have remaining lease terms of less than one year to approximately five years. Some of the lease agreements include options to extend the lease term for up to an additional five years. Rental expense under operating lease arrangements was $4.7 million, $4.5 million and $4.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. Additionally, Prosper subleases certain leased office space to third parties when it determines there is excess leased capacity. Sublease revenue from operating lease arrangements was $0.7 million, $0.3 million and $0.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

**Operating Lease Right-of-Use Assets** 

The following table summarizes the operating lease ROU assets as of December 31, 2022, which are included in Property and Equipment, Net on the Consolidated Balance Sheets.

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| | | | |
|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| | **Gross**<br>**Carrying Value** | **Accumulated**<br>**Amortization** | **Net**<br>**Carrying Value** |
| ROU assets - office buildings | $26151 | $12215 | $13936 |
| ROU assets - other | 900 | 704 | 196 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total operating lease ROU assets** | $27051 | $12919 | $14132 |

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In May 2022, the Company entered into an amendment to its San Francisco office lease, the most prominent impact of which was to extend the lease term for the Company's primary space in that office for an additional period through May 2028. As a result of this lease modification, the Company recorded additional ROU operating lease assets and liabilities of $9.9 million.

The Company identified certain impairment triggers related to its ROU assets in 2020, primarily due to the non-renewal of certain sublease agreements and the time expected to find new subtenants. As a result of impairment testing performed on these ROU assets, the Company recorded an impairment charge of $0.4 million for the year ended December 31, 2020. No impairment charge was identified for the years ended December 31, 2022 and 2021.

**Lease Liabilities**

Future maturities of operating lease liabilities as of December 31, 2022 were as follows (in thousands). The present value of the future minimum lease payments represents the Company's operating lease liabilities as of December 31, 2022 and are included in "Other Liabilities" on the consolidated balance sheets.

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| | |
|:---|:---|
| | **December 31, 2022** |
| 2023 | $3715 |
| 2024 | 4391 |
| 2025 | 4517 |
| 2026 | 4432 |
| 2027 | 3311 |
| Thereafter | 1411 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total future minimum lease payments** | 21777 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Imputed interest | (5426) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Present value of future minimum lease payments** | $16351 |

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Because the rate implicit in each lease is not readily determinable, we use our incremental borrowing rate to determine the present value of the lease payments. Supplemental cash flow information related to the Company's operating leases is as follows (dollars in thousands):

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| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| Non-cash operating activity: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;ROU assets obtained or adjusted in exchange for new, amended and modified operating lease liabilities | $9980 | $1773 | $290 |

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The weighted-average remaining lease term and discount rate used in the calculation of the Company's operating lease assets and liabilities are as follows (dollars in thousands):

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| | |
|:---|:---|
| | **December 31, 2022** |
| Weighted-average remaining lease term | 4.88 years |
| Weighted-average discount rate | 10.96% |

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**NOTE 16. COMMITMENTS AND CONTINGENCIES**

In the normal course of its operations, Prosper becomes involved in various legal actions. Prosper maintains provisions it considers to be adequate for such actions. Prosper does not believe it is probable that the ultimate liability, if any, arising out of any such matters will have a material effect on Prosper's financial condition, results of operations or cash flows.

**Operating Commitments**

Prosper has entered into an agreement with WebBank, under which all Borrower Loans originated through the marketplace are made by WebBank under its bank charter. On June 25, 2021, PMI, along with its wholly-owned subsidiary Prosper Funding LLC, and WebBank entered into: (i) a Fifth Amendment (the "Sale Agreement Amendment") to the Asset Sale Agreement, dated July 1, 2016, between Prosper Funding LLC and WebBank (the "Sale Agreement"); (ii) a Sixth Amendment (the "Marketing Agreement Amendment") to the Marketing Agreement, dated July 1, 2016, between PMI and WebBank (the "Marketing Agreement"); and (iii) a Third Amendment (the "Purchase Agreement Amendment") to the Stand By Purchase Agreement, dated July 1, 2016, between PMI and WebBank (the "Purchase Agreement" and, collectively with the Sale Agreement and the Marketing Agreement, the "Origination and Sale Agreements"). The Sale Agreement Amendment, the Marketing Agreement Amendment, and the Purchase Agreement Amendment, collectively, are hereinafter referred to as the "Amendments."

The Sale Agreement Amendment, among other things, extends the term of the Sale Agreement to February 1, 2025 and amends certain collateral requirements under the Sale Agreement. The Marketing Agreement Amendment, among other things, extends the term of the Marketing Agreement to February 1, 2025 and sets forth the amended terms and conditions of certain fees owed by the Registrants to WebBank under the Marketing Agreement. The Purchase Agreement Amendment amends certain collateral requirements of PMI under the Purchase Agreement.

Pursuant to the Marketing Agreement Amendment, the marketing fee that Prosper receives in connection with the origination of each loan is partially reduced by an amount (the "Designated Amount") calculated as a percentage of the principal amount of such loan based on the aggregate principal amount of loans originated for the applicable month. To the extent the aggregate Designated Amount for all loans originated during any month is less than $100,000 through February 1, 2025, Prosper is required to pay WebBank an amount equal to such deficiency. Accordingly, the minimum fee is $1.2 million for each year from 2023 through 2024, and $0.1 million in 2025.

Additionally, under the agreement with WebBank, Prosper is required to maintain minimum net liquidity of $15.0 million at all times during the term of the agreement. Net liquidity is defined as the sum of Cash, Cash Equivalents and Available for Sale Investments. Violation of this covenant can result in termination of the contract with WebBank. At December 31, 2022, Prosper was in compliance with the covenant.

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**Loan Purchase Commitments**

Prosper entered into an agreement with WebBank to purchase $6.0 million of Borrower Loans that WebBank originated during the last two business days of the year ended December 31, 2022. Prosper will purchase these Borrower Loans within the first two business days of the year ending December 31, 2023.

**Repurchase Obligation**

Under the terms of the loan purchase agreements between Prosper and investors that participate in the Whole Loan Channel, Prosper may, in certain circumstances, become obligated to repurchase a Borrower Loan from an investor. Generally, these circumstances include the occurrence of verifiable identity theft, the failure to properly follow loan listing or bidding protocols or a violation of the applicable federal, state or local lending laws. Prosper recognizes a liability at fair value for the repurchase obligation when the Borrower Loans are sold. The fair value of the repurchase obligation is estimated based on historical experience. Repurchased Borrower Loans associated with violations of federal, state or local lending laws or verifiable identity theft are written off at the time of repurchase. The maximum potential amount of future payments associated with this obligation is the outstanding balances of the Borrower Loans issued through the Whole Loan Channel, which at December 31, 2022 is $3.7 billion. Prosper has accrued $0.3 million and $0.3 million as of December 31, 2022 and 2021, respectively, in regard to this obligation.

Under the terms of the indenture and investor registration agreement, Prosper may, in certain circumstances, become obligated to either repurchase a Note or indemnify the investor for any losses resulting from nonpayment of a Note purchased in the Retail Channel. The decision to repurchase or indemnify is in Prosper's sole discretion. These circumstances include, but are not limited to, the occurrence of verifiable identity theft, a technical error in the automated bidding tools which results in the purchase of a Note that does not match the investor's investment criteria, or situations in which a loan listing includes a Prosper Rating that is different from the Prosper Rating that should have appeared in the listing for the corresponding Borrower Loan because either PFL inaccurately input data into, or inaccurately applied, the formula for determining the Prosper Rating and, as a result, the interest of the investor is materially and adversely affected. As of December 31, 2022, the Company has accrued $0.3 million for the repurchase of a portion of the underlying Notes, and agreed to indemnify an additional $1.2 million in outstanding Notes.

**Regulatory Contingencies** 

Prosper accrues for contingencies when a loss from such contingencies is probable and the amount of loss can be reasonably estimated. In determining whether a loss is probable and if it is possible to quantify the amount of the estimated loss, Prosper reviews and evaluates its litigation and regulatory matters on at least a quarterly basis in light of potentially relevant factual and legal developments. If Prosper determines that an unfavorable outcome is not probable or that the amount of a loss cannot be reasonably estimated, Prosper does not accrue for a potential litigation loss. If an unfavorable outcome is probable and Prosper can estimate a range of outcomes, an amount is recorded which management considers to be the best estimate within the range of potential losses that are both probable and estimable; however, if management cannot quantify the amount of the estimated loss, then the low end of the range of the potential losses is recorded.

***West Virginia Matter***

In January 2018, the Attorney General of the State of West Virginia (the "Attorney General") initiated discussions regarding certain acts and practices of PMI and PFL that the Attorney General asserts may have violated the West Virginia Consumer Credit and Protection Act (the "Consumer Act"), to which Prosper responded with such information as was requested by the Attorney General. Following a period of more than a year with limited to no communication, in February 2020, Prosper received a proposed Assurance of Discontinuance (an "AOD") from the Attorney General requesting that, without in any way admitting that any of its prior practices were in violation of the Consumer Act, Prosper agree to certain terms and conditions regarding its past and potential future conduct of its business with respect to customers in West Virginia, including a release by the Attorney General of any claims it may have related to the matters identified in the AOD. Prosper is evaluating and intends to discuss the proposed terms in the AOD with the Attorney General.

We cannot predict the outcome of the matter and any potential fines or penalties, if any, that may arise from the matter. Further, we are unable to estimate a range of outcomes and as a result no accrual has been made.

No loans have been originated through the Prosper platform to West Virginians since June 2016.

------

**NOTE 17. RELATED PARTIES**

Since Prosper's inception, it has engaged in various transactions with its directors, executive officers and holders of more than 10% of its voting securities, and immediate family members and other affiliates of its directors, executive officers, and 10% stockholders. Prosper believes that all of the transactions described below were made on terms no less favorable to Prosper than could have been obtained from unaffiliated third parties.

Prosper's executive officers, directors who are not executive officers, and certain affiliates participate in its marketplace by placing bids and purchasing Notes. The aggregate amount of the Notes purchased and the income earned by parties deemed to be affiliates and related parties of Prosper for the year ended December 31, 2022 and 2021, as well as the Notes outstanding as of December 31, 2022 and 2021 are summarized below (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Aggregate Amount of Notes Purchased for the Year Ended December 31,** | **Aggregate Amount of Notes Purchased for the Year Ended December 31,** | **Interest Earned on Notes for the Year Ended December 31,** | **Interest Earned on Notes for the Year Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| Executive officers and management | $37 | $35 | $7 | $7 |
| Directors (excluding executive officers and management) |  | 24 | 1 | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $37 | $59 | $8 | $8 |

---

---

| | | |
|:---|:---|:---|
| | **Notes Balance as of** | **Notes Balance as of** |
| | **December 31, 2022** | **December 31, 2021** |
| Executive officers and management | $52 | $41 |
| Directors (excluding executive officers and management) | 6 | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $58 | $56 |

---

**NOTE 18. POSTRETIREMENT BENEFIT PLANS**

Prosper has a 401(k) plan that covers all employees meeting certain eligibility requirements. The 401(k) plan is designed to provide tax-deferred retirement benefits in accordance with the provisions of Section 401(k) of the Internal Revenue Code. Eligible employees may defer up to 90% of eligible compensation up to the annual maximum as determined by the Internal Revenue Service. Prosper's contributions to the plan are discretionary. During the years ended December 31, 2022, 2021 and 2020, Prosper contributed $2.7 million, $2.0 million and $1.2 million, respectively, to the 401(k) plan.

**NOTE 19. SIGNIFICANT CONCENTRATIONS** 

Prosper is dependent on third party funding sources such as banks, asset managers, investment funds and Warehouse Lines to provide the funds to allow WebBank to originate Borrower Loans that the third party funding sources will later purchase. Of all Borrower Loans originated in the year ended December 31, 2022, two individual third parties purchased 23.4% and 10.4% of all Borrower Loans originated, and the Company's Warehouse VIEs purchased 13.9% of such loans. For the year ended December 31, 2021, one individual party purchased 26.7% of all Borrower Loans originated, and the Company's Warehouse VIEs purchased 12.6% of such loans. These purchases reflect that a significant portion of Prosper's business is dependent on funding through the Whole Loan Channel, through which 92% and 88% of Borrower Loans were originated in the years ended December 31, 2022 and 2021, respectively.

Prosper receives all of its transaction fee revenue related to personal loans from WebBank. Prosper earns a transaction fee from WebBank for our services in facilitating originations of Borrower Loans issued by WebBank. The rate of the transaction fee for each individual Borrower Loan is based on the term and credit grade of the Borrower Loan. No individual borrower or investor accounted for 10% or more of consolidated net revenue for any of the periods presented.

**NOTE 20. SEGMENTS**

Starting with the fourth quarter of 2022, the Company realigned its reportable and operating segments to better reflect the nature and materiality of its product offerings. As a result of these changes, the Company now has three reportable and operating segments: Personal Loan, Home Equity and Credit Card. Financial information for the years ended December 31, 2021 and 2020 presented below have been revised to conform with the current year presentation.

------

The Company's Chief Executive Officer, who serves as the chief operating decision maker ("CODM") evaluates the financial performance of the Company's segments based upon segment revenues and segment Adjusted EBITDA, a non-GAAP profitability measure. Items outside of Adjusted EBITDA are not reported by segment, since they are excluded from the measure of segment profitability reviewed by the CODM. The Company's CODM does not use segment assets to allocate resources or to assess performance of the segments and, therefore, total segment assets have not been disclosed.

The tables below present segment information reconciled to total Company Net Income (Loss) Before Income Taxes, as well as interest income and expense included in segment Adjusted EBITDA, for the periods indicated (in thousands).

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** |
| | **Personal Loan** | **Home Equity** | **Credit Card** | **Total** |
| **Total Net Revenue** | $180717 | $2821 | $16343 | $199881 |
| **Segment Adjusted EBITDA** | $2053 | $(2163) | $(8946) | $(9056) |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation expense: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Origination and Servicing |  |  |  | (8132) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and Administrative |  |  |  | (2656) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangibles |  |  |  | (136) |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation |  |  |  | (1326) |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in Fair Value of Convertible Preferred Stock Warrants |  |  |  | 84595 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on Forgiveness of PPP Loan |  |  |  | 8604 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income on cash and cash equivalents |  |  |  | 511 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest Expense on Term Loan |  |  |  | (1527) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net Income Before Income Taxes** |  |  |  | $70877 |
| **Interest Income (Expense) Included in Segment Adjusted EBITDA** |  |  |  |  |
| Interest Income on Borrower Loans and Loans Held for Sale | $86350 | $— | $— | $86350 |
| Interest Expense on Notes and Warehouse Lines | (60025) |  |  | (60025) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Interest Income, Net** | $26325 | $— | $— | $26325 |

---

------

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** |
| | **Personal Loan** | **Home Equity** | **Credit Card** | **Total** |
| **Total Net Revenue** | $143670 | $946 | $10 | $144626 |
| **Segment Adjusted EBITDA** | $19219 | $(2556) | $(3849) | $12814 |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation expense: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Origination and Servicing |  |  |  | (7167) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and Administrative |  |  |  | (2501) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangibles |  |  |  | (172) |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation |  |  |  | (1136) |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in Fair Value of Convertible Preferred Stock Warrants |  |  |  | (138622) |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on Deconsolidation of VIEs |  |  |  | (1494) |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income on cash and cash equivalents |  |  |  | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net Loss Before Income Taxes** |  |  |  | $(138270) |
| **Interest Income (Expense) Included in Segment Adjusted EBITDA** |  |  |  |  |
| Interest Income on Borrower Loans and Loans Held for Sale | $83107 | $— | $— | $83107 |
| Interest Expense on Financial Instruments | (50816) |  |  | (50816) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Interest Income, Net** | $32291 | $— | $— | $32291 |

---

Because the Company's Credit Card product launched in December 2021, all activity for the year ended December 31, 2020 related to the Personal Loan and Home Equity segments.

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31, 2020** | **Year Ended December 31, 2020** | **Year Ended December 31, 2020** |
| | **Personal Loan** | **Home Equity** | **Total** |
| **Total Net Revenue** | $102979 | $257 | $103236 |
| **Segment Adjusted EBITDA** | $(5106) | $(3481) | $(8587) |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation expense: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Organization and Servicing |  |  | (5830) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and Administrative |  |  | (2300) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangibles |  |  | (219) |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment Expenses |  |  | (445) |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation |  |  | (1913) |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in Fair Value of Convertible Preferred Stock Warrants |  |  | 37677 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income on cash and cash equivalents |  |  | 184 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net Income Before Income Taxes** |  |  | $18567 |
| **Interest Income (Expense) Included in Segment Adjusted EBITDA** |  |  |  |
| Interest Income on Borrower Loans and Loans Held for Sale | $104150 | $— | $104150 |
| Interest Expense on Financial Instruments | (60127) |  | (60127) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Interest Income, Net** | $44023 | $— | $44023 |

---

**NOTE 21. SUBSEQUENT EVENTS**

On February 10, 2023, PMI extended its PWIIT Warehouse Line ("PWIIT 2023 Extension"). The PWIIT 2023 Extension increased the maximum borrowing amount from $300 million to $450 million, consisting of a $400 million Class A loan with the existing PWIIT Warehouse Line national banking association and a $50 million Class B loan with the existing asset manager. The total advance rate on the PWIIT 2023 Extension is the lesser of (a) 90% and (b) the sum of defined Class A and B advance rates determined primarily on the basis of a proprietary calculation developed by the lenders, which is expected to range from approximately 80% to 90%. This advance rate became applicable to all new and existing borrowings under the

------

PWIIT Warehouse Line at the time the PWIIT 2023 Extension was signed. Under the PWIIT 2023 Extension, proceeds of loans made under the PWIIT Warehouse Line may be borrowed, repaid and reborrowed until the earlier of March 3, 2024 or the occurrence of any accelerated amortization event or event of default. Repayment of any outstanding proceeds will be made over a 24-month period ending March 4, 2026, excluding the occurrence of any accelerated amortization event or event of default.

Under the PWIIT 2023 Extension, the Class A loan bears interest at a per annum rate of the national banking association's asset-backed commercial paper rate, plus a spread of 2.85%. The spread increases by 0.375% during the first 12 months immediately following the termination of the revolving period with an additional increase of 0.375% thereafter. Additionally, the Class A loan bears a monthly unused commitment fee of 0.75% per annum on the undrawn portion available under the Class A loan.

The Class B loan bears interest at a per annum rate of adjusted one-month Term SOFR, plus a spread of 10.75%. The spread increases by 0.375% during the first twelve months immediately following the termination of the revolving period with an additional increase of 0.375% thereafter. Additionally, the Class B loan bears a monthly unused commitment fee of 0.50% or 1.00% per annum on the undrawn portion available under the Class B loan, depending on the Class B loan utilization percentage.

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** 

To the Stockholders and the Board of Directors of Prosper Funding LLC

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of Prosper Funding LLC and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, member's equity, and cash flows, for each of the three years ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

**Emphasis of a Matter**

As discussed in Note 1 to the consolidated financial statements, the Company earns significant amounts of revenues and incurs significant expenses with a related party, its direct parent company, Prosper Marketplace, Inc.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

**Valuation of Level 3 Financial Instruments and Unobservable Inputs Therein**

–Borrower Loans, at Fair Value – See *Note 4. Borrow Loans and Notes, at Fair Value* 

–Servicing Assets – See *Note 5. Servicing Assets*

<u>Critical Audit Matter Description</u>

------

The Company measures financial instruments at fair value including borrower loans and servicing assets. As of December 31, 2022, Borrower Loans were $320.6 million and servicing assets were $14.9 million. The Company estimates the fair values using discounted cash flow valuation methodologies incorporating significant unobservable inputs and valuation assumptions that are reflective of management's own estimates of assumptions that market participants would use in pricing the instruments and requires significant management judgement or estimate. Significant unobservable inputs used in the valuation methodology include the market servicing rate, discount rates, default rates and prepayment rates.

Auditing the methodology and significant unobservable inputs used by management to estimate the fair values of level 3 financial instruments required a high degree of auditor judgment and subjectivity and an increased extent of effort, including the need to involve our fair value specialists.

<u>How the Critical Audit Matter Was Addressed in the Audit</u>

Our audit procedures related to the valuation of these Level 3 financial instruments and unobservable inputs used by management to estimate the fair value included the following key procedures:

• We gained an understanding of the significance of inputs and assumptions using sensitivity analysis, identifying relevant inputs and assumptions for further testing.

• With the assistance of our fair value specialists, we developed independent estimates of fair value and compared our estimates to the Company's estimates.

• We tested the source information derived from the Company's data used in the valuation models.

• We evaluated the reasonableness of the market servicing rate assumption used in developing the fair value estimate of the servicing assets.

*/s/ DELOITTE & TOUCHE LLP*

San Francisco, CA

March 29, 2023

We have served as the Company's auditor since 2014.

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**Prosper Funding LLC**

**Consolidated Balance Sheets**

**(amounts in thousands)**

---

| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| **Assets:** |  |  |
| Cash and Cash Equivalents | $6285 | $10765 |
| Restricted Cash | 91564 | 157111 |
| Borrower Loans, at Fair Value | 320642 | 267626 |
| Property and Equipment, Net | 10004 | 7907 |
| Servicing Assets | 14860 | 9796 |
| Other Assets | 84 | 317 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Assets** | $443439 | $453522 |
| **Liabilities and Member's Equity:** |  |  |
| Accounts Payable and Accrued Liabilities | $4576 | $1818 |
| Payable to Related Party | 2853 | 1306 |
| Payable to Investors | 86927 | 153681 |
| Notes, at Fair Value | 318704 | 265985 |
| Other Liabilities | 3608 | 2434 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities** | 416668 | 425224 |
| **Member's Equity:** |  |  |
| Member's Equity | 6354 | 11404 |
| Retained Earnings | 20417 | 16894 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Member's Equity** | 26771 | 28298 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities and Member's Equity** | $443439 | $453522 |

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*The accompanying notes are an integral part of these consolidated financial statements.*

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**Prosper Funding LLC**

**Consolidated Statements of Operations**

**(amounts in thousands)**

---

| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| **Revenues:** |  |  |  |
| **Operating Revenues:** |  |  |  |
| Administration Fee Revenue – Related Party | $60256 | $34017 | $21618 |
| Servicing Fees, Net | 20641 | 15770 | 20791 |
| Gain on Sale of Borrower Loans | 1678 | 8450 | 6430 |
| Other Revenue | 894 | 1312 | 552 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Operating Revenues** | 83469 | 59549 | 49391 |
| **Interest Income (Expense):** |  |  |  |
| Interest Income on Borrower Loans | 45289 | 36952 | 36765 |
| Interest Expense on Notes | (42165) | (34514) | (34457) |
| **&nbsp;&nbsp;&nbsp;&nbsp; Total Interest Income, Net** | 3124 | 2438 | 2308 |
| Change in Fair Value of Financial Instruments, Net | 394 | 770 | 454 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Net Revenues** | 86987 | 62757 | 52153 |
| **Expenses:** |  |  |  |
| Administration Fee – Related Party | 74382 | 52641 | 45472 |
| Servicing | 8472 | 6409 | 4900 |
| General and Administrative | 610 | 497 | 380 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Expenses** | 83464 | 59547 | 50752 |
| **Net Income** | $3523 | $3210 | $1401 |

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*The accompanying notes are an integral part of these consolidated financial statements.*

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**Prosper Funding LLC**

**Consolidated Statements of Member's Equity**

**(amounts in thousands)**

---

| | | | |
|:---|:---|:---|:---|
| | **Member's**<br>**Equity** | **Retained Earnings** | **Total** |
| **Balance at December 31, 2019** | $15904 | $12283 | $28187 |
| Distributions to Parent | (4500) |  | (4500) |
| Net Income |  | 1401 | 1401 |
| **Balance at December 31, 2020** | 11404 | 13684 | 25088 |
| Distributions to Parent |  |  |  |
| Net Income |  | 3210 | 3210 |
| **Balance at December 31, 2021** | 11404 | 16894 | 28298 |
| Contribution from Parent | 650 |  | 650 |
| Distributions to Parent | (5700) |  | (5700) |
| Net Income |  | 3523 | 3523 |
| **Balance at December 31, 2022** | $6354 | $20417 | $26771 |

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*The accompanying notes are an integral part of these consolidated financial statements.*

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**Prosper Funding LLC**

**Consolidated Statements of Cash Flows**

**(amounts in thousands)**

---

| | | | |
|:---|:---|:---|:---|
| | **Years Ended December 31,** | **Years Ended December 31,** | **Years Ended December 31,** |
| | **2022** | **2021** | **2020** |
| **Cash Flows from Operating Activities:** |  |  |  |
| Net Income | $3523 | $3210 | $1401 |
| Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: | Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in Fair Value of Financial Instruments, Net | (394) | (770) | (454) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other Non-Cash Changes in Borrower Loans, Loans Held for Sale and Notes | 92 | 26 | 46 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on Sale of Borrower Loans | (15278) | (9020) | (7203) |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in Fair Value of Servicing Rights | 10214 | 10312 | 11003 |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and Amortization | 5525 | 4878 | 4149 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Changes in Operating Assets and Liabilities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of Loans Held for Sale, at Fair Value | (3063729) | (1712705) | (1338082) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from Sales and Principal Payments of Loans Held for Sale, at Fair Value | 3063729 | 1712705 | 1338082 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Assets | 233 | (100) | 532 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts Payable and Accrued Liabilities | 2758 | (543) | 228 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payable to Investors | (66754) | 27415 | 20979 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Related Party Receivable/Payable | 1468 | (2544) | 1183 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Liabilities | 1174 | (179) | (1114) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net Cash (Used in) Provided by Operating Activities** | (57439) | 32685 | 30750 |
| **Cash Flows From Investing Activities:** |  |  |  |
| Purchase of Borrower Loans, at Fair Value | (284921) | (231998) | (133644) |
| Proceeds from Sales and Principal Payments of Borrower Loans, at Fair Value | 202119 | 172709 | 149908 |
| Purchases of Property and Equipment | (7543) | (6127) | (3270) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net Cash (Used in) Provided by Investing Activities** | (90345) | (65416) | 12994 |
| **Cash Flows from Financing Activities:** |  |  |  |
| Proceeds from Issuance of Notes, at Fair Value | 285115 | 231933 | 133228 |
| Payments of Notes, at Fair Value | (202308) | (172250) | (149409) |
| Cash Contribution from Parent | 650 |  |  |
| Cash Distributions to Parent | (5700) |  | (4500) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net Cash Provided by (Used in) Financing Activities** | 77757 | 59683 | (20681) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash** | (70027) | 26952 | 23063 |
| Cash, Cash Equivalents and Restricted Cash at Beginning of the Period | 167876 | 140924 | 117861 |
| Cash, Cash Equivalents and Restricted Cash at End of the Period | $97849 | $167876 | $140924 |
| **Supplemental Disclosure of Cash Flow Information:** |  |  |  |
| Cash Paid for Interest | $41431 | $34682 | $34410 |
| Non-Cash Investing Activity- Accrual for Property and Equipment, Net | 313 | 234 | 504 |
| **Reconciliation to Amounts on Consolidated Balance Sheets:** |  |  |  |
| Cash and Cash Equivalents | $6285 | $10765 | $8592 |
| Restricted Cash | 91564 | 157111 | 132332 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Cash, Cash Equivalents and Restricted Cash** | $97849 | $167876 | $140924 |

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*The accompanying notes are an integral part of these consolidated financial statements.*

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**PROSPER FUNDING LLC**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE 1. ORGANIZATION AND BUSINESS**

Prosper Funding LLC ("PFL") was formed in the state of Delaware in February 2012 as a limited liability company with Prosper Marketplace, Inc. ("PMI") as its sole equity member. Except as the context otherwise requires, as used in these Notes to consolidated financial statements of Prosper Funding LLC, PFL and the "Company" refer to Prosper Funding LLC and its wholly owned subsidiary, Prosper Depositor LLC, a Delaware limited liability company, on a consolidated basis.

PFL did not have any items of other comprehensive income (loss) during any of the periods presented in the consolidated financial statements as of and for the years ended December 31, 2022, 2021 and 2020.

PFL was formed by PMI to hold Borrower Loans and issue Notes through the marketplace. Although PFL is consolidated with PMI for accounting and tax purposes, PFL has been organized and is operated in a manner that is intended to minimize the likelihood that it would be substantively consolidated with PMI in a bankruptcy proceeding. PFL's intention is to minimize the likelihood that its assets would be subject to claims by PMI's creditors if PMI were to file for bankruptcy, as well as to minimize the likelihood that PFL will become subject to bankruptcy proceedings directly. PFL seeks to achieve this by placing certain restrictions on its activities and implementing certain formal procedures designed to expressly reinforce its status as a distinct entity from PMI.

Since February 1, 2013, all Notes issued and sold through the marketplace are issued, sold and serviced by PFL. Pursuant to a Loan Account Program Agreement between PMI and WebBank, PMI manages the operation of the marketplace, as agent of WebBank, in connection with the submission of Borrower Loan applications by potential borrowers, the origination of related Borrower Loans by WebBank and the funding of such Borrower Loans by WebBank. Pursuant to an Administration Agreement between PFL and PMI, PMI manages all other aspects of the marketplace on behalf of PFL. As a result PFL earns significant revenues and incurs significant expenses with a related party, its direct parent company, PMI.

A borrower who wishes to obtain a loan through the marketplace must post a loan listing on the marketplace. PFL allocates listings to one of two investor funding channels: (i) the "Note Channel," which allows investors to commit to purchase Notes from PFL, the payments of which are dependent on PFL's receipt of payments made on the corresponding Borrower Loan; and (ii) the "Whole Loan Channel," which allows investors to commit to purchase 100% of a Borrower Loan directly from PFL.

All loans requested and obtained through the marketplace are unsecured obligations of individual borrowers with a fixed interest rate and original terms to maturity of 24, 36, 48 or 60 months as of December 31, 2022. All loans made through the marketplace are funded by WebBank, an FDIC-insured, Utah chartered industrial bank. After funding a loan, WebBank sells the loan to PFL, without recourse to WebBank, in exchange for the principal amount of the loan. WebBank does not have any obligation to purchasers of the Notes.

As of December 31, 2022, PFL's marketplace was open to investors in 30 states and the District of Columbia. Additionally, as of December 31, 2022, PFL's marketplace was open to borrowers in 48 states and the District of Columbia. Currently, the marketplace does not operate internationally.

**NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES**

**Basis of Presentation**

PFL's consolidated financial statements include the accounts of PFL and its wholly-owned subsidiary, Prosper Depositor LLC. All intercompany balances and transactions between PFL and Prosper Depositor LLC have been eliminated in consolidation. PFL's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP").

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**Use of Estimates**

The preparation of PFL's consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates, judgments and assumptions include, but are not limited to, the following: valuation of Loans Held for Sale, Borrower Loans and associated Notes, valuation of servicing rights, valuation of loan trailing fee liability, repurchase obligations, and contingent liabilities. PFL bases its estimates on historical experience from all Borrower Loans and on various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ materially from estimates.

**Consolidation of Variable Interest Entities**

A variable interest entity (VIE) is a legal entity that has either a total equity investment that is insufficient to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. PFL's variable interest arises from contractual, ownership or other monetary interests in the entity, which change with fluctuations in the fair value of the entity's net assets. A VIE is consolidated by its primary beneficiary, which is the party that has both the power to direct the activities that most significantly impact the VIE's economic performance, and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. PFL consolidates a VIE when it is deemed to be the primary beneficiary. PFL assesses whether or not it is the primary beneficiary of a VIE on an ongoing basis.

**Transfers of Financial Assets**

PFL accounts for transfers of financial assets as sales when it has surrendered control over the transferred assets. Control is generally considered to have been surrendered when the transferred assets have been legally isolated from PFL, the transferee has the right to pledge or exchange the assets without any significant constraints, and PFL has not entered into a repurchase agreement, does not hold unconditional call options and has not written put options on the transferred assets. In assessing whether control has been surrendered, PFL considers whether the transferee would be a consolidated affiliate and the impact of all arrangements or agreements made contemporaneously with, or in contemplation of the transfer, even if they were not entered into at the time of transfer. PFL measures gain or loss on sale of financial assets as the net proceeds received on the sale less the carrying amount of the loans sold. The net proceeds of the sale represent the fair value of any assets obtained or liabilities incurred as part of the transaction, including, but not limited to Servicing Assets, retained securities, and recourse obligations.

**Fair Value Measurement**

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial instruments consist principally of Cash and Cash Equivalents, Restricted Cash, Borrower Loans, Loans Held for Sale, Servicing Assets, Loan Trailing Fee Liability, Accounts Receivable, Accounts Payable and Accrued Liabilities, Payable to Investors and Notes. The estimated fair values of Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable and Accrued Liabilities, and Payable to Investors approximate their carrying values because of their short term nature.

The fair value hierarchy includes a three-level classification, which is based on whether the inputs to the valuation methodology used for measurement are observable:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly.

Level 3 — Unobservable inputs.

When developing fair value measurements, PFL maximizes the use of observable inputs and minimizes the use of unobservable inputs. However, for certain instruments PFL must utilize unobservable inputs in determining fair value due to the lack of observable inputs in the market, which requires greater judgment in measuring fair value. In instances where there is limited or no observable market data, fair value measurements for assets and liabilities are determined using assumptions that management believes a market participant would use in pricing the asset or liability.

As observable market prices are not available for the Borrower Loans, Loans Held for Sale, Notes, and Servicing Assets, or for similar assets and liabilities, PFL believes the Borrower Loans, Loans Held for Sale, Notes, and Servicing Assets should be considered level 3 financial instruments. PFL primarily uses a discounted cash flow model to estimate their fair value and key assumptions used in valuation include default rates and prepayment rates derived from historical performance and

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discount rates based on estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics.

The obligation to pay principal and interest on any series of Notes is equal to the loan payments, if any, that are received on the corresponding Borrower Loan, net of our servicing fee which is generally 1.0% of the outstanding balance. The fair value election for Notes and Borrower Loans allows both the assets and the related liabilities to receive similar accounting treatment for expected losses which is consistent with the subsequent cash flows to investors that are dependent upon borrower payments. As such, the fair value of a series of Notes is approximately equal to the fair value of the corresponding Borrower Loan, adjusted for the 1.0% servicing fee and the timing of loan purchase, Note issuance and borrower payments. As a result, the valuation of the Notes uses the same methodology and assumptions as the Borrower Loans, except that the Notes incorporate the 1.0% servicing fee and any differences in timing in payments. Any unrealized gains or losses on the Borrower Loans and Notes for which the fair value option has been elected is recorded as a separate line item in the statement of operations. The effective interest rate associated with a group of Notes is less than the interest rate earned on the corresponding Borrower Loan due to the 1.0% servicing fee.

Refer to Note 7 for additional fair value disclosures.

**Cash and Cash Equivalents**

Cash includes various unrestricted deposits with highly rated financial institutions. Cash equivalents consist of highly liquid marketable securities with original maturities of three months or less at the time of purchase and consist primarily of money market funds, commercial paper, U.S. treasury securities and U.S. agency securities. Cash equivalents are recorded at cost, which approximates fair value.

**Restricted Cash**

Restricted Cash consists primarily of cash deposits, money market funds and short-term certificate of deposit accounts held as collateral as required for long term leases, loan funding and servicing activities, and cash that investors have on our marketplace that has not yet been invested in Borrower Loans or disbursed to the investor.

**Borrower Loans, Loans Held for Sale and Notes**

With respect to the Note Channel, PFL purchases Borrower Loans from WebBank, then issues Notes and holds the Borrower Loans until maturity. The obligation to repay a series of Notes funded through the Note Channel is dependent upon the repayment of the associated Borrower Loan. Borrower Loans and Notes funded through the Note Channel are carried on PFL's consolidated balance sheets as assets and liabilities, respectively.

PFL places Borrower Loans and Loans Held for Sale on non-accrual status when they are 120 days past due. When a loan is placed on non-accrual status, PFL stops accruing interest and reverses all accrued but unpaid interest as of such date. Additionally, PFL charges-off Borrower Loans and Loans Held for Sale when they are 120 days past due. The fair value of loans 120 days past due generally consists of the expected recovery from debt sales in subsequent periods.

Management has elected the fair value option for Borrower Loans, Loans Held for Sale, and Notes. Changes in fair value of Borrower Loans are largely offset by the changes in fair value of Notes due to the borrower payment-dependent design of the Notes. Changes in fair value of Borrower Loans, Loans Held for Sale and Notes are included in "Change in Fair Value of Financial Instruments, Net" on the Consolidated Statements of Operations.

PFL primarily uses a discounted cash flow model to estimate the fair value of Borrower Loans, Loans Held for Sale and Notes. The key assumptions used in the valuation include default rates and prepayment rates derived primarily from historical performance and discount rates based on estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics.

**Servicing Assets** 

PFL records Servicing Assets at their estimated fair values for servicing rights retained when PFL sells Borrower Loans to unrelated third-party buyers. The change in fair value of Servicing Assets is recognized in revenue as Servicing Fees, Net. The gain or loss on a loan sale is recorded in Gain on Sale of Borrower Loans while the fair value of the servicing rights, which is based on the degree to which the contractual loan servicing fee is above or below an estimated market loan servicing rate, is recorded in Servicing Assets on the Consolidated Balance Sheets.

PFL uses a discounted cash flow model to estimate the fair value of Servicing Assets which considers the contractual servicing fee revenue that PFL earns on the Borrower Loans, estimated market servicing fees to service such loans, prepayment rates, default rates and the current principal balances of the Borrower Loans.

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**Software and Website Development**

Software and website development represents the software and website development costs that PMI transferred to PFL. PFL does not develop any of its own software or its website. Software and website development are included in Property and Equipment, Net and amortized to expense using the straight-line method over their expected lives which is generally one to five years. PFL evaluates its software assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of software and website development assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such software and website development assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software and website development assets.

**Payable to Investors**

Payable to Investors primarily represents the Company's obligation to investors related to cash held in an account for the benefit of investors and payments-in-process received from borrowers.

**Loan Trailing Fee Liability**

On July 1, 2016, PMI signed a series of agreements with WebBank which, among other things, includes an additional program fee (the "Loan Trailing Fee") paid to WebBank in connection with the performance of each loan sold to PMI. These agreements were effective as of August 1, 2016. The Loan Trailing Fee is dependent on the amount and timing of principal and interest payments made by borrowers of the underlying loans, irrespective of whether the loans are sold by PMI, and gives WebBank an ongoing financial interest in the performance of the loans it originates. This fee is paid by PMI to WebBank over the term of the respective loans and is a function of the principal and interest payments made by borrowers of such loans. In the event that principal and interest payments are not made with respect to any loan, PMI is not required to make the related Loan Trailing Fee payment. The obligation to pay the Loan Trailing Fee for any loan sold to PMI is recorded at fair value at the time of the origination of such loan within Other Liabilities and recorded as a reduction of "Transaction Fees, net". Any changes in the fair value of this liability are recorded in "Servicing Fees, Net" on the Consolidated Statements of Operations. The fair value of the Loan Trailing Fee represents the present value of the expected monthly Loan Trailing Fee payments, which takes into consideration certain assumptions related to expected prepayment rates and defaults rates.

**Revenue Recognition**

Revenue primarily results from fees, net interest earned and gains on the sale of Borrower Loans. Fees consist of related party administrative fees and Servicing Fees paid by investors. The Company also has other smaller sources of revenue reported as Other Revenues including fees charged in relation to securitizations by outside investors.

***Administration Agreement License Fees***

PFL primarily generates revenues through license fees it earns through an Administration Agreement with PMI. The Administration Agreement contains a license granted by PFL to PMI that entitles PMI to use the platform for and in relation to: (i) PMI's performance of its duties and obligations under the Administration Agreement relating to corporate administration, loan platform services, loan and Note servicing and marketing, and (ii) PMI's performance of its duties and obligations to WebBank in relation to loan origination and funding. The license fees are based on the number of listings that are posted to the platform.

***Service Fees***

Investors who purchase Borrower Loans from PFL through the Whole Loan Channel typically pay PFL a servicing fee which is currently set at 1.0% per annum of the outstanding principal balance of the Borrower Loan prior to applying the current payment, plus an additional 0.075% per annum to cover the Loan Trailing Fee. The servicing fee compensates PFL for the costs incurred in servicing the Borrower Loan, including managing payments from borrowers, managing payments to investors and maintaining investors' account portfolios. PFL records Servicing Fees from investors as a component of operating revenue when received.

***Gain on Sale of Borrower Loans***

PFL recognizes gains or losses on the sale of Borrower Loans when it sells Borrower Loans to third parties. PFL measures gain or loss on sale of Borrower Loans as the net proceeds received on the sale less the fair value of the Borrower Loans sold. The net proceeds of the sale represent the fair value of any assets obtained or liabilities incurred as part of the transaction, including, but not limited to Servicing Assets, retained securities, and repurchase obligations.

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***Interest Income on Borrower Loans and Interest Expense on Notes***

PFL recognizes interest income on Borrower Loans originated through the Note Channel and interest expense on the corresponding Notes using the accrual method based on the stated interest rate to the extent PFL believes it to be collectable.

**Administration Fee Expense - Related Party**

Pursuant to the Administration Agreement between PFL and PMI, PMI manages the marketplace on behalf of PFL. Accordingly each month, PFL is required to pay PMI an administration fee that is based on PMI's (a) finance and legal personnel costs, (b) number of Borrower Loans originated through the Marketplace, (c) Servicing Fees collected by or on behalf of PFL, and (d) nonsufficient funds fees collected by or on behalf of PFL.

**Recent Accounting Pronouncements**

***Accounting Standards Adopted in the Current Period***

No accounting standards were adopted in the current period for PFL.

***Accounting Standards Issued, to be Adopted in Future Periods***

No issued and pending accounting standards were identified that are expected to have an impact on PFL.

**NOTE 3. PROPERTY AND EQUIPMENT, NET**

Property and Equipment consist of the following as of the dates presented (in thousands):

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| Internal-use software and web site development costs | $37428 | $31979 |
| Less: Accumulated depreciation and amortization | (27424) | (24072) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Property and Equipment, Net** | $10004 | $7907 |

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Depreciation and amortization expense for the years ended December 31, 2022, 2021, and 2020 was $5.5 million, $4.9 million and $4.1 million, respectively. Internal-use software and web site development additions of $7.6 million, $5.9 million and $3.5 million were purchased from PMI in the years ended December 31, 2022, 2021, and 2020, respectively.

**NOTE 4. BORROWER LOANS AND NOTES, AT FAIR VALUE**

The fair value of Borrower Loans and Notes issued through the Note Channel is estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The primary assumptions used to value such Borrower Loans and Notes include default and prepayment rates derived from historical performance and discount rates that reflect estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics. The obligation to pay principal and interest on any series of Notes is equal to the payments, if any, received on the corresponding borrower loan, net of the servicing fee. As such, the fair value of Notes is approximately equal to the fair value of Borrower Loans originated through the Note Channel, adjusted for the servicing fee and the timing of borrower payments subsequently disbursed to the note holders. The effective interest rate associated with a series of notes will be less than the interest rate earned on the corresponding borrower loan due to the servicing fee.

The aggregate principal balances outstanding and fair values of Borrower Loans and Notes as of December 31, 2022 and 2021, are presented in the following table (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Borrower Loans** | **Borrower Loans** | **Notes** | **Notes** |
| | **December 31, 2022** | **December 31, 2021** | **December 31, 2022** | **December 31, 2021** |
| Aggregate principal balance outstanding | $333294 | $265232 | $336555 | $267415 |
| Fair value adjustments | (12652) | 2394 | (17851) | (1430) |
| **Fair value** | $320642 | $267626 | $318704 | $265985 |

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As of December 31, 2022, outstanding Borrower Loans had original terms to maturity of 24, 36, 48 or 60 months, had monthly payments with fixed interest rates ranging from 5.31% to 33.00% and had various original maturity dates through December 2027. At December 31, 2021, Borrower Loans had original maturities of either 36 months or 60 months, had monthly payments with fixed interest rates ranging from 5.31% to 31.82% and had various original maturity dates through December 2026.

As of December 31, 2022, Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of $2.7 million and a fair value of $0.3 million. As of December 31, 2021, Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of $0.9 million and a fair value of $0.1 million. PFL places loans on non-accrual status when they are over 120 days past due. As of December 31, 2022 and 2021, Borrower Loans in non-accrual status had a fair value of $0.3 million and $0.1 million, respectively.

**NOTE 5. SERVICING ASSETS**

PFL accounts for Servicing Assets at their estimated fair values with changes in fair values recorded in Servicing Fees, Net on the Consolidated Statements of Operations. The initial asset is recognized when PFL sells Borrower Loans to unrelated third-party buyers through the Whole Loan Channel and the servicing rights are retained. The total recognized gains and losses on the sale of such Borrower Loans were a $1.7 million gain, a $8.5 million gain and a $6.4 million gain for the years ended December 31, 2022, 2021, and 2020, respectively.

At December 31, 2022, Borrower Loans that were sold, but for which PFL retained servicing rights, had a total outstanding principal balance of $3.7 billion, original terms of 24, 36, 48 or 60 months, monthly payments with fixed interest rates ranging from 5.31% to 33.00% and various original maturity dates through December 2027. At December 31, 2021, Borrower Loans that were sold, but for which PFL retained servicing rights, had a total outstanding principal balance of $2.5 billion, original terms of either 36 or 60 months, monthly payments with fixed interest rates ranging from 5.31% to 31.82% and various original maturity dates through December 2026.

Contractually-specified servicing fees and ancillary fees totaled $33.8 million, $29.2 million and $34.8 million for the years ended December 31, 2022, 2021, and 2020, respectively, and are included in Servicing Fees, Net on the Statement of Operations.

**Fair Value Valuation Method**

PFL uses a discounted cash flow valuation methodology generally consisting of developing an estimate of future cash flows that are expected to occur over the life of a financial instrument and then discounting those cash flows at a rate of return that results in the fair value amount.

Significant unobservable inputs presented in the table within Note 7 are those that PFL considers significant to the estimated fair values of the Level 3 Servicing Assets. The following is a description of the significant unobservable inputs provided in the table.

***Market Servicing Rate***

PFL estimates adequate market servicing rates that would fairly compensate a substitute servicer should one be required, which includes the profit that would be demanded in the marketplace. This rate is stated as a fixed percentage of outstanding principal balance on a per annum basis. With the assistance of a valuation specialist, PFL estimates these market servicing rates based on observable market rates for other loan types in the industry and bids from sub-servicing providers, adjusted for the unique loan attributes that are present in the specific loans that PFL sells and services and information from backup service providers.

***Discount Rate***

The discount rate is a rate of return used to discount future expected cash flows to arrive at a present value, which represents the fair value of the loan servicing rights. Management used a range of discount rates for the Servicing Assets based on comparable observed valuations of similar assets and publicly available disclosures related to servicing valuations, with comparability adjustments made to account for differences with PFL's Servicing Assets.

***Default Rate***

The default rate presented in Note 7 is an annualized, average estimate considering all Borrower Loan categories (i.e., risk ratings and duration), and represents an aggregate of conditional default rate curves for each credit grade or borrower loan category. Each point on a particular borrower loan category's curve represents the percentage of principal expected to default

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per period based on the term and age of the underlying Borrower Loans. The assumption regarding defaults directly reduces servicing revenues because the amount of servicing revenues received is based on the amount collected each period.

***Prepayment Rate***

The prepayment rate presented in Note 7 is an annualized, average estimate considering all borrower loan categories (i.e., risk ratings and duration), and represents an aggregate of conditional prepayment rate curves for each credit grade or borrower loan category. Each point on a particular borrower loan category's curve represents the percentage of principal expected to prepay per period based on the term and age of the underlying Borrower Loans. Prepayments reduce servicing revenues as they shorten the period over which PFL expects to collect fees on the Borrower Loans, which is used to project future servicing revenues.

**NOTE 6. INCOME TAXES** 

PFL incurred no income tax provision for the year ended December 31, 2022 and 2021. PFL is a U.S. disregarded entity and its income and loss are included in the income tax reporting of its parent, PMI. Since PMI is in a taxable loss position, is not currently subject to income taxes, and has fully reserved against its deferred tax asset, the net effective tax rate for PFL is 0%.

**NOTE 7. FAIR VALUE OF ASSETS AND LIABILITIES**

PFL has elected to record certain financial instruments at fair value on the balance sheet. PFL classifies Borrower Loans, Loans Held for Sale and Notes as financial instruments and assesses their fair value on a quarterly basis for financial statement presentation purposes. Gains and losses on these financial instruments are shown separately on the Consolidated Statements of Operations.

As of December 31, 2022 and 2021, the discounted cash flow methodology used to estimate the Note fair values used the same projected cash flows as the related Borrower Loans. As demonstrated in the following table, the fair value adjustments for Borrower Loans were largely offset by the fair value adjustments of the Notes due to the borrower payment dependent design of the Notes and because the principal balances of the Borrower Loans approximated the principal balances of the Notes.

For a description of the fair value hierarchy and PFL's fair value methodologies, see Note 2 - Summary of Significant Accounting Policies. PFL did not transfer any assets or liabilities in or out of Level 3 during the year ended December 31, 2022 and 2021.

**Financial Instruments Recorded at Fair Value**

The fair value of the Borrower Loans and Notes are estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The primary cash flow assumptions used to value such Borrower Loans and Notes include default and prepayment rates derived from historical performance and discount rates that reflect estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics.

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The following tables present the fair value hierarchy for assets and liabilities measured at fair value (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2022** | **Level 1**<br>**Inputs** | **Level 2**<br>**Inputs** | **Level 3**<br>**Inputs** | **Total** |
| **Assets:** | | | | |
| Borrower Loans, at Fair Value | $— | $— | $320642 | $320642 |
| Servicing Assets |  |  | 14860 | 14860 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Assets** | $— | $— | $335502 | $335502 |
| **Liabilities:** |  |  |  |  |
| Notes, at Fair Value | $— | $— | $318704 | $318704 |
| Loan Trailing Fee Liability\* |  |  | 3290 | 3290 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities** | $— | $— | $321994 | $321994 |

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| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2021** | **Level 1**<br>**Inputs** | **Level 2**<br>**Inputs** | **Level 3**<br>**Inputs** | **Total** |
| **Assets:** | | | | |
| Borrower Loans, at Fair Value | $— | $— | $267626 | $267626 |
| Servicing Assets |  |  | 9796 | 9796 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Assets** | $— | $— | $277422 | $277422 |
| **Liabilities:** |  |  |  |  |
| Notes, at Fair Value | $— | $— | $265985 | $265985 |
| Loan Trailing Fee Liability\* |  |  | 2161 | 2161 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities** | $— | $— | $268146 | $268146 |

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\*Included in Other Liabilities on the Consolidated Balance Sheets.

As PFL's Borrower Loans, Notes, Servicing Assets and loan trailing fee liability do not trade in an active market with readily observable prices, PFL uses significant unobservable inputs to measure the fair value of these assets and liabilities. Financial instruments are categorized in the Level 3 valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, the realized and unrealized gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable and unobservable inputs.

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**Significant Unobservable Inputs**

The following tables present quantitative information about the significant unobservable inputs used for PFL's Level 3 fair value measurements at the dates presented:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Range** | **Range** | **Range** | **Range** |
| **Borrower Loans and Notes:** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
| Discount rate | 5.6% | 12.9% | 4.3% | 13.9% |
| Default rate | 1.8% | 18.2% | 2.0% | 13.5% |

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Range** | **Range** | **Range** | **Range** |
| **Servicing Assets:** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
| Discount rate | 15.0% | 25.0% | 15.0% | 25.0% |
| Default rate | 2.0% | 19.3% | 1.5% | 14.1% |
| Prepayment rate | 14.2% | 28.0% | 10.2% | 32.3% |
| Market servicing rate <sup>(1) (2)</sup> | 0.648% | 0.842% | 0.648% | 0.842% |
| <sup>(1)</sup> Servicing assets associated with loans enrolled in a relief program offered by the Company in response to the COVID-19 pandemic as of December 31, 2022 and 2021 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption of 64.8 basis points. | <sup>(1)</sup> Servicing assets associated with loans enrolled in a relief program offered by the Company in response to the COVID-19 pandemic as of December 31, 2022 and 2021 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption of 64.8 basis points. | <sup>(1)</sup> Servicing assets associated with loans enrolled in a relief program offered by the Company in response to the COVID-19 pandemic as of December 31, 2022 and 2021 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption of 64.8 basis points. | <sup>(1)</sup> Servicing assets associated with loans enrolled in a relief program offered by the Company in response to the COVID-19 pandemic as of December 31, 2022 and 2021 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption of 64.8 basis points. | <sup>(1)</sup> Servicing assets associated with loans enrolled in a relief program offered by the Company in response to the COVID-19 pandemic as of December 31, 2022 and 2021 were measured using a market servicing rate assumption of 84.2 basis points. This rate was estimated using a multiplier consistent with observable market rates for other loan types, applied to the base market servicing rate assumption of 64.8 basis points. |
| <sup>(2)</sup> Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2022 and 2021, the market rate for collection fees and non-sufficient fund fees was assumed to be 6 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 70.8 basis points to 90.2 basis points and 70.8 basis points to 90.2 basis points, respectively. | <sup>(2)</sup> Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2022 and 2021, the market rate for collection fees and non-sufficient fund fees was assumed to be 6 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 70.8 basis points to 90.2 basis points and 70.8 basis points to 90.2 basis points, respectively. | <sup>(2)</sup> Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2022 and 2021, the market rate for collection fees and non-sufficient fund fees was assumed to be 6 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 70.8 basis points to 90.2 basis points and 70.8 basis points to 90.2 basis points, respectively. | <sup>(2)</sup> Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2022 and 2021, the market rate for collection fees and non-sufficient fund fees was assumed to be 6 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 70.8 basis points to 90.2 basis points and 70.8 basis points to 90.2 basis points, respectively. | <sup>(2)</sup> Excludes collection fees that would be passed on to a hypothetical third-party servicer. As of December 31, 2022 and 2021, the market rate for collection fees and non-sufficient fund fees was assumed to be 6 basis points and 6 basis points, respectively, for a weighted-average total market servicing rate of 70.8 basis points to 90.2 basis points and 70.8 basis points to 90.2 basis points, respectively. |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Range** | **Range** | **Range** | **Range** |
| **Loan Trailing Fee Liability:** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
| Discount rate | 15.0% | 25.0% | 15.0% | 25.0% |
| Default rate | 2.0% | 19.3% | 1.5% | 14.1% |
| Prepayment rate | 14.2% | 28.0% | 10.2% | 32.3% |

---

**Changes in Level 3 Fair Value Assets and Liabilities on a Recurring Basis**

The following table presents additional information about Level 3 Loans Held for Sale, Borrower Loans, and Notes measured at fair value on a recurring basis for the year ended December 31, 2022 and 2021 (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Fair Value Measurements Using Significant Unobservable Inputs (Level 3)** | **Fair Value Measurements Using Significant Unobservable Inputs (Level 3)** | **Fair Value Measurements Using Significant Unobservable Inputs (Level 3)** | **Fair Value Measurements Using Significant Unobservable Inputs (Level 3)** | **Fair Value Measurements Using Significant Unobservable Inputs (Level 3)** |
| | **Assets** | **Assets** | **Liabilities** | |
| | **Borrower<br>Loans** | **Loans Held<br>for Sale** | **Notes** |<br>**Total** |
| **Fair value at January 1, 2021** | $209670 | $— | $(208379) | $1291 |
| Originations | 232000 | 1712705 | (231933) | 1712772 |
| Principal repayments | (171286) |  | 172250 | 964 |
| Borrower Loans sold to third parties | (1422) | (1712705) |  | (1714127) |
| Other changes | (195) |  | 166 | (29) |
| Change in fair value | (1141) |  | 1911 | 770 |
| **Fair value at December 31, 2021** | $267626 | $— | $(265985) | $1641 |
| Originations | 284921 | 3063729 | (285115) | 3063535 |
| Principal repayments | (187599) |  | 202308 | 14709 |
| Borrower Loans sold to third parties | (14520) | (3063729) |  | (3078249) |
| Other changes | 650 |  | (742) | (92) |
| Change in fair value | (30436) |  | 30830 | 394 |
| **Fair value at December 31, 2022** | $320642 | $— | $(318704) | $1938 |

---

------

The following table presents additional information about Level 3 Servicing Assets recorded at fair value (in thousands):

---

| | |
|:---|:---|
| | **Servicing Assets** |
| **Fair value at January 1, 2021** | $11088 |
| Additions | 9020 |
| Change in fair value | (10312) |
| **Fair value at December 31, 2021** | $9796 |
| Additions | 15277 |
| Change in fair value | (10213) |
| **Fair value at December 31, 2022** | $14860 |

---

***Loan Trailing Fee Liability***

The fair value of the Loan Trailing Fee Liability represents the present value of the expected monthly Loan Trailing Fee payments, which takes into consideration certain assumptions related to expected prepayment rates and default rates using a discounted cash flow model. The assumptions used are the same as those used for the valuation of Servicing Assets, as described below.

The following tables present additional information about Level 3 Loan Trailing Fee Liability measured at fair value on a recurring basis (in thousands):

---

| | |
|:---|:---|
| | **Loan Trailing Fee Liability** |
| **Fair Value at January 1, 2021** | $2233 |
| Issuances | 1775 |
| Cash payment of Loan Trailing Fee | (2100) |
| Change in fair value | 253 |
| **Fair Value at December 31, 2021** | $2161 |
| Issuances | 3070 |
| Cash payment of Loan Trailing Fee | (2245) |
| Change in fair value | 304 |
| **Fair Value at December 31, 2022** | $3290 |

---

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**Significant Recurring Level 3 Fair Value Asset and Liability Input Sensitivity**

Key economic assumptions are used to compute the fair value of Borrower Loans and Notes. The sensitivity of the current fair value to immediate changes in assumptions at December 31, 2022 and 2021 for Borrower Loans are presented in the following table (in thousands, except percentages):

---

| | | |
|:---|:---|:---|
| **Borrower Loans:** | **December 31, 2022** | **December 31, 2021** |
| Fair value, using the following assumptions: | $320642 | $267626 |
| &nbsp;&nbsp;&nbsp;&nbsp; Weighted-average discount rate | 6.87% | 5.76% |
| &nbsp;&nbsp;&nbsp;&nbsp; Weighted-average default rate | 11.36% | 10.70% |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point increase in discount rate | $317380 | $265104 |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point increase in discount rate | $314201 | $262499 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point decrease in discount rate | $323991 | $270520 |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point decrease in discount rate | $327429 | $273337 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.1 multiplier to default rate | $316832 | $265435 |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.2 multiplier to default rate | $313053 | $263107 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.9 multiplier to default rate | $324484 | $270133 |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.8 multiplier to default rate | $328361 | $272505 |

---

Key economic assumptions are used to compute the fair value of Notes. The sensitivity of the fair value to immediate changes in assumptions at December 31, 2022 and 2021 for Notes funded through the Note Channel are presented in the following table (in thousands, except percentages):

---

| | | |
|:---|:---|:---|
| **Notes:** | **December 31, 2022** | **December 31, 2021** |
| Fair value, using the following assumptions: | $318704 | $265985 |
| &nbsp;&nbsp;&nbsp;&nbsp; Weighted-average discount rate | 6.87% | 5.76% |
| &nbsp;&nbsp;&nbsp;&nbsp; Weighted-average default rate | 11.36% | 10.70% |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point increase in discount rate | $315456 | $263326 |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point increase in discount rate | $312291 | $260735 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point decrease in discount rate | $322037 | $268714 |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point decrease in discount rate | $325461 | $271516 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.1 multiplier to default rate | $314892 | $263644 |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.2 multiplier to default rate | $311112 | $261318 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.9 multiplier to default rate | $322547 | $268340 |
| &nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.8 multiplier to default rate | $326425 | $270711 |

---

Key economic assumptions are used to compute the fair value of Servicing Assets. The sensitivity of the current fair value to immediate changes in assumptions at December 31, 2022 and 2021 for Servicing Assets are presented in the following table (in thousands, except percentages):

------

---

| | | |
|:---|:---|:---|
| **Servicing Assets:** | **December 31, 2022** | **December 31, 2021** |
| Fair value, using the following assumptions: | $14860 | $9796 |
| &nbsp;&nbsp;&nbsp;&nbsp; Weighted-average market servicing rate | 0.649% | 0.650% |
| &nbsp;&nbsp;&nbsp;&nbsp; Weighted-average prepayment rate | 18.77% | 20.82% |
| &nbsp;&nbsp;&nbsp;&nbsp; Weighted-average default rate | 12.63% | 12.24% |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market servicing rate increase of 0.025% | $13850 | $9171 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market servicing rate decrease of 0.025% | $15870 | $10421 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.1 multiplier to prepayment rate | $14534 | $9580 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.9 multiplier to prepayment rate | $15191 | $10015 |
| Fair value resulting from: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Applying a 1.1 multiplier to default rate | $14557 | $9667 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Applying a 0.9 multiplier to default rate | $15165 | $9926 |

---

These sensitivities are hypothetical and should be evaluated with care. The effect on fair value of a 10% variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.

**NOTE 8. COMMITMENTS AND CONTINGENCIES**

In the normal course of its operations, PFL becomes involved in various legal actions. PFL maintains provisions it considers to be adequate for such actions. The Company does not believe it is probable that the ultimate liability, if any, arising out of any such matters will have a material effect on financial condition, results of operations or cash flows.

**Operating Commitments**

Prosper has entered into an agreement with WebBank, under which all Borrower Loans originated through the marketplace are made by WebBank under its bank charter. On June 25, 2021, PMI, along with PFL, and WebBank entered into: (i) a Fifth Amendment (the "Sale Agreement Amendment") to the Asset Sale Agreement, dated July 1, 2016, between PFL and WebBank (the "Sale Agreement"); (ii) a Sixth Amendment (the "Marketing Agreement Amendment") to the Marketing Agreement, dated July 1, 2016, between PMI and WebBank (the "Marketing Agreement"); and (iii) a Third Amendment (the "Purchase Agreement Amendment") to the Stand By Purchase Agreement, dated July 1, 2016, between PMI and WebBank (the "Purchase Agreement" and, collectively with the Sale Agreement and the Marketing Agreement, the "Origination and Sale Agreements"). The Sale Agreement Amendment, the Marketing Agreement Amendment, and the Purchase Agreement Amendment, collectively, are hereinafter referred to as the "Amendments."

The Sale Agreement Amendment, among other things, extends the term of the Sale Agreement to February 1, 2025 and amends certain collateral requirements under the Sale Agreement. The Marketing Agreement Amendment, among other things, extends the term of the Marketing Agreement to February 1, 2025 and sets forth the amended terms and conditions of certain fees owed by the Registrants to WebBank under the Marketing Agreement. The Purchase Agreement Amendment amends certain collateral requirements of Prosper under the Purchase Agreement.

Pursuant to the Marketing Agreement Amendment, the marketing fee that Prosper receives in connection with the origination of each loan is partially reduced by an amount (the "Designated Amount") calculated as a percentage of the principal amount of such loan based on the aggregate principal amount of loans originated for the applicable month. To the extent the aggregate Designated Amount for all loans originated during any month is less than $100,000 through February 1, 2025, Prosper is required to pay WebBank an amount equal to such deficiency. Accordingly, the minimum fee is $1.2 million for each year from 2023 through 2024, and $0.1 million in 2025.

------

Additionally, under the agreement with WebBank, Prosper is required to maintain minimum net liquidity of $15 million at all times during the term of the agreement. Net liquidity is defined as the sum of Cash, Cash Equivalents and Available for Sale Investments. Violation of this covenant can result in termination of the contract with WebBank. As of December 31, 2022 the Company was in compliance with the covenant.

**Loan Purchase Commitments**

Under the terms of PFL's agreement with WebBank, PFL is committed to purchase $6.0 million of Borrower Loans that WebBank originated during the last two business days of the year ended December 31, 2022. PFL will purchase these Borrower Loans within the first two business days of the year ending December 31, 2023.

**Repurchase Obligation**

Under the terms of the loan purchase agreements between PFL and investors that participate in the Whole Loan Channel, PFL may, in certain circumstances, become obligated to repurchase a Borrower Loan from an investor. Generally, these circumstances include the occurrence of verifiable identity theft, the failure to properly follow loan listing or bidding protocols or a violation of the applicable federal, state or local lending laws. The fair value of indemnification and repurchase obligation is estimated based on historical experience. PFL recognizes a liability for the repurchase and indemnification obligation when the Borrower Loans are issued. Indemnified or repurchased Borrower Loans associated with violations of federal, state or local lending laws or verifiable identity theft are written off at the time of repurchase or at the time an indemnification payment is made. The maximum potential amount of future payments associated under this repurchase obligation is the outstanding balances of the Borrower Loans issued through the Whole Loan Channel, which at December 31, 2022 was $3.7 billion. PFL has accrued $0.3 million and $0.3 million as of December 31, 2022 and 2021 respectively in regard to this obligation.

Under the terms of the indenture and investor registration agreement, Prosper may, in certain circumstances, become obligated to either repurchase a Note or indemnify the investor for any losses resulting from nonpayment of a Note purchased in the Retail Channel. The decision to repurchase or indemnify is in Prosper's sole discretion. These circumstances include, but are not limited to, the occurrence of verifiable identity theft, a technical error in the automated bidding tools which results in the purchase of a Note that does not match the investor's investment criteria, or situations in which a loan listing includes a Prosper Rating that is different from the Prosper Rating that should have appeared in the listing for the corresponding Borrower Loan because either PFL inaccurately input data into, or inaccurately applied, the formula for determining the Prosper Rating and, as a result, the interest of the investor is materially and adversely affected. As of December 31, 2022, the Company has accrued $0.3 million for the repurchase of a portion of the underlying Notes, and agreed to indemnify an additional $1.2 million in outstanding Notes.

**Regulatory Contingencies** 

PFL accrues for contingencies when a loss from such contingencies is probable and the amount of loss can be reasonably estimated. In determining whether a loss is probable and if it is possible to quantify the amount of the estimated loss, PFL reviews and evaluates its litigation and regulatory matters on at least a quarterly basis in light of potentially relevant factual and legal developments. If PFL determines that an unfavorable outcome is not probable or that the amount of a loss cannot be reasonably estimated, PFL does not accrue for a potential litigation loss. If an unfavorable outcome is probable and PFL can estimate a range of outcomes, PFL records the amount management considers to be the best estimate within the range of potential losses that are both probable and estimable; however, if management cannot quantify the amount of the estimated loss, then PFL records the low end of the range of those potential losses.

***West Virginia Matter***

In January 2018, the Attorney General of the State of West Virginia (the "Attorney General") initiated discussions regarding certain acts and practices of PMI and PFL that the Attorney General asserts may have violated the West Virginia Consumer Credit and Protection Act (the "Consumer Act"), to which PMI responded with such information as was requested by the Attorney General. Following a period of more than a year with limited to no communication, in February 2020, PMI received a proposed Assurance of Discontinuance (an "AOD") from the Attorney General requesting that, without in any way admitting that any of its prior practices were in violation of the Consumer Act, PMI agreed to certain terms and conditions regarding its past and potential future conduct of its business with respect to customers in West Virginia, including a release by the Attorney General of any claims it may have related to the matters identified in the AOD. PMI is evaluating and intends to discuss the proposed terms in the AOD with the Attorney General.

We cannot predict the outcome of the matter and any potential fines or penalties, if any, that may arise from the matter. Further, we are unable to estimate a range of outcomes and as a result no accrual has been made.

------

No loans have been originated through the PFL platform to West Virginians since June 2016.

**NOTE 9. RELATED PARTIES**

Since inception, PFL has engaged in various transactions with its directors, executive officers, PMI, and immediate family members and other affiliates of its directors, executive officers and PMI. PFL believes that all of the transactions described below were made on terms no less favorable to PFL than could have been obtained from unaffiliated third parties.

PFL's executive officers and directors who are not executive officers participate in its marketplace by placing bids and purchasing Notes. The aggregate amount of the Notes purchased and the income earned by parties deemed to be related parties of PFL for the years ended December 31, 2022 and 2021 are summarized below (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Aggregate Amount of Notes Purchased for the Year Ended December 31,** | **Aggregate Amount of Notes Purchased for the Year Ended December 31,** | **Interest Earned on Notes for the Year Ended December 31,** | **Interest Earned on Notes for the Year Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| Executive officers and management | $34 | $35 | $7 | $7 |
| Directors (excluding executive officers and management) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $34 | $35 | $7 | $7 |

---

The balance of Notes held by officers and directors who are not executive officers are as follows (in thousands):

---

| | | |
|:---|:---|:---|
| | **Notes Balance as of** | **Notes Balance as of** |
| | **December 31, 2022** | **December 31, 2021** |
| Executive officers and management | $45 | $41 |
| Directors (excluding executive officers and management) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $45 | $41 |

---

**NOTE 10. SEGMENTS**

PFL's Chief Executive Officer, who serves as the chief operating decision maker, reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. As such, the Company has a single reportable and operating segment.

**NOTE 11. SIGNIFICANT CONCENTRATIONS** 

PFL is dependent on third party funding sources such as banks, asset managers, and investment funds to provide the funds to allow WebBank to originate Borrower Loans that the third party funding sources will later purchase. Of all Borrower Loans originated in the year ended December 31, 2022, two individual party purchased 23.4% and 10.4% of such loans, and PMI's Warehouse VIEs purchased 13.9% of such loans. For the year ended December 31, 2021, one individual party purchased 26.7% of such loans, and PMI's Warehouse VIEs purchased 12.6% of such loans. These purchases reflect that a significant portion of PFL's business is dependent on funding through the Whole Loan Channel, through which 92% and 88% of Borrower Loans were originated in the years ended December 31, 2022 and 2021, respectively.

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**EXHIBIT INDEX** 

---

| | |
|:---|:---|
| **Exhibit**<br>**Number** | **Description** |
| <u>[2.1](http://www.sec.gov/Archives/edgar/data/1416265/000114036113003353/ex2_1.htm)</u> | Asset Transfer Agreement, dated January 22, 2013, between Prosper Marketplace, Inc. and Prosper Funding LLC (incorporated by reference to Exhibit 2.1 of PMI and PFL's Current Report on Form 8-K, filed on January 28, 2013) |
| <u>[2.2](http://www.sec.gov/Archives/edgar/data/1416265/000154257415000071/ex21.htm)</u> | Agreement and Plan of Merger dated as of January 23, 2015 by and among Prosper Marketplace, Inc., American HealthCare Lending, LLC ("AHL"), Prosper Healthcare Lending, LLC and Shaun Sorensen, solely in his capacity as agent for AHL's members and option holders (incorporated by reference to Exhibit 2.1 of PMI's Current Report on Form 8-K, filed on January 27, 2015) |
| <u>[2.3](http://www.sec.gov/Archives/edgar/data/1416265/000156459015008393/prosper-ex21_6.htm)</u> | Agreement and Plan of Merger, dated as of September 23, 2015, by and among Prosper Marketplace, Inc., BillGuard, Inc., Beach Merger Sub, Inc. and Shareholder Representative Services LLC, solely in its capacity as the Stockholders' Representative (incorporated by reference to Exhibit 2.1 of PMI's Current Report on Form 8-K, filed on October 15, 2015) |
| <u>[2.4](https://www.sec.gov/Archives/edgar/data/1416265/000141626522000167/exhibit24-ipassettransfera.htm)</u> | Asset Transfer Agreement, dated August 17, 2021, between Prosper Marketplace, Inc. and Prosper Funding LLC (1) |
| <u>[3.1](http://www.sec.gov/Archives/edgar/data/1416265/000141626513000731/exhibitd3d1.htm)</u> | Fifth Amended and Restated Limited Liability Company Agreement of Prosper Funding LLC, dated October 21, 2013 (incorporated by reference to Exhibit 3.1 of Post-Effective Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-179941), filed on October 23, 2013 by PFL and PMI) |
| <u>[3.2](http://www.sec.gov/Archives/edgar/data/1416265/000141626518000657/prosper10q9-30x18ex32.htm)</u> | Amended and Restated Certificate of Incorporation of PMI, as further amended on October 15, 2018 (incorporated by reference to Exhibit 3.2 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 14, 2018) |
| <u>[3.3](http://www.sec.gov/Archives/edgar/data/1542574/000141626512000250/pllcex3d2.htm)</u> | Certificate of Formation of Prosper Funding LLC (incorporated by reference to Exhibit 3.2 of the Registration Statement on Form S-1/A, filed April 23, 2012 by PFL) |
| <u>[3.4](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000371/prosper10q063020ex34.htm)</u> | Bylaws of Prosper Marketplace, Inc., dated March 22, 2005, as amended by Amendment No. 1 dated February 15, 2016 and Amendment No. 2 dated May 19, 2020 (incorporated by reference to Exhibit 3.4 of PMI's and PFL's Quarterly Report on Form 10-Q (File No. 333-225797), filed August 14, 2020) |
| <u>[4.1](http://www.sec.gov/Archives/edgar/data/1416265/000114036113003353/ex4_2.htm)</u> | Form of PFL Borrower Payment Dependent Note (included as Exhibit A in Exhibit 4.5) |
| <u>[4.2](http://www.sec.gov/Archives/edgar/data/1416265/000141626509000008/prosper_s-1a5ex4d2.htm)</u> | Form of PMI Borrower Payment Dependent Note (included as Exhibit A in Exhibit 4.4) |
| <u>[4.3](http://www.sec.gov/Archives/edgar/data/1416265/000114036113003353/ex4_1.htm)</u> | Supplemental Indenture, dated January 22, 2013, between Prosper Marketplace, Inc., Prosper Funding LLC and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 of PMI and PFL's Current Report on Form 8-K, filed on January 28, 2013) |
| <u>[4.4](http://www.sec.gov/Archives/edgar/data/1416265/000141626509000008/prosper_s-1a5ex4d2.htm)</u> | Indenture, dated June 15, 2009, between Prosper Marketplace, Inc. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 of Pre-Effective Amendment No. 5 to PMI's Registration Statement on Form S-1 (File No. 333-147019), filed on June 26, 2009) |
| <u>[4.5](http://www.sec.gov/Archives/edgar/data/1416265/000114036113003353/ex4_2.htm)</u> | Amended and Restated Indenture, dated January 22, 2013, between Prosper Funding LLC and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 of PMI and PFL's Current Report on Form 8-K, filed on January 28, 2013) |
| <u>[4.6](http://www.sec.gov/Archives/edgar/data/1416265/000114036113032671/ex4_1.htm)</u> | First Supplemental Indenture, dated May 10, 2013, between Prosper Funding LLC and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 of PMI and PFL's Quarterly Report on Form 10-Q, filed on August 14, 2013) |
| <u>[4.7](exhibit47-10k2022.htm)</u> | Credit Agreement, dated November 14, 2022, by and among Prosper Marketplace, Inc., as Borrower, the lenders from time to time party thereto, and Wilmington Trust, National Association, as Administrative Agent and Collateral Agent (1)(2) |
| <u>[10.1](a202210-kexhibit101.htm)</u> | Form of PFL Borrower Registration Agreement (incorporated by reference to Exhibit 10.1 of PMI and PFL's Annual Report on Form 10-K filed on March 28, 2022) |
| <u>[10.2](exhibit102-10k2022.htm)</u> | Form of PFL Investor Registration Agreement (incorporated by reference to Exhibit 10.2 of PMI and PFL's Annual Report on Form 10-K filed on March 20, 2020) |
| <u>[10.3](http://www.sec.gov/Archives/edgar/data/1416265/000155278117000103/i17103_ex10-1.htm)</u> | Asset Sale Agreement, dated July 1, 2016, between PFL and WebBank (incorporated by reference to Exhibit 10.1 of PMI and PFL's Current Report on Form 8-K/A, filed on March 7, 2017) (1) |
| <u>[10.4](https://www.sec.gov/Archives/edgar/data/1416265/000155278119000186/e19150_ex10-1.htm)</u> | First Amendment to Asset Sale Agreement, dated October 7, 2016, between PFL and WebBank (incorporated by reference to Exhibit 10.1 of PMI and PFL's Current Report on Form 8-K/A, filed on April 22, 2019) (1) |

---

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---

| | |
|:---|:---|
| **Exhibit**<br>**Number** | **Description** |
| <u>[10.5](https://www.sec.gov/Archives/edgar/data/1416265/000155278119000186/e19150_ex10-2.htm)</u> | Second Amendment to Asset Sale Agreement, dated March 27, 2017, between PFL and WebBank (incorporated by reference to Exhibit 10.2 of PMI and PFL's Current Report on Form 8-K/A, filed on April 22, 2019) (1) |
| <u>[10.6](https://www.sec.gov/Archives/edgar/data/1416265/000155278119000201/e19071_ex10-1.htm)</u> | Third Amendment to Asset Sale Agreement, dated February 1, 2019, between PFL and WebBank (incorporated by reference to Exhibit 10.1 of PMI and PFL's Current Report on Form 8-K/A, filed on April 24, 2019) |
| <u>[10.7](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex107.htm)</u> | Fourth Amendment to Asset Sale Agreement, dated November 9, 2020, between PFL and WebBank (incorporated by reference to Exhibit 10.7 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) |
| <u>[10.8](https://www.sec.gov/Archives/edgar/data/0001416265/000155278121000571/e21461_ex10-1.htm)</u> | Fifth Amendment to Asset Sale Agreement, dated June 25, 2021, between PFL and WebBank (incorporated by reference to Exhibit 10.1 of PMI and PFL's Current Report on Form 8-K/A, filed on July 1, 2021) (1) |
| <u>[10.9](https://www.sec.gov/Archives/edgar/data/1416265/000155278122000573/e22450_ex10-1.htm)</u> | Sixth Amendment to Asset Sale Agreement, dated October 5, 2022, between PFL and WebBank (incorporated by reference to Exhibit 10.1 of PMI and PFL's Current Report on Form 8-K, filed on October 11, 2022) (1) |
| <u>[10.](http://www.sec.gov/Archives/edgar/data/1416265/000155278117000103/i17103_ex10-2.htm)[10](http://www.sec.gov/Archives/edgar/data/1416265/000155278117000103/i17103_ex10-2.htm)</u> | Marketing Agreement, dated July 1, 2016, between PMI and WebBank (incorporated by reference to Exhibit 10.2 of PMI and PFL's Current Report on Form 8-K/A, filed on March 7, 2017) (1) |
| <u>[10.1](https://www.sec.gov/Archives/edgar/data/1416265/000155278119000186/e19150_ex10-3.htm)[1](https://www.sec.gov/Archives/edgar/data/1416265/000155278119000186/e19150_ex10-3.htm)</u> | First Amendment to Marketing Agreement, dated October 7, 2016, between PMI and WebBank (incorporated by reference to Exhibit 10.3 of PMI and PFL's Current Report on Form 8-K/A, filed on April 22, 2019) (1) |
| <u>[10.1](https://www.sec.gov/Archives/edgar/data/1416265/000155278119000186/e19150_ex10-4.htm)[2](https://www.sec.gov/Archives/edgar/data/1416265/000155278119000186/e19150_ex10-4.htm)</u> | Second Amendment to Marketing Agreement, dated November 17, 2017, between PMI and WebBank (incorporated by reference to Exhibit 10.4 of PMI and PFL's Current Report on Form 8-K/A, filed on April 22, 2019) (1) |
| <u>[10.1](https://www.sec.gov/Archives/edgar/data/1416265/000155278119000201/e19071_ex10-2.htm)[3](https://www.sec.gov/Archives/edgar/data/1416265/000155278119000201/e19071_ex10-2.htm)</u> | Third Amendment to Marketing Agreement, dated February 1, 2019, between PMI and WebBank (incorporated by reference to Exhibit 10.2 of PMI and PFL's Current Report on Form 8-K/A, filed on April 24, 2019) (1) |
| <u>[10.1](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex105.htm)[4](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex105.htm)</u> | Fourth Amendment to Marketing Agreement, dated September 21, 2020, between PMI and WebBank (incorporated by reference to Exhibit 10.5 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) (1) |
| <u>[10.1](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex106.htm)[5](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex106.htm)</u> | Fifth Amendment to Marketing Agreement, dated November 9, 2020, between PMI and WebBank (incorporated by reference to Exhibit 10.6 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) (1) |
| <u>[10.1](https://www.sec.gov/Archives/edgar/data/0001416265/000155278121000571/e21461_ex10-2.htm)[6](https://www.sec.gov/Archives/edgar/data/0001416265/000155278121000571/e21461_ex10-2.htm)</u> | Sixth Amendment to Marketing Agreement, dated June 25, 2021, between PMI and WebBank (incorporated by reference to Exhibit 10.2 of PMI and PFL's Current Report on Form 8-K/A, filed on July 1, 2021) (1) |
| <u>[10.1](http://www.sec.gov/Archives/edgar/data/1416265/000114036113003353/ex10_1.htm)[7](http://www.sec.gov/Archives/edgar/data/1416265/000114036113003353/ex10_1.htm)</u> | Administration Agreement, effective as of February 1, 2013, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.1 of PMI and PFL's Current Report on Form 8-K, filed on January 28, 2013) |
| <u>[10.1](http://www.sec.gov/Archives/edgar/data/1416265/000114036114020960/ex10_1.htm)[8](http://www.sec.gov/Archives/edgar/data/1416265/000114036114020960/ex10_1.htm)</u> | Amendment No. 1 to Administration Agreement, dated as of January 1, 2014, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.1 of PMI and PFL's Current Report on Form 10-Q filed on May 14, 2014) |
| <u>[10.1](http://www.sec.gov/Archives/edgar/data/1416265/000156459015002385/prosper-ex107_201412311386.htm)[9](http://www.sec.gov/Archives/edgar/data/1416265/000156459015002385/prosper-ex107_201412311386.htm)</u> | Amendment No. 2 to Administration Agreement, dated as of January 1, 2015, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.7 of PMI and PFL's Annual Report on Form 10-K filed on April 6, 2015) |
| <u>[10.](http://www.sec.gov/Archives/edgar/data/1416265/000141626517000164/exhibit108-10k.htm)[20](http://www.sec.gov/Archives/edgar/data/1416265/000141626517000164/exhibit108-10k.htm)</u> | Amendment No. 3 to Administration Agreement, dated as of November 8, 2016 and made effective as of July 1, 2016, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.8 of PMI and PFL's Annual Report on Form 10-K, filed on March 20, 2017) |
| <u>[10.2](http://www.sec.gov/Archives/edgar/data/1416265/000141626518000173/exhibit1032-amendmentnumbe.htm)[1](http://www.sec.gov/Archives/edgar/data/1416265/000141626518000173/exhibit1032-amendmentnumbe.htm)</u> | Amendment No. 4 to Administration Agreement, dated as of January 25, 2018, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.32 of PMI and PFL's Annual Report on Form 10-K, filed on March 26, 2018) |

---

------

---

| | |
|:---|:---|
| **Exhibit**<br>**Number** | **Description** |
| <u>[10.2](https://www.sec.gov/Archives/edgar/data/1416265/000141626519000171/exhibit1016-pmi10k2018.htm)[2](https://www.sec.gov/Archives/edgar/data/1416265/000141626519000171/exhibit1016-pmi10k2018.htm)</u> | Amendment No. 5 to Administration Agreement, dated as of November 12, 2018 and made effective as of October 1, 2018, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.16 of PMI and PFL's Annual Report on Form 10-K, filed on March 29, 2019) |
| <u>[10.2](https://www.sec.gov/Archives/edgar/data/1416265/000141626521000258/prosper-q12021exhibit103.htm)[3](https://www.sec.gov/Archives/edgar/data/1416265/000141626521000258/prosper-q12021exhibit103.htm)</u> | Amendment No. 6 to Administration Agreement, dated as of May 12, 2021, between Prosper Funding LLC and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.3 of PMI and PFL's Quarterly Report on Form 10-Q, filed on May 13, 2021) |
| <u>[10.2](http://www.sec.gov/Archives/edgar/data/1416265/000114036112048429/ex10_8.htm)[4](http://www.sec.gov/Archives/edgar/data/1416265/000114036112048429/ex10_8.htm)</u> | Services and Indemnity Agreement, dated March 1, 2012, among Global Securitization Services, LLC, Kevin Burns, Bernard Angelo, Prosper Marketplace, Inc. and Prosper Funding LLC (incorporated by reference to Exhibit 10.8 of Pre-Effective Amendment No. 3 to PFL and PMI's Registration Statement on Form S-1 (File Nos. 333-179941 and 333-179941-01), filed on November 21, 2012) (3) |
| <u>[10.2](http://www.sec.gov/Archives/edgar/data/1416265/000155278116001830/e00409_ex10-3.htm)[5](http://www.sec.gov/Archives/edgar/data/1416265/000155278116001830/e00409_ex10-3.htm)</u> | Stand By Purchase Agreement, dated July 1, 2016, between WebBank and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.3 of PMI and PFL's Current Report on Form 8-K, filed on July 8, 2016) (1) |
| <u>[10.2](https://www.sec.gov/Archives/edgar/data/1416265/000155278119000201/e19071_ex10-3.htm)[6](https://www.sec.gov/Archives/edgar/data/1416265/000155278119000201/e19071_ex10-3.htm)</u> | First Amendment to Stand By Purchase Agreement, dated February 1, 2019, between WebBank and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.3 of PMI and PFL's Current Report on Form 8-K/A, filed on April 24, 2019) (1) |
| <u>[10.](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex108.htm)[27](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex108.htm)</u> | Second Amendment to Stand By Purchase Agreement, dated November 9, 2020, between WebBank and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.8 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) (1) |
| <u>[10.](https://www.sec.gov/Archives/edgar/data/0001416265/000155278121000571/e21461_ex10-3.htm)[28](https://www.sec.gov/Archives/edgar/data/0001416265/000155278121000571/e21461_ex10-3.htm)</u> | Third Amendment to Stand By Purchase Agreement, dated June 25, 2021, between WebBank and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.3 of PMI and PFL's Current Report on Form 8-K/A, filed on July 1, 2021) (1) |
| <u>[10.](http://www.sec.gov/Archives/edgar/data/1416265/000114036114014832/ex10_20.htm)[29](http://www.sec.gov/Archives/edgar/data/1416265/000114036114014832/ex10_20.htm)</u> | Director Indemnification Agreement, dated January 15, 2013, between Prosper Marketplace, Inc. and Patrick (Pat) Grady (incorporated by reference to Exhibit 10.20 of PMI and PFL's Annual Report on Form 10-K, filed on March 31, 2014) (3) |
| <u>[10.3](http://www.sec.gov/Archives/edgar/data/1416265/000156459016015019/prosper-ex1021_14.htm)[0](http://www.sec.gov/Archives/edgar/data/1416265/000156459016015019/prosper-ex1021_14.htm)</u> | Form of Indemnification Agreement for PMI's directors (other than Patrick Grady), officers and key employees (incorporated by reference to Exhibit 10.21 of PMI and PFL's Annual Report on Form 10-K, filed on March 18, 2016) (3) |
| <u>[10.3](http://www.sec.gov/Archives/edgar/data/1416265/000141626517000293/prosper10q3312017ex1010.htm)[1](http://www.sec.gov/Archives/edgar/data/1416265/000141626517000293/prosper10q3312017ex1010.htm)</u> | Back-Up Servicing Agreement (Note Channel), dated as of February 24, 2017, among Prosper Funding LLC, Prosper Marketplace, Inc., and Vervent, Inc. (f/k/a First Associates Loan Servicing, LLC) (incorporated by reference to Exhibit 10.10 of PMI and PFL's Quarterly Report on Form 10-Q, filed on May 15, 2017) (1)  |
| <u>[10.3](http://www.sec.gov/Archives/edgar/data/1416265/000141626513000401/agreements.htm)[2](http://www.sec.gov/Archives/edgar/data/1416265/000141626513000401/agreements.htm)</u> | Amended and Restated Services and Indemnity Agreement, dated May 30, 2013, between Prosper Funding LLC, Prosper Marketplace, Inc., Global Securitization Services, LLC, Bernard J. Angelo and David V. DeAngelis (incorporated by reference to Exhibit 10.1 of PMI and PFL's Current Report on Form 8-K, filed on June 5, 2013) (3) |
| <u>[10.3](http://www.sec.gov/Archives/edgar/data/1416265/000114036114023514/ex4_2.htm)[3](http://www.sec.gov/Archives/edgar/data/1416265/000114036114023514/ex4_2.htm)</u> | Amended and Restated Prosper Marketplace, Inc. 2005 Stock Plan (incorporated by reference to Exhibit 4.2 of PMI's Registration Statement on Form S-8 filed on May 29, 2014) (3) |
| <u>[10.3](http://www.sec.gov/Archives/edgar/data/1416265/000114036115018927/ex4_1.htm)[4](http://www.sec.gov/Archives/edgar/data/1416265/000114036115018927/ex4_1.htm)</u> | Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 of PMI's Registration Statement on Form S-8 filed on May 12, 2015) (3) |
| <u>[10.3](http://www.sec.gov/Archives/edgar/data/1416265/000155278116001531/e00230_ex4-1.htm)[5](http://www.sec.gov/Archives/edgar/data/1416265/000155278116001531/e00230_ex4-1.htm)</u> | Amendment No. 1 to Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 of PMI's Registration Statement on Form S-8 filed on April 13, 2016) (3) |
| <u>[10.3](http://www.sec.gov/Archives/edgar/data/1416265/000155278116001920/e00456_ex4-1.htm)[6](http://www.sec.gov/Archives/edgar/data/1416265/000155278116001920/e00456_ex4-1.htm)</u> | Amendment No. 2 to Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 of PMI's Registration Statement on Form S-8 filed on August 15, 2016) (3) |
| <u>[10.](http://www.sec.gov/Archives/edgar/data/1416265/000141626518000176/amendmentno3equityincentiv.htm)[37](http://www.sec.gov/Archives/edgar/data/1416265/000141626518000176/amendmentno3equityincentiv.htm)</u> | Amendment No. 3 to Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 of PMI's Registration Statement on Form S-8 filed on March 26, 2018) (3) |
| <u>[10.](http://www.sec.gov/Archives/edgar/data/1416265/000156459016015019/prosper-ex1029_924.htm)[38](http://www.sec.gov/Archives/edgar/data/1416265/000156459016015019/prosper-ex1029_924.htm)</u> | Form of Stock Option Agreement under the Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.29 of PMI and PFL's Annual Report on Form 10-K, filed on March 18, 2016) (3) |
| <u>[10.](http://www.sec.gov/Archives/edgar/data/1416265/000156459016015019/prosper-ex1030_925.htm)[39](http://www.sec.gov/Archives/edgar/data/1416265/000156459016015019/prosper-ex1030_925.htm)</u> | Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under the Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.30 of PMI and PFL's Annual Report on Form 10-K, filed on March 18, 2016) (3) |

---

------

---

| | |
|:---|:---|
| **Exhibit**<br>**Number** | **Description** |
| <u>[10.4](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex102.htm)[0](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex102.htm)</u> | Prosper Marketplace, Inc. Eligible Employee Retention Plan, adopted as of November 6, 2020 (incorporated by reference to Exhibit 10.2 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) (3) |
| <u>[10.4](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex103.htm)[1](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex103.htm)</u> | Prosper Marketplace, Inc. Long-Term Cash Incentive Plan, effective November 5, 2020 (incorporated by reference to Exhibit 10.3 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) (3) |
| <u>[10.4](https://www.sec.gov/Archives/edgar/data/1416265/000141626521000258/prosper-q12021exhibit102.htm)[2](https://www.sec.gov/Archives/edgar/data/1416265/000141626521000258/prosper-q12021exhibit102.htm)</u> | First Amendment to Prosper Marketplace, Inc. Long-Term Cash Incentive Plan, effective May 11, 2021 (incorporated by reference to Exhibit 10.2 of PMI and PFL's Quarterly Report on Form 10-Q, filed on May 13, 2021) (3) |
| <u>[10.4](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex104.htm)[3](https://www.sec.gov/Archives/edgar/data/1416265/000141626520000383/prosper10q093020ex104.htm)</u> | Form of Prosper Marketplace, Inc. Severance and Change in Control Agreement (incorporated by reference to Exhibit 10.4 of PMI and PFL's Quarterly Report on Form 10-Q, filed on November 12, 2020) (3) |
| <u>[10.4](http://www.sec.gov/Archives/edgar/data/1416265/000141626517000293/prosper10q3312017ex109.htm)[4](http://www.sec.gov/Archives/edgar/data/1416265/000141626517000293/prosper10q3312017ex109.htm)</u> | Warrant Agreement, dated as of February 27, 2017, among PMI, PF WarrantCo Holdings, LP, and, for certain limited purposes, New Residential Investment Corp (incorporated by reference to Exhibit 10.9 of PMI and PFL's Quarterly Report on Form 10-Q, filed on May 15, 2017) (1)  |
| <u>[21.1](exhibit211-pmisubsidiaries.htm)</u> | Subsidiaries of Prosper Marketplace, Inc. (2) |
| <u>[21.2](exhibit212-pflsubsidiaries.htm)</u> | Subsidiaries of Prosper Funding LLC (2) |
| <u>[23.1](exhibit231-10k2022.htm)</u> | Consent of Independent Registered Accounting Firm (2) |
| <u>[31.1](exhibit311-10k2022.htm)</u> | Certification of Principal Executive Officer of PMI pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2) |
| <u>[31.2](exhibit312-10k2022.htm)</u> | Certification of Principal Financial Officer of PMI pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2) |
| <u>[31.3](exhibit313-10k2022.htm)</u> | Certification of Principal Executive Officer of PFL pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2) |
| <u>[31.4](exhibit314-10k2022.htm)</u> | Certification of Principal Financial Officer of PFL pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2) |
| <u>[32.1](exhibit321-10k2022.htm)</u> | Certification of Principal Executive Officer and Principal Financial Officer of PMI pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to PMI's Annual Report on Form 10-K for the year ended December 31, 2020 (2) |
| <u>[32.2](exhibit322-10k2022.htm)</u> | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to PFL's Annual Report on Form 10-K for the year ended December 31, 2020 (2) |

---

(1) Certain portions of this exhibit have been, as applicable, (i) omitted and filed separately with the Commission pursuant to a request for confidential treatment under Rule 406 of the Securities Act or (ii) marked by brackets and omitted because the information is (a) not material and (b) would be competitively harmful if disclosed.

(2) Filed herewith.

(3) Management contract or compensatory plan or arrangement.

------

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 29th day of March 2023.

---

| | |
|:---|:---|
| PROSPER MARKETPLACE, INC. | PROSPER MARKETPLACE, INC. |
| By: | /s/ David Kimball  |
|  | David Kimball |
|  | Chief Executive Officer (Principal Executive Officer);<br>Chairman of the Board |

---

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Usama Ashraf and Edward R. Buell III, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agents full power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

---

| | | |
|:---|:---|:---|
| **Name** | **Title** | **Date** |
| /s/ David Kimball | Chief Executive Officer (Principal Executive Officer); <br>Chairman of the Board | March 29, 2023 |
| David Kimball |  |  |
| /s/ Usama Ashraf | President and Chief Financial Officer (Principal Financial Officer) | March 29, 2023 |
| Usama Ashraf |  |  |
| /s/ Claire A. Huang | Director | March 29, 2023 |
| Claire A. Huang |  |  |
| /s/ Thomas R. Kearney | Director | March 29, 2023 |
| Thomas R. Kearney |  |  |
| /s/ Peter J. deSilva | Director | March 29, 2023 |
| Peter J. deSilva |  |  |

---

------

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 29th day of March 2023.

---

| | |
|:---|:---|
| PROSPER FUNDING LLC | PROSPER FUNDING LLC |
| By: | /s/ David Kimball |
|  | David Kimball |
|  | Chief Executive Officer (Principal Executive Officer); Director |

---

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Usama Ashraf and Edward R. Buell III, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agents full power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

---

| | | |
|:---|:---|:---|
| **Name** | **Title** | |
| /s/ David Kimball | Chief Executive Officer (Principal Executive Officer); Director | March 29, 2023 |
| David Kimball |  |  |
| /s/ Usama Ashraf | President, Chief Financial Officer and Treasurer (Principal Financial Officer); Director | March 29, 2023 |
| Usama Ashraf |  |  |
| /s/ Bernard J. Angelo | Director | March 29, 2023 |
| Bernard J. Angelo |  |  |
| /s/ David V. DeAngelis | Director | March 29, 2023 |
| David V. DeAngelis |  |  |

---

## Exhibit 4.7

CREDIT AGREEMENT

Dated as of November 14, 2022

among

PROSPER MARKETPLACE, INC., <br>as Borrower,

WILMINGTON TRUST, NATIONAL ASSOCIATION <br>as Administrative Agent and as Collateral Agent,

and

THE LENDERS PARTY HERETO FROM TIME TO TIME

**[\*\*\*] = Certain information contained in this document, marked by brackets, has been omitted because it is both not material and would be competitively harmful if publicly disclosed.**

**Exhibits and Schedules to this exhibit have been omitted pursuant to** 

**Item 601(a)(5) of Regulation S-K.**

------

**TABLE OF CONTENTS**

Page

---

| | |
|:---|:---|
| ARTICLE I<br>DEFINITIONS AND ACCOUNTING TERMS | [1](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 1.01.&nbsp;&nbsp;&nbsp;&nbsp;<u>Defined Terms</u> | [1](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 1.02.&nbsp;&nbsp;&nbsp;&nbsp;<u>Other Interpretive Provisions</u> | [31](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 1.03.&nbsp;&nbsp;&nbsp;&nbsp;<u>Accounting Terms</u> | [32](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 1.04.&nbsp;&nbsp;&nbsp;&nbsp;<u>Rounding</u> | [32](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 1.05.&nbsp;&nbsp;&nbsp;&nbsp;<u>Times of Day</u> | [32](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 1.06.&nbsp;&nbsp;&nbsp;&nbsp;<u>Divisions</u> | [33](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| ARTICLE II<br>THE LOANS | [33](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.01.&nbsp;&nbsp;&nbsp;&nbsp;<u>The Loans</u> | [33](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.02.&nbsp;&nbsp;&nbsp;&nbsp;<u>Borrowing of the Loans</u> | [33](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.03.&nbsp;&nbsp;&nbsp;&nbsp;<u>Prepayments</u> | [33](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.04.&nbsp;&nbsp;&nbsp;&nbsp;<u>Repayment of Loans</u> | [35](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.05.&nbsp;&nbsp;&nbsp;&nbsp;<u>Interest</u> | [35](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.06.&nbsp;&nbsp;&nbsp;&nbsp;<u>Computation of Interest and Fees</u> | [36](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.07.&nbsp;&nbsp;&nbsp;&nbsp;<u>Evidence of Debt</u> | [37](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.08.&nbsp;&nbsp;&nbsp;&nbsp;<u>Payments Generally; Administrative Agent's Clawback</u> | [37](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.09.&nbsp;&nbsp;&nbsp;&nbsp;<u>Sharing of Payments by Lenders</u> | [38](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.10.&nbsp;&nbsp;&nbsp;&nbsp;<u>Fees</u> | [38](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.11.&nbsp;&nbsp;&nbsp;&nbsp;<u>Defaulting Lenders</u>. | [39](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.12.&nbsp;&nbsp;&nbsp;&nbsp;<u>[Reserved]</u>. | [39](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.13.&nbsp;&nbsp;&nbsp;&nbsp;<u>Conversions</u>. | [39](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 2.14.&nbsp;&nbsp;&nbsp;&nbsp;<u>Benchmark Replacement Setting</u> | [40](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| ARTICLE III<br>TAXES, YIELD PROTECTION AND ILLEGALITY | [41](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 3.01.&nbsp;&nbsp;&nbsp;&nbsp;<u>Taxes</u> | [41](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 3.02.&nbsp;&nbsp;&nbsp;&nbsp;<u>Increased Costs</u>. | [45](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 3.03.&nbsp;&nbsp;&nbsp;&nbsp;<u>Survival</u>. | [46](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| ARTICLE IV<br>CONDITIONS PRECEDENT | [46](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 4.01.&nbsp;&nbsp;&nbsp;&nbsp;<u>Conditions to Funding of Loans on the Closing Date</u> | [46](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| ARTICLE V<br>REPRESENTATIONS AND WARRANTIES | [49](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.01.&nbsp;&nbsp;&nbsp;&nbsp;<u>Existence, Qualification and Power</u> | [49](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.02.&nbsp;&nbsp;&nbsp;&nbsp;<u>Authorization; No Contravention</u> | [49](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.03.&nbsp;&nbsp;&nbsp;&nbsp;<u>Governmental Authorization; Other Consents</u> | [50](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.04.&nbsp;&nbsp;&nbsp;&nbsp;<u>Binding Effect</u> | [50](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.05.&nbsp;&nbsp;&nbsp;&nbsp;<u>Financial Statements; No Material Adverse Effect</u> | [50](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.06.&nbsp;&nbsp;&nbsp;&nbsp;<u>Litigation</u> | [50](#iaa1d8f36dbf449548f5870b08e48225b_7) |

---

i

------

---

| | |
|:---|:---|
| 5.07.&nbsp;&nbsp;&nbsp;&nbsp;<u>No Default</u> | [51](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.08.&nbsp;&nbsp;&nbsp;&nbsp;<u>Environmental Matters</u> | [51](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.09.&nbsp;&nbsp;&nbsp;&nbsp;<u>Taxes</u> | [52](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.10.&nbsp;&nbsp;&nbsp;&nbsp;<u>ERISA Compliance</u> | [52](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.11.&nbsp;&nbsp;&nbsp;&nbsp;<u>Equity Interests; Subsidiaries</u> | [53](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.12.&nbsp;&nbsp;&nbsp;&nbsp;<u>Margin Regulations; Investment Company Act; Other Regulations</u> | [53](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.13.&nbsp;&nbsp;&nbsp;&nbsp;<u>Disclosure</u> | [53](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.14.&nbsp;&nbsp;&nbsp;&nbsp;<u>Compliance with Laws</u> | [54](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.15.&nbsp;&nbsp;&nbsp;&nbsp;<u>Intellectual Property</u> | [54](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.16.&nbsp;&nbsp;&nbsp;&nbsp;<u>Solvency</u> | [54](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.17.&nbsp;&nbsp;&nbsp;&nbsp;<u>Creation and Perfection of Security Interests in the Collateral</u> | [54](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.18.&nbsp;&nbsp;&nbsp;&nbsp;<u>Real Properties</u> | [55](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.19.&nbsp;&nbsp;&nbsp;&nbsp;<u>Labor Matters</u> | [56](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.20.&nbsp;&nbsp;&nbsp;&nbsp;<u>[Reserved]</u> | [56](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.21.&nbsp;&nbsp;&nbsp;&nbsp;<u>[Reserved]</u> | [56](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.22.&nbsp;&nbsp;&nbsp;&nbsp;<u>[Reserved]</u> | [56](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.23.&nbsp;&nbsp;&nbsp;&nbsp;<u>Legal Name, Jurisdiction of Formation and Type of Entity</u> | [56](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.24.&nbsp;&nbsp;&nbsp;&nbsp;<u>Anti-Corruption Laws; Anti-Money-Laundering Laws; and Sanctions</u> | [57](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.25.&nbsp;&nbsp;&nbsp;&nbsp;<u>[Reserved]</u> | [57](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 5.26.&nbsp;&nbsp;&nbsp;&nbsp;<u>Insurance</u> | [57](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| ARTICLE VI<br>AFFIRMATIVE COVENANTS | [57](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.01.&nbsp;&nbsp;&nbsp;&nbsp;<u>Financial Statements</u> | [57](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.02.&nbsp;&nbsp;&nbsp;&nbsp;<u>Certificates; Other Information</u> | [58](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.03.&nbsp;&nbsp;&nbsp;&nbsp;<u>Notices</u> | [59](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.04.&nbsp;&nbsp;&nbsp;&nbsp;<u>Payment of Taxes</u> | [60](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.05.&nbsp;&nbsp;&nbsp;&nbsp;<u>Preservation of Existence</u> | [60](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.06.&nbsp;&nbsp;&nbsp;&nbsp;<u>Operation and Maintenance of Properties; Insurance</u> | [61](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.07.&nbsp;&nbsp;&nbsp;&nbsp;<u>[Reserved].</u> | [61](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.08.&nbsp;&nbsp;&nbsp;&nbsp;<u>[Reserved]</u> | [62](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.09.&nbsp;&nbsp;&nbsp;&nbsp;<u>Books and Records</u> | [62](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.10.&nbsp;&nbsp;&nbsp;&nbsp;<u>Inspection Rights</u> | [62](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.11.&nbsp;&nbsp;&nbsp;&nbsp;<u>Use of Proceeds</u> | [62](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.12.&nbsp;&nbsp;&nbsp;&nbsp;<u>Additional Subsidiaries; Additional Security</u> | [62](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.13.&nbsp;&nbsp;&nbsp;&nbsp;<u>Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions</u>. | [63](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.14.&nbsp;&nbsp;&nbsp;&nbsp;<u>Environmental Compliance</u>. | [63](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.15.&nbsp;&nbsp;&nbsp;&nbsp;<u>Pledged Assets</u> | [63](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.16.&nbsp;&nbsp;&nbsp;&nbsp;<u>[Reserved]</u> | [64](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.17.&nbsp;&nbsp;&nbsp;&nbsp;<u>Further Assurances</u> | [64](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.18.&nbsp;&nbsp;&nbsp;&nbsp;<u>Controlled Account</u> | [64](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.19.&nbsp;&nbsp;&nbsp;&nbsp;<u>Intellectual Property</u> | [64](#iaa1d8f36dbf449548f5870b08e48225b_7) |

---

ii

------

---

| | |
|:---|:---|
| 6.20.&nbsp;&nbsp;&nbsp;&nbsp;<u>Commercial Tort Claims</u> | [65](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.21.&nbsp;&nbsp;&nbsp;&nbsp;<u>Landlord Waivers or Subordination Agreements</u>. | [65](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.22.&nbsp;&nbsp;&nbsp;&nbsp;<u>[Reserved]</u> | [65](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 6.23.&nbsp;&nbsp;&nbsp;&nbsp;<u>Cash Sweep</u> | [65](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| ARTICLE VII<br>NEGATIVE COVENANTS | [65](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.01.&nbsp;&nbsp;&nbsp;&nbsp;<u>Financial Covenants</u> | [66](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.02.&nbsp;&nbsp;&nbsp;&nbsp;<u>Reserved</u> | [66](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.03.&nbsp;&nbsp;&nbsp;&nbsp;<u>Liens</u> | [66](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.04.&nbsp;&nbsp;&nbsp;&nbsp;<u>Investments</u> | [68](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.05.&nbsp;&nbsp;&nbsp;&nbsp;<u>Indebtedness</u> | [72](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.06.&nbsp;&nbsp;&nbsp;&nbsp;<u>Fundamental Changes</u> | [74](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.07.&nbsp;&nbsp;&nbsp;&nbsp;<u>Dispositions</u> | [74](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.08.&nbsp;&nbsp;&nbsp;&nbsp;<u>Restricted Payments</u> | [74](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.09.&nbsp;&nbsp;&nbsp;&nbsp;<u>Lines of Business</u>. | [75](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.10.&nbsp;&nbsp;&nbsp;&nbsp;<u>Transactions with Affiliates</u> | [75](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.11.&nbsp;&nbsp;&nbsp;&nbsp;<u>Burdensome Agreements</u> | [75](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.12.&nbsp;&nbsp;&nbsp;&nbsp;<u>Use of Proceeds</u> | [75](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.13.&nbsp;&nbsp;&nbsp;&nbsp;<u>Amendments to Indebtedness and Material Contracts</u> | [76](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.14.&nbsp;&nbsp;&nbsp;&nbsp;<u>Amendments to Material Documents; Fiscal Year; Legal Name</u> | [76](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.15.&nbsp;&nbsp;&nbsp;&nbsp;<u>[Reserved]</u> | [76](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.16.&nbsp;&nbsp;&nbsp;&nbsp;<u>Non-Guarantor Restricted Subsidiaries</u> | [76](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.17.&nbsp;&nbsp;&nbsp;&nbsp;<u>[Reserved]</u> | [76](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.18.&nbsp;&nbsp;&nbsp;&nbsp;<u>Repayment of Junior Indebtedness</u> | [76](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.19.&nbsp;&nbsp;&nbsp;&nbsp;<u>Sanctions, Anti-Corruption Laws, and Anti-Money Laundering Laws</u> | [76](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.20.&nbsp;&nbsp;&nbsp;&nbsp;<u>Limitations on Negative Pledge</u> | [77](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 7.21.&nbsp;&nbsp;&nbsp;&nbsp;<u>Accounting Methods</u> | [77](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| ARTICLE VIII<br>EVENTS OF DEFAULT AND REMEDIES | [77](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 8.01.&nbsp;&nbsp;&nbsp;&nbsp;<u>Events of Default</u> | [77](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 8.02.&nbsp;&nbsp;&nbsp;&nbsp;<u>Remedies Upon Event of Default</u> | [80](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 8.03.&nbsp;&nbsp;&nbsp;&nbsp;<u>Application of Funds</u> | [81](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 8.04.&nbsp;&nbsp;&nbsp;&nbsp;<u>Equity Cure</u> | [81](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| ARTICLE IX<br>ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT | [82](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 9.01.&nbsp;&nbsp;&nbsp;&nbsp;<u>Appointment and Authority</u> | [83](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 9.02.&nbsp;&nbsp;&nbsp;&nbsp;<u>Rights as a Lender</u> | [84](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 9.03.&nbsp;&nbsp;&nbsp;&nbsp;<u>Exculpatory Provisions</u> | [84](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 9.04.&nbsp;&nbsp;&nbsp;&nbsp;<u>Reliance by and Direction to Agents</u> | [86](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 9.05.&nbsp;&nbsp;&nbsp;&nbsp;<u>Delegation of Duties</u> | [87](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 9.06.&nbsp;&nbsp;&nbsp;&nbsp;<u>Resignation or Removal of Agents</u> | [87](#iaa1d8f36dbf449548f5870b08e48225b_7) |

---

iii

------

---

| | |
|:---|:---|
| 9.07.&nbsp;&nbsp;&nbsp;&nbsp;<u>Non-Reliance on Agents and Lenders</u> | [88](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 9.08.&nbsp;&nbsp;&nbsp;&nbsp;<u>Agents May File Proofs of Claim</u> | [88](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 9.09.&nbsp;&nbsp;&nbsp;&nbsp;<u>Collateral and Guaranty Matters</u> | [89](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 9.10.&nbsp;&nbsp;&nbsp;&nbsp;<u>Force Majeure</u> | [90](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 9.11.&nbsp;&nbsp;&nbsp;&nbsp;<u>Erroneous Payments</u> | [90](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 9.12.&nbsp;&nbsp;&nbsp;&nbsp;<u>Enforcement</u> | [92](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 9.13.&nbsp;&nbsp;&nbsp;&nbsp;<u>Survival</u> | [92](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| ARTICLE X<br>MISCELLANEOUS | [92](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.01.&nbsp;&nbsp;&nbsp;&nbsp;<u>Amendments</u> | [92](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.02.&nbsp;&nbsp;&nbsp;&nbsp;<u>Notices and Other Communications</u> | [94](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.03.&nbsp;&nbsp;&nbsp;&nbsp;<u>No Waiver; Cumulative Remedies</u> | [96](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.04.&nbsp;&nbsp;&nbsp;&nbsp;<u>Expenses; Indemnity; Damage Waiver</u> | [96](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.05.&nbsp;&nbsp;&nbsp;&nbsp;<u>Payments Set Aside</u> | [98](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.06.&nbsp;&nbsp;&nbsp;&nbsp;<u>Successors and Assigns</u> | [98](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.07.&nbsp;&nbsp;&nbsp;&nbsp;<u>Treatment of Certain Information; Confidentiality</u> | [101](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.08.&nbsp;&nbsp;&nbsp;&nbsp;<u>Set-off</u> | [102](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.09.&nbsp;&nbsp;&nbsp;&nbsp;<u>Interest Rate Limitation</u> | [102](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.10.&nbsp;&nbsp;&nbsp;&nbsp;<u>Counterparts; Integration; Effectiveness; Electronic Signature</u> | [102](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.11.&nbsp;&nbsp;&nbsp;&nbsp;<u>Survival of Representations and Warranties</u> | [103](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.12.&nbsp;&nbsp;&nbsp;&nbsp;<u>Severability</u> | [103](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.13.&nbsp;&nbsp;&nbsp;&nbsp;<u>Replacement of Lenders</u> | [103](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.14.&nbsp;&nbsp;&nbsp;&nbsp;<u>GOVERNING LAW; JURISDICTION</u> | [104](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.15.&nbsp;&nbsp;&nbsp;&nbsp;<u>WAIVER OF RIGHT TO TRIAL BY JURY</u> | [105](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.16.&nbsp;&nbsp;&nbsp;&nbsp;<u>USA Patriot Act Notice</u> | [105](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.17.&nbsp;&nbsp;&nbsp;&nbsp;<u>No Advisory or Fiduciary Relationship</u> | [105](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.18.&nbsp;&nbsp;&nbsp;&nbsp;<u>Acknowledgement and Consent to Bail-In of Affected Financial Institutions</u> | [106](#iaa1d8f36dbf449548f5870b08e48225b_7) |
| 10.19.&nbsp;&nbsp;&nbsp;&nbsp;<u>Entire Agreement</u> | [106](#iaa1d8f36dbf449548f5870b08e48225b_7) |

---

iv

------

SCHEDULES

---

| | |
|:---|:---|
| 1.01(a) | Commitments and Applicable Percentages |
| 1.01(b) | Permitted Holders |
| 5.10(d) | Pension Plans |
| 5.11 | Subsidiaries |
| 5.15 | Registered IP |
| 5.18 | Real Property |
| 5.23 | Legal Name, Jurisdiction of Formation and Type of Entity |
| 6.20 | Commercial Tort Claims |
| 7.03 | Existing Liens |
| 7.04 | Existing Investments |
| 7.05 | Existing Indebtedness |
| 7.10 | Existing Transactions with Affiliates |
| 10.02 | Certain Addresses for Notices |

---

EXHIBITS

---

| | |
|:---|:---|
| A | Form of Assignment and Assumption |
| B | Form of Borrowing Request |
| C | Form of Compliance Certificate |
| D | Form of U.S. Tax Compliance Certificates |
| E | Form of Notice of Conversion |
| F | Form of Intercompany Subordination Agreement |

---

v

------

CREDIT AGREEMENT<br>

This CREDIT AGREEMENT (as amended, restated or otherwise modified from time to time, this "<u>Agreement</u>") is entered into as of November 14, 2022 among Prosper Marketplace, Inc., a Delaware corporation, as borrower (the "<u>Borrower</u>"), the Lenders (as defined herein) from time to time party hereto, Wilmington Trust, National Association ("<u>Wilmington Trust</u>"), as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the "<u>Administrative Agent</u>"), and Wilmington Trust, as collateral agent for the Secured Parties (as defined herein) (in such capacity, together with its successors and assigns, the "<u>Collateral Agent</u>").

The Borrower has requested that the Lenders provide a senior secured term credit facility consisting of Loans to be drawn on the Closing Date in an aggregate principal amount equal to $75,000,000 for the purposes set forth herein, and the Lenders are willing to do so on the terms and conditions set forth herein.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I<br>DEFINITIONS AND ACCOUNTING TERMS

1.01.<u>Defined Terms</u>.

As used in this Agreement, the following terms shall have the meanings set forth below:

"<u>ABR</u>" when used in reference to any Loan, refers to whether such Loan is bearing interest at a rate determined by reference to the Alternate Base Rate.

"<u>ABR Loan</u>" means each Loan bearing interest based on the ABR.

"<u>Account Control Agreements</u>" means, collectively, each deposit account control agreement, blocked account agreement, and securities account control agreement by and among the applicable Loan Party, the Collateral Agent and the applicable depositary bank, in each case in form and substance reasonably satisfactory to the Required Lenders.

"<u>Acquisition</u>", by any Person, means the acquisition by such Person, in a single transaction or in a series of related transactions, of all or substantially all of the property of another Person or more than a majority of the Voting Stock of another Person, in each case whether or not involving a merger or consolidation with such other Person and whether for cash, property, services, assumption of Indebtedness, securities or otherwise.

"<u>Administrative Agent</u>" has the meaning set forth in the introductory paragraph hereto.

"<u>Administrative Agent's Account</u>" means such account as the Administrative Agent may from time to time designate by written notice to the Borrower and the Lenders.

"<u>Administrative Questionnaire</u>" means an administrative questionnaire in the form provided to a Lender by the Administrative Agent.

"<u>Affected Financial Institution</u>" means (a) any EEA Financial Institution or (b) any UK Financial Institution.

"<u>Affiliate</u>" means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

"<u>Agent</u>" means the Administrative Agent and/or the Collateral Agent.

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"<u>Agent Fee Letter</u>" means the letter agreement, dated as of the date hereof, among the Borrower and Wilmington Trust, as may be amended from time to time.

"<u>Agreement</u>" has the meaning set forth in the introductory paragraph hereto.

"<u>Alternate Base Rate</u>" means, for any day, a fluctuating rate *per annum* equal to the greatest of (a) the Prime Rate in effect on such day or (b) the Federal Funds Effective Rate (which, if negative, shall be deemed to be 0%) in effect on such day plus ½ of 1.00%. If the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, the Alternate Base Rate shall be determined without regard to <u>clause (b)</u> above until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

"<u>Anti-Corruption Laws</u>" means the Foreign Corrupt Practices Act of 1977, 15 U.S.C. §§ 78dd-1, et seq., the U.K. Bribery Act 2010 and any other Laws of any jurisdiction applicable to the Borrower, any other Loan Party or any of their Subsidiaries from time to time concerning or relating to bribery or corruption.

"<u>Anti-Money Laundering Laws</u>" means the Money Laundering Control Act of 1986 (18 U.S.C. §§ 1956-1957), the Patriot Act, the Bank Secrecy Act (31 U.S.C. §§5311-5332)), the UK Proceeds of Crime Act 2002, the UK Terrorism Act 2000, and any other Laws of any jurisdiction applicable to the Borrower, any other Loan Party or any of their Subsidiaries from time to time concerning or relating to money laundering or terrorist financing, including know-your-customer (KYC) and financial recordkeeping and reporting requirements.

"<u>Applicable Cash Rate</u>" means a percentage *per annum* equal to (1) for SOFR Loans, 9.00% and (2) for ABR Loans, 8.00%.

"<u>Applicable Intercompany Agreements</u>" means (i) the Administration Agreement, effective as of February 1, 2013, by and between Prosper Funding LLC and the Borrower, as amended, supplemented or otherwise modified from time to time, (ii) the Asset Transfer and License Agreement, dated as of August 17, 2021, by and between Prosper Funding LLC and the Borrower, as amended, supplemented or otherwise modified from time to time, and (iii) other agreements between any Non-Guarantor Restricted Subsidiary and any Loan Party to facilitate the ordinary course operation of the Business.

"<u>Applicable Percentage</u>" means, with respect to such Lender's portion of the outstanding Loans and Commitments at any time, the percentage of the outstanding principal amount of the Loans and Commitments held by such Lender at any time. The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on <u>Schedule 1.01(a)</u> or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

"<u>Applicable PIK Rate</u>" means a percentage *per annum* equal to 2.00%.

"<u>Applicable Premium</u>" means an amount, calculated by Required Lenders, equal to (a) the present value of the sum of (i) all required payments of interest and all interest that would have accrued, including any interest paid in kind (calculated in each case at the rate of interest (at the rate applicable to ABR Loans) in effect on the Settlement Date) on the Loans being repaid, prepaid or that have become or are declared accelerated pursuant to <u>ARTICLE VIII</u> or otherwise or that have otherwise become due and payable, as the case may be, from the Settlement Date until the second anniversary of the Closing Date (excluding accrued and unpaid interest to the Settlement Date), which present value shall be calculated using a discount rate equal to the Treasury Rate plus 50 basis points as of the day of determination *<u>plus</u>* (ii) two percent (2.00%) of the principal amount of the Loans being repaid, prepaid or that has become or is declared accelerated pursuant to <u>ARTICLE VIII</u> or otherwise, or that have otherwise become due and payable; <u>provided</u>, that in no case shall the Applicable Premium be less than zero (0). For the avoidance of doubt, such amount shall be payable whether the Loans are being repaid or prepaid before or after an Event of Default or acceleration of the Loans pursuant to <u>ARTICLE VIII</u> or otherwise.

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"<u>Approved Fund</u>" means any Fund that is administered, managed, advised or sub-advised by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers, manages, advises or sub-advises a Lender.

"<u>Asset Coverage Ratio</u>" means, as of any date of determination, with respect to the Borrower and its Subsidiaries, the ratio of (x) the *<u>sum</u>* of (i) Cash, Cash Equivalents and Available for Sale Investments of the Borrower and its Subsidiaries that are either not Restricted or considered Restricted solely due to the lien of the Collateral Agent securing the Obligations, (ii) the outstanding balance of unencumbered personal loans and credit card receivables on balance sheet [\*\*\*], (iii) without duplication of any amounts in the foregoing <u>clause (ii)</u>, the outstanding balance of encumbered personal loans and credit card receivables [\*\*\*], net of secured borrowings (other than borrowings under any Excluded Subsidiary Financing for which assets are excluded below), and (iv) the fair value of credit card derivative assets, less any assets of Excluded Subsidiaries included in the foregoing <u>clause (x)</u> that are subject to a financing by an Excluded Subsidiary (an "<u>Excluded Subsidiary Financing</u>") with respect to which either (A) an "event of default" has occurred under such Excluded Subsidiary Financing that has not been cured or waived within [\*\*\*] after the occurrence thereof (or, to the extent that such "event of default" was subject to a grace period or cure period under such Excluded Subsidiary Financing, immediately upon the occurrence thereof) or (B) such Excluded Subsidiary Financing has been accelerated or become subject to wind-down procedures, to (y) total consolidated indebtedness for the Borrower and its Subsidiaries (other than indebtedness of any non-recourse securitization indebtedness, Non-Recourse Warehouse Indebtedness and Payment Dependent Notes).

"<u>Assignee Group</u>" means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

"<u>Assignment and Assumption</u>" means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by <u>Section 10.06(b)</u>), and accepted by the Administrative Agent, substantially in the form of <u>Exhibit A</u>, or such other form as shall be approved by the Administrative Agent (including electronic documentation generated by ClearPar or other electronic platform).

"<u>Available for Sale Investments</u>" means, as of the date of determination, (a) marketable securities (1) issued directly and unconditionally guaranteed as to interest and principal by the United States government, or (2) issued by any agency of the United States of America the obligations of which are backed by the full faith and credit of the United States of America, in each case maturing within one year after such date; and (b) shares of any money market fund that (1) has substantially all of its assets invested continuously in the types of investments referred to in clause (a) above, (2) has assets of not less than $500,000,000, and (3) has the highest rating obtainable from either S&P or Moody's

"<u>Available Tenor</u>" means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (<u>x</u>) if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement or (<u>y</u>) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark, in each case, as of such date.

"<u>Bail-In Action</u>" means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.

"<u>Bail-In Legislation</u>" means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).

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"<u>Bank Product Partner Account</u>" means any collateral account held for the benefit of an originating or issuing bank partner of the Borrower, to the extent that such account is required by such bank.

"<u>Banking Services</u>" means (a) credit cards (including "commercial credit cards" and purchasing cards), (b) stored value cards, (c) merchant processing services, and (d) treasury management services (including controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services and cash pooling services).

"<u>Benchmark</u>" means, initially, with respect to any SOFR Loans, Daily Simple SOFR; <u>provided</u> that if a Benchmark Transition Event has occurred with respect to Daily Simple SOFR or the then-current Benchmark, then "Benchmark" means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to <u>Section 2.14</u>.

"<u>Benchmark Replacement</u>" means, with respect to any Benchmark Transition Event, the *<u>sum</u>* of: (i) the alternate benchmark rate that has been selected by the Administrative Agent (acting at the direction of the Required Lenders) and the Borrower giving due consideration to (A) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (B) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities and (ii) the related Benchmark Replacement Adjustment; <u>provided</u> that if the Benchmark Replacement would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.

"<u>Benchmark Replacement Adjustment</u>" means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment (which may be a positive or negative value or zero) that has been selected by the Administrative Agent (acting at the direction of the Required Lenders) and the Borrower giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for Dollar-denominated syndicated credit facilities.

"<u>Benchmark Replacement Conforming Changes</u>" means, with respect to either the use or administration of any Benchmark or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of "ABR," the definition of "Alternate Base Rate", the definition of "Business Day," the definition of "U.S. Government Securities Business Day," timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent (with the consent of the Required Lenders and the Borrower) decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Administrative Agent (with the consent of the Required Lenders and the Borrower) decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).

"<u>Benchmark Replacement Date</u>" means the earliest to occur of the following events with respect to the then-current Benchmark:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;in the case of <u>clause (a)</u> or <u>(b)</u> of the definition of "Benchmark Transition Event", the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;in the case of <u>clause (c)</u> of the definition of "Benchmark Transition Event", the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by or on behalf of the administrator of such Benchmark (or such component thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative or non-compliant with or non-aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks; <u>provided</u>, that such non-representativeness, non-compliance or non-alignment will be determined by reference to the most recent statement or publication referenced in such <u>clause (c)</u> and even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.

For the avoidance of doubt, the "Benchmark Replacement Date" will be deemed to have occurred in the case of <u>clause (a</u>) or <u>(b)</u> with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).

"<u>Benchmark Transition Event</u>" means the occurrence of one or more of the following events with respect to the then-current Benchmark:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely, <u>provided</u> that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks.

For the avoidance of doubt, a "Benchmark Transition Event" will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).

"<u>Benchmark Unavailability Period</u>" means, the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with <u>Section 2.14</u> and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with <u>Section 2.14</u>.

"<u>Beneficial Ownership Regulation</u>" means 31 C.F.R. §1010.230.

"<u>Board of Directors</u>" means, with respect to any Person, the board of directors of such Person (or the equivalent board of advisors, managers or members or body performing similar functions for such

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Person) or any committee of the Board of Directors of such Person authorized, with respect to any particular matter, to exercise the power of the board of directors (or board of advisors, managers or members or body performing similar functions) of such Person.

"<u>Borrower</u>" has the meaning set forth in the introductory paragraph hereto.

"<u>Borrowing</u>" means the borrowing of Loans.

"<u>Borrowing Request</u>" means a written notice of a borrowing of Loans, which shall be substantially in the form of <u>Exhibit B</u>.

"<u>Budget</u>" means a consolidated budget for the Borrower and its Subsidiaries on a consolidated basis for the applicable Fiscal Year delivered to the Administrative Agent and Lenders in accordance with <u>Section 6.02(g)</u>.

"<u>Business</u>" means the business of the Borrower and its Subsidiaries conducted as of the Closing Date, and any reasonably related extensions and expansions thereof, including new products and services reasonably related, complementary or ancillary to providing financial services to consumers, including intercompany transactions pursuant to the Applicable Intercompany Agreements, and Investor Wind-Down Transactions.

"<u>Business Day</u>" means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the State of New York or the State of California.

"<u>Capital Lease</u>" means, as applied to any Person, any lease of any property by that Person as lessee which, in accordance with GAAP, is required to be accounted for as a capital lease on the balance sheet of that Person; <u>provided</u> that all obligations of any Person that are or would have been treated as operating leases for purposes of GAAP prior to the effectiveness of ASC 842 shall be accounted for as operating leases for all purposes hereunder or under any other Loan Document notwithstanding the fact that such obligations are required in accordance with ASC 842 (on a prospective or retroactive basis or otherwise) to be treated as capital leases.

"<u>Cash</u>" means money, currency or a credit balance in any demand or deposit account.

"<u>Cash Equivalents</u>" means, as at any date, highly liquid marketable securities with original maturities of three (3) months or less at the time of purchase and consisting primarily of money market funds, commercial paper, United States treasury securities and United States agency securities.

"<u>CFC</u>" means a "controlled foreign corporation" as described in Section 957 of the Code.

"<u>Change in Law</u>" means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation, administration or application thereof, after the date of this Agreement or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority, central bank or comparable agency made or issued after the date of this Agreement; <u>provided</u>, <u>however</u>, that notwithstanding anything to the contrary contained herein, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, guidelines, directives, rules or regulations thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a "Change in Law", regardless of the date enacted, adopted or issued and shall be deemed to have gone into effect and adopted after the Closing Date.

"<u>Change of Control</u>" means the occurrence of any of the following events:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)the acquisition of ownership, directly or indirectly, beneficially or of record, by any single "person" or "group" (within the meaning of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) of sufficient common or preferred shares to elect or appoint a majority of members of the Board of Directors or otherwise obtain the power and authority to direct the management and policies of the Borrower, other than Permitted Holders; <u>provided</u> that, for the avoidance of doubt, Qualified Public Offering Reorganization Transactions or a Holding Company Transaction shall not be deemed a Change of Control;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)a Qualified Public Offering;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)the Borrower, shall cease to directly or indirectly own 100% of the issued and outstanding Equity Interests in any Restricted Subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)any Disposition of, in one or a series of transactions, all or substantially all of the property or assets of the Borrower and its Subsidiaries (taken as a whole); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)a "Change of Control" or similar term shall have occurred under any Material Indebtedness (other than under any SPV Transaction or agreements with respect to Payment Dependent Notes);

"<u>Closing Date</u>" means the date upon which the conditions precedent set forth in <u>Article IV</u> are satisfied (or waived by the Required Lenders) and the Loan is made to the Borrower, which date is November 14, 2022.

"<u>Code</u>" means the Internal Revenue Code of 1986, as amended, or any successor statute.

"<u>Collateral</u>" means a collective reference to all real and personal property with respect to which Liens in favor of the Collateral Agent, for the benefit of the Secured Parties, are granted or purported to be granted pursuant to and in accordance with the terms of the Collateral Documents.

"<u>Collateral Agent</u>" has the meaning set forth in the introductory paragraph hereto.

"<u>Collateral Documents</u>" means a collective reference to the Guaranty and Collateral Agreement, IP Security Agreement, the Account Control Agreements, any intercreditor agreement, any subordination agreements, any collateral access agreement, and all other security documents as may be executed and delivered by the Loan Parties pursuant to the terms of <u>Section 6.15</u> or otherwise to secure or perfect the Liens securing any or all of the Obligations.

"<u>Commitment</u>" means, for any Lender, the obligation of such Lender to make a Loan hereunder, up to the principal amount shown on <u>Schedule 1.01(a)</u>. The aggregate amount of the Lenders' Commitments as of the Closing Date is $75,000,000.

"<u>Compliance Certificate</u>" means a certificate substantially in the form of <u>Exhibit C</u>.

"<u>Conforming Changes</u>" means, with respect to either the use or administration of Daily Simple SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of "Business Day," the definition of "U.S. Government Securities Business Day" or any similar or analogous definition, timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment or conversion notices, the applicability and length of lookback periods and other technical, administrative or operational matters) that the Administrative Agent (with the consent of the Required Lenders and the Borrower) decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Administrative Agent decides (with the consent of the Required Lenders and the Borrower) is

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reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).

"<u>Connection Income Taxes</u>" means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

"<u>Contractual Obligation</u>" means, as to any Person, any provision of any security issued by such Person or of any agreement, lease, contract, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

"<u>Control</u>" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "<u>Controlling</u>" and "<u>Controlled</u>" have meanings correlative thereto. Without limiting the generality of the foregoing, a Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, power to vote 20% or more of the securities having ordinary voting power for the election of directors, managing general partners or the equivalent; <u>provided</u> that none of the Agents or the Lenders shall be deemed to "control" the Loan Parties.

"<u>Controlled Account</u>" means the Deposit Account designated by the Borrower for the transfer of any amounts pursuant to <u>Section 6.23</u>, which Deposit Account shall be subject to an Account Control Agreement within the time period specified in <u>Section 6.23</u>.

"<u>Cure Amount</u>" has the meaning specified in <u>Section 8.04</u>.

"<u>Cure Deadline</u>" has the meaning specified in <u>Section 8.04(a)</u>.

"<u>Cure Right</u>" has the meaning specified in <u>Section 8.04</u>.

"<u>Daily Simple SOFR</u>" means, for any day (a "<u>SOFR Rate Day</u>"), a rate per annum equal to the greater of (a) SOFR for the day (such day, a "<u>SOFR Determination Day</u>") that is five (5) U.S. Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each case, as SOFR is published by the SOFR Administrator on the SOFR Administrator's Website, and (b) the Floor. If by 5:00 p.m. (New York City time) on the second (2<sup>nd</sup>) U.S. Government Securities Business Day immediately following any SOFR Determination Day, SOFR in respect of such SOFR Determination Day has not been published on the SOFR Administrator's Website and a Benchmark Replacement Date with respect to Daily Simple SOFR has not occurred, then SOFR for such SOFR Determination Day will be SOFR as published in respect of the first preceding U.S. Government Securities Business Day for which such SOFR was published on the SOFR Administrator's Website; <u>provided</u> that SOFR determined pursuant to this sentence shall be utilized for purposes of calculation of Daily Simple SOFR for no more than three (3) consecutive SOFR Rate Days. Any change in Daily Simple SOFR due to a change in SOFR shall be effective from and including the effective date of such change in SOFR without notice to the Borrower.

"<u>Debt Issuance</u>" means the issuance by any Loan Party of any Indebtedness.

"<u>Debtor Relief Laws</u>" means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

"<u>Default</u>" means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

"<u>Default Rate</u>" means an interest rate equal to the *<u>sum</u>* of (w) the Alternate Base Rate, (x) Applicable Cash Rate applicable to ABR Loans, (y) the Applicable PIK Rate applicable to ABR Loans, and (z) 2.00% *per annum*, to the fullest extent permitted by applicable Laws.

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"<u>Defaulting Lender</u>" means, subject to <u>Section 2.11(e)</u>, any Lender that has (i) failed to perform any of its funding obligations hereunder, including in respect of its Loans, within two Business Days of the date required to be funded by it hereunder, unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender's determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable Default or Event of Default, shall be specifically identified in such writing) has not been satisfied, or (ii) failed, within two Business Days after request by the Administrative Agent (acting at the direction of the Required Lenders), to pay any amounts owing to the Administrative Agent or the other Lenders. Any determination by the Administrative Agent that a Lender is a Defaulting Lender shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to <u>Section 2.11(e)</u>) upon delivery of written notice of such determination to the Borrower and each Lender. Notwithstanding the foregoing, (x) at any time when there are fewer than two Lenders, no Lender shall be or be deemed to be a Defaulting Lender and (y) at no time shall all Lenders be or be deemed to be Defaulting Lenders.

"<u>Disposition</u>" or "<u>Dispose</u>" means any sale, transfer, license, lease or other disposition (including any Sale and Leaseback Transaction) of any property by any Loan Party or any Restricted Subsidiary (including the Equity Interests of any Subsidiary), including by merger, allocation of assets, division, consolidation or amalgamation.

"<u>Disqualified Equity Interest</u>" means any Equity Interest that, by its terms (or the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Equity Interests that are not Disqualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments), (b) is redeemable at the option of the holder thereof, in whole or in part, (c) provides for scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is ninety-one days after the Maturity Date; <u>provided</u> that if such Equity Interests are issued pursuant to a plan for the benefit of employees of the Borrower or any Subsidiary or by any such plan to such employees, such Equity Interests shall not constitute Disqualified Equity Interests solely because they may be required to be repurchased by the Borrower or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee's termination, death or disability.

"<u>Disqualified Institution</u>" means solely those persons specifically identified by the Borrower to the Administrative Agent in writing prior to the Closing Date, which list shall have been made available to all Lenders, and which list may be updated from time to time by the Borrower, but not more than once in any Fiscal Year, to include competitors of the Borrower and its Subsidiaries by delivering a new list of Disqualified Institutions to the Administrative Agent <u>provided</u>, for the avoidance of doubt, that in no case shall the Administrative Agent or any Lender or their Affiliates be a Disqualified Institution.

"<u>Dollar</u>" and "<u>$</u>" mean lawful money of the United States.

"<u>EEA Financial Institution</u>" means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

"<u>EEA Member Country</u>" means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

"<u>EEA Resolution Authority</u>" means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

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"<u>Eligible Assignee</u>" means any Person that meets the requirements to be an assignee under <u>Section 10.06(b)(iii),</u> <u>(iv), (v)</u> and <u>(vi)</u>.

"<u>Employment Laws</u>" means any and all applicable laws, rules, orders, regulations, statutes, ordinances, codes, decrees or other legally enforceable requirements (including common law) of any Governmental Authority relating to labor and employment, including laws relating to terms and conditions of employment, employment discrimination, civil rights, unlawful harassment, retaliation, disability, immigration, plant closures and mass layoffs, employee leave, safety and health, background checks, employee classification, wages and hours, collective bargaining, unfair labor practices, and workers' compensation.

"<u>Environmental Laws</u>" means any and all applicable Laws or other legally enforceable requirements (including common law) of any Governmental Authority regulating, relating to or imposing liability or standards of conduct concerning pollution, protection of the environment, natural resources or public health and safety, or employee/occupational health and safety, as has been, is now, or may at any time hereafter be, in effect, including the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §5101 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. §300f et seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the Toxic Substances Control Act, 15 U.S.C. §2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. §136 et seq., the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. §11001, the Oil Pollution Act of 1990, 33 U.S.C. §2701 et seq., the Occupational Safety and Health Act, 29 U.S.C. §651 et seq., and the regulations promulgated pursuant thereto, and all analogous state or local statutes and regulations.

"<u>Environmental Liability</u>" means any liability, contingent or otherwise (including any liability for personal injury or damages, costs of environmental investigation, feasibility studies, and remediation and other response actions, costs of administrative oversight, fines, penalties, natural resource damages or indemnities), relating to (a) an actual or alleged violation of, or liability arising under, any Environmental Law, (b) the use, manufacture, production, generation, handling, transportation, treatment, reclamation, recycling, transfer, storage, disposal, distribution, importing, labeling or testing of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the presence, disposal, Release, cleanup or control of any Hazardous Materials, or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

"<u>Equity Interests</u>" means, with respect to any Person, all of the shares of capital stock of (or other ownership, partnership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership, partnership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership, partnership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership, partnership or profit interests in such Person (including partnership, units, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

"<u>ERISA</u>" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

"<u>ERISA Affiliate</u>" means any trade or business (whether or not incorporated) under common control with any Loan Party or any of its Restricted Subsidiaries within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code or Section 302 of ERISA) or the meaning of Section 4001(a)(14) of ERISA; <u>provided</u>, <u>however</u>, that in no event shall any Agent, any Lender or any of their respective Affiliates constitute an ERISA Affiliate for the purposes of this Agreement. Any former ERISA Affiliate of a Person shall continue to be considered an ERISA Affiliate of such Person within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of such Person and with respect to liabilities arising during such period (but, for the avoidance of doubt, not after such period) for which such Person could reasonably be expected to be liable under the Code or ERISA.

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"<u>ERISA Event</u>" means (a) a Reportable Event; (b) a withdrawal by a Loan Party or any of its Restricted Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan subject to Section 4063 of ERISA during a plan year in which such entity was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by a Loan Party or any of its Restricted Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan or notification that a Multiemployer Plan is in "critical," "endangered" or "critical and declining" status (each, within the meaning of Section 432 of the Internal Revenue Code or ERISA Section 305); (d) a mass withdrawal from a Multiemployer Plan under ERISA Section 4219(c)(1)(D); (e) the withdrawal from a Multiemployer Plan by any employer required to be listed in Schedule R of the Multiemployer Plan's Form 5500; (f) a Multiemployer Plan's adoption, amendment or update of a rehabilitation plan under ERISA Section 305(e); (g) the adoption by a Multiemployer Plan of any plan rule creating employer liability that is in addition to collectively bargained contributions or withdrawal liability; (h) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (i) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (j) notice received by any Loan Party or any of its Restricted Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan that such Multiemployer Plan is insolvent within the meaning of Section 4245 of ERISA and subject thereto; (k) the failure of any Loan Party or any of its Restricted Subsidiaries or any of their respective ERISA Affiliates to make by its due date a required installment under Section 430(j) of the Internal Revenue Code with respect to any Pension Plan or the failure by any Pension Plan to satisfy the minimum funding standards (within the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA) applicable to such Pension Plan, whether or not waived in accordance with Section 412(c) of the Internal Revenue Code or Section 302(c) of ERISA; (l) a determination that any Pension Plan is, or is expected to be, in "at-risk" status (within the meaning of Section 430 of the Internal Revenue Code or Section 303 of ERISA); (m) the filing pursuant to Section 412 of the Internal Revenue Code or Section 302 of ERISA of an application for a waiver of the minimum funding standard with respect to any Pension Plan; (n) the failure by any Loan Party or any of its Restricted Subsidiaries or any of their respective ERISA Affiliates to make any required contribution to a Multiemployer Plan pursuant to Section 431 or 432 of the Internal Revenue Code; (o) the failure by any Loan Party or any of its Restricted Subsidiaries or any of their respective ERISA Affiliates to pay when due (after expiration of any applicable grace period) any installment payment with respect to withdrawal liability under Section 4201 of ERISA; (p) the imposition of a Lien pursuant to Section 430(k) of the Internal Revenue Code or Section 303(k) or 4068 of ERISA with respect to any Pension Plan; or (q) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon a Loan Party or any of its Restricted Subsidiaries or any of their respective ERISA Affiliates.

"<u>Erroneous Payment</u>" has the meaning specified in <u>Section 9.11(a)</u>.

"<u>EU Bail-In Legislation Schedule</u>" means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

"<u>Event of Default</u>" has the meaning specified in <u>Section 8.01</u>.

"<u>Excluded Account</u>" means (i) each Deposit Account or other account of a Loan Party which is used exclusively for the payment of payroll, payroll taxes, employee benefits, withholding or escrow or fiduciary deposits, (ii) each Bank Product Partner Account and each Other Product Partner Account, (iii) accounts used to satisfy the requirements of an applicable Governmental Authority (including but not limited to state licensing obligations), with the amounts therein limited to $5,000,000 (or such higher amount as may be agreed by the Administrative Agent at the direction of the Required Lenders) <u>less</u> the face amount of any letters of credit issued pursuant to <u>Section 7.05(u)(ii)</u>, and (iv) Deposit Accounts or other accounts of Loan Parties holding Cash, Cash Equivalents and Available for Sale Investments that are not Restricted in an amount less than the Sweep Threshold then in effect.

"<u>Excluded Subsidiary</u>" means (i) each Subsidiary of the Borrower that is an SPV Entity and (ii) Prosper Grantor Trust, only for so long as Prosper Grantor Trust continues to operate substantially consistent

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with the manner in which it operates on the Closing Date, or in a manner similar in nature thereto, including any reasonably related extensions and expansions thereof.

"<u>Excluded Taxes</u>" means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under <u>Section 10.13</u>) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to <u>Section 3.01</u>, amounts with respect to such Taxes were payable either to such Lender's assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient's failure to comply with <u>Section 3.01(e)</u>, and (d) any withholding Taxes imposed under FATCA.

"<u>FATCA</u>" means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.

"<u>Federal Funds Effective Rate</u>" means, for any day, the rate calculated by the Federal Reserve Bank of New York based on such day's federal funds transactions by depository institutions (as set forth on the Federal Reserve Bank of New York's Website from time to time) and published on the next succeeding Business Day by the Federal Reserve Bank of New York as the federal funds effective rate. For the avoidance of doubt, if the Federal Funds Effective Rate as determined pursuant to the foregoing would be less than 0.00%, such rate shall be deemed to be 0.00% for purposes of this Agreement.

"<u>Fiscal Quarter</u>" means a calendar quarter of a Fiscal Year.

"<u>Fiscal Year</u>" means the Fiscal Year of the Borrower and its Subsidiaries, which period shall be the 12-month period ending on December 31 of each year or such other date which the Borrower notifies the Administrative Agent pursuant to <u>Section 7.14(b)</u>.

"<u>Floor</u>" means the benchmark rate floor, if any, provided in this Agreement (as of the execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) and with respect to Daily Simple SOFR, a rate of interest equal to 2.00% *per annum*.

"<u>Foreign Lender</u>" means (a) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) if the Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.

"<u>Foreign Plan</u>" means any employee pension benefit plan, program, policy, arrangement or agreement maintained or contributed to by any Loan Party or any Subsidiary of any Loan Party with respect to employees employed outside the United States (other than any governmental arrangement).

"<u>FRB</u>" means the Board of Governors of the Federal Reserve System of the United States (or any successor).

"<u>FSHCO</u>" means any direct or indirect Subsidiary of the Borrower that is organized under the laws of the United States, any state thereof or the District of Columbia, in each case, which Subsidiary owns no material assets other than capital stock (or, if applicable, capital stock or indebtedness) of one or more Subsidiaries that are CFCs or one or more other FSHCOs.

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"<u>Fund</u>" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.

"<u>GAAP</u>" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board, consistently applied and as in effect from time to time.

"<u>Governmental Authority</u>" means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

"<u>Grantor Trust Equity Transfer</u>" means a transaction pursuant to which the Borrower acquires, or contributes capital for the acquisition of, Equity Interests from one or more of its shareholders for nominal consideration and, with respect to acquisitions of Equity Interests, contributes or otherwise transfers such Equity Interests to Prosper Grantor Trust.

"<u>Guarantee</u>" means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the "<u>primary obligor</u>") in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); <u>provided</u> that, to the extent that any recourse with respect to such Indebtedness or other obligation is limited solely to such assets, the amount of such Guarantee for purposes of this clause (b) shall be equal to the lesser of (i) the amount determined by the penultimate sentence of this definition and (ii) the net book value of such assets encumbered thereby; <u>provided</u>, <u>however</u>, that the term "Guarantee" shall not include (x) any product or service warranties or indemnities extended in the ordinary course of business, (y) endorsements for collection or deposit in the ordinary course of business, or (z) limited recourse guarantees related only to bad acts and not to asset performance. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term "Guarantee" as a verb has a corresponding meaning.

"<u>Guarantor</u>" means each Subsidiary of the Borrower identified as a "Guarantor" on the signature pages to the Guaranty and Collateral Agreement or on a joinder to the Guaranty and Collateral Agreement in accordance with <u>Section 6.12</u>, in each case together with their successors and permitted assigns.

"<u>Guaranty and Collateral Agreement</u>" means that certain Guaranty and Collateral Agreement, dated as of the date hereof, executed in favor of the Collateral Agent, for the benefit of the Secured Parties, by the Borrower and each of the other Loan Parties party thereto, as amended or modified from time to time in accordance with the terms thereof and hereof.

"<u>Hazardous Materials</u>" means any and all materials, substances, and wastes that are regulated by, or for which liability or standards of conduct may be imposed under, Environmental Law, including any and all materials, substances, and wastes defined as "hazardous materials," "hazardous substances," "hazardous

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wastes," "solid wastes," "special wastes," "pollutants," "contaminants," "toxic substances," or "toxic wastes" under any provision of Environmental Law, and including asbestos and asbestos-containing materials, urea formaldehyde, polychlorinated biphenyls, petroleum or any fraction thereof, petroleum products, natural gas, natural gas liquids, lead based paint, mold, radon gas, regulated medical waste, radioactive materials, and per- and polyfluoroalkyl substances.

"<u>Holding Company Transaction</u>" means a transaction involving the Equity Interests of the Borrower being exchanged or otherwise transferred for Equity Interests in a newly formed holding company of the Borrower, resulting in such newly formed holding company being the direct parent of the Borrower and the ultimate equity owners of the Borrower being direct equityholders of such newly formed holding company or its direct or indirect parent; <u>provided</u> that such newly formed holding company (i) shall become a Loan Party by executing and delivering a joinder to the Guaranty and Collateral Agreement and (ii) does not have any material liabilities (other than liabilities arising under the Loan Documents), own any material assets (other than 100% of the Equity Interests of the Borrower, all of which shall be pledged as Collateral pursuant to the Guaranty and Collateral Agreement) or engage in any operations or business, other than (a) the ownership of the Borrower, (b) the maintenance of its corporate existence, (c) liabilities incidental to the conduct of its business as a holding company, (d) the sale and issuance of Equity Interests and the maintenance and investment of any proceeds thereof, and the incurrence of any liabilities, costs and expenses reasonably related thereto, whether or not such issuance of Equity Interests is consummated, (e) the imposition of Permitted Liens, (f) opening and maintaining bank and deposit accounts, (g) providing Guarantees for the benefit of any Loan Party or Non-Guarantor Restricted Subsidiary to the extent such Person is otherwise permitted to enter into the transaction under this Agreement (including Guarantees of lease obligations), (h) participating in tax, accounting and other administrative matters as a member of a consolidated group with the Borrower, (i) activities incidental to the business or activities described in the foregoing clauses (a) through (h) and (j) receiving and distributing the dividends, distributions and payments permitted to be made to such holding company pursuant to Section 7.08.

"<u>Indebtedness</u>" means, of any Person at any date, without duplication (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services including earnout obligations to the extent such obligations are required to be accounted for as a liability or debt on the consolidated balance sheet of the Borrower in accordance with GAAP, (c) all obligations of such Person evidenced by notes, bonds, debentures, loan agreements or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations under Capital Leases of such Person, (f) the maximum amount of all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers' acceptances, bank guaranties, surety bonds, performance bonds and similar instruments, (g) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Equity Interests of such Person and all Disqualified Equity Interests, (h) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements and mortgage, industrial revenue bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse, (i) all obligations (netted, to the extent provided for therein) of such Person in respect of Swap Contracts (including obligations and liabilities arising in connection with or as a result of early or premature termination of a Swap Contract, whether or not occurring as a result of a default thereunder), (j) all obligations of such Person under or in respect of a synthetic lease, Tax retention operating lease, off-balance sheet loan or other off-balance sheet financing product, (k) Indebtedness of any partnership or unincorporated joint venture in which such Person is the general partner or a joint venturer, as applicable (except to the extent such Person's liability for such Indebtedness is otherwise limited) and (l) all Guarantees of such Person in respect of the foregoing. The Indebtedness of a Person shall include the Indebtedness of any other Person (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.

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"<u>Indemnified Taxes</u>" means (a) Taxes, other than Excluded Taxes imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document, and (b) to the extent not otherwise included in clause (a), Other Taxes.

"<u>Indemnitee</u>" has the meaning specified in <u>Section 10.04(b)</u>.

"<u>Information</u>" has the meaning specified in <u>Section 10.07</u>.

"<u>Initial Financial Statements</u>" means, collectively, (i) the audited consolidated balance sheet of the Borrower and its Subsidiaries and the related consolidated statements of income or operations, shareholders' equity and cash flows for the Fiscal Year ended December 31, 2021 and (ii) the unaudited consolidated balance sheet of the Borrower and its Subsidiaries and the related consolidated statements of income or operations, shareholders' equity and cash flows for the Fiscal Quarter ended September 30, 2022 , in each case, prepared in conformity with GAAP.

"<u>Intellectual Property</u>" means all rights, title, and interest in any of the following throughout the world: (a) issued patents, patent applications (including originals, divisions, continuations, continuations-in-part, extensions, reexaminations and reissues thereof), patent disclosures, inventions and invention disclosures (whether or not patentable), (b) trademarks, service marks, trade dress, trade names, corporate names, business names, logos, slogans, and other indicia of origin (and all translations, transliterations, adaptations, derivations and combinations of the foregoing) and Internet domain names, social media handles, and franchises, together with all goodwill associated with each of the foregoing, (c) copyrights and copyrightable works and original works of authorship, (d) technical information, marketing and business plans, databases, specifications, prototypes, customer/vendor lists, engineering information, samples, market forecasts, techniques, know-how, business methods, software development methodologies, and trade secrets ("<u>Trade Secrets</u>"), and inventions (whether patentable or unpatentable and whether or not reduced to practice), (e) Software, (f) all rights of publicity, including the right to use the name, voice, likeness, signature and biographies of real persons, together with all goodwill related thereto, and (g) all registrations and applications for any of the foregoing items.

"<u>Intercompany Subordination Agreement</u>" means an Intercompany Subordination Agreement, made by the Borrower and its Restricted Subsidiaries party thereto, in favor of the Collateral Agent for the benefit of the Secured Parties, substantially in the form of <u>Exhibit F</u> or otherwise in form and substance reasonably satisfactory to the Collateral Agent.

"<u>Interest Payment Date</u>" means (i) the last Business Day of each month, commencing on November 30, 2022 and (ii) the Maturity Date.

"<u>Investment</u>" means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor incurs Indebtedness of the type referred to in clause (h) of the definition of "Indebtedness" in respect of such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the property and assets or business of another Person or assets constituting a business unit, line of business or division of such Person. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment but giving effect to any returns or distributions of capital or repayment of principal actually received in case by such Person with respect thereto.

"<u>Investor Wind-Down Transactions</u>" means transactions pursuant to which the Borrower and/or its Restricted Subsidiaries acquire the remaining investments in products of the Business from individual or institutional investors in connection with the wind-down of such investors' accounts or funds.

"<u>Involuntary Disposition</u>" means any loss of, damage to or destruction of, or any condemnation or other taking for public use of, or any event that causes to be rendered unfit for normal use for any reason

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whatsoever, other than ordinary use or wear and tear, any property of any Loan Party or any Restricted Subsidiary, in one event or a series of events, including any taking of all or any part of any Real Property of any Person in or by condemnation or other eminent domain proceedings pursuant to any applicable Laws, or by reason of the temporary requisition of the use or occupancy of all or any part of any Real Property of any Person by any Governmental Authority, civil or military, or any settlement in lieu thereof.

"<u>IP Security Agreement</u>" means an Intellectual Property Security Agreement, executed in favor of the Collateral Agent, for the benefit of the Secured Parties, by the applicable Loan Parties party thereto, as amended or modified from time to time in accordance with the terms thereof and hereof.

"<u>IRS</u>" means the United States Internal Revenue Service or any successor agency.

"<u>Junior Indebtedness</u>" means Indebtedness that is (i) contractually subordinated in right of payment to the Obligations, (ii) unsecured, or (iii) secured by Liens that are junior to the Liens securing the Obligations.

"<u>Laws</u>" means, collectively, all international, foreign, federal, state and local laws, constitutions, statutes, treaties, conventions, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable orders, rulings, decrees, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

"<u>Lenders</u>" means each of the Persons identified as a "Lender" on the signature pages hereto and their successors and permitted assigns.

"<u>Lending Office</u>" means, as to any Lender, the office or offices of such Lender as a Lender may from time to time notify the Borrower and the Administrative Agent.

"<u>Leverage Ratio</u>" means, as of any date of determination, the ratio of (a) total consolidated indebtedness for the Borrower and its Subsidiaries (other than indebtedness of any non-recourse securitization indebtedness, Non-Recourse Warehouse Indebtedness and Payment Dependent Notes) to (b) Tangible Net Worth for the Borrower and its Subsidiaries on a consolidated basis. For the avoidance of doubt, amounts payable to investors which primarily represents the obligation to investors related to cash held in an account for the benefit of investors and payments-in-process received from borrowers is not considered indebtedness for purposes of this covenant.

"<u>Lien</u>" means (a) any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing) and (b) in the case of securities or Equity Interests, any purchase option, call or similar right of a third party with respect to such securities or Equity Interests.

"<u>Loan</u>" for any Lender, means each Loan made by such Lender under <u>Section 2.01(a)</u> in an original aggregate principal amount not to exceed such Lender's Commitment. "<u>Loans</u>" means the aggregate amount of all such Loans made by all Lenders.

"<u>Loan Documents</u>" means this Agreement, the Notes, the Collateral Documents, the Agent Fee Letter, the Intercompany Subordination Agreement, and each other agreement, instrument, or document executed at any time in connection with this Agreement or otherwise evidencing or securing any Loan or any other Obligation.

"<u>Loan Modification Accepting Lender</u>" has the meaning specified in <u>Section 10.01</u>.

"<u>Loan Modification Agreement</u>" has the meaning specified in <u>Section 10.01</u>.

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"<u>Loan Modification Offer</u>" has the meaning specified in <u>Section 10.01</u>.

"<u>Loan Parties</u>" means, collectively, the Borrower and each Guarantor.

"<u>Material Contract</u>" means, with respect to any Person, each contract or other agreement, the termination or breach of which could reasonably be expected to result in a Material Adverse Effect.

"<u>Material Indebtedness</u>" means any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) of the Borrower or any Restricted Subsidiary having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than the Threshold Amount.

"<u>Material Owned Real Property</u>" has the meaning specified in <u>Section 5.18</u>.

"<u>Material Real Property Leases</u>" has the meaning specified in <u>Section 5.18</u>.

"<u>Maturity Date</u>" means the date that is four years from the Closing Date, which is November 14, 2026; <u>provided</u>, that if such date is not a Business Day, then the "Maturity Date" shall be the next succeeding Business Day.

"<u>Moody's</u>" means Moody's Investors Service, Inc. and any successor thereto.

"<u>Multiemployer Plan</u>" means any employee benefit plan of the type described in Section 3(37) or 4001(a)(3) of ERISA and to which any Loan Party or any of its Restricted Subsidiaries or any of their respective ERISA Affiliates makes or is obligated to make contributions, during the preceding five plan years, has made or been obligated to make contributions, or has any liability.

"<u>Narrative Report</u>" means, with respect to the financial statements with respect to which it is delivered, a management discussion and narrative report in a form customarily prepared by the Borrower describing the operations of the Borrower and its Subsidiaries for the applicable Fiscal Quarter or Fiscal Year and for the period from the beginning of the then-current Fiscal Year to the end of the period to which the relevant financial statements relate.

"<u>Net Cash Proceeds</u>" means the aggregate Cash, Cash Equivalents or Available for Sale Investments proceeds received (directly or indirectly) by the Borrower or any Restricted Subsidiary from time to time in respect of any Disposition or Involuntary Disposition (whether as initial consideration or through the payment or Disposition of deferred consideration but only as and when received) by or on behalf of the Borrower or such Restricted Subsidiary, including, by way of insurance proceeds or condemnation awards, net of (a) direct costs incurred in connection therewith (including reasonable and documented legal, accounting and investment banking fees, and sales commissions), (b) Taxes actually paid as a result thereof (after taking into account any tax credits or deductions and any tax sharing arrangements), and (c) in the case of any Disposition, the amount necessary to retire any Indebtedness secured by a Permitted Lien on the related property; it being understood that "Net Cash Proceeds" shall include any Cash, Cash Equivalents or Available for Sale Investments received upon the sale or other disposition of any non-cash consideration received by the Borrower or any Restricted Subsidiary in any Disposition or Involuntary Disposition; <u>provided</u> that no proceeds shall constitute Net Cash Proceeds in any Fiscal Year until the aggregate amount of all such proceeds in any Fiscal Year shall exceed $500,000; <u>provided</u> further, that no proceeds with respect to Dispositions or Involuntary Dispositions of assets of Prosper Funding LLC shall constitute Net Cash Proceeds in any Fiscal Year until the aggregate amount of all such proceeds in any Fiscal Year shall exceed $10,000,000. In the case of any mandatory prepayment required under <u>Section 2.03(b)(i)</u>, "Net Cash Proceeds" shall not include the Net Cash Proceeds that such Loan Party or Restricted Subsidiary has

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reinvested in assets useful to the business of such Loan Party or Restricted Subsidiary (or intends to reinvest within the Reinvestment Period or has entered into a binding commitment prior to the last day of such Reinvestment Period to reinvest); provided that any portion of such proceeds that has not been so reinvested within such Reinvestment Period shall, unless such Loan Party or Restricted Subsidiary has entered into a binding commitment prior to the last day of such Reinvestment Period to reinvest such proceeds no later than 180 days following the last day of such Reinvestment Period, (1) be deemed to be Net Cash Proceeds, occurring on the last day of such Reinvestment Period or, if later, 180 days after the date such Loan Party or Restricted Subsidiary has entered into such binding commitment, as applicable, and (2) be applied in accordance with <u>Section 2.03(b)(vi)</u>; <u>provided</u>, further, that any such proceeds shall be pledged as Collateral and held in the Controlled Account until so reinvested.

"<u>Net Liquidity</u>" means, with respect to the Borrower and its Subsidiaries on a consolidated basis, as of any date of determination, the sum of Cash, Cash Equivalents and Available for Sale Investments that are not Restricted.

"<u>Non-Guarantor Restricted Subsidiary</u>" means (i) Prosper Funding LLC, only for so long as such entity continues to operate substantially consistent with the manner in which it operates on the Closing Date, and operations similar in nature thereto and reasonably related extensions and expansions thereof, and (ii) each other direct or indirect Subsidiary of the Borrower that is not an Excluded Subsidiary and which is a bankruptcy remote entity, as reasonably necessary for the operation of its business or required by its counterparties.

"<u>Non-Recourse Warehouse Indebtedness</u>" means warehouse indebtedness that is either non-recourse or limited recourse to the Borrower or any of its Subsidiaries; <u>provided</u> that if limited recourse in nature, such indebtedness may only relate to bad acts and not to asset performance.

"<u>Note</u>" or "<u>Notes</u>" has the meaning specified in <u>Section 2.07</u>.

"<u>Obligations</u>" means all present and future advances to, and debts, principal, interest, premiums (including any Prepayment Premium), fees, liabilities, obligations, covenants and duties of, any Loan Party arising under or in connection with this Agreement or any other Loan Document, or otherwise with respect to any Loan, in each case, payable in accordance with the Loan Documents, whether or not the right of payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in <u>ARTICLE VIII</u>, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, premiums (including any Prepayment Premium) and fees that accrue after the commencement by or against any Loan Party of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

"<u>Organization Documents</u>" means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

"<u>Other Connection Taxes</u>" means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

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"<u>Other Product Partner Account</u>" means any Deposit Account or other account required to be maintained by the applicable product partner in connection with the credit card and home equity products of the Borrower and its Subsidiaries, or such other additional products of the Borrower and its Subsidiaries as may be developed in accordance with the Business from time to time.

"<u>Other Taxes</u>" means all present or future stamp, court or documentary, intangible, recording, filing, or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to <u>Section 10.13</u>).

"<u>Participation Register</u>" has the meaning ascribed to such term in <u>Section 10.06(d)</u>.

"<u>Patriot Act</u>" has the meaning ascribed to such term in <u>Section 10.16</u>.

"<u>Payment Dependent Notes</u>" means the notes issued by Prosper Funding LLC pursuant to any registration statement filed with Securities and Exchange Commission, and PMI management rights referred to in such registration statements issued by the Borrower and attached to and inseparable from each such note; <u>provided</u> that such notes (i) are offered to retail investors, (ii) shall be non-credit recourse to the Borrower or any Restricted Subsidiary and (iii) shall not be secured by any assets other than (x) consumer financial products and related assets in respect of which such notes are issued, (y) the accounts in which payments for such consumer financial products and related assets are held and (z) other assets of similar scope to the collateral securing the Payment Dependent Notes as of the Closing Date.

"<u>PBGC</u>" means the Pension Benefit Guaranty Corporation or any successor thereto.

"<u>Pension Plan</u>" means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that (i) is subject to Title IV of ERISA or the minimum funding standards under Section 412 of the Internal Revenue Code and (ii) is sponsored or maintained by any Loan Party or any of its Restricted Subsidiaries or any of their respective ERISA Affiliates or to which any Loan Party or any of its Restricted Subsidiaries or any of their respective ERISA Affiliates contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the preceding five plan years.

"<u>Permit</u>" means any permit, license, certificate, approval, consent, clearance, notification, waiver, certification, registration, franchises, accreditations, qualification or authorization issued or granted by any Governmental Authority or pursuant to any applicable Law.

"<u>Permitted Acquisitions</u>" means any Acquisition by a Loan Party or a Restricted Subsidiary thereof to the extent that each of the following conditions shall have been satisfied:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;no Event of Default shall have occurred and be continuing or would result from the consummation of such Acquisition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) &nbsp;&nbsp;&nbsp;&nbsp;such Acquisition (A) shall be consensual and, to the extent required under applicable law, shall have been approved by the Board of Directors and equityholders of the Person that is the subject of such Acquisition and such Person shall not have announced that it will oppose such Acquisition or shall not have commenced any action which alleges that such Acquisition shall violate any applicable Law and is ongoing (it being understood that such condition shall be deemed satisfied in connection with a court-approved sale) and (B) shall not have been preceded by an unsolicited tender offer for any Equity Interests by, or proxy contest initiated by, the Borrower or any of its Restricted Subsidiaries;

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subject of a prior Permitted Acquisition during the relevant period) to the historical consolidated financial statements of the Person to be acquired (or the historical financial statements related to the assets to be acquired) pursuant to such Acquisition, the Loan Parties will be in *pro forma* compliance with the financial covenants in <u>Section 7.01</u> for the relevant period ended immediately prior to the proposed date of consummation of such Acquisition after giving effect to such Acquisition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;&nbsp;&nbsp;(i) the aggregate amount of Acquisitions permitted to be made when the Specified Transaction Conditions are not satisfied on a *pro forma* basis shall not exceed $2,500,000 in the aggregate and (ii) the aggregate amount of Acquisitions permitted to be made when the Specified Transaction Conditions are satisfied on a *pro forma* basis shall not exceed $10,000,000 in the aggregate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;the Acquisition is consummated substantially in accordance with the terms of the applicable acquisition agreement and all applicable material Laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;&nbsp;&nbsp;&nbsp;[reserved];

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)&nbsp;&nbsp;&nbsp;&nbsp;the assets being acquired (other than a *de minimis* amount of assets in relation to the Loan Parties' and the Subsidiaries' total assets), or the Person whose Equity Interests are being acquired, are useful in or engaged in, as applicable, the Business, in the Borrower's reasonable discretion;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)&nbsp;&nbsp;&nbsp;&nbsp;the assets being acquired (other than a *de minimis* amount of assets in relation to the assets being acquired) are located within the United States, or the Person whose Equity Interests are being acquired is organized in a jurisdiction located within the United States;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)&nbsp;&nbsp;&nbsp;&nbsp;such Acquisition shall be effected in such a manner so that if the acquiror is a Loan Party, the acquired assets or Equity Interests are owned by a Loan Party or a Person that becomes a Loan Party and, if effected by merger or consolidation involving one or more Loan Parties, a Loan Party shall be the continuing or surviving Person; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)&nbsp;&nbsp;&nbsp;&nbsp;the agreements, instruments and other documents required by <u>Section 6.12</u> shall be delivered within the time periods set forth therein.

"<u>Permitted Amendments</u>" means (a) an extension of the final maturity date of the Loans of the Loan Modification Accepting Lenders and the payment of fees by the Borrower to such Loan Modification Accepting Lenders as may be required in connection therewith, (b) a change in rate of interest, premium or other amount with respect to the Loans of the Loan Modification Accepting Lenders, and (c) any other amendments to this Agreement and any other Loan Document required to give effect to the amendments described in clauses <u>(a) and</u> <u>(b)</u> above.

"<u>Permitted Dispositions</u>" means (so long as no Event of Default exists or would result therefrom) the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;(i) Dispositions from one Loan Party to another Loan Party, (ii) Dispositions from any Non-Guarantor Restricted Subsidiary to a Loan Party or another Non-Guarantor Restricted Subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;the Disposition of surplus, obsolete, or worn-out property that is, in the reasonable judgment of the Borrower or any of its Restricted Subsidiaries, no longer economically practicable to maintain or useful in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;the sale of inventory which is sold in the ordinary course of business on ordinary trade terms;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;the discount, write off or Disposition of accounts receivable or the sale of any such accounts receivable for the purpose of collection to any collection agency, in each case in the ordinary course of business and consistent with past practices;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;the making of a Restricted Payment permitted by <u>Section 7.08</u> or Investments permitted by <u>Section 7.04</u>, the creation or incurrence of a Permitted Lien, or the consummation of transactions permitted by <u>Section 7.06</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Dispositions of Cash, Cash Equivalents and Available for Sale Investments pursuant to transactions not prohibited hereunder for the payment of ordinary-course business expenses or in arm's-length transactions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;non-exclusive licenses, sublicenses and similar arrangements for the use of Intellectual Property and licenses or sublicenses of Intellectual Property that would not result in a legal transfer of title of the licensed property, but which (i) may be exclusive in respects other than territory or (ii) may be exclusive as to territory only as to discrete geographical areas outside of the United States in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp;the Disposition of credit card receivables and similar consumer finance receivables in the ordinary course of business or on arm's-length terms;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;Dispositions of Intellectual Property to Prosper Funding LLC;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;Dispositions in connection with SPV Transactions, bank partner, credit card product, personal loan, home equity or other consumer financial product and service arrangements in the ordinary course operation of the Business and (other than with respect to such Dispositions among Loan Parties) which are on arm's-length terms;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (k)&nbsp;&nbsp;&nbsp;&nbsp;other Dispositions; <u>provided</u> that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) &nbsp;&nbsp;&nbsp;&nbsp;at the time of any such Disposition, no Event of Default shall exist or shall result therefrom;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) &nbsp;&nbsp;&nbsp;&nbsp;any such Disposition is for fair market value;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) &nbsp;&nbsp;&nbsp;&nbsp;at least 75% of the consideration received shall be in the form of Cash, Cash Equivalents or Available for Sale Investments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;&nbsp;&nbsp;any Net Cash Proceeds from such Disposition shall be applied to the prepayment of the Loans to the extent required under <u>Section 2.03(b)(i)</u>; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;(i) the fair market value of the assets subject to any such Dispositions consummated when the Specified Transaction Conditions are not satisfied on a *pro forma* basis shall not exceed $2,500,000 in the aggregate and (ii) the fair market value of the assets subject to any such Dispositions consummated when the Specified Transaction Conditions are satisfied on a *pro forma* basis shall not exceed $5,000,000 in the aggregate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp;Dispositions of securitization residuals and residuals in warehouse facilities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;&nbsp;&nbsp;the leasing or subleasing of any assets (other than Intellectual Property) in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;&nbsp;&nbsp;&nbsp;abandonment or other Disposition of Intellectual Property that is not material to the business of the Borrower and its Restricted Subsidiaries;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;&nbsp;&nbsp;&nbsp;Dispositions of accounts receivable (excluding sales or dispositions in a factoring arrangement) in connection with the compromise, settlement or collection thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;&nbsp;&nbsp;&nbsp;Dispositions resulting from any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;&nbsp;&nbsp;&nbsp;the surrender or waiver of contract rights or settlement, release or surrender of a contract, tort or other litigation claim;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)&nbsp;&nbsp;&nbsp;&nbsp;Dispositions of Real Property pursuant to any Sale and Leaseback Transaction; <u>provided</u> any Net Cash Proceeds from such Disposition shall be applied to the prepayment of the Loans to the extent required under <u>Section 2.03(b)(i)</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)&nbsp;&nbsp;&nbsp;&nbsp;Dispositions of Equity Interests to Prosper Grantor Trust pursuant to a Grantor Trust Equity Transfer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)&nbsp;&nbsp;&nbsp;&nbsp;Dispositions of Investments in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)&nbsp;&nbsp;&nbsp;&nbsp;Dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such disposition are reasonably promptly applied to the purchase price of such replacement property; <u>provided</u> that to the extent the property being Disposed of constitutes Collateral, such replacement property shall constitute Collateral.

"<u>Permitted Holders</u>" means the Persons set forth on <u>Schedule 1.01(b)</u>.

"<u>Permitted Indebtedness</u>" means, at any time, Indebtedness of any Loan Party or any Restricted Subsidiary permitted to exist at such time pursuant to the terms of <u>Section 7.05</u>.

"<u>Permitted Liens</u>" means, at any time, Liens in respect of property of any Loan Party or any Restricted Subsidiary permitted to exist at such time pursuant to the terms of <u>Section 7.03</u>.

"<u>Person</u>" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

"<u>Plan</u>" means any "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) in respect of which any Loan Party or any of its Restricted Subsidiaries or any of their respective ERISA Affiliates is (or, if such Plan were terminated, would under Section 4062 or Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA or has any liability.

"<u>Platform</u>" shall have the meaning assigned to such term in <u>Section 10.02(b)</u>.

"<u>Prepayment Premium</u>" means (i) in the event of a mandatory prepayment pursuant to <u>Section 2.03(b)(iii)</u>, voluntary repayment or prepayment or redemption, or an acceleration, of Loans or the Loans becoming due and payable pursuant to this Agreement: (a) prior to the second anniversary of the Closing Date, the Applicable Premium, (b) on or after the second anniversary of the Closing Date but prior to the third anniversary of the Closing Date, two percent (2.00%) of the principal amount of the Loans so repaid, prepaid or that has become or is declared accelerated pursuant to <u>ARTICLE VIII</u> or otherwise and (c) on or after the third anniversary of the Closing Date, zero and (ii) in the event of a mandatory repayment or prepayment pursuant to <u>Section 2.03(b)(ii)</u> in connection with a Qualified Public Offering prior to the third anniversary of the Closing Date, two percent (2.00%) of the principal amount of the Loans so repaid or prepaid.

"<u>Prime Rate</u>" means the rate of interest last quoted by *The Wall Street Journal* as the "Prime Rate" in the U.S. or, if *The Wall Street Journal* ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the "bank prime loan" rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Federal Reserve Board (as determined by the Administrative Agent).

"<u>Properly Contested</u>" means, in the case of any Indebtedness, Lien or Taxes, as applicable, of any Person that are not paid as and when due or payable by reason of such Person's bona fide dispute concerning

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its liability to pay the same or concerning the amount thereof: (a) such Indebtedness, Lien or Taxes, as applicable, are being properly contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (b) such Person has established appropriate reserves as shall be required in conformity with GAAP; and (c) the non-payment of such Indebtedness or Taxes will not have a Material Adverse Effect.

"<u>Public Listco</u>" means a Person formed in contemplation of a Qualified Public Offering to become the issuer of Equity Interests in such Qualified Public Offering.

"<u>Qualified Equity Interests</u>" means any Equity Interests that are not Disqualified Equity Interests.

"<u>Qualified Public Offering</u>" means any transaction or series of transactions that results in any common Equity Interests of the Borrower or any direct or indirect parent of the Borrower being publicly traded on any United States national securities exchange.

"<u>Qualified Public Offering Reorganization Transactions</u>" means, collectively, transactions taken in connection with and reasonably related to consummating a Qualified Public Offering, including (a) the formation of a Public Listco and the issuance by the Borrower of its Equity Interests to such Public Listco, (b) the entry into, and performance of, (i) a reorganization agreement among the Borrower and any Public Listco implementing Qualified Public Offering Reorganization Transactions and (ii) customary underwriting agreements in connection with a Qualified Public Offering, and (c) the issuance of Equity Interests of a Public Listco to holders of Equity Interests of the Borrower in connection with any Qualified Public Offering Reorganization Transactions; <u>provided</u> that (A) the Borrower shall have provided the Administrative Agent with not less than ten (10) days prior written notice of any such Qualified Public Offering Reorganization Transactions, (B) the Borrower shall have provided the Administrative Agent with all such information and documents reasonably requested by the Administrative Agent (acting at the direction of the Required Lenders) in connection with such Qualified Public Offering Reorganization Transactions, and (C) any direct holding company of the Borrower resulting from such Qualified Public Offering Reorganization Transactions shall become a Loan Party and shall pledge its Equity Interests in the Borrower as part of the Collateral.

"<u>Real Property</u>" means, at any time, any and all of the real property owned, leased or operated by any Loan Party or any Restricted Subsidiary, together with, in each case, all improvements and appurtenant fixtures, equipment, personal property, easements and other property and rights incidental to the ownership, lease or operation thereof.

"<u>Recipient</u>" means (a) the Administrative Agent or (b) any Lender, as applicable.

"<u>Register</u>" has the meaning specified in <u>Section 10.06(c)</u>.

"<u>Registered IP</u>" has the meaning specified in <u>Section 5.15</u>.

"<u>Reinvestment Period</u>" means the period of 365 consecutive days immediately following the date of receipt of Net Cash Proceeds of a Disposition or Involuntary Disposition.

"<u>Rejection Notice</u>" has the meaning specified in <u>Section 2.03(b)(vii)</u>.

"<u>Related Parties</u>" means, with respect to any Person, such Person's Affiliates and the partners, directors, officers, employees, agents, advisors and sub-advisors of such Person and of such Person's Affiliates.

"<u>Release</u>" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migrating, dumping, disposing or other release into or through the environment, and any abandonment or discarding of barrels, containers, or other closed receptacles containing any Hazardous Material.

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"<u>Relevant Governmental Body</u>" means, with respect to a Benchmark Replacement in respect of Loans denominated in Dollars, the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

"<u>Reportable Event</u>" means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30-day notice period has been waived pursuant to PBGC regulations.

"<u>Required Lenders</u>" means, at any time, Lenders holding Loans outstanding representing in the aggregate more than 50% of the aggregate outstanding principal amount of the Loans. The Loans of any Defaulting Lender shall be disregarded in determining Required Lenders at any such time.

"<u>Resolution Authority</u>" means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority

"<u>Responsible Officer</u>" means the chief executive officer, president, chief financial officer, treasurer, chief compliance officer, general counsel, secretary or assistant treasurer of a Loan Party or any other officer of a Loan Party designated as a "Responsible Officer" of the applicable Loan Party for purposes of the Loan Documents by a Loan Party in writing to the Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

"<u>Restricted</u>" means, with respect to Cash, Cash Equivalents and Available for Sale Investments, such that are (i) listed as "restricted" (or any like caption) on the balance sheet of the Borrower and its Subsidiaries and (ii) subject to any control agreement or preferential arrangement in favor of any Person; <u>provided</u> that Cash, Cash Equivalents and Available for Sale Investments held by SPV Entities that are Restricted as of the last day of any month but are to be released to the Loan Parties during the succeeding month (subject to any payment priorities of the SPV Entities) in the ordinary course operation of the Business will be deemed not to be Restricted as of the applicable month-end date of determination.

"<u>Restricted Payment</u>" means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests of any Loan Party or any Restricted Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or on account of any return of capital to the stockholders, partners or members (or the equivalent Person thereof), any payment of management fees (or other fee of a similar nature) or out-of-pocket expenses to the holders of such Equity Interests or any setting apart of funds or property for any of the foregoing or any option, warrant or other right to acquire any such Equity Interests, dividends, or other distributions.

"<u>Restricted Subsidiaries</u>" means the Subsidiaries of the Borrower that are not Excluded Subsidiaries.

"<u>S&P</u>" means Standard & Poor's Financial Services LLC, a subsidiary of S&P Global Inc., and any successor thereto.

"<u>Sale and Leaseback Transaction</u>" means, with respect to any Loan Party or any Restricted Subsidiary, any arrangement, directly or indirectly, with any Person whereby the Loan Party or such Restricted Subsidiary shall sell or transfer any property used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred.

"<u>Sanctioned Country</u>" means any country or territory that is itself the subject of comprehensive Sanctions (currently, Crimea, Cuba, Iran, North Korea, Syria, and the so-called Donetsk People's Republic and Luhansk People's Republic).

"<u>Sanctioned Person</u>" means, at any time, any Person that is (a) the target of Sanctions, including any Person listed or otherwise designated on the U.S. Department of the Treasury's Office of Foreign Assets

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Control's ("<u>OFAC</u>") Specially Designated Nationals and Blocked Persons List, Sectoral Sanctions Identifications List, or any other Sanctions-related list maintained by a Sanctions authority, (b) any Person that is organized, located or resident in a Sanctioned Country, and/or (c) any Person that is owned 50% or more or controlled (as defined by the relevant Sanctions program) by one or more of the Persons described in clauses (a) and/or (b).

"<u>Sanctions</u>" means any economic, financial or trade sanctions administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State, and the U.S. Department of Commerce, (b) the United Nations Security Council, (c) the European Union, and (d) the United Kingdom, including with respect to clause (a), with the Trading With the Enemy Act, the International Emergency Economic Powers Act, the Iran Sanctions Act, the Sudan Accountability and Divestment Act and any other OFAC Sanctions program.

"<u>SEC</u>" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

"<u>Secured Parties</u>" means, collectively, the Lenders and the Agents.

"<u>Securitizable Assets</u>" means loans, notes, receivables, retail installment sales contracts, leases, leased vehicles, cash deposited into reserve and other similar accounts and other assets arising from the financial services, in each case which the Borrower or any of its Subsidiaries or originating bank partners provides, originates or acquires, other related assets, the records relating thereto, the proceeds, rights and benefits thereunder, including with respect to any ownership or security interests in the related vehicles, and any residual or beneficial interests therein or indebtedness secured thereby (including any residual or other ownership interest in, or asset-backed security issued by, a SPV Entity).

"<u>Settlement Date</u>" means, with respect to any Loans, the date on which such Loans are repaid, prepaid or have become or are declared accelerated pursuant to <u>Section 8.02</u> or otherwise or due and payable pursuant to this Agreement.

"<u>SOFR</u>" means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.

"<u>SOFR Administrator</u>" means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).

"<u>SOFR Administrator's Website</u>" means the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.

"<u>SOFR Borrowing</u>" means, as to any Borrowing, the SOFR Loans comprising such Borrowing.

"<u>SOFR Determination Day</u>" has the meaning specified in the definition of "Daily Simple SOFR".

"<u>SOFR Loan</u>" means any Loan bearing interest at a rate based on Daily Simple SOFR.

"<u>SOFR Rate Day</u>" has the meaning specified in the definition of "Daily Simple SOFR".

"<u>Software</u>" means any and all (a) computer programs, architectures, libraries, firmware and middleware, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (b) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (c) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing and (d) all programmer and user documentation, including user manuals and training materials, relating to any of the foregoing.

"<u>Solvent</u>" or "<u>Solvency</u>" means, with respect to any Person as of a particular date, that on such date (a) such Person is able to pay its debts and other liabilities, contingent obligations and other commitments as

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they mature in the ordinary course of business, (b) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature in their ordinary course, (c) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is to engage, (d) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person and (e) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

"<u>Specified Transaction Conditions</u>" means each of the following, as at the close of business on the last Business Day of the month for which financial statements have most recently been delivered pursuant to <u>Section 6.01</u>, calculated on a pro forma basis: (a)&nbsp;&nbsp;&nbsp;&nbsp;Tangible Net Worth shall not be less than [\*\*\*]; (b) Net Liquidity shall not be less than [\*\*\*]; (c) the Leverage Ratio shall not exceed [\*\*\*]; and (d) the Asset Coverage Ratio shall not be less than [\*\*\*].

"<u>SPV Entity</u>" means any entity that meets (and only for so long that it meets) the following requirements: (i) it is a direct or indirect Subsidiary of the Borrower and (ii) it is a special purpose, bankruptcy remote vehicle that does not engage in any business except that it borrows, funds or incurs other Indebtedness or issues securities in, or exists primarily to facilitate, one or more SPV Transactions. As of the Closing Date, Prosper Warehouse I Trust, Prosper Warehouse II Trust and Prosper Depositor LLC are SPV Entities.

"<u>SPV Transaction</u>" means (i) any purchase, sale, pledge or financing of Securitizable Assets, including, but not limited to, warehouse and other term or revolving financings (including Non-Recourse Warehouse Indebtedness), securitizations and financing arrangements in the form of repurchase agreements or (ii) any sale of Securitizable Assets to any third-party, and any agreements, indentures, credit agreements, note purchase agreements, pledges, certificates and other documents relating thereto, in each case, which are non-credit recourse with respect to the Restricted Subsidiaries.

"<u>Subsidiary</u>" of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which at least a majority of the shares of Voting Stock is at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a "Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of the Borrower.

"<u>Swap Contract</u>" means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a "<u>Master Agreement</u>"), including any such obligations or liabilities under any Master Agreement.

"<u>Swap Termination Value</u>" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s) and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based

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upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

"<u>Sweep Date</u>" has the meaning specified in <u>Section 6.23(a)</u>.

"<u>Sweep Threshold</u>" has the meaning specified in <u>Section 6.23(a)</u>.

"<u>Tangible Net Worth</u>" means, with respect to the Borrower and its Subsidiaries on a consolidated basis, as of any date of determination, the *<u>difference</u>* of (a) the *<u>sum</u>* of (i) convertible preferred stock, (ii) total stockholders' deficit and (iii) convertible preferred stock warrant liability *<u>less</u>* (b) the sum of (i) goodwill and (ii) intangible assets.

"<u>Taxes</u>" means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

"<u>Test Date</u>" has the meaning specified in <u>Section 8.04</u>.

"<u>Threshold Amount</u>" means [\*\*\*].

"<u>Trade Secret</u>" has the meaning assigned to such term in the definition of Intellectual Property.

"<u>Treasury Rate</u>" means, as of the date of any repayment, prepayment, repricing, replacement, redemption or acceleration of Loans or the Loans becoming due and payable, the yield to maturity as of such date of U.S. Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two (2) Business Days prior to such day of repayment, prepayment, redemption or acceleration or such date such Loan became due and payable (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such date of repayment, prepayment, redemption or acceleration or such date such Loan became due and payable to the date that is twenty-four (24) months following the Closing Date.

"<u>Type</u>" when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, "Rate" shall include Daily Simple SOFR and the Alternate Base Rate.

"<u>UCC</u>" means the Uniform Commercial Code as in effect in the State of New York or, when the laws of any other jurisdiction govern the perfection or enforcement of any Lien, the Uniform Commercial Code of such jurisdiction.

"<u>UK Financial Institution</u>" means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.

"<u>UK Resolution Authority</u>" means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

"<u>Unadjusted Benchmark Replacement</u>" means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.

"<u>Unfunded Pension Liability</u>" means the excess of a Pension Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan's assets, determined in accordance with the assumptions used for funding that Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

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"<u>United States</u>" and "<u>U.S</u>." means the United States of America.

"<u>U.S. Government Securities Business Day</u>" means any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.

"<u>U.S. Person</u>" means any Person that is a "United States Person" as defined in Section 7701(a)(30) of the Code.

"<u>U.S. Tax Compliance Certificate</u>" has the meaning specified in <u>Section 3.01(e)(ii)(B)(c)</u>.

"<u>Voting Stock</u>" means, with respect to any Person, Equity Interests issued by such Person the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency.

"<u>Withholding Agent</u>" means any Loan Party and the Administrative Agent.

"<u>Write-Down and Conversion Powers</u>" means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

1.02.<u>Other Interpretive Provisions</u>.

With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented, restated or otherwise modified (subject to any restrictions on such amendments, supplements, restatements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person's successors and assigns (subject to any restrictions on assignments set forth herein or in any other Loan Document), (iii) the words "<u>herein</u>," "<u>hereof</u>" and "<u>hereunder</u>," and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law, and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all real and personal property and tangible and intangible assets and properties, including cash, securities, accounts and contract rights. Terms used herein (including "Accounts", "Chattel Paper", "Deposit Accounts", "Documents", "Instruments", "Inventory", and "Proceeds") that are defined in the UCC, unless otherwise defined herein, shall have the meanings specified in the UCC.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding"; and the word "through" means "to and including".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

1.03.<u>Accounting Terms</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Generally</u>. Except as otherwise specifically prescribed herein, all accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Changes in GAAP</u>. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); <u>provided</u> that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. For the avoidance of doubt, this <u>Section 1.03(b)</u> shall not require the Borrower to modify its financial statements or financial reporting (or to negotiate with the Administrative Agent or the Lenders regarding any such modifications).

1.04.<u>Rounding</u>.

&nbsp;&nbsp;&nbsp;&nbsp;Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

1.05.<u>Times of Day</u>.

Unless otherwise specified, all references herein to times of day shall be references to New York time (Eastern daylight or standard, as applicable).

1.06.<u>Divisions</u>. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction's laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.

ARTICLE II<br>THE LOANS

1.01.<u>The Loans</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Subject to the terms and conditions set forth herein, each Lender severally but not jointly agrees to make its portion of the Loans to the Borrower in a single advance in Dollars on the Closing Date in an amount equal to such Lender's Commitment. The Commitment of each Lender to fund the Loans shall expire upon the funding by the Lenders of the Loans on the Closing Date. The Loans will be funded on the Closing Date with original issue discount in the amount of [\*\*\*] (for an issue price in an amount equal to

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[\*\*\*] of the par principal amount thereof) (it being agreed that the Borrower shall be obligated to repay 100% of the principal amount of the Loans and interest shall accrue on 100% of the principal amount of the Loans, in each case as provided herein).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Once repaid, whether such repayment is voluntary or required, the Loans may not be reborrowed.

1.02.<u>Borrowing of the Loans</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The Borrowing of the Loans shall be made upon the Borrower's irrevocable Borrowing Request to the Administrative Agent and the Lenders in substantially the form of <u>Exhibit B</u>. Such Borrowing Request must be received by the Administrative Agent not later than 12:00 p.m. at least three (3) Business Days (or such later time as the Required Lenders and the Administrative Agent agree in their sole discretion) prior to the Closing Date. The Borrowing Request shall specify (i) the requested date of the borrowing (which shall be a Business Day), (ii) the principal amount of Loans to be borrowed (which shall be the entire amount of the Commitments), (iii) whether such Loans shall consist of ABR Loans and/or SOFR Loans, and (iv) wire instructions of the accounts to which funds are to be disbursed (or have a flow of funds or direction letter attached thereto directing the delivery of the funds).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Following receipt of a Borrowing Request, the Administrative Agent shall promptly notify each Lender of the amount of its Applicable Percentage or other applicable share provided for under this Agreement of the Loans. In the case of each borrowing of Loans, each applicable Lender shall make the amount of its Loan available to the Borrower in immediately available funds by wire transfer to the Borrower's Account not later than 12:00 p.m. on the Business Day specified in the applicable Borrowing Request.

1.03.<u>Prepayments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Voluntary Prepayments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Subject to the Prepayment Premium, the Borrower may, upon written notice to the Administrative Agent, voluntarily prepay any Loans in whole or in part without premium or penalty (except as expressly set forth in this <u>Section 2.03</u>); <u>provided</u> that (1) such written notice must be received by the Administrative Agent not later than 2:00 p.m. three (3) Business Days prior to any date of prepayment of Loans and (2) any prepayment of Loans shall be in a minimum principal amount of $1,000,000, or a whole multiple of $500,000 in excess thereof or, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender's Applicable Percentage or other applicable share provided for under this Agreement of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to <u>clause (ii)</u> below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Notwithstanding anything to the contrary contained in this Agreement, (x) in the event of each prepayment of any Loans pursuant to <u>Section 2.03(a)(i)</u>, <u>Section 2.03(b)(ii),</u> or <u>Section 2.03(b)(iii)</u>, such prepayment shall be accompanied by, and there shall become due and payable automatically upon such event, an early prepayment premium payable in cash on the principal amount so prepaid, repaid or redeemed, in an amount equal to the Prepayment Premium, calculated on the aggregate principal amount of the Loans so prepaid or repaid, together with all accrued and unpaid interest on the amount being prepaid or repaid and (y) each repayment of, or redemption or distribution in respect of, the principal amount of the Loans after acceleration thereof pursuant to <u>Section 8.02</u> (including automatically as a result of any bankruptcy or insolvency proceeding), shall be accompanied by, and there shall become due and payable automatically upon acceleration, a payment premium payable in cash on the principal amount so repaid, redeemed or distributed or on the principal amount that has become or is declared accelerated pursuant to <u>Section 8.02</u> (including automatically as a result of any bankruptcy or insolvency proceeding), in an amount equal to the

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Prepayment Premium, calculated on the aggregate principal amount of the Loans so repaid, redeemed, distributed or accelerated, together with all accrued and unpaid interest on such Loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Mandatory Prepayments of Loans</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Dispositions and Involuntary Dispositions</u>. Upon the receipt by any Loan Party or any Restricted Subsidiary of the Net Cash Proceeds of any Disposition or Involuntary Disposition consummated on or after the Closing Date pursuant to <u>clauses (k)</u> and <u>(r)</u> of the definition of "Permitted Dispositions"), the Borrower shall, on or prior to the date which is five (5) Business Days after the date of the realization or receipt by the Borrower or any other Restricted Subsidiary of such Net Cash Proceeds, prepay the Loans as hereafter provided in an aggregate amount equal to 100% of the Net Cash Proceeds of such Disposition or Involuntary Disposition.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>Qualified Public Offering</u>. Subject to the Prepayment Premium, in the event that a Qualified Public Offering shall occur, the Borrower shall prepay (or cause to be prepaid) all of the outstanding Loans and other Obligations on the date of such Qualified Public Offering; <u>provided</u> that the Borrower shall give notice of such Qualified Public Offering to the Administrative Agent at least five (5) Business Days prior to the occurrence of such Qualified Public Offering, which notice shall (i) refer specifically to this Section 2.03(b)(iii), (ii) state the date on which such Qualified Public Offering is expected to occur and (iii) set forth a calculation of the amount of the prepayment (including all accrued and unpaid interest, fees and other amounts constituting Obligations) required to be made hereunder, together with a "per diem" if such transaction closes after the anticipated date of such closing. Notwithstanding the foregoing, any such notice under this Section 2.03(b)(ii) may state that the prepayment is conditioned upon the effectiveness of the Qualified Public Offering, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)<u>Debt Issuances</u>. Subject to the Prepayment Premium, upon the receipt after the Closing Date by the Borrower or any other Loan Party of the Net Cash Proceeds of any Debt Issuance not permitted under <u>Section 7.05</u> the Borrower shall promptly (and in any event, on or prior to the date which is three (3) Business Days after the date of the realization or receipt by the Borrower or any Subsidiary of such Net Cash Proceeds), prepay the Loans as hereafter provided in an aggregate amount equal to 100% of such Net Cash Proceeds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)<u>[Reserved]</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)<u>Notice of Prepayment</u>. The Borrower shall notify the Administrative Agent and each Lender in writing of any mandatory prepayment of Loans required to be made by the Borrower pursuant to <u>clauses (i)</u> and <u>(iii)</u> of this <u>Section 2.03(b)</u> not later than 12:00 p.m. at least two (2) Business Days prior to the date of such prepayment. Each such written notice shall specify the date of such prepayment, the sub-clause of this Section 2.03(b) such prepayment is being made under and provide a reasonably detailed calculation of the aggregate amount of such prepayment to be made by the Borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)<u>Application of Mandatory Prepayments</u>. All amounts required to be paid pursuant to this <u>Section 2.03(b)</u> shall be applied to payment of that portion of the Obligations constituting unpaid principal payments ratably among the Lenders in portion to the respective amounts payable to them. Notwithstanding anything to the contrary in any Loan Document, all prepayments under <u>Section 2.03(b)</u> shall be accompanied by (i) interest on the principal amount prepaid through the date of prepayment and (ii) the Prepayment Premium payable in connection with such prepayment of the Loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)<u>Rejection Right</u>. Upon notification of any prepayment pursuant to clause (v) of this <u>Section 2.03(b)</u>, the Administrative Agent will promptly notify each Lender holding Loans of the contents of such prepayment notice and of such Lender's Applicable Percentage of such prepayment. Each Lender may reject all (but not less than all) of its pro rata share of any mandatory prepayment of Loans required to be made pursuant to <u>Section 2.03(b)</u> by providing written notice (each, a "<u>Rejection Notice</u>") to the Administrative Agent no later than 3:00 p.m. (New York City

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time) one Business Day prior to the requested prepayment date for such prepayment. If a Lender fails to deliver a Rejection Notice to the Administrative Agent within the time frame specified above, any such failure will be deemed an acceptance of the total amount of such mandatory prepayment of Loans.

1.04.<u>Repayment of Loans</u>.

The Borrower shall repay to the Lenders on the Maturity Date the aggregate principal amount of all Loans outstanding on such date together with all accrued and unpaid interest thereon and any outstanding fees, if any, in each case, payable in accordance with the Loan Documents.

1.05.<u>Interest</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Subject to the provisions of <u>Section 2.05(b)</u> and <u>(c)</u> and <u>Section 2.14</u>, (i) the SOFR Loans shall bear interest on the outstanding principal amount thereof at a rate *per annum* equal to the *<u>sum</u>* of (x) Daily Simple SOFR *<u>plus</u>* (y) the Applicable Cash Rate *<u>plus</u>* (z) the Applicable PIK Rate and (ii) the ABR Loans shall bear interest on the outstanding principal amount thereof at a rate *per annum* equal to the *<u>sum</u>* of (x) the Alternate Base Rate *<u>plus</u>* (y) the Applicable Cash Rate *<u>plus</u>* (z) the Applicable PIK Rate. If the Borrower, by written notice to the Administrative Agent no later than 12:00 p.m. three (3) Business Days prior to any Interest Payment Date, elects to pay all or a portion of any interest accrued under the Applicable PIK Rate in cash, (A) such interest (or the portion thereof) will be paid in cash and (B) the remainder of such interest (if any) will be paid in kind (and be added to the outstanding principal amount of the Loans), and the Applicable Cash Rate and the Applicable PIK Rate for such Interest Payment Date shall reflect the actual amount of interest paid in cash (with respect to the Applicable Cash Rate) and capitalized and added to outstanding principal (with respect to the Applicable PIK Rate), respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) &nbsp;&nbsp;&nbsp;&nbsp;If all or a portion of the principal amount of any Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise) or there shall occur and be continuing any other Event of Default, the Borrower shall pay interest in cash (including, for the avoidance of doubt, the Applicable PIK Rate portion of such payment) upon demand of the Required Lenders on the outstanding Obligations hereunder at the Default Rate (which, for the avoidance of doubt, will be instead of the interest rate otherwise applicable pursuant to <u>Section 2.05(a)</u>) to the fullest extent permitted by applicable Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable in cash (including, for the avoidance of doubt, the Applicable PIK Rate portion of such payment) upon demand of the Required Lenders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Accrued and unpaid interest on each Loan shall be due and payable (including by being capitalized and added to outstanding principal) in arrears on each Interest Payment Date; <u>provided</u> that (i) accrued and unpaid interest shall be payable upon demand in accordance with <u>clause (b)</u> of this <u>Section 2.05</u>, (ii) in the event of any repayment or prepayment (whether voluntary or mandatory) of any Loan, accrued and unpaid interest on the principal amount repaid or prepaid shall be payable in cash (including, for the avoidance of doubt, the Applicable PIK Rate portion of such payment) on the date of such repayment or pre-payment, (iii) the portion of any accrued and unpaid interest that is not the Applicable PIK Rate shall be payable in cash, and (iv) except as otherwise provided herein, the portion of any accrued and unpaid interest that is the Applicable PIK Rate shall accrue and be capitalized and added to the outstanding principal balance of the Loans on each Interest Payment Date and, from and after each applicable Interest Payment Date, the outstanding principal amount of the Loans shall without further action by any party hereto be deemed to be increased by the aggregate amount of interest so capitalized and added to the Loans, whereupon such amount of interest so capitalized and added shall also accrue interest in accordance with the terms of this <u>Section 2.05</u>. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)In connection with the use or administration of Daily Simple SOFR, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document. The Administrative Agent will promptly notify the Borrower and the Lenders of the effectiveness of any Conforming Changes in connection with the use or administration of Daily Simple SOFR.

1.06.<u>Computation of Interest and Fees</u>.

All computations of interest and fees for the Loans shall be made on the basis of a 365-day year (or 366 days in a leap year) and actual days elapsed. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid; <u>provided</u> that any Loan that is repaid on the same day on which it is made shall, subject to <u>Section 2.08(a)</u>, bear interest for one day. Each determination by the Administrative Agent or the Required Lenders of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

1.07.<u>Evidence of Debt</u>.

The Loans made by each Lender shall be evidenced by one or more accounts or records (including the Register maintained pursuant to <u>Section 10.06(c)</u>) maintained by such Lender and by the Administrative Agent in the ordinary course of business. Such accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in the accounts or records shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount actually owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the Register, the Register shall control in the absence of manifest error. For the avoidance of doubt, this Agreement is being executed as a "noteless" credit agreement. However, at the request of any Lender at any time, the Borrower agrees that it will prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender and its registered assigns and in a form reasonably acceptable to the Borrower and the Required Lenders (a "<u>Note</u>"). Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment permitted hereunder) be represented by one or more Notes in such form payable to the order of the payee named therein and its registered assigns.

1.08.<u>Payments Generally; Administrative Agent's Clawback</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>General</u>. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, by wire transfer to the Administrative Agent's Account in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender's Lending Office. All payments received by the Administrative Agent after 2:00 p.m. may, at the sole discretion of the Administrative Agent, be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Payments by Borrower; Presumptions by Administrative Agent</u>. Unless the Administrative Agent shall have received written notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may (but shall have no obligation to), in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so

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distributed to such Lender, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this <u>Section 2.08(b)</u> shall be conclusive, absent manifest error.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Failure to Satisfy Conditions Precedent</u>. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this <u>Article II,</u> and such funds are not made available to the Borrower by the Administrative Agent because the conditions set forth in <u>Article IV</u> are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Obligations of Lenders Several</u>. The obligations of the Lenders hereunder to make Loans and to make payments pursuant to <u>Section 10.04(c)</u> are several and not joint. The failure of any Lender to make any Loan, to fund any such participation or to make any payment under <u>Section 10.04(c)</u> on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to purchase its participation or to make its payment under <u>Section 10.04(c)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Funding Source</u>. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Insufficient Funds</u>. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied as provided in <u>Section 8.03</u>.

1.09.<u>Sharing of Payments by Lenders</u>.

If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Loans made by it, resulting in such Lender's receiving payment of a proportion of the aggregate amount of such Loans and accrued interest thereon greater than its <u>pro rata</u> share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact and (b) purchase (for cash at face value) participations in the Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them; <u>provided</u> that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)the provisions of this <u>Section 2.09</u> shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this <u>Section 2.09</u> shall apply).

Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.

1.10.<u>Fees</u>.

The Borrower agrees to pay to the Agents the fees in the amounts and on the dates from time to time as set forth in the Agent Fee Letter.

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1.11.<u>Defaulting Lenders</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Notwithstanding anything to the contrary contained herein, in the event any Lender is a Defaulting Lender, all rights and obligations hereunder of such Defaulting Lender and of the other parties hereto shall be modified to the extent of the express provisions of this <u>Section 2.11</u> so long as such Lender is a Defaulting Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Amounts received in respect of principal of Loans shall be applied to reduce such Loans of each Lender (other than any Defaulting Lender) in accordance with the Applicable Percentages of such Lender; <u>provided</u>, that the Administrative Agent shall not be obligated to transfer to a Defaulting Lender any payments received by the Administrative Agent for the Defaulting Lender's benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal, interest or fees). Amounts payable to a Defaulting Lender shall instead be paid to or retained by the Administrative Agent. The Administrative Agent may hold the amount of such payments received or retained by it for the account of such Defaulting Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)A Defaulting Lender shall not be entitled to give instructions to the Administrative Agent or to approve, disapprove, consent to or vote on any matters relating to this Agreement and the other Loan Documents, and all amendments, waivers and other modifications of this Agreement and the other Loan Documents may be made without regard to a Defaulting Lender and, for purposes of the definition of "Required Lenders," a Defaulting Lender shall not be deemed to be a Lender or to have any outstanding Loans; <u>provided</u>, that this <u>clause (c)</u> shall not apply to the vote of a Defaulting Lender in the case of an amendment, waiver or other modification described in <u>clause (i)</u> or <u>clause (ii)</u> of <u>Section 10.01(a)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Other than as expressly set forth in this <u>Section 2.11</u>, the rights and obligations of a Defaulting Lender (including the obligation to indemnify the Administrative Agent) and the other parties hereto shall remain unchanged. Nothing in this <u>Section 2.11</u> shall be deemed to (i) release a Defaulting Lender from its obligations under this Agreement and the other Loan Documents, (ii) alter the obligations of a Defaulting Lender under this Agreement and the other Loan Documents, (iii) operate as a waiver of any default by a Defaulting Lender hereunder, or (iv) prejudice any rights which the Borrower, the Administrative Agent or any Lender may have against a Defaulting Lender as a result of any default by such Defaulting Lender hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)If the Administrative Agent (acting at the direction of the Required Lenders) determines that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the Administrative Agent will so notify the parties hereto.

1.12.<u>[Reserved]</u>.

1.13.<u>Conversions</u>.

Subject to the other requirements of this paragraph, the Borrower shall have the option on any Business Day to convert all or a portion equal to at least $500,000 (or, if such Borrowing is less, the entire remaining applicable amount at such time) of the outstanding principal amount of Loans of one Type into a Borrowing or Borrowings of another Type; <u>provided</u> that (i) no partial conversion of SOFR Loans shall reduce the outstanding principal amount of SOFR Loans made pursuant to a single Borrowing to less than $1,000,000 and (ii) ABR Loans may not be converted into SOFR Loans if an Event of Default is in existence on the date of the conversion and the Required Lenders have determined in their sole discretion by written notice to the Borrower not to permit such conversion. Each such conversion shall be effected by the Borrower by giving the Administrative Agent prior to 2:00 p.m. at least three (3) Business Days' prior written notice, in the case of a conversion to SOFR Loans (substantially in the form of <u>Exhibit E</u>) specifying the Loans to be so converted and the Type of Loans to be converted. The Administrative Agent shall give each applicable Lender notice as promptly as practicable of any such proposed conversion affecting any of its Loans. If any Event of Default is in existence at the time any SOFR Borrowing is outstanding, the Required Lenders may, in their sole discretion by written notice to the Borrower, require all SOFR Loans to be automatically converted to ABR Loans upon delivery of such notice.

1.14.<u>Benchmark Replacement Setting</u>.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Benchmark Replacement</u>. Notwithstanding anything to the contrary herein or in any other Loan Document, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to any setting of the then-current Benchmark, then (<u>x</u>) if a Benchmark Replacement is determined in accordance with clause (a) of the definition of "Benchmark Replacement" for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any other Loan Document in respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document and (<u>y</u>) if a Benchmark Replacement is determined in accordance with clause (<u>2</u>) of the definition of "Benchmark Replacement" for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any other Loan Document in respect of any Benchmark setting at or after 5:00 p.m. (New York City time) on the fifth (5<sup>th</sup>) Business Day after the Administrative Agent has posted such proposed amendment to all affected Lenders and the Borrower without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Required Lenders; <u>provided</u> that if the Administrative Agent and Borrower each determine in good faith that the Benchmark Replacement is the prevailing market standard for USD-denominated syndicated of loans of a similar type, no Required Lender consent shall be required.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Benchmark Replacement Conforming Changes</u>. In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Notices; Standards for Decisions and Determinations</u>. The Administrative Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Benchmark Replacement Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement. The Administrative Agent will promptly notify the Borrower of the removal or reinstatement of any tenor of a Benchmark pursuant to <u>Section 2.14(d)</u>. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Lenders) pursuant to this <u>Section 2.14</u>, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this <u>Section 2.14.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Unavailability of Tenor of Benchmark</u>. Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (B) the administrator of such Benchmark or the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks, then the Administrative Agent (acting at the direction of the Required Lenders) may modify the definition of "Interest Period" (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable, non-representative, non-compliant or non-aligned tenor and (ii) if a tenor that was removed pursuant to <u>clause (i)</u> above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is not or will not be representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks for a Benchmark (including a Benchmark Replacement), then the Administrative Agent (acting at the direction of the Required Lenders) may modify the definition of "Interest Period" (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Benchmark Unavailability Period</u>. Upon the Borrower's receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower may revoke any pending request for a SOFR Borrowing, or any request for conversion to SOFR Loans, to be made or converted during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any request for a borrowing of, conversion to a SOFR Loan into a request for a borrowing of or conversion to ABR. Furthermore, if any SOFR Loan is outstanding on the date of the Borrower's receipt of notice of the commencement of a Benchmark Unavailability Period with respect to Daily Simple SOFR, then until such time as a Benchmark Replacement is implemented pursuant to this <u>Section 2.14</u>, any SOFR Loan shall on the next Business Day convert to, and shall constitute, an ABR Loan.

Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, from time to time if the Borrower and the Administrative Agent reasonably determine in good faith that a comparable successor rate to Daily Simple SOFR (or a successor to such successor rate) becomes available for USD-denominated syndicated similar types of loans, then the Borrower and the Administrative Agent (acting at the direction of the Required Lenders) may amend this Agreement and the other Loan Documents without the consent of any Lender to replace Daily Simple SOFR or any successor rate with the applicable successor rate to it pursuant to generally accepted then prevailing market convention as determined by the Borrower in good faith and to make such other conforming changes to this Agreement and the other Loan Documents in connection therewith, including any necessary spread adjustment that is generally accepted as the then prevailing market convention determined by the Borrower in good faith. In addition, from time to time, if the Borrower and the Required Lenders determine that the circumstances described above arise, then, the Borrower and the Required Lenders may enter into an amendment to this Agreement to implement the changes described above and to make such other conforming changes to this Agreement and the other Loan Documents in connection therewith, in each case, so long as such rate is reasonably practicable for the Administrative Agent to administer.

ARTICLE III<br>TAXES, YIELD PROTECTION AND ILLEGALITY

1.01.<u>Taxes</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Payments Free of Taxes</u>. Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable Law. If any applicable Law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this <u>Section 3.01</u>) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Payment of Other Taxes by the Loan Parties</u>. The Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable Law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Tax Indemnification</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)The Loan Parties shall jointly and severally indemnify each Recipient, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this <u>Section 3.01</u>) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Each Lender shall, and does hereby, severally indemnify the Administrative Agent, and shall make payment in respect thereof within ten (10) days after demand therefor, against (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (ii) any Taxes attributable to such Lender's failure to comply with the provisions of <u>Section 10.06(d)</u> relating to the maintenance of a Participation Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender, as the case may be, under this Agreement or any other Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this clause (ii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Evidence of Payments</u>. As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this <u>Section 3.01</u>, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Status of Lenders</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in <u>Sections 3.01(e)(ii)(A)</u>, <u>3.01(e)(ii)(B)</u> and <u>3.01(e)(ii)(D)</u>) shall not be required if in the Lender's reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Borrower,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or about the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or about the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the "interest" article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the "business profits" or "other income" article of such tax treaty;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)executed copies of IRS Form W-8ECI;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of <u>Exhibit D-1</u> to the effect that such Foreign Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, a "10 percent shareholder" of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a "controlled foreign corporation" related to the Borrower as described in Section 881(c)(3)(C) of the Code (a "<u>U.S. Tax Compliance Certificate</u>") and (y) executed copies of IRS Form W-8BEN or W-8BEN-E; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)(4) to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of <u>Exhibit D-2</u> or <u>Exhibit D-3</u>, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; <u>provided</u> that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of <u>Exhibit D-4</u> on behalf of each such direct and indirect partner;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or about the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable Law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative

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Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender's obligations under FATCA or to determine the amount, if any, to deduct and withhold from such payment. Solely for purposes of this clause (D), "FATCA" shall include any amendments made to FATCA after the date of this Agreement.

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Treatment of Certain Refunds</u>. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this <u>Section 3.01</u> (including by the payment of additional amounts pursuant to this <u>Section 3.01</u>), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this <u>Section 3.01</u> with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this <u>Section 3.01(f)</u> (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this <u>Section 3.01(f)</u>, in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this <u>Section 3.01(f)</u> the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This <u>Section 3.01(f)</u> shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)<u>Survival</u>. Each party's obligations under this <u>Section 3.01</u> shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)<u>Tax Status of Borrower</u>. The Borrower is currently treated as a corporation for U.S. federal income tax purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Tax Reporting Assistance.</u> The Borrower shall use commercially reasonable efforts to assist any Lender with information reasonably necessary in the computation of accruals with respect to any "original issue discount" with respect to the Loan for U.S. federal income tax purposes.

1.02.<u>Increased Costs</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)If any Change in Law shall subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto then, and in any such event, such Lender shall promptly give written notice to the Borrower and to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Lenders). Thereafter the Borrower agrees to pay to such Lender, upon such Lender's written request therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender shall determine after consultation with the Borrower) as shall be required to compensate such Lender for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing in reasonable detail the basis for the calculation thereof, submitted to the Borrower by such Lender (with a copy to the Administrative Agent) shall, absent manifest error, be final and conclusive and binding on all the parties hereto).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)If any Lender determines that after the date of this Agreement the introduction of or any change in any applicable Law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law) concerning capital adequacy, or any change in interpretation or administration thereof by the NAIC or any Governmental Authority, central bank or comparable agency, will have the effect of increasing the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender based on the existence of such Lender's Commitments hereunder or its obligations hereunder, then the Borrower agrees to pay to such Lender, upon its written demand therefor, such additional amounts as shall be required to compensate such Lender or such other corporation for the increased cost to such Lender or such other corporation or the reduction in the rate of return to such Lender or such other corporation as a result of such increase of capital. In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable; <u>provided</u> that such Lender's determination of compensation owing under this <u>Section 3.02(b)</u> shall, absent manifest error, be final and conclusive and binding on all the parties hereto. Each Lender, upon determining that any additional amounts will be payable pursuant to this <u>Section 3.02(b)</u>, will give prompt written notice thereof to the Borrower (with a copy to the Administrative Agent), which notice shall show in reasonable detail the basis for calculation of such additional amounts, although the failure to give any such notice shall not release or diminish the Borrower's obligations to pay additional amounts pursuant to this <u>Section 3.02(b)</u> upon the subsequent receipt of such notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Notwithstanding anything in this Agreement to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder, issued in connection therewith or in implementation thereof and (y) all requests rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall be deemed to be a change after the date of this Agreement in a requirement of law or government rule, regulation or order, regardless of the date enacted, adopted, issued or implemented (including for purposes of this <u>Section 3.02)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)With respect to any Lender's claim for compensation under this <u>Section 3.02</u>, the Borrower shall not be required to compensate such Lender for any amount incurred more than 180 days prior to the date that such Lender notifies the Borrower of the event that gives rise to such claim; provided that, if the circumstance giving rise to such claim is retroactive, then such 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

1.03.<u>Survival</u>.

All of the Borrower's obligations under this <u>Article III</u> shall survive repayment of all other Obligations hereunder, subject to the limitations contained in this <u>Article III</u>.

ARTICLE IV<br>CONDITIONS PRECEDENT

1.01.<u>Conditions to Funding of Loans on the Closing Date</u>.

The obligations of each Lender to make the Loans on the Closing Date shall be subject to the satisfaction (or waiver in accordance with <u>Section 10.01)</u> of the following conditions precedent:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Credit Agreement</u>. Receipt by the Agents and the Lenders of executed counterparts of this Agreement, properly executed by a Responsible Officer of the Borrower and by the Administrative Agent, Collateral Agent and each Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Borrowing Request</u>. The Administrative Agent and the Lenders shall have received a Borrowing Request in accordance with the requirements hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Other Loan Documents</u>. Receipt by the Agents and the Lenders of executed counterparts of the other Loan Documents, each properly executed by a Responsible Officer of the signing Loan Party.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Organization Documents, Resolutions</u>. Receipt by the Agents and the Lenders of the following, in form and substance reasonably satisfactory to the Required Lenders and their legal counsel:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)copies of the Organization Documents of each Loan Party certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation or organization and certified by an officer of such Loan Party to be true and correct as of the Closing Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)such copies of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Lenders may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)such documents and certifications as the Lenders may reasonably require to evidence that each Loan Party (A) is duly organized or formed, and (B) is validly existing, in good standing and qualified to engage in business in its state of organization or formation and each other jurisdiction where its ownership, lease or operation of properties or the conduct of its business otherwise requires such qualification or license, except, in each such case referred to in this clause (B), to the extent failure to be so qualified in any such jurisdiction could not reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Financial Statements</u>. The Lenders shall have received the Initial Financial Statements in form and substance satisfactory to the Required Lenders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Evidence of Insurance</u>. Receipt by the Agents and the Lenders of certificates of insurance of the Loan Parties evidencing liability and casualty insurance naming the Collateral Agent as additional insured (in the case of liability insurance) and loss payee (in the case of casualty insurance) on behalf of the Secured Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)<u>Perfection and Priority of Liens</u>. Receipt by the Agents and the Lenders of the following, in each case in form and substance reasonably satisfactory to the Required Lenders:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)searches of Uniform Commercial Code filings in the jurisdiction of formation of each Loan Party or where a filing would need to be made in order to perfect the Collateral Agent's security interest in the Collateral, on behalf of the Secured Parties, copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)UCC financing statements, to perfect the Collateral Agent's security interest in the Collateral, on behalf of the Secured Parties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)[reserved]; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)a completed perfection certificate, signed by a Responsible Officer of each Loan Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)<u>Additional Lien Searches</u>. Receipt by the Lenders of Tax and judgment lien searches, each of a recent date, listing all effective lien notices or comparable documents that name any Loan Party as debtor and that are filed in the state, county or other jurisdictions reasonably requested by the Collateral Agent or the Required Lenders in each case in form and substance reasonably satisfactory to the Required Lenders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Opinions of Counsel</u>. Receipt by the Agents and the Lenders of favorable opinions of Orrick, Herrington & Sutcliffe LLP in form and substance reasonably satisfactory to the Required Lenders and their legal counsel and covering such matters incident to the transactions contemplated by this Agreement and the other Loan Documents as the Administrative Agent and the Required Lenders may reasonably require, addressed to the Administrative Agent, the Collateral Agent and each Lender.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)<u>Solvency Certificate</u>. Receipt by the Agents and the Lenders of a certificate, in form and substance reasonably satisfactory to the Required Lenders and their legal counsel, signed by the Chief Financial Officer of the Borrower, certifying in his or her capacity as Chief Financial Officer and not in his or her individual capacity, that after giving effect to the Borrowing of the Loans on the Closing Date and the other transactions contemplated by this Agreement and the other Loan Documents, the Borrower and its respective Subsidiaries on a consolidated basis will be Solvent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)<u>Fees</u>. Receipt by the Administrative Agent, the Collateral Agent and the Lenders of any fees and expenses required by the Loan Documents to be paid on or before the Closing Date, including as set forth in the Agent Fee Letter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)<u>Attorney Costs</u>. The Borrower shall have paid all reasonable fees, charges and disbursements of Akin Gump Strauss Hauer & Feld LLP, as counsel to the Lenders and Ballard Spahr LLP, as counsel to the Agents, subject to the limitations set forth in <u>Section 10.04(a)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)<u>Sources and Uses</u>. The Administrative Agent and the Lenders shall have received a sources and uses of the Loans reasonably satisfactory to the Required Lenders, which shall include, among other things, itemized fees and expenses incurred with respect to the Loan Documents, inclusive of those payable by the Loan Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)<u>KYC/Patriot Act</u>. The Lenders and the Agents shall have received, not less than three (3) Business Days prior to the Closing Date, all documentation, to include a duly executed IRS Form W-9 or such other applicable IRS Form, and other information that may be reasonably requested by such Lenders and the Agents, and is requested at least seven (7) Business Days prior to the Closing Date, in connection with Sanctions or Anti-Money Laundering Laws including, applicable "know your customer" requirements, the Patriot Act and Beneficial Ownership Regulation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)<u>Material Adverse Effect</u>. There shall not have occurred since December 31, 2021, any Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)<u>Responsible Officer Certificate</u>. Receipt by the Administrative Agent and the Lenders of a certificate of a Responsible Officer of the Borrower, in form and substance reasonably satisfactory to the Required Lenders, certifying compliance with the conditions precedent set forth in <u>Sections 4.01(o)</u>, <u>(s)</u>, <u>(t)</u> and <u>(u)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)<u>No Litigation</u>. There shall be no (i) material litigation pending, or to any Loan Party's knowledge threatened in writing, against or affecting the Borrower or any Subsidiary, or (ii) injunction or other form of restraining order, which in either case restrains or restricts or seeks to restrain or restrict the closing of this Agreement or the making of the Loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)<u>Consents</u>. The Administrative Agent and the Required Lenders shall have received copies of any and all consents necessary, if any, to permit the effectuation by the Loan Parties of the transactions contemplated by this Agreement and the other Loan Documents; and the Administrative Agent and the Required Lenders shall have received such consents and waivers of such third parties, if any, as might assert claims with respect to the Collateral, as the Required Lenders and their counsel shall deem necessary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)<u>Net Liquidity</u>. After giving effect to the Borrowing of the Loans on the Closing Date and the other transactions contemplated by this Agreement and the other Loan Documents, Net Liquidity shall not be less than [\*\*\*].

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)<u>Accuracy of Representations and Warranties</u>. The representations and warranties of the Borrower and each other Loan Party contained in <u>Article V</u> or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) on and as of the Closing Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of such earlier date.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)<u>No Default</u>. No Default or Event of Default shall exist, or would result from the making of such Loans or from the application of the proceeds thereof.

For purposes of determining compliance with the conditions specified in <u>Section 4.01</u> on the Closing Date, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received written notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

ARTICLE V<br>REPRESENTATIONS AND WARRANTIES

Each of the Loan Parties represents and warrants to the Administrative Agent and the Lenders, on the Closing Date and at such other times (if any) that the representations and warranties in this <u>ARTICLE V</u> are expressly made, that the following are true and correct:

1.01.<u>Existence, Qualification and Power</u>.

The Borrower and each Restricted Subsidiary: (a) is duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization and (b) has all requisite organizational power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own, pledge, mortgage and operate its assets, to lease or sublease its assets and to carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and in good standing under the Laws of each material jurisdiction, where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, except with respect to <u>clauses (b)(i)</u> and <u>(c)</u>, to the extent the failure thereof could not reasonably be expected to result in a Material Adverse Effect. There is no existing default or event of default under the Borrower's or any Restricted Subsidiary's Organization Documents.

1.02.<u>Authorization; No Contravention</u>.

The execution, delivery and performance by each Loan Party of each Loan Document to which such Loan Party is party have been duly authorized by all necessary company or other organizational action and do not (a) contravene the terms of any of such Loan Party's Organization Documents; (b) result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Material Contract to which the Borrower or any Restricted Subsidiary is a party or affecting the Borrower or any Restricted Subsidiary or the properties of the Borrower or any Restricted Subsidiary or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which the Borrower or any Restricted Subsidiary or its property is subject; (c) or violate any Law (including Regulation U or Regulation X issued by the FRB), except, in each case referred to in <u>clauses (b)</u> or <u>(c),</u> to the extent that such violation could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

1.03.<u>Governmental Authorization; Other Consents</u>.

1.04.<u>Binding Effect</u>.

Each Loan Document has been duly executed and delivered by each Loan Party that is party thereto. Each Loan Document constitutes a legal, valid and binding obligation of each Loan Party that is party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may

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be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

1.05.<u>Financial Statements; No Material Adverse Effect</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The Initial Financial Statements (i) were prepared in conformity with GAAP in all material respects for the periods covered thereby; and (ii) fairly present, in all material respects, the financial position of the Borrower and its Subsidiaries on a consolidated basis as of the dates thereof and their results of operations for the periods covered thereby, in each case, in conformity with GAAP, subject to normal year-end adjustments and the absence of all related notes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Since the date of the last day of the period covered in the Initial Financial Statements to and including the Closing Date, there has been no Disposition by the Borrower or any Restricted Subsidiary outside the ordinary course of business, or any Involuntary Disposition, of any material part of the business or property of the Borrower or any Subsidiary, and no material purchase or other acquisition by any of them of any business or property (including any Equity Interests of any other Person) outside the ordinary course of business, in each case, which is not reflected in the foregoing financial statements or in the notes thereto or otherwise disclosed in writing to the Lenders on or prior to the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)The financial statements delivered pursuant to <u>Sections 6.01(a)</u> and <u>(b)</u> have been prepared in conformity with GAAP throughout the periods covered thereby and, except as may otherwise be permitted under <u>Sections 6.01(a)</u> and <u>(b)</u>, fairly present, in all material respects (on the basis disclosed in the footnotes to such financial statements for the audited financials), the consolidated financial position of the Borrower and its Subsidiaries on a consolidated basis and the results of their operations and cash flows as of the dates thereof and for the periods covered thereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Since December 31, 2021, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

1.06.<u>Litigation</u>.

There are no actions, suits, proceedings, claims, disputes, charges or investigations pending or, to the knowledge of the Loan Parties, threatened, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any Restricted Subsidiary or against any of their properties or revenues that: (a) purport to affect or pertain to this Agreement, any other Loan Document, or any of the other transactions contemplated hereby or thereby, or (b) could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

1.07.<u>No Default</u>.

No Default or Event of Default has occurred and is continuing.

1.08.<u>Environmental Matters</u>

<u>.</u>

Except in each case to the extent the failure or existence thereof could not reasonably be expected to result in a Material Adverse Effect:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The Borrower and each Restricted Subsidiary is, and within the period of all applicable statutes of limitation has been, in compliance with all applicable Environmental Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)The Borrower and each Restricted Subsidiary has obtained, has complied with, and is in compliance with all Permits that are required pursuant to Environmental Laws for the occupation of its facilities and the operation of its business, and all such Permits are in full force and effect, free from breach and the transactions contemplated by this Agreement will not adversely affect them.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)There is no judicial, administrative, or arbitral action, claim, charge, complaint, demand, litigation, hearing, inquiry, investigation, or proceeding (including any notice of violation or alleged violation) under or relating to any Environmental Law with respect to the operation of its business or the Real Properties or to which the Borrower or any Restricted Subsidiary is or would reasonably be expected to be named as a party that is pending or, to any Loan Party's knowledge, threatened.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Neither the Borrower nor any Restricted Subsidiary has received any written or oral notice, report or other information regarding any actual or alleged violation of Environmental Law or any liability arising under Environmental Law, which has not been fully resolved.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Neither the Borrower nor any Restricted Subsidiary has entered into or agreed to any consent decree, order, or settlement or other agreement, or is subject to any judgment, ruling, verdict, writ, award, mandate, subpoena, injunction, decree, or order or other agreement, in any judicial, administrative, arbitral, or other forum for dispute resolution, relating to compliance with or liability under any Environmental Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)Neither the Borrower nor any Restricted Subsidiary has handled, stored, transported, disposed of, arranged for or permitted the disposal of, or Released any Hazardous Materials, or owned or operated any property or facility (and no such property or facility is contaminated by Hazardous Materials), in each case, in a manner that has given or would reasonably be expected to give rise to liabilities, including liabilities for response costs, corrective action costs, personal injury, property damage or natural resources damages, pursuant to any Environmental Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)[Reserved].

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)Neither the Borrower nor any Restricted Subsidiary has assumed or retained, by contract or operation of law, any liabilities of any kind, fixed or contingent, known or unknown, under any Environmental Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)No facts, events or conditions relating to the past or present facilities, properties or operations of the Borrower or any Restricted Subsidiary, nor any of their respective predecessors, will prevent, hinder or limit continued compliance with Environmental Laws or give rise to Environmental Liabilities.

1.09.<u>Taxes</u>.

The Borrower and its Restricted Subsidiaries have timely filed or caused to be timely filed (taking into account any available extensions), with the appropriate Governmental Authorities and in the appropriate jurisdictions, all material U.S. federal, state, local and non-U.S. Tax returns and reports required to be filed, and have timely paid, prior to the date on which any liability may be added thereto for non-payment thereof, all material U.S. federal, state, local and other Taxes levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being Properly Contested. All such returns and reports are true, correct, and complete in all material respects. No such material Tax return or report is under audit or examination by any Governmental Authority and no notice of such a Tax audit or examination or any assertion of any claim for Taxes has been given or made by any Governmental Authority in writing.

1.10.<u>ERISA Compliance</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Except as could not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect, (i) each Plan is in compliance with the applicable provisions of ERISA, the Code and other federal or state Laws and (ii) each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS (or the prototype plan sponsor has received such a letter from the IRS) or an application for such a letter is currently being processed by the IRS with respect thereto and, to the knowledge of the Loan Parties, after due inquiry, nothing has occurred which could prevent, or cause the loss of, such qualification.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Except as could not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect, (i) there are no pending or, to the knowledge of the Loan Parties, after due inquiry, threatened or contemplated claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan, (ii) there has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan, and (iii) except to the extent required under Section 4980B of the Internal Revenue Code or similar state Laws, no Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of the Borrower or any Restricted Subsidiary or any of their respective ERISA Affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Except as could not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect, (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any Restricted Subsidiary nor any of their respective ERISA Affiliates has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (iv) neither the Borrower nor any Restricted Subsidiary nor any of their respective ERISA Affiliates has engaged in a transaction subject to Section 4069 or 4212(c) of ERISA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Neither the Borrower nor any Restricted Subsidiary nor any of their respective ERISA Affiliates sponsors, maintains or contributes to, or has any unsatisfied obligation to contribute to, or any liability or obligation under, any active or terminated Pension Plan other than (i) on the Closing Date, those listed on <u>Schedule 5.10(d)</u> hereto and (ii) thereafter, Pension Plans not otherwise prohibited by this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)To the extent applicable, each Foreign Plan has been maintained in compliance with its terms and with the requirements of any and all applicable requirements of Law and has been maintained, where required, in good standing with applicable regulatory authorities, except to the extent that the failure so to comply could not reasonably be expected either individually or in the aggregate, to have a Material Adverse Effect. Neither the Borrower nor any Restricted Subsidiary has incurred any material obligation in connection with the termination of or withdrawal from any Foreign Plan. The present value of the accrued benefit liabilities (whether or not vested) under each Foreign Plan that is funded, determined as of the end of the most recently ended Fiscal Year of the Borrower or any Restricted Subsidiary, as applicable, on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the property of such Foreign Plan by a material amount, and for each Foreign Plan that is not funded, the obligations of such Foreign Plan are properly accrued.

1.11.<u>Equity Interests; Subsidiaries</u>.

All of the Equity Interests of each Loan Party and each Subsidiary, to the extent constituting Collateral, have been duly and validly authorized and issued and are fully paid and non-assessable. <u>Schedule 5.11</u> sets forth a true, correct, complete and accurate list as of the Closing Date of each Subsidiary of any Loan Party, together with (i) the jurisdiction of formation, (ii) the number of shares or units of each class of Equity Interests authorized and outstanding, (iii) if not wholly-owned by such Loan Party, the number and percentage of outstanding shares of each class owned by such Loan Party or any Subsidiary, (iv) whether such Subsidiary is a Guarantor, and (v) whether such Subsidiary is an Excluded Subsidiary. The Loan Parties are the record and beneficial owners of, and have good and marketable title to, the Equity Interests pledged by them under the Collateral Documents, free of any and all Liens (other than Permitted Liens), and there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any such pledged Equity Interests.

1.12.<u>Margin Regulations; Investment Company Act; Other Regulations</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Neither the Borrower nor any Restricted Subsidiary is engaged, or will engage, in the business of extending credit for the purpose of, and no proceeds of any Loan or other extensions of credit hereunder will be used for the purpose of, buying or carrying margin stock (within the meaning of

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Regulation U of the FRB) or extending credit to others for the purpose of purchasing or carrying any such margin stock, in each case in contravention of Regulation T, U or X or any other regulations of the FRB.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Neither the Borrower nor any Restricted Subsidiary is an "investment company" within the meaning of the Investment Company Act of 1940, as amended; (ii) a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of either a "holding company" or a "subsidiary company" within the meaning of the Public Utility Holding Company Act of 2005, as amended; or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

1.13.<u>Disclosure</u>.

The reports, financial statements, certificates or other information furnished in writing by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document including the representations and warranties made by any Loan Party in this Agreement or another Loan Document (in each case, as modified or supplemented by other information so furnished) do not contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, taken as a whole, in light of the circumstances when made, not materially misleading; <u>provided</u> that, with respect to projected financial information, the Loan Parties represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time and is no guarantee of future performance, it being acknowledged and agreed by the Administrative Agent and the Lenders that projections as to future events are not to be viewed as facts and that the actual results during the period or periods covered by such projections may materially differ from the projected results.

1.14.<u>Compliance with Laws</u>.

The Borrower and each Restricted Subsidiary is in compliance with the requirements of all Laws and all orders, writs, injunctions and decrees binding upon it and its properties, except in such instances (x) in which such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (y) the failure thereof could not reasonably be expected to have a Material Adverse Effect.

1.15.<u>Intellectual Property</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;Attached hereto as <u>Schedule 5.15(a)</u> is a true, correct and complete listing as of the Closing Date of all issued and registered Intellectual Property and pending applications therefor owned by the Loan Parties, individually or jointly with others (collectively, "<u>Registered IP</u>"). All Registered IP is subsisting, valid, in full force and, to the knowledge of the Loan Parties, enforceable. The Loan Parties exclusively own all Registered IP and have rights to use, all other Intellectual Property necessary for the conduct of the Businesses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;The Loan Parties have taken and continue to take commercially reasonable measures to protect their Intellectual Property, including Trade Secrets, and to the knowledge of the Loan Parties, there has not been any material unauthorized access or breach concerning any such Trade Secrets owned by the Loan Parties. Loan Parties have implemented procedures that are reasonably designed to detect misuse and illegal or unlawful use of personal information. Except as previously disclosed to the Lenders prior to the Closing Date, to the knowledge of the Loan Parties, there are no facts that indicate misuse or illegal or unlawful use in any material respect or any incident in which personal information or other data was or may have been stolen or improperly accessed in any material respect. The Loan Parties are in compliance in all material respects with applicable laws pertaining to personal information in their possession and/or control, including personal information of customers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;The conduct of the Businesses and the use of the Intellectual Property owned by the Loan Parties in connection with the conduct of the Businesses, have not and do not, to the knowledge of the Loan Parties, infringe, misappropriate, or violate the Intellectual Property of any Person in any material respect. No proceedings are pending before any Governmental Authority, and none of the Loan Parties has received any non-frivolous written claim or demand alleging, that the use by the Loan Parties of any Intellectual

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Property infringes, misappropriates or dilutes the Intellectual Property of any Person in any material respect. To the knowledge of the Loan Parties, there is currently no material infringement or unauthorized use by any third party of any Intellectual Property owned by the Loan Parties.

1.16.<u>Solvency</u>.

Immediately after giving effect to the Borrowing of the Loans on the Closing date and the other transactions contemplated by this Agreement and the other Loan Documents, the Borrower and its Subsidiaries on a consolidated basis are Solvent.

1.17.<u>Creation and Perfection of Security Interests in the Collateral</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The provisions of the Collateral Documents are effective to create in favor of the Collateral Agent, for the benefit of the Secured Parties, a legal, valid and enforceable, first priority security interest in all right, title and interest of the Loan Parties in each item of Collateral, except (i) in the case of any Permitted Liens, to the extent that any such Permitted Liens would have priority over the security interest in favor of the Collateral Agent pursuant to any applicable Law and (ii) Liens perfected only by possession to the extent Collateral Agent has not obtained or does not maintain possession of the Collateral.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)When financing statements with respect to each Loan Party in appropriate form are filed in the central filing office in the jurisdiction of such Grantor (as defined in the Guaranty and Collateral Agreement) specified in Schedule 6(j) to the Guaranty and Collateral Agreement, the Lien on the Collateral shall constitute a perfected Lien on, and security interest of the Collateral Agent, for the benefit of the Secured Parties, in all right, title, and interest of the Loan Parties in such Collateral and the proceeds thereof, to the extent contemplated by the Guaranty and Collateral Agreement as security for the Obligations and to the extent such security interest can be perfected by filing under the UCC, in each case prior and superior in right to any other Person, except in the case of any Permitted Liens, to the extent that any such Permitted Liens would have priority over the security interest in favor of the Collateral Agent pursuant to any applicable Law.

1.18.<u>Real Properties</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The Borrower and each Restricted Subsidiary has good, insurable, exclusive, legal and marketable fee simple title to the owned Real Property and the valid and enforceable power and unqualified right to use and sell, transfer, convey or assign such Real Property, and valid leasehold interests in the Material Real Property Leases, in each case free and clear of all Liens, except for Permitted Liens.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Each Material Real Property Lease is in full force and effect. Neither the Borrower nor any Restricted Subsidiary, nor, to the knowledge of the Loan Parties, any other Person, is in breach or violation of, or default under, any Material Real Property Lease, and no event has occurred and no circumstance exists which, if not remedied, would result in such a breach, violation or default (with or without notice or lapse of time, or both), in each case except to the extent such breach, violation or default could not reasonably be expected to result in a Material Adverse Effect. The Borrower and each Restricted Subsidiary will comply with, and will cause its Real Property and all improvements thereon to be operated, maintained and repaired in compliance with, the requirements of each applicable Real Property lease, except to the extent the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)The Material Owned Real Property (if any) is in compliance in all material respects with all applicable legal requirements and fire, health, building, use, occupancy, subdivision and zoning laws. There do not exist any actual or, to the knowledge of the Loan Parties, threatened condemnation or eminent domain proceedings that affect any Material Owned Real Property or any part thereof, and neither the Borrower nor any Subsidiary has received any notice of the intention of any Governmental Authority or other Person to take or use any Material Owned Real Property or any part thereof of interest therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Schedule 5.18</u> sets forth a complete and accurate list as of the Closing Date (i) of all Real Property owned in fee simple by the Loan Parties with a fair market value in excess of $2,500,000 (collectively, the "<u>Material Owned Real Property</u>"), or in which the Borrower or any Restricted Subsidiary owns or holds a leasehold or similar interest where assets with a fair market value in excess of $500,000 are

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located, whether by lease, sublease, license or any other similar contractual arrangement under which the Borrower or any Restricted Subsidiary occupies or uses any Real Property (together with each amendment, modification, restatement or supplement thereto collectively, the "<u>Material Real Property Leases</u>"), with the current location of each such Real Property by street address, including the county, state and other relevant jurisdictions, the landlord with respect thereto and, where applicable, each lessee, licensee, sublessee or other occupant thereof, (ii) any lease, sublease, license or sublicense of such Real Property by the Borrower or any Restricted Subsidiary as lessor, licensor or similar capacity, and (iii) each Contractual Obligation by the Borrower or any Restricted Subsidiary, whether contingent or otherwise, to sell or lease such Real Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)All Material Owned Real Property is insured pursuant to policies and other bonds which are valid and in full force and effect and which provide adequate coverage from reputable and financially sound insurers in amounts sufficient to insure the assets and risks of each such Loan Party in accordance with prudent business practice in the industry of the Borrower and its Restricted Subsidiaries.

1.19.<u>Labor Matters</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;The Borrower and each Restricted Subsidiary is in material compliance with all requirements of all Employment Laws and there are no actions, suits, proceedings, claims, disputes, charges, or investigations pending or, to the knowledge of the Loan Parties, threatened, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any Restricted Subsidiary relating to Employment Laws that could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;Except as set forth in <u>Schedule 5.19(b)</u>, (i) there are no collective bargaining agreements covering the employees of the Borrower or any Restricted Subsidiary; (ii) there are no strikes, walkouts, stoppages or slowdowns or other organized labor disputes against the Borrower or any Restricted Subsidiary pending or, to the Borrower's knowledge, threatened that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect; (iii) there are no unfair labor practice charges pending or threatened against the Borrower or any Restricted Subsidiary before any Governmental Authority and no material grievance or arbitration proceeding pending or threatened against the Borrower or any Restricted Subsidiary which arises out of or under any collective bargaining agreement that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect; and (iv) no labor organization or group of employees has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;The employees of the Borrower and each Restricted Subsidiary have been paid all wages and other compensation due as required under any Contractual Obligation, the Fair Labor Standards Act of 1938, as amended, or any other applicable Law dealing with such matters that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid. All payments due from the Borrower and each Restricted Subsidiary on account of any workers' compensation program, unemployment insurance program, or employee health and welfare insurance that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of the Borrower or its Restricted Subsidiaries. Neither the Borrower nor any Restricted Subsidiary has incurred any material liability or obligations under the Worker Adjustment and Retraining Notification Act or any similar Law, which remains unpaid or unsatisfied.

1.20.<u>[Reserved]</u>.

1.21.<u>[Reserved]</u>.

1.22.<u>[Reserved]</u>.

1.23.<u>Legal Name, Jurisdiction of Formation and Type of Entity</u>.

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<u>Schedule 5.23</u> sets forth, as of the Closing Date, the exact legal name, the jurisdiction of formation, the type of entity, the tax payer identification number and the organizational identification number of each Loan Party. Except as set forth on <u>Schedule 5.23</u>, no Loan Party has during the preceding five years (i) changed its legal name, (ii) changed its state of formation or (iii) been party to a merger, consolidation or other change in structure.

1.24.<u>Anti-Corruption Laws; Anti-Money-Laundering Laws; and Sanctions</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)None of the Borrower, any Subsidiary, or any of their respective directors, officers, employees, or, to the knowledge of the Borrower, any of their respective agents or representatives (i) is a Sanctioned Person or (ii) directly or indirectly holds an ownership interest in or controls a Sanctioned Person. Neither the Borrower nor any Subsidiary: (i) has assets located in, or otherwise directly or indirectly derives revenues from or engages in, investments, dealings, activities, or transactions in or with, any Sanctioned Country; or (ii) directly or knowingly, indirectly, derives revenues from or engages in investments, dealings, activities, or transactions with, any Sanctioned Person in violation of Sanctions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Each of the Borrower and each Subsidiary, their respective directors, officers, employees, and to the knowledge of the Borrower, and agents and representatives acting on behalf of the Borrower or any of its Subsidiaries, has been during the past five years in material compliance with, and currently is in compliance (other than any non-compliance the impact of which would be immaterial to the business of the Borrower and its Subsidiaries) with, Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)There has not been during the past five years, and there is no, pending or, to the knowledge of the Borrower, threatened action, suit, dispute, litigation, proceeding or suspension before any court or other Governmental Authority against the Borrower or any Subsidiary or any Affiliate thereof, or any investigation by the Borrower or any Subsidiary, or their respective legal representatives at the direction of the Borrower or any Subsidiary or, to the knowledge of the Borrower, a Governmental Authority, involving the foregoing, that relates to a potential or actual violation of Anti-Corruption Laws, Anti-Money Laundering Laws or Sanctions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)The Borrower has instituted and maintains policies and procedures designed to ensure compliance by the Borrower and each Subsidiary (and their respective directors, officers, employees, agents and representatives acting on behalf of the Borrower or each Subsidiary, as applicable) with Anti-Money Laundering Laws and Sanctions.

1.25.<u>[Reserved]</u>.

1.26.<u>Insurance</u>.

The Borrower and each Subsidiary maintains all insurance required by <u>Section 6.06</u>.

ARTICLE VI<br>AFFIRMATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification obligations for which no underlying claim has been asserted), after giving effect to the Borrowing of the Loans on the Closing Date and the other transactions contemplated by this Agreement and the other Loan Documents, the Loan Parties shall, and to the extent applicable shall cause each of the Restricted Subsidiaries to:

1.01.<u>Financial Statements</u>.

Deliver to the Administrative Agent, for delivery by the Administrative Agent to the Lenders:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)as soon as available, and in any event within ninety (90) days after the end of each Fiscal Year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income or operations, shareholders' equity and

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cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, audited and accompanied by a report and opinion of independent public accountants of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards (and shall not be subject to any "going concern" qualification, unless resulting from (i) an upcoming maturity date of any Indebtedness or (ii) an anticipated breach of any financial covenant in any future period or an actual breach of any financial covenant for which the applicable cure deadline has not passed) to the effect that such consolidated financial statements present fairly, in all material respects, the financial position of the Borrower and its Subsidiaries on a consolidated basis and the results of their operations and cash flows in conformity with GAAP;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)as soon as available, but in any event not later than sixty (60) days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such Fiscal Quarter and the portion of the Fiscal Year through the end of such Fiscal Quarter, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments and the absence of footnotes), and setting forth in comparative form the figures as of the end of and for the corresponding period in the previous year; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)as soon as available, but in any event not later than thirty (30) days after the end of each of the first two months of each Fiscal Quarter of the Borrower, the unaudited consolidated profit and loss statement and balance sheet of the Borrower and its Subsidiaries as of the end of such month, in each case substantially in the form customarily prepared by the Borrower and delivered to the Lenders prior to the Closing Date.

Notwithstanding the foregoing, the obligations in <u>clauses (a)</u> and <u>(b)</u> of this <u>Section 6.01</u>, and <u>clause (a)</u> of <u>Section 6.02</u>, may instead be satisfied with respect to any financial statements of the Borrower and its Subsidiaries by furnishing the Borrower's Form 10-K or 10-Q, as applicable, filed with the SEC or any securities exchange, in each case, within the time periods specified in such clauses and without any requirement to provide notice of such filing to the Administrative Agent or to any Lender; <u>provided</u> that, to the extent such statements are in lieu of statements required to be provided under <u>Section 6.01(a)</u>, such statements shall be audited and accompanied by a report and opinion of independent public accountants of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards (and shall not be subject to any "going concern" qualification, unless resulting from (i) an upcoming maturity date of any Indebtedness or (ii) an anticipated breach of any financial covenant in any future period or an actual breach of any financial covenant for which the applicable cure deadline has not passed) to the effect that such consolidated financial statements present fairly, in all material respects, the financial position of the Borrower and its Subsidiaries on a consolidated basis and the results of their operations and cash flows in conformity with GAAP.

1.02.<u>Certificates; Other Information</u>.

Deliver to the Administrative Agent, for delivery by the Administrative Agent to the Lenders:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)concurrently with the delivery of any financial statements pursuant to <u>Sections 6.01(a)</u> and <u>(b),</u> a Narrative Report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)within thirty (30) days after the end of each month, a Compliance Certificate in the form attached hereto as <u>Exhibit C</u> certifying (i) compliance by the Borrower and its Subsidiaries (on a consolidated basis) with the financial covenants in <u>Section 7.01</u> and attaching exhibits showing the calculation thereof, (ii) that to the best of its knowledge, the Borrower has during such period observed or performed all of its respective covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by the Borrower and the other Loan Parties, and that a Responsible Officer of the Borrower has obtained no knowledge of any Default or Event of Default, except as specified in such certificate, (iii) copies of any amendment, supplement or other modification with respect to the Organization Documents of any Loan Party, (iv) any assets of Excluded Subsidiaries included in clause (x) of the Asset Coverage Ratio that, notwithstanding an "event of default" having occurred under an Excluded Subsidiary Financing, are included in the Asset Coverage Ratio as a result of the applicable cure period not having expired, and (v)

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whether the Borrower or any Subsidiary thereof has instituted any informal or formal investigation, or their respective legal representatives involving the foregoing, with respect to any material potential or actual violation under Anti-Corruption Laws, Anti-Money Laundering Laws, or Sanctions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)[reserved];

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)upon the written request of any Lender, copies of all Tax returns filed by the Loan Parties in respect of Taxes measured by income or gross receipts (excluding sales, use and similar taxes);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)[reserved];

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)[reserved];

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)no later than ninety (90) days after the start of each Fiscal Year, the proposed Budget for such Fiscal Year, setting forth the Borrower's full year business plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)promptly, such additional financial and other information as any Lender may from time to time reasonably request, including such information as may be required for tax purposes; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)concurrently with the delivery of the financial statements pursuant to <u>Section 6.01(a)</u>, a copy of the insurance binder, insurance certificates or other evidence of insurance for any insurance coverage of any Loan Party that was renewed, replaced or modified in any material respect during such Fiscal Year.

1.03.<u>Notices</u>.

Promptly, and in any event within five (5) Business Days (other than with respect to <u>Section 6.03(a)</u>, which shall be within one (1) Business Day, and with respect to <u>Section 6.03(b)</u>, which shall be two (2) Business Days) after a Responsible Officer of the Borrower or any Restricted Subsidiary obtains knowledge thereof, the Borrower shall give notice to the Administrative Agent, which shall notify each Lender, of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)the occurrence of any Event of Default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)any development, circumstance, or event that has had or could reasonably be expected to have a Material Adverse Effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)(i) the occurrence of any Default, (ii) any termination of any Material Contract of the Borrower or any Restricted Subsidiary, (iii) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Restricted Subsidiary and any Governmental Authority in which the amount involved that is not covered by insurance is in excess of $2,500,000, (iv) any action, suit, proceeding or claim alleging any Environmental Liability against the Borrower or any Restricted Subsidiary in which the amount involved that is not covered by insurance is in excess of $2,500,000, (v) any action, suit, dispute, litigation, investigation, proceeding or suspension before any court or other Governmental Authority against or affecting the Borrower or any Subsidiary or any Affiliate thereof with respect to any Anti-Corruption Laws, Anti-Money Laundering Laws, or Sanctions, and (vi) any litigation, proceeding, or judgment affecting the Borrower or any Restricted Subsidiary in which the amount involved that is not covered by insurance is in excess of the Threshold Amount or in which injunctive or similar relief is sought in respect of the performance of the Loan Parties under the Loan Documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)any casualty or other insured damage to any material portion of the Collateral or the commencement of any action or proceeding for the taking of any material portion of the Collateral or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding, in each case to the extent the effect thereof could reasonably be expected to have a Material Adverse Effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)the occurrence of any ERISA Event that, either individually or together with any other ERISA Events, could reasonably be expected to result in liability of any Loan Party or any of its Restricted

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Subsidiaries or any of their respective ERISA Affiliates in an aggregate amount in excess of the Threshold Amount;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)[reserved];

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)subject to the disclosure and confidentiality restrictions of applicable Law, copies of any other reports or notices received by the Borrower or such Restricted Subsidiary, respectively, from any Governmental Authority alleging a Tax or a violation of applicable Law that could reasonably be expected to have a Material Adverse Effect; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)a copy of any notice of default given or received by the Borrower or any Restricted Subsidiary under any Organization Document for which the effect thereof could reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this <u>Section 6.03</u> shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower or applicable Subsidiary has taken and proposes to take with respect thereto. Each notice pursuant to <u>Section 6.03(a)</u> shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

1.04.<u>Payment of Taxes</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Except to the extent expressly prohibited by any Loan Document, pay and discharge, in the ordinary course of business, all material Taxes upon it or its properties or assets, or with respect to which the Borrower or any Restricted Subsidiary has a withholding obligation, unless the same are being Properly Contested by the Borrower or such Restricted Subsidiary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Filing of Returns</u>. Timely and correctly file all material federal, state, local and other Tax returns required to be filed by or with respect to it or its properties or assets (taking into account any available extensions).

1.05.<u>Preservation of Existence</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization, except in connection with a transaction permitted by <u>Section 7.06</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Preserve, renew and maintain in full force and effect its good standing under the Laws of the jurisdiction of its organization, except (x) in connection with a transaction permitted by <u>Section 7.06</u> or (y) to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Preserve or renew all of its registered patents, copyrights, trademarks, trade names, service marks, and domain names, except (x) in a transaction that constitutes a Permitted Disposition or (y) to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.

1.06.<u>Operation and Maintenance of Properties; Insurance</u>.

&nbsp;&nbsp;&nbsp;&nbsp;The Borrower and each Loan Party shall and shall cause each Restricted Subsidiary to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Keep, preserve and maintain in all respects all property and systems, all improvements, personal property and equipment, useful and necessary in its business in good working order and condition in accordance with the general practice of other businesses of similar character and size (ordinary wear and tear excepted) and make all necessary repairs, renewals and replacements so that its business may be properly conducted at all times, except (x) to the extent that any such property and systems are obsolete, are

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being replaced or, in the good faith judgment of the Borrower, are no longer useful or desirable in the conduct of the business of the Loan Parties and their Restricted Subsidiaries or (y) to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Maintain insurance with financially sound and reputable insurance companies or associations (including comprehensive general liability, property and business interruption insurance) with respect to its business, in such amounts and covering such risks as is required by any Governmental Authority having jurisdiction with respect thereto or as is carried generally by companies in businesses similarly situated and located. All certificates of insurance are to be delivered to the Collateral Agent, with appropriate lender loss payable, mortgagee and additional insured endorsements (as applicable) in favor of the Collateral Agent, and shall provide for not less than 30 days' prior written notice (or 10 days in the case of non-payment of premiums) to the Collateral Agent of the exercise of any right of cancellation; <u>provided</u> that such endorsements may be delivered to the Collateral Agent within 60 days after the Closing Date or, for insurance obtained after the Closing Date, within 60 days after such insurance is obtained. If the Borrower or any Restricted Subsidiary fails to maintain such insurance, the Collateral Agent (acting at the direction of the Required Lenders) may, upon prior notice to the Borrower, arrange for such insurance, but at the Borrower's expense and without any responsibility on the Collateral Agent's part for obtaining the insurance, the solvency of the insurance companies, the adequacy of the coverage, or the collection of claims. Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent shall have the right, in the name of the Borrower or any other Loan Party, to file claims under any insurance policies covering Collateral, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies.

1.07.<u>[Reserved].</u>

1.08.<u>[Reserved]</u> .

1.09.<u>Books and Records</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;Maintain books of record and account, in which full, true and correct entries in all material respects in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower or any Restricted Subsidiary, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;Maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower or any Restricted Subsidiary, as the case may be, except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.

1.10.<u>Inspection Rights</u>.

Permit representatives and independent contractors on behalf of the Lenders to visit and inspect any of its properties, to examine any of its documents, contracts, books, records, offices and other facilities and properties, to conduct a field exam of such Loan Party's assets, liabilities, books and records, including examining its corporate, financial and operating records, and to make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its officers and independent public accountants (with officers of the Borrower permitted to be present for any such discussions with independent public accountants), all at the expense of the Borrower and at such reasonable times during the Borrower's normal business hours, at reasonable intervals and upon reasonable advance written notice to the Borrower; <u>provided</u> that, unless an Event of Default has occurred and is continuing at the time such visit, inspection or examination commences, the Borrower shall not be required to pay expenses relating to more than one (1) such visit, inspection or examination by or on behalf of the Lenders in any twelve consecutive month period; <u>provided</u>, <u>further</u>, that when an Event of Default exists the Agents or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours of the Borrower, with advance written notice to the Borrower. The Borrower and each other Loan Party acknowledges that the Administrative Agent at the direction of the Required Lenders, after exercising its rights of inspection, may prepare and distribute to the Lenders certain

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reports pertaining to the Borrower's or such other Loan Party's assets for internal use by the Administrative Agent and the Lenders.

1.11.<u>Use of Proceeds; Compliance with Laws</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Use the proceeds of the Loans (i) for general corporate purposes, including for investments by the Borrower in its new credit card product and personal loans and (ii) to pay fees and expenses in connection with the incurrence of the Loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Comply with the requirements of all applicable Laws and all Permits, orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

1.12.<u>Additional Subsidiaries; Additional Security</u>.

Within thirty (30) days after the acquisition or formation of any Subsidiary (i) cause such Person (other than any Non-Guarantor Restricted Subsidiary or Excluded Subsidiary) to become a Guarantor by executing and delivering to the Administrative Agent a supplement and joinder to the Guaranty and Collateral Agreement (as set forth therein) and (ii) deliver or cause such Person to deliver to the Administrative Agent documents of the types referred to in <u>Sections 4.01(d)</u> and <u>(g)</u>, and if reasonably requested by the Required Lenders, favorable opinions of counsel to such Subsidiary.

1.13.<u>Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Comply in all respects (other than any non-compliance the impact of which would be immaterial to the business of the Borrower and its Subsidiaries) with Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Implement within 45 days policies and procedures designed to ensure compliance by each Loan Party, its Subsidiaries, and their respective directors, officers, employees, agents and representatives acting on behalf of the Loan Party or each Subsidiary, as applicable, with Anti-Corruption Laws. Maintain in effect policies and procedures designed to ensure compliance by each Loan Party, its Subsidiaries, and their respective directors, officers, employees, agents and representatives acting on behalf of the Loan Party or each Subsidiary, as applicable, with Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions.

1.14.<u>Environmental Compliance</u>.

Except in each case to the extent the failure thereof could not reasonably be expected to result in a Material Adverse Effect:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Comply with, and ensure compliance at any property owned, leased or operated by each Loan Party, and by all tenants, subtenants, lessees, sub-lessees, operators and contractors of the Loan Parties, if any, with, all applicable Environmental Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Promptly comply with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws.

1.15.<u>Pledged Assets</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Equity Interests</u>. Cause 100% of the issued and outstanding Equity Interests of each Subsidiary directly owned by the Borrower or any other Loan Party (other than Borrower's Equity Interests in Prosper Grantor Trust and, if applicable, the Borrower's interest as administrator of the SPV Entities), to be subject at all times to a first priority, perfected Lien in favor of the Collateral Agent, for the benefit of the Secured Parties, pursuant to the terms and conditions of the Guaranty and Collateral Agreement,

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together with any filings and deliveries reasonably necessary in connection therewith to perfect the security interests therein, all in form and substance reasonably satisfactory to the Collateral Agent and the Required Lenders. Notwithstanding anything herein or in any other Loan Document to the contrary, no more than 65% of the voting stock of any Subsidiary that is a CFC or a FSHCO shall be subject to the requirements of this <u>Section 6.15(a)</u> solely to the extent (i) the pledge of such voting stock in excess of 65% could reasonably be expected to result in material adverse tax consequences to any Loan Party or any of their respective Subsidiaries as determined in good faith by the Loan Parties and the Required Lenders and (ii) such voting stock in excess of 65% is not otherwise subject to a Lien securing Indebtedness other than the Obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Other Property</u>. (i) Subject to the limits on pledges with respect to personal property, qualified by the definition of "Collateral" in the Guaranty and Collateral Agreement, cause all or substantially all of any Loan Party's personal property to be subject at all times to perfected, first priority Liens in favor of the Collateral Agent, for the benefit of the Secured Parties, to secure the Obligations pursuant to the terms and conditions of the Collateral Documents or, with respect to any such property acquired subsequent to the Closing Date, such other additional security documents as the Collateral Agent or the Required Lenders shall reasonably request, in each case subject to no Liens (other than Permitted Liens) and (ii) deliver such other documentation as the Collateral Agent or the Required Lenders may reasonably request in connection with the foregoing, including appropriate UCC-1 financing statements, certified resolutions and other organizational and authorizing documents of such Person, and other items of the types required to be delivered pursuant to <u>Section 4.01(g)</u>, all in form, content and scope reasonably satisfactory to the Required Lenders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Notwithstanding anything herein or in any other Loan Document to the contrary, in no event shall the assets of any Subsidiary that is a CFC or a FSHCO, or a subsidiary of a CFC or a FSHCO constitute security for, nor shall the proceeds of such assets be available for, payment of the Obligations, in each case solely to the extent (i) the pledge of such assets as security for the payment of the Obligations could reasonably be expected to result in material adverse tax consequences to any Loan Party or any of their respective Subsidiaries as determined in good faith by the Loan Parties and the Required Lenders and (ii) such assets are not otherwise subject to a Lien securing Indebtedness other than the Obligations.

1.16.<u>[Reserved]</u>.

1.17.<u>Further Assurances</u>.

At the reasonable request of the Administrative Agent or the Required Lenders at any time and from time to time, the Borrower and the other Loan Parties shall, at their expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments as are reasonable or necessary to (i) subject to valid and perfected, first priority Liens any of the Collateral or any other property of any Loan Party intended to be Collateral hereunder or under any other Loan Document and (ii) establish and maintain the validity, perfection and priority of the Liens intended to be created thereby.

1.18.<u>Controlled Account</u>.

The Loan Parties agree, within forty-five (45) days after the Closing Date, to maintain an Account Control Agreement in favor of the Collateral Agent with respect to the Controlled Account.

1.19.<u>Intellectual Property</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Whenever a Loan Party, either by itself or through an agent, employee, licensee or designee, shall file or own an application for any patent or trademark with the United States Patent and Trademark Office, any copyright with the United States Copyright Office, or any patent, trademark or copyright in any similar office or agency in any other country, jurisdiction or political subdivision thereof, such Loan Party shall report such filing to the Agents within thirty (30) days after the last day of the Fiscal Quarter in which such filing occurs; <u>provided</u> no reporting shall be required for patents, trademarks or copyrights that are in process of being assigned by a Loan Party to Prosper Funding LLC pursuant to the Applicable Intercompany Agreements. Upon request of the Required Lenders, a Loan Party shall execute and deliver any and all agreements, instruments, documents and papers as the Required Lenders may reasonably

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request to evidence and confirm the security interest of the Collateral Agent and the Lenders in any Intellectual Property registered with the United States Patent and Trademark Office or the United States Copyright Office and the goodwill and general intangibles of a Loan Party relating thereto or represented thereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Promptly take such actions as the Borrower shall reasonably deem appropriate under the circumstances to protect material Intellectual Property included in the Collateral. Neither the Borrower nor any Restricted Subsidiary shall do any act or omit to do any act to infringe, misappropriate, dilute, violate or otherwise impair the Intellectual Property of any other Person in any manner that could reasonably be expected to result in a Material Adverse Effect.

1.1.<u>Commercial Tort Claims</u>.

Each Loan Party shall notify the Administrative Agent in writing, within five (5) Business Days after the last day of each Fiscal Quarter, of the initiation of any Commercial Tort Claim (as such term is defined in the UCC) in excess of $750,000 before any Governmental Authority by or in favor of such Loan Party. All outstanding Commercial Tort Claims of the Loan Parties, in each case, in excess of $750,000 as of the Closing Date are set forth on <u>Schedule 6.20</u>. Each Loan Party agrees that, if it shall acquire any interest in any Commercial Tort Claim which interest has a value that is reasonably expected by such Loan Party to exceed $750,000 (whether from another Person or because such Commercial Tort Claim shall have come into existence), (i) such Loan Party shall, within five (5) Business Days after the last day of each Fiscal Quarter, deliver to the Administrative Agent, in each case in form and substance reasonably satisfactory to the Required Lenders, a notice of the existence and nature of such Commercial Tort Claim and containing a specific description of such Commercial Tort Claim, (ii) the Guaranty and Collateral Agreement shall apply to such Commercial Tort Claim, and (iii) such Loan Party shall execute and deliver to the Administrative Agent, in each case in form and substance satisfactory to the Required Lenders, any document, and take all other action, deemed by the Required Lenders to be reasonably necessary or appropriate for the Collateral Agent to obtain, for the benefit of the Secured Parties, a perfected first priority security interest in all such Commercial Tort Claims.

1.2.<u>Landlord Waivers or Subordination Agreements</u>. The Borrower will use commercially reasonable efforts to obtain written subordinations or waivers, in form and substance reasonably satisfactory to the Collateral Agent and the Required Lenders, from (x) the lessor of the Loan Parties' headquarters and (y) the lessor of each other leased property or bailee in possession of any Collateral (other than locations where Collateral with an aggregate fair market value of not more than $2,500,000 individually is stored or located).

1.3.<u>[Reserved]</u>.

1.4.<u>Cash Sweep</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)On the first Business Day of each week (each, a "<u>Sweep Date</u>"), if the amount of Cash and Cash Equivalents that are not Restricted for the Loan Parties on the last Business Day of the immediately preceding week, based on the Borrower's good faith estimate, is greater than [\*\*\*](or [\*\*\*] if an Event of Default exists on such day) (the "<u>Sweep Threshold</u>"), then the Borrower shall sweep the amount of such excess into the Controlled Account on such Sweep Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)The Loan Parties shall not be permitted to withdraw funds from the Controlled Account except that the Loan Parties may withdraw funds from the Controlled Account at any time (1) in any amounts and for any purposes so long as on the date of withdrawal on a *pro forma* basis the amount of Cash and Cash Equivalents that are not Restricted for the Loan Parties does not, based on the Borrower's good faith estimate, exceed the Sweep Threshold; or (2) in any amounts only for the purposes of (i) purchasing consumer financial products and related assets in connection with SPV Transactions or (ii) posting collateral or maintaining required operating account balances and reserves against consumer financial products and related assets (including by or for the benefit of SPV Entities established to hold consumer financial products and related assets), in each case of this clause (ii) in the ordinary course operation of the Business.

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ARTICLE VII<br>NEGATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification obligations for which no underlying claim has been asserted), (x) with respect to <u>Sections 7.03</u>, <u>7.05</u>, <u>7.14(a)</u>, <u>7.14(c)</u>, <u>7.18</u> and <u>7.20</u>, no Loan Party shall, and (y) with respect to all other Sections in this <u>ARTICLE VII</u>, no Loan Party shall, nor shall it permit any Restricted Subsidiary to (subject the waiver of any covenant hereof in accordance with <u>Section 10.01</u>):

1.01.<u>Financial Covenants</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Minimum Tangible Net Worth</u>: Beginning November 30, 2022, permit Tangible Net Worth as at the close of business on the last Business Day of any month to be less than [\*\*\*].

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Minimum Net Liquidity</u>. Beginning November 30, 2022, permit Net Liquidity as at the close of business on the last Business Day of any month to be less than [\*\*\*].

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Maximum Leverage Ratio</u>. Beginning November 30, 2022, permit the Leverage Ratio as at the close of business on the last Business Day of any month to exceed [\*\*\*].

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Minimum Asset Coverage Ratio</u>: Beginning November 30, 2022, permit the Asset Coverage Ratio as at the close of business on the last Business Day of any month to be less than [\*\*\*].

1.02.<u>Reserved</u>.

1.03.<u>Liens</u>.

Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following (collectively "<u>Permitted Liens</u>"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Liens created in favor of the Collateral Agent, for the benefit of the Secured Parties, pursuant to the Collateral Documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Liens for Taxes, assessments or governmental charges (i) which are not yet delinquent for more than 30 days or remain payable without penalty or (ii) which are being Properly Contested;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business that are not due and payable for more than 90 days or remain payable without penalty or that are being Properly Contested;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)Liens not securing Indebtedness arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor (except to the extent of the Collateral Agent having "control" within the meaning of the UCC) in excess of those set forth by regulations promulgated by the FRB and no such deposit account is intended by the Borrower to provide collateral to the depository institution;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations to (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)Liens securing Indebtedness of the type described in <u>Section 7.05(j)</u>; <u>provided</u> that (x) such Lien may not extend to any property or equipment (or assets affixed or appurtenant thereto) other than the property or equipment being financed or refinanced under <u>Section 7.05(j)</u>, replacements of such property, equipment or assets, and additions and accessions and in the case of multiple financings of equipment provided by any lender, other equipment financed by such lender, (y) such Lien is incurred, and the Indebtedness secured thereby is created within 270 days after such purchase, lease, construction, installation, maintenance, replacement or improvement and (z) such Indebtedness secured thereby does not exceed 100% of the cost of such equipment or other property or improvements at the time of such purchase, lease, construction, installation, maintenance, replacement or improvement plus any fees, costs, and expenses incurred in connection with such Indebtedness;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)(i) Liens on assets (other than Real Property) securing judgments, awards, attachments and/or decrees and notices of *lis pendens* and associated rights relating to litigation not constituting an Event of Default under <u>Section 8.01(i)</u>, and (ii) any pledge and/or deposit securing any settlement of litigation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)Liens (including deposits) to secure the performance of bids, tenders, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds, and other obligations of like nature, in each case in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)easements, zoning restrictions, rights-of-way, minor defects or irregularities in title, and similar encumbrances on real property imposed by law or arising in the ordinary course of business which, either individually or in the aggregate, (i) could not reasonably be expected to result in a Material Adverse Effect, (ii) do not detract from the ownership, maintenance, use, operation or value of the Real Property encumbered thereby, (iii) do not interfere with the ordinary conduct of business of the Borrower or any of its Subsidiaries, or the business conducted on the related Real Property, (iv) do not secure Indebtedness for borrowed money, and (v) are not violated by the current and ongoing use of the Real Property subject thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)Liens in existence as of the date hereof which are listed on Schedule 7.03, and any renewals, modifications, replacements, and extensions of such Liens; <u>provided</u> that (i) the aggregate principal amount of the Indebtedness secured by such Liens does not increase from that amount outstanding at the time of any such renewal, modification, replacement, or extension, (ii) any such renewal, modification, replacement, or extension does not encumber any additional assets or properties of the Borrower or any other Loan Party and (iii) such renewal, modification, replacement, or extension does not affect or change the Lien priority with respect to the Obligations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any other Loan Party or any Lien existing on any property or asset of any Person that becomes a Subsidiary of the Borrower or any other Loan Party at the time such Person becomes a Subsidiary of the Borrower or other Loan Party; <u>provided</u> that (i) such Lien is not created in contemplation of, or in connection with, such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall apply only to the same assets to which it applied immediately prior to such acquisition, and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be, and any refinancing, refunding, extension, renewal, or replacement thereof that does not increase the outstanding principal amount thereof plus any accrued interest, premium, fee, and reasonable and documented out-of-pocket expenses payable in connection with any such refinancing, refunding, extension, renewal, or replacement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)Liens arising from precautionary Uniform Commercial Code financing statement filings solely as a precautionary measure in connection with operating leases or consignment of goods;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)Liens on (i) any Securitizable Assets, any intangible contract rights and other documents, records and assets directly related to the foregoing assets and any proceeds thereof, (ii) any Equity Interests of or other ownership or residual interests in, or any assets of, any SPV Entity and any proceeds thereof,

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and (iii) any Deposit Accounts or other accounts holding funds to purchase and/or collect on the foregoing assets, in each case of <u>clauses (i)</u>, <u>(ii)</u> and <u>(iii)</u>, incurred in connection with any SPV Transaction or permitted guarantees thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)other Liens securing obligations (other than obligations representing Indebtedness for borrowed money) in an aggregate amount not to exceed $750,000;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)Liens on Bank Product Partner Accounts and Other Product Partner Accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)Liens consisting of customary security deposits under operating leases entered into in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)licenses and sublicenses granted in the ordinary courses of business not impairing the business of the Borrower and its Subsidiaries, taken as a whole, in any material respect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)Liens of a collecting bank arising in the ordinary course of business under Section 4-210 of the UCC in effect in the relevant jurisdiction covering only the items being collected upon;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)Liens arising by operation of law under Article 2 of the UCC in favor of a reclaiming seller of goods or buyer of goods;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)Liens arising out of conditional sale, title retention, consignment or similar arrangements entered into in the ordinary course of business for the sale of goods in the ordinary course of business, in each case extending solely to the assets that are the subject of such sale;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)Liens in favor of customs and revenue authorities arising as a matter of law which secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)Liens on and in respect of cash earnest money deposits in connection with any letter of intent or purchase agreement permitted hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)Liens on cash collateral securing Swap Contracts entered into in the ordinary course of business for bona fide hedging purposes and not for speculation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)Liens on cash collateral securing letters of credit permitted under <u>Section 7.05(u)</u> so long as the aggregate amount of such cash collateral at no time exceeds 105% of the aggregate amount of such letters of credit.

Notwithstanding anything to the contrary herein or in any other Loan Document, (i) the Borrower and its Restricted Subsidiaries shall not create, incur, assume or suffer to exist any Lien upon any of its Cash, Cash Equivalents, or Available for Sale Investments other than Liens in favor of the Collateral Agent permitted under <u>Section 7.03(a)</u> and other Liens expressly contemplated to be incurred on cash collateral or deposits under this <u>Section 7.03</u> and (ii) no Loan Party shall or shall create, incur, assume or suffer to exist any Lien on any Equity Interest of any Subsidiary of any Loan Party which constitute Collateral except as contemplated under <u>Sections 7.03(i)(i)</u> and <u>(o)(ii)</u>.

1.04.<u>Investments</u>.

Make any Investments, except:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Investments held in the form of Cash, Cash Equivalents or Available for Sale Investments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)extensions of trade credit and advances in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Investments arising in connection with the incurrence of Permitted Indebtedness;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Investments received in connection with workouts with, or bankruptcy, insolvency or other similar proceedings with respect to, customers, working interest owners, other industry partners or any other Person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Investments (i) constituting deposits, prepayments and/or other credits to suppliers, (ii) made in connection with obtaining, maintaining or renewing client and customer contracts and/or (iii) in the form of advances made to distributors, suppliers, licensors and licensees, in each case, in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)Investments constituting Guarantees otherwise permitted hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)(i) Investments by any Loan Party in or to another Loan Party and (ii) Investments by any Non-Guarantor Restricted Subsidiary in or to a Loan Party or another Non-Guarantor Restricted Subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)Permitted Acquisitions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Investments in Subsidiaries that are not Loan Parties or in joint ventures in an aggregate amount not to exceed $750,000;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)any Investments (i) in any SPV Entity or in any Securitizable Assets or in connection with any SPV Transaction in the ordinary course of business or (ii) otherwise in the ordinary course operation of the Business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)other Investments in an aggregate amount not to exceed $750,000;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)Investments existing on the date hereof and set forth on Schedule 7.04;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)Investments resulting from Banking Services in the ordinary course of business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)Investments in the form of (i) non-Cash loans and advances to officers, directors, management or employees of the Borrower or any of its Subsidiaries for the purpose of purchasing Equity Interests in the Borrower not to exceed $750,000 at any time outstanding and (ii) loans or advances made to officers, directors, management or employees of the Borrower or any of its Subsidiaries for travel and entertainment expenses and similar purposes in the ordinary course of business not to exceed $250,000 at any time outstanding;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)Investments received as the non-cash portion of consideration received in connection with transactions permitted pursuant to <u>Section 7.07</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)Investments in the form of deposits of cash made in the ordinary course of business to secure performance of operating leases;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)Investments constituting deposits described in <u>Sections 7.03(d)</u> and <u>(e)</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)Investments consisting of negotiable instruments held for collection in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)Investments in Swap Contracts entered into in the ordinary course of business for bona fide hedging purposes and not for speculation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)Investments of any Person in existence at the time such Person becomes a Subsidiary pursuant to transaction permitted by this Agreement, so long as such Investment was not made in connection with or anticipation of such Person becoming a Subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)the establishment or creation of Subsidiaries, subject to, other than with respect to Non-Guarantor Restricted Subsidiaries and Excluded Subsidiaries, compliance with <u>Section 6.12</u>;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)equity Investments required by law to maintain a minimum net capital requirement or as may otherwise be required by applicable Laws or for the purpose of obtaining or maintaining a license applicable to the Business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Investments funded with the proceeds of Qualified Equity Interests (other than to the extent constituting a Cure Amount); <u>provided</u> that

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)with respect to any such Investment that is an Acquisition, all of the requirements in the definition of "Permitted Acquisition" are satisfied (<u>provided</u> that up to 15% of the value of the acquired assets may be non-Collateral);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)with respect to any such Investment that is not an Acquisition,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)no Event of Default shall have occurred and be continuing or would result from the consummation of such Investment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)the Investment is consummated in accordance with all applicable material Laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)the assets being acquired (other than a *de minimis* amount of assets in relation to the Loan Parties' and the Subsidiaries' total assets), or the Person whose Equity Interests are being acquired, are useful in or engaged in, as applicable, the Business, in the Borrower's reasonable discretion;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)the assets being acquired (other than a *de minimis* amount of assets in relation to the assets being acquired) are located within the United States, or the Person whose Equity Interests are being acquired is organized in a jurisdiction located within the United States; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)such Investment shall be effected in such a manner so that if a Loan Party is making such Investment, the acquired assets or Equity Interests are owned by a Loan Party or a Person that becomes a Loan Party (<u>provided</u> that up to 15% of the value of the acquired assets may be non-Collateral); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)(I) the aggregate amount of Investments permitted to be made pursuant to this <u>clause (i)</u> when the Specified Transaction Conditions are not satisfied on a *pro forma* basis shall not exceed $2,500,000 in the aggregate; and (II) the aggregate amount of Investments permitted to be made under this <u>clause (</u>i<u>)</u> when the Specified Transaction Conditions are satisfied on a *pro forma* basis shall not exceed $10,000,000 in the aggregate; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)Investments funded with the proceeds of Qualified Equity Interests (other than to the extent constituting a Cure Amount); <u>provided</u> that

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)with respect to any such Investment that is an Acquisition, the requirements in the definition of "Permitted Acquisition" are satisfied (other than (x) clause (viii) thereof and (y) only with respect to Investments under clause (C)(II) below, clauses (ix) and (x) thereof);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)with respect to any such Investment that is not an Acquisition,

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)no Event of Default shall have occurred and be continuing or would result from the consummation of such Investment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)the Investment is consummated in accordance with all applicable material Laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)the assets being acquired (other than a *de minimis* amount of assets in relation to the Loan Parties' and the Subsidiaries' total assets), or the Person whose Equity Interests are being acquired, are useful in or engaged in, as applicable, the Business, in the Borrower's reasonable discretion; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)only if such Investment is being made pursuant to subclause (C)(I) below, such Investment shall be effected in such a manner so that if a Loan Party is making such Investment, the acquired assets or Equity Interests are owned by a Loan Party or a Person that becomes a Loan Party; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)(I) the aggregate amount of Investments permitted to be made pursuant to this <u>clause (ii)</u> when the Specified Transaction Conditions are not satisfied on a *pro forma* basis shall not exceed $2,500,000 in the aggregate; and (II) the aggregate amount of Investments permitted to be made under this <u>clause (ii)</u> when the Specified Transaction Conditions are satisfied on a *pro forma* basis shall not exceed $5,000,000 in the aggregate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)Investments pursuant to a Grantor Trust Equity Transfer; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)Investments pursuant to Qualified Public Offering Reorganization Transactions.

Notwithstanding anything to the contrary herein or in any other Loan Document, during any period of twelve (12) consecutive months in which Net Liquidity is less than [\*\*\*] as at the close of business on the last Business Day of any month during such period (i) no more than [\*\*\*] in the aggregate may be contributed during such period to the SPV Entities to cure any Excluded Subsidiary Financing with respect to which either (A) an "event of default" has occurred under such Excluded Subsidiary Financing or (B) such Excluded Subsidiary Financing has been accelerated or become subject to wind-down procedures and (ii) subject to the aggregate limit in <u>clause (i)</u>, no more than three (3) contributions for such purpose may be made during any such period.

1.05.<u>Indebtedness</u>.

Create, incur, assume or suffer to exist any Indebtedness, except:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Indebtedness under the Loan Documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Indebtedness of a Loan Party owed (i) to another Loan Party or (ii) to a Restricted Subsidiary that is not a Loan Party to the extent permitted as an Investment pursuant to <u>Section 7.04</u>; <u>provided</u>, in each case that with respect to clause (ii), any such Indebtedness shall be subordinated in right of payment to the Obligations pursuant to the Intercompany Subordination Agreement or otherwise on customary terms reasonably acceptable to the Required Lenders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Indebtedness incurred as a result of endorsing negotiable instruments for deposit or collection in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)unsecured current accounts payable incurred in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Indebtedness set forth on Schedule 7.05 hereto and any extensions, renewals and replacements of such Indebtedness which does not (i) increase the principal amount thereof, (ii) shorten the

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maturity thereof, (iii) add any obligor with respect thereto, and (iv) provide for a security interest secured on any assets except those (if any) that secured such Indebtedness prior to any such extension, renewal or replacement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)Indebtedness arising pursuant to tenders, statutory obligations, bids, leases, governmental contracts, trade contracts, surety, stay, customs, appeal, performance and/or return of money bonds, or other similar obligations incurred in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)Indebtedness representing incentive, non-compete, consulting, deferred compensation or similar arrangements with current or former directors, officers, employees, members of management, managers, and consultants of the Loan Parties and their Subsidiaries in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)Guarantees of Indebtedness to the extent the Person providing such Guarantee would be permitted to incur the applicable Indebtedness under this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)obligations for *ad valorem*, severance and other taxes payable that permitted to be outstanding pursuant to <u>Section 6.04(a)</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)Indebtedness under Capital Leases and Indebtedness incurred to finance the acquisition, construction or improvement of any asset, in each case, incurred prior to or within 270 days after the purchase, lease, construction, installation, maintenance, replacement or improvement of the applicable asset, and any extensions, renewals and replacements of any such Indebtedness in an aggregate amount not to exceed not to exceed $1,500,000 in the aggregate at any time outstanding ;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)non-credit recourse (for the avoidance of doubt, excluding recourse for matters such as fraud, misappropriation, and misapplication) Indebtedness incurred under or in connection with any SPV Transaction, including Indebtedness owed to any SPV Entity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)Payment Dependent Notes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)other unsecured Indebtedness in an aggregate amount not to exceed $750,000 at any time;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)Indebtedness with respect to Banking Services in the ordinary course of business <u>provided</u> that such Indebtedness incurred under clauses (a) and (b) of the definition of "Banking Services" shall not exceed $250,000 at any time outstanding;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)unsecured Indebtedness in respect of netting services, overdraft protection, and other like services, in each case incurred in the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)endorsements for collection, deposit or negotiation and warranties of products or services, in each case in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)Indebtedness consisting of Swap Contracts entered into in the ordinary course of business for bona fide hedging purposes and not for speculation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)Indebtedness consisting of unpaid insurance premiums owing to insurance companies and insurance brokers incurred in connection with the financing of insurance premiums in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)Indebtedness in respect of workers' compensation claims (or other similar health, disability or other employee benefits reimbursement-type obligations), performance, bid and surety bonds and completion guaranties, in each case, in the ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)Indebtedness in respect of indemnification claims relating to adjustments of purchase price or similar obligations in any case incurred in connection with any transaction permitted under <u>Section 7.04</u> or <u>7.07</u> (but in no case in connection with earnouts, seller notes or similar obligations);

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)Indebtedness constituting letters of credit issued on behalf of the Loan Parties or any of their respective Subsidiaries in a face amount thereof not to exceed (i) $3,000,000 in the aggregate at any time outstanding, plus (ii) $5,000,000 (or such higher amount as may be agreed by the Administrative Agent at the direction of the Required Lenders) in the aggregate at any time outstanding used to satisfy the requirements of an applicable Governmental Authority (including but not limited to state licensing obligations) <u>less</u> the amount of balances held in accounts described in clause (c) of the definition of Excluded Accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)Indebtedness owing to current and former employees, officers, directors or consultants (or any spouses, ex-spouses, or estates of any of the foregoing) incurred in connection with the repurchase or redemption of the Equity Interests of the Borrower permitted under <u>Section 7.08(b)</u> that has been issued to such Persons, not to exceed $750,000 at any time outstanding;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)Indebtedness owing under the lease portion of a sale leaseback;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)Indebtedness of any Person that becomes a Subsidiary after the date hereof; <u>provided</u> that such Indebtedness exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)unsecured Indebtedness in respect of earnouts or similar contingent obligations owing to sellers of assets or Equity Interests to such Loan Party or its Subsidiaries that is incurred in connection with the consummation of one or more Permitted Acquisitions or other Investments permitted under <u>Section 7.04</u>; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)accrual of interest, accretion or amortization of original issue discount, or the payment of interest in kind, in each case, on Indebtedness otherwise permitted under this <u>Section 7.05</u>, in each case so long as such amounts are not prohibited by any applicable subordination or intercreditor terms pertaining thereto.

1.06.<u>Fundamental Changes</u>.

Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person; <u>provided</u> that, notwithstanding the foregoing provisions of this <u>Section 7.06</u> but subject to the terms of <u>Section 6.15,</u> (a) the Borrower may merge or consolidate with, or dissolve or liquidate into, any of its Subsidiaries so long as the Borrower shall be the continuing or surviving Person, (b) any Loan Party other than the Borrower may merge or consolidate with, or dissolve or liquidate into, any other Loan Party, (c) any Non-Guarantor Restricted Subsidiary may merge or consolidate with, or dissolve or liquidate into, (i) any Loan Party so long as such Loan Party shall be the continuing or surviving entity or (ii) any other Non-Guarantor Restricted Subsidiary, and (d) the Borrower may consummate a Holding Company Transaction and (e) the Borrower may consummate Qualified Public Offering Reorganization Transactions.

1.07.<u>Dispositions</u>.

Make any Disposition, other than Permitted Dispositions.

1.08.<u>Restricted Payments</u>.

Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)the Borrower may (i) make Restricted Payments in the form of Equity Interests (other than Disqualified Equity Interests) of the Borrower and (ii) redeem in whole or in part any of its Equity Interests for another class of Equity Interests (other than Disqualified Equity Interests) of the Borrower;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)the Borrower may make repurchases or redemptions of its Equity Interests issued to directors, officers, or employees of the Borrower or any Subsidiary in an amount not exceeding $750,000 in the aggregate for any Fiscal Year (with no carryover of unused amounts to subsequent Fiscal Years); <u>provided</u> no Event of Default shall have occurred and be continuing or would result therefrom;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)each Loan Party and each Restricted Subsidiary may declare and make dividend payments or other distributions payable solely in the Equity Interests of such Person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)a Restricted Subsidiary may pay dividends (or, in the case of any partnership or limited liability company, any similar distribution) to the holders of its Equity Interests on a *pro rata* basis;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)the Borrower and its Restricted Subsidiaries may make Restricted Payments pursuant to and in accordance with stock option plans or other benefit plans for management, employees and service providers of the Borrower and its Subsidiaries;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)the Borrower may redeem its Equity Interests pursuant to a Grantor Trust Equity Transfer; <u>provided</u> that the amount of Cash distributed in any such redemptions shall not exceed $500,000 in the aggregate; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)Restricted Payments shall be permitted for the purpose of consummating a Holding Company Transaction or Qualified Public Offering Reorganization Transactions.

1.09.<u>Lines of Business</u>.

Enter into any business, either directly or indirectly, except for the Business and any businesses reasonably related thereto.

1.10.<u>Transactions with Affiliates</u>.

Enter into any transaction, including, any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate, in each case with a value in excess of $75,000, except for (a) transactions between or among Loan Parties and their Restricted Subsidiaries, (b) indemnification payments to officers or directors to the extent required by reasonable and customary indemnification provisions of the applicable Organization Documents or contractual obligations of such Person or applicable Law, (c) payment of compensation and benefits to officers, managers and employees of the Loan Parties and their Subsidiaries, and payment of fees to directors, (d) SPV Transactions and any agreement or arrangement between the Borrower or any Restricted Subsidiary and any SPV Entity, (e) transactions that are upon fair and reasonable terms no less favorable to the applicable Loan Party or Restricted Subsidiary than it would obtain in a comparable arm's-length transaction with a Person that is not an Affiliate, (f) a Holding Company Transaction or Qualified Public Offering Reorganization Transactions, (g) Grantor Trust Equity Transfers, (h) transactions existing on the date hereof and set forth on Schedule 7.10, (i) transactions permitted under <u>Sections 7.04(i)</u>, <u>7.04(n)</u>, <u>7.05(v)</u>, <u>7.06</u> and <u>7.08</u>, and <u>clause (t)</u> of the definition of "Permitted Dispositions," or (j) transactions approved in writing by the Required Lenders, such approval not to be unreasonably withheld, delayed or conditioned.

1.11.<u>Burdensome Agreements</u>.

Enter into, or permit to exist, any Contractual Obligation that encumbers or restricts the ability of any such Person to (i) pay dividends or make any other distributions to any Loan Party on its Equity Interests, (ii) pay any Indebtedness or other obligation owed to any Loan Party, (iii) make loans or advances to any Loan Party, (iv) sell, lease or transfer any of its property to any Loan Party (except for Contractual Obligations involving leased Real Property or requirement that the foregoing be on arms-length terms), (v) pledge the Collateral pursuant to the Loan Documents or (vi) act as a Loan Party pursuant to the Loan Documents, except (in respect of any of the matters referred to in <u>clauses (i)</u> through <u>(v)</u> above) for (1) this Agreement and the other Loan Documents, (2) any Permitted Lien or any document or instrument governing any Permitted Lien; <u>provided</u> that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien, (3) encumbrances and restrictions imposed by law, (4) encumbrances and

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restrictions pursuant to any agreement in effect at the time any Person becomes a Subsidiary after the date hereof, so long as such agreement was not entered into in contemplation of such Person becoming a Subsidiary, (5) encumbrances and restrictions arising in the ordinary course operation of the Business, (6) customary restrictions and conditions contained in agreements relating to the sale or other disposition of a Subsidiary pending such sale or other disposition, provided that such restrictions and conditions apply only to the Subsidiary to be sold or disposed of and such sale or disposition is permitted hereunder, and (7) restrictions imposed by customary provisions in joint venture agreements and other similar agreements that restrict the transfer of ownership interests in such joint venture or similar Person.

1.12.<u>Use of Proceeds</u>.

Use the proceeds of any Loan, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.

1.13.<u>Amendments to Indebtedness and Material Contracts</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;Amend any document, agreement or instrument evidencing any Indebtedness that is subordinated to the Obligations other than amendments or modifications that do not affect the subordination or payment provisions thereof (if any) in a manner adverse to the Lenders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;Amend, modify or change any Material Contract in a manner that could reasonably result in a Material Adverse Effect, except to the extent such amendment, modification or change is necessary to comply with the requirements of any Governmental Authority or applicable Law.

1.14.<u>Amendments to Material Documents; Fiscal Year; Legal Name</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Amend, modify or change its Organization Documents in a manner that could reasonably be expected to materially and adversely affect the Loan Parties' performance or the Lenders rights hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Change its Fiscal Year without providing prior written notice to the Administrative Agent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Change its name, jurisdiction of formation or type of entity without providing five (5) days' prior written notice of such change to the Administrative Agent.

1.15.<u>[Reserved]</u>.

1.16.<u>Non-Guarantor Restricted Subsidiaries</u>.

Permit any Non-Guarantor Restricted Subsidiary to contract, create, incur, assume or suffer to exist any Indebtedness for borrowed money in which it is the borrower in the form of any credit facility, term loan or similar financing transaction, or liens securing Indebtedness for borrowed money, other than with respect to financings incurred pursuant to the ordinary course of business of the Borrower and its Restricted Subsidiaries (including, for the avoidance of doubt, the issuance of Payment Dependent Notes).

1.17. <u>[Reserved]</u>.

1.18.<u>Repayment of Junior Indebtedness</u>.

At any time, directly or indirectly, repay or prepay any Junior Indebtedness or repurchase, redeem, retire or otherwise acquire any Junior Indebtedness except (a) payments as part of an "applicable high yield discount obligation" (AHYDO) catch-up payment, (b) regularly scheduled or required payments of interest in respect thereof, (c) the prepayment, redemption, defeasance or other retirement of the principal of Indebtedness incurred under <u>Section 7.05(j)</u> which is satisfied solely from the proceeds of a sale or other disposition of the assets purchased or financed with such Indebtedness, and (d) additional repayments or prepayments of Junior Indebtedness not to exceed $250,000 in the aggregate, <u>provided</u> that (i) no Event of

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Default shall have occurred and be continuing or would result therefrom and (ii) such payment is permitted by any applicable subordination or intercreditor agreement with respect thereto.

1.19.<u>Sanctions, Anti-Corruption Laws, and Anti-Money Laundering Laws.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Directly or indirectly use, lend, contribute or otherwise make available any proceeds of the Loan, in whole or in part, to any Subsidiary, Affiliate, joint venture partner or other Person (i) to fund any investments, activities or transactions involving any Sanctioned Person or Sanctioned Country, or (ii) in any other manner that, in each case, will result in any violation by any Person (including any Lender or any Agent) of any Sanctions, Anti-Corruption Laws, or Anti-Money Laundering Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Fund all or part of any payment under this Agreement out of proceeds or property directly or indirectly derived from any activity (i) undertaken by a Loan Party in violation of Anti-Corruption Laws, Anti-Money Laundering Laws, or Sanctions; or (ii) which would cause a violation by any Person (including any Lender or any Agent) of any Anti-Corruption Laws, Anti-Money Laundering Laws or Sanctions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Become or permit any other Subsidiary to become (including by virtue of being owned or controlled by a Sanctioned Person) or own or control a Sanctioned Person.

1.20.<u>Limitations on Negative Pledge</u>.

Enter into, incur or permit to exist, directly or indirectly, any agreement, instrument, deed, lease or other arrangement that prohibits, restricts or imposes any condition upon the ability of any Loan Party to create, incur or permit to exist any Lien upon any of the Collateral, whether now owned or hereafter acquired, or that requires the grant of any security for an obligation if security is granted for another obligation, except the following: (i) this Agreement and the other Loan Documents, (ii) restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by <u>Section 7.05</u> of this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness, (iii) any customary restrictions and conditions contained in agreements relating to the sale or other disposition of assets or of a Subsidiary pending such sale or other disposition, provided that such restrictions and conditions apply only to the assets or Subsidiary to be sold or disposed of and such sale or disposition is permitted hereunder, (iv) customary provisions in leases or other contracts restricting the assignment or sublet thereof, (v) restrictions or conditions imposed by law, (vi) restrictions or conditions in connection with SPV Transactions, (vii) restrictions or conditions in connection with bank partner, credit card product, personal loan, home equity or other consumer financial product arrangements, (viii) restrictions or conditions set forth in any agreement in effect at any time any Person becomes a Subsidiary (but not any modification or amendment expanding the scope of any such restriction or condition), provided that such agreement was not entered into in contemplation of such Person becoming a Subsidiary, and (ix) restrictions imposed by customary provisions in joint venture agreements and other similar agreements that restrict the transfer of ownership interests in such joint venture or similar Person.

1.21.<u>Accounting Methods</u>. Modify or change its method of accounting or accounting principles from those utilized in the preparation of the Initial Financial Statements (other than as may be required to conform to GAAP).

ARTICLE VIII<br>EVENTS OF DEFAULT AND REMEDIES

1.01.<u>Events of Default</u>.

Any of the following shall constitute an "<u>Event of Default</u>":

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Non-Payment</u>. Any Loan Party fails to pay (i) when and as required to be paid herein, whether at stated maturity, by acceleration, by mandatory prepayment or otherwise, any amount of principal of any Loan and (ii) within five (5) Business Days after the applicable due date, any interest on any Loan, premium (including any Prepayment Premium) or any fee due hereunder or under the Agent Fee

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Letter or any other amount payable hereunder or under any other Loan Document (other than payments of principal referred to in the preceding <u>clause (i)</u>).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Specific Covenants</u>. The Borrower or any Restricted Subsidiary fails to perform or observe any term, covenant or agreement contained in any of <u>Sections 6.03(a) or (b)</u>, <u>6.05(a)</u> (with respect to the Borrower only), <u>6.11(a)</u>, <u>6.12</u>, <u>6.18</u> or <u>Article VII</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Other Defaults</u>. The Borrower or any Restricted Subsidiary fails to perform or observe any other covenant or agreement (not specified in <u>Section 8.01(a)</u> or <u>(b)</u>) contained in this Agreement or any other Loan Document on its part to be performed or observed and (i) with respect to <u>Section 6.23</u>, such failure continues for two (2) Business Days after the occurrence of a Default under such Section, (ii) with respect to <u>Sections 6.01</u> and <u>6.02(b)</u>, such failure continues for ten (10) Business Days after the date of delivery required by such Sections and (iii) with respect to any other covenant or agreement contained in this Agreement or any other Loan Document, such failure continues for thirty (30) days after the earlier of (x) the time at which a Responsible Officer of the Borrower or any other Loan Party shall first have knowledge of such Default or the facts or circumstances giving rise thereto or (y) receipt by the Borrower of written notice of such Default from the Administrative Agent (acting at the direction of the Required Lenders).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>[Reserved]</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Representations and Warranties</u>. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any Restricted Subsidiary herein, in any other Loan Document or in any document delivered in connection herewith or therewith shall be incorrect in any material respect when made or deemed made (other than those representations, warranties and certifications that are expressly qualified by Material Adverse Effect or other materiality, in which case such representations, warranties and certifications shall be incorrect or misleading in any respect when made or deemed made) and, to the extent capable of being cured, such incorrect representation, warranty, certification, or statement shall remain untrue for a period of thirty (30) days after the earlier of (x) the time at which a Responsible Officer of the Borrower or any other Loan Party shall first have knowledge thereof or the facts or circumstances giving rise thereto or (y) receipt by the Borrower of written notice thereof from the Administrative Agent (acting at the direction of the Required Lenders).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Cross-Default</u>. (i) The Borrower or any Restricted Subsidiary fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) in respect of any Material Indebtedness and, only with respect to a Non-Guarantor Restricted Subsidiary, the effect of which non-payment is that such Material Indebtedness is demanded to become or becomes due to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Material Indebtedness is demanded or required to be made, prior to its stated maturity; (ii) the Borrower or any Restricted Subsidiary (other than a Non-Guarantor Restricted Subsidiary) fails to observe or perform any other agreement or condition relating to any such Material Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Material Indebtedness or the beneficiary or beneficiaries of such Guarantees constituting Material Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect of the full amount thereof to be demanded; (iii) any Non-Guarantor Restricted Subsidiary fails to observe or perform any other agreement or condition relating to any such Material Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is that such Material Indebtedness is demanded to become due or becomes due to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Material Indebtedness is demanded or required to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect of the full amount thereof to be demanded; or (iv) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) with respect to all transactions under such Swap Contract resulting from (A) any event of default under such Swap Contract as to which any Loan Party is the

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Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (under and as defined in such Swap Contract) as to which any Loan Party is the sole Affected Party (as defined in such Swap Contract) and, in either event, the Swap Termination Value owed by the Loan Parties as a result thereof is greater than the Threshold Amount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)<u>Insolvency Proceedings</u>. The Borrower or any Restricted Subsidiary institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for forty-five (45) calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for forty-five (45) calendar days, or an order for relief is entered in any such proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)<u>Inability to Pay Debts; Attachment</u>. (i) The Borrower or any Restricted Subsidiary becomes unable, or admits in writing its inability or fails generally, to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person that constitutes Collateral and is not released, vacated or fully bonded within forty-five (45) days after its issue or levy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Judgments</u>. There is entered against the Borrower or any Restricted Subsidiary (i) one or more final non-appealable judgments or orders for the payment of money in an aggregate amount exceeding the Threshold Amount (to the extent not covered (subject to normal deductibles) by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any one or more non-monetary final non-appealable judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order and such proceedings remain unstayed or undismissed for a period of forty-five (45) consecutive days, or (B) there is a period of forty-five (45) consecutive days during which a stay of enforcement of such judgment is not in effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)<u>ERISA</u>. An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan that has resulted or could reasonably be expected to result, individually or in the aggregate, in liability of any Loan Party or any of its Restricted Subsidiaries or any of their respective ERISA Affiliates in an aggregate amount in excess of the Threshold Amount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)<u>Invalidity of Loan Documents</u>. Any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party contests in any manner the validity or enforceability of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document, in each case if any such event or circumstance could reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)<u>Change of Control</u>. A Change of Control shall occur.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)<u>Collateral Documents</u>. Any Collateral Document after delivery thereof shall for any reason (other than pursuant to the terms thereof including as a result of a transaction not prohibited under this Agreement) cease to create a valid and perfected Lien, with the priority required by the Collateral Documents on and security interest in any Collateral purported to be covered thereby, subject to Liens permitted under <u>Section 7.03</u> and other than as provided for in <u>Section 9.09</u>, in each case if any such event or circumstance could reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)<u>Guaranties</u>. Any guaranty of any Guarantor contained in the Guaranty and Collateral Agreement shall cease, for any reason, to be in full force and effect in any material respect, other than as provided for in <u>Section 9.09</u> or any Loan Party shall so assert.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)<u>Legal Process</u>: The expropriation, attachment, sequestration, distress or execution or any analogous process in any jurisdiction affecting asset(s) of the Loan Parties that could reasonably be expected to have a Material Adverse Effect

1.02.<u>Remedies Upon Event of Default</u>.

If any Event of Default occurs and is continuing, the Administrative Agent or the Collateral Agent (as applicable) shall, at the written request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, premiums (including any Prepayment Premium), fees and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower and the other Loan Parties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)declare the Commitments terminated, whereupon the Commitments shall immediately be terminated;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)terminate this Agreement and the other Loan Documents as to any future liability or obligation of the Loan Parties, but without affecting any of the Collateral Agent's Liens in the Collateral and without affecting the Obligations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents, under applicable Law or equity;

<u>provided</u> that upon the occurrence of an actual or deemed entry of an order for relief with respect to any Loan Party under the Bankruptcy Code of the United States or other Debtor Relief Law or upon the occurrence of any Event of Default described in <u>Section 8.01(g)</u>, in addition to the remedies set forth above, without any notice to the Borrower or any other Person or any act by the Required Lenders, the Commitments shall automatically terminate and the unpaid principal amount of all outstanding Loans, all interest, fees, premiums (including any Prepayment Premium) and other amounts as aforesaid and other Obligations shall automatically become due and payable in cash without further act of any Agent or any Lender and the Borrower shall automatically be obligated to repay all of such Obligations in full in cash, without presentment, demand, protest, or notice or other requirements of any kind, all of which are expressly waived by the Loan Parties.

Upon an acceleration of the Loans as a result of an Event of Default (including an acceleration upon the occurrence of an actual or deemed entry of an order for relief with respect to any Loan Party under the Bankruptcy Code of the United States or other Debtor Relief Law or upon the occurrence of any Event of Default described in <u>Section 8.01(g</u>) with respect to the Borrower, any Guarantor or any Restricted Subsidiary of the Borrower or any Guarantor), the amount of principal of, and premium on (if any), the Loans that becomes due and payable shall include the Prepayment Premium (if any), determined as of such date, shall become immediately due and payable by the Loan Parties and shall constitute part of the Obligations as if the Loans were being voluntarily prepaid or repaid as of such date, in view of the impracticability and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of each Lender's lost profits as a result thereof. Any Prepayment Premium payable pursuant to this Agreement shall be presumed to be the liquidated damages sustained by each Lender as the result of the early repayment or prepayment of the Loans and each of the Borrower and the other Loan Parties agrees that it is reasonable under the circumstances currently existing. EACH OF THE BORROWER AND THE OTHER LOAN PARTIES EXPRESSLY WAIVE (TO THE FULLEST EXTENT THEY MAY LAWFULLY DO SO) THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE FOREGOING PREMIUMS IN CONNECTION WITH ANY SUCH ACCELERATION. Each of the Borrower and the other Loan Parties expressly agrees (to the fullest extent it may lawfully do so) that: (A) the Prepayment Premium is reasonable and the product of an arm's-length transaction between sophisticated business people, ably represented by counsel; (B) the Prepayment Premium shall be payable notwithstanding the then prevailing market rates at the time payment or redemption is made; (C) there has been a course of

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conduct between Lenders, the Borrower and the other Loan Parties giving specific consideration in this transaction for such agreement to pay the Prepayment Premium; and (D) the Borrower and the other Loan Parties shall be estopped hereafter from claiming differently than as agreed to in this paragraph. Each of the Borrower and the Guarantors expressly acknowledges that its agreement to pay or guarantee the payment of the Prepayment Premium, to the Lenders as herein described is a material inducement to Lenders to make (or be deemed to make) the Loans.

1.03.<u>Application of Funds</u>.

After the exercise of remedies provided for in <u>Section 8.02</u> (or after the Loans have automatically become immediately due and payable), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:

<u>First</u>, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Agents and amounts payable under <u>Article III</u>) payable to the Agents in each of their capacities as such in accordance with the Loan Documents;

<u>Second</u>, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the respective Lenders and amounts payable under <u>Article III</u>) payable in accordance with the Loan Documents to the Lenders, ratably among them in proportion to the respective amounts described in this clause Second payable to them;

<u>Third</u>, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans, premiums (including the Prepayment Premium) and scheduled periodic payments, and any interest accrued thereon, ratably among the Lenders in proportion to the respective amounts described in this clause Third held by them;

<u>Fourth</u>, to payment of that portion of the Obligations constituting unpaid principal of the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them; and

<u>Last,</u> the balance, if any, after all of the Obligations have been indefeasibly paid in full (other than contingent indemnification obligations for which no underlying claim has been asserted), to the Borrower or as otherwise required by Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.04.<u>Equity Cure</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Notwithstanding anything to the contrary contained in <u>Section 8.01</u> and <u>Section 8.02</u>, in the event the Loan Parties fail to, or anticipate that that they will fail to comply with the requirements of the financial covenants set forth in <u>Section 7.01(a)</u> and/or <u>Section 7.01(b)</u> on the last Business Day of any month (a "<u>Test Date</u>"), during the period beginning on the tenth (10th) day prior to such Test Date and ending on the sixtieth (60th) day following such Test Date (the "<u>Cure Deadline</u>"), the Borrower shall have the right (the "<u>Cure Right</u>"), to issue Equity Interests, incur Indebtedness that is subordinated in right of payment to the Obligations on terms acceptable to the Required Lenders and that is otherwise permitted hereunder, or obtain a contribution to its common equity, in each case, for cash and upon receipt by the Borrower of such cash (the "<u>Cure Amount</u>") pursuant to the exercise by the Borrower of such Cure Right and shall submit to the Administrative Agent documentation to effect such recalculation and any of the financial covenants set forth in <u>Section 7.01(a)</u> and/or <u>Section 7.01(b)</u> giving effect to the following pro forma adjustments:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)solely for such month (and any twelve-month period that includes such month) and solely for the purpose of determining compliance with the applicable covenant in <u>Section 7.01(a)</u> and/or <u>Section 7.01(b)</u>, Tangible Net Worth (in the case of <u>Section 7.01(a)</u>) and/or Cash (in the case of <u>Section 7.01(b)</u>) shall be increased, in each case, on a dollar-for-dollar basis by an amount equal to the Cure Amount;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)other than as described in this <u>Section 8.04</u>, no Cure Amount shall be used when determining any ratio test or other purpose under this Agreement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)if, after giving effect to the foregoing calculations, the Loan Parties shall then be in compliance with the requirements of the applicable financial covenants set forth in <u>Section 7.01(a)</u> and <u>Section 7.01(b</u>), the Loan Parties shall be deemed to have satisfied the requirements of the applicable financial covenants set forth in <u>Section 7.01(a)</u> and <u>Section 7.01(b)</u> as of the relevant Test Date with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of the applicable financial covenant that had occurred shall be deemed cured for the purposes of this Agreement as of the applicable Test Date and shall be deemed to have never existed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Notwithstanding anything herein to the contrary (i) the Cure Right may not be exercised more than twice in any in consecutive four Fiscal Quarters, (ii) during the term of this Agreement, the Cure Right may be exercised no more than five (5) times, (iii) the Cure Amount shall be no greater than the amount required for purposes of causing the Loan Parties to comply with the applicable financial covenant as of the relevant Test Date, and (iv) the Cure Amount shall be disregarded for calculating financial covenants for all other purposes of this Agreement. The parties hereby acknowledge that this <u>Section 8.04</u> may not be relied on for purposes of calculating any financial ratios other than as applicable to <u>Section 7.01</u> and shall not result in any adjustment to any amounts other than as provided in this <u>Section 8.04</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)During the period from the applicable Test Date in which the applicable financial covenants set forth in <u>Section 7.01(a)</u> and/or <u>Section 7.01(b)</u> are not in compliance through the Cure Deadline, (i) if both (x) the Loan Parties are in compliance with such covenant or covenants on either one or both of the two (2) immediately succeeding Test Dates and (y) no Event of Default (other than with respect to the applicable financial covenants set forth in <u>Section 7.01(a</u>) and/or <u>Section 7.01(b)</u>) is continuing at such time, then such non-compliance shall be deemed cured and (ii) neither the Lenders nor the Agent shall exercise any remedies arising due to failure of the Loan Parties to comply with the requirements of the applicable financial covenants set forth in <u>Section 7.01(a)</u> and/or <u>Section 7.01(b</u>) on the applicable Test Date (including imposition of the Default Rate, acceleration of the Obligations or termination of any Commitments).

ARTICLE IX<br>ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT

1.01.<u>Appointment and Authority</u>.

Each of the Lenders hereby (i) irrevocably appoints Wilmington Trust to act on its behalf as Administrative Agent and as Collateral Agent hereunder and under the other Loan Documents and (ii) authorizes the Administrative Agent and the Collateral Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent and the Collateral Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. Without limiting the generality of the foregoing, each Lender authorizes and directs each Agent to enter into the Loan Documents to which it is a party on the date hereof on behalf of and for the benefit of the Lenders and to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with this Agreement and the other Loan Documents and acknowledge and agree that any such action by any Agent shall bind the Lenders. The provisions of this Article IX are solely for the benefit of the Agents and the Lenders, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions.

The Collateral Agent shall act as the "collateral agent" under the Loan Documents, and each of the Lenders hereby irrevocably appoints and authorizes the Collateral Agent to act as the agent of such Lender for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties pursuant to the Collateral Documents to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Collateral Agent, as "collateral agent" and any co-agents, sub-agents and attorneys-in-fact appointed by the Collateral Agent pursuant to <u>Section 9.05</u> for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted

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under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Administrative Agent or the Required Lenders, shall be entitled to the benefits of all provisions of this Article IX and <u>Section 10.04</u> (as though such co-agents, sub-agents and attorneys-in-fact were the "collateral agent" under the Loan Documents) as if set forth in full herein with respect thereto. Unless otherwise specifically set forth herein, the Collateral Agent shall have all the rights and benefits of the Administrative Agent set forth in this Article IX.

Any corporation or association into which any Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer all or substantially all of its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which such Agent is a party, will be and become the successor Agent, as applicable, under this Agreement and will have and succeed to the rights, powers, duties, immunities and privileges as its predecessor, without the execution or filing of any instrument or paper or the performance of any further act.

Each Lender acknowledges and agrees that no Agent shall have any duties or responsibilities except those expressly set forth herein and in the other Loan Documents. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, no Agent shall have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent. Regardless of whether a Default has occurred and is continuing and without limiting the generality of the foregoing sentence, the use of the term "agent" herein and in the other Loan Documents with reference to any Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

The permissive authorizations, entitlements, powers and rights (including the right to request that the Borrower take an action or deliver a document and the exercise of remedies following an Event of Default) granted to any Agent herein shall not be construed as duties. No Agent shall have any responsibility for interest or income on any funds held by it hereunder and any funds so held shall be held un-invested pending distribution thereof. Whether or not explicitly set forth therein, the rights, powers, protections, immunities and indemnities granted to each Agent herein shall apply to any document entered into by such Agent in connection with its role as Agent under the Loan Documents. Except to the extent expressly provided otherwise herein, the Required Lenders shall have the right to direct the Agents in all matters concerning the Loan Documents.

1.02.<u>Rights as a Lender</u>.

Each Person serving as an Agent hereunder shall, if it is a Lender, have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated or unless the context otherwise requires, and to the extent applicable, include each Person serving as an Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with any Loan Party or any Subsidiary or other Affiliate thereof as if such Person were not an Agent hereunder and without any duty to account therefor to the Lenders.

1.03.<u>Exculpatory Provisions</u>.

The Administrative Agent and the Collateral Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and their duties hereunder and thereunder shall be administrative and ministerial in nature. In performing its functions and duties hereunder, each Agent shall act solely as an agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for any Loan Party or any of their Subsidiaries. Without limiting the generality of the foregoing, the Agents:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent or the Collateral Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that no Agent shall be required to take any action that, in its opinion or the opinion of its counsel, may expose such Agent to liability or that is contrary to any Loan Document or applicable Law; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Loan Party or any of its Affiliates that is communicated to or obtained by it or any of its Affiliates in any capacity.

Notwithstanding anything to the contrary set forth in this Agreement or any other Loan Document, no Agent shall be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as such Agent shall believe in good faith shall be necessary, under the circumstances as provided in <u>Sections 8.02</u> and <u>10.01</u>) or (ii) in the absence of its own gross negligence or willful misconduct (such absence to be presumed unless otherwise determined by a court of competent jurisdiction by a final and non-appealable judgment). No Agent shall be deemed to have knowledge of any Default unless and until written notice, conspicuously marked as a "notice of default" describing such Default is given to the Administrative Agent by the Borrower or a Lender. Notwithstanding anything to the contrary contained herein or in any other Loan Document, any action taken (or not taken) by an Agent or its Related Parties at the direction or instruction of the Required Lenders shall not constitute gross negligence or willful misconduct on the part of such Agent or its Related Parties. Nothing in this Agreement or any other Loan Document shall require any Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties or in the exercise of any of its rights or powers hereunder if such Agent has reason to believe the repayment of such funds or adequate indemnity against or security for such risk or liability is not reasonably assured to it.

No Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, (v) the calculation of the Applicable Premium or the Prepayment Premium or (vi) the satisfaction of any condition set forth in <u>Article IV</u> or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to such Agent. For the avoidance of doubt, no Agent shall be obligated to calculate or confirm the calculations of any financial covenants set forth herein or the other Loan Documents or in any of the financial statements of the Loan Parties. No Agent shall be liable to the Lenders for any apportionment or distribution of payments made by it to such Lenders in good faith and if any such apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender to whom payment was due but not made shall be to recover pro rata from the other Lenders any payment equal to the amount to which they are determined to be entitled (and such other Lenders hereby agree to return to such Lender any such erroneous payments received by them).

No Agent shall be responsible for (i) perfecting, maintaining, monitoring, preserving or protecting the security interest or Lien granted under this Agreement, the Collateral Documents, any other Loan Document or any agreement or instrument contemplated hereby or thereby, (ii) the filing, re-filing, recording, re-recording or continuing of any document, financing statement, mortgage, assignment, notice, instrument of further assurance or other instrument in any public office at any time or times or (iii) providing, maintaining, monitoring or preserving insurance on or the payment of taxes with respect to any of the Collateral.

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No Agent shall be (i) required to qualify in any jurisdiction in which it is not presently qualified to perform its obligations as such Agent or (ii) required to take any enforcement action against any Loan Party or any other obligor outside of the United States.

No Agent shall be responsible for, nor chargeable with, knowledge of the terms and conditions of any other agreement, instrument, or document other than this Agreement and any other Loan Document to which such Agent is a party, whether or not an original or a copy of such agreement has been provided to such Agent.

No Agent shall be responsible for nor have any duty to monitor the performance or any action of any Loan Party, the Lenders, or any of their directors, members, officers, agents, affiliates or employees, nor shall they have any liability in connection with the malfeasance or nonfeasance by such party; the Agents may assume performance by all such Persons of their respective obligations.

No Agent shall be responsible or have any liability for, or have any duty to ascertain, inquire into, monitor or enforce, compliance with the provisions hereof relating to Disqualified Institutions. Without limiting the generality of the foregoing, the Administrative Agent and the Collateral Agent shall not (x) be obligated to ascertain, monitor or inquire as to whether any Lender or participant or prospective Lender or participant is a Disqualified Institution or (y) have any liability with respect to or arising out of any assignment or participation of Loans, or disclosure of confidential information, to any Disqualified Institution.

Phrases such as "satisfactory to the Administrative Agent or the Collateral Agent", "approved by the Administrative Agent or the Collateral Agent", "acceptable to the Administrative Agent or the Collateral Agent", "as determined by the Administrative Agent or the Collateral Agent", "in the Administrative Agent or the Collateral Agent's discretion", "selected by the Administrative Agent or the Collateral Agent", and phrases of similar import authorize and permit the Administrative Agent or the Collateral Agent to approve, disapprove, determine, act or decline to act in its discretion, it being understood that the Administrative Agent and/or the Collateral Agent in exercising such discretion under the Loan Documents shall be acting on the instructions of the Administrative Agent or the Required Lenders (or all Lenders to the extent required hereunder) and shall be fully protected in, and shall incur no liability in connection with, acting or failing to (or failing to act while awaiting such instruction) pursuant to such instructions. Upon request from the Collateral Agent, the Administrative Agent shall confirm that the Lenders executing any document or delivering any direction are, in fact, the Required Lenders.

Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or assignees, may rely on the Agents to carry out such Lender's, Affiliate's, participant's or assignee's customer identification program, or other obligations required or imposed under or pursuant to any anti-terrorism law, including any programs involving any of the following items relating to or in connection with the Borrower or its respective Subsidiaries, any of their respective Affiliates or agents, the Loan Documents or the transactions hereunder: (i) any identity verification procedures, (ii) any record keeping, (iii) any comparisons with government lists, (iv) any customer notices or (v) any other procedures required under any anti-terrorism law.

1.04.<u>Reliance by and Direction to Agents</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, legal order, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise made by the proper Person. Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. Each Agent may consult with legal counsel (who may be counsel for the Loan Parties), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything else to the contrary herein or in any of the Loan Documents, in each instance where the action or inaction of an Agent is required or permitted, or discretionary rights or powers conferred upon an Agent may be exercised or refrained from being exercised hereunder or under any of the other Loan Documents, or whenever reference is made in this Agreement to any discretionary action by, consent, designation, specification, requirement or approval of, notice, request or other communication from, or other direction given or action to be undertaken or to be (or not to be) suffered or omitted by any Agent or to any election, decision, opinion, acceptance, use of judgment, expression of satisfaction or other exercise of discretion, rights or remedies to be made (or not to be made) by an Agent, it is understood that in all cases such Agent shall not be required to take any action in the absence of written direction from the Required Lenders, and shall have the absolute right, in its sole discretion, to consult with, or seek the affirmative or negative vote from, the Required Lenders or, if otherwise applicable, the Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents or in any agreement to which the Required Lenders and such Agent is a party), and it may do so pursuant to a negative notice or otherwise, and each Agent shall be fully justified in failing or refusing to take any such action under the Loan Documents if it has not received such written instruction, advice or concurrence as such Agent deems appropriate from such Lenders. Upon receipt of such written direction from such Lenders, such Agent shall take such discretionary actions in accordance with such written instruction, advice or concurrence and, if it so requests, it shall first be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. This provision is intended solely for the benefit of each Agent and its successors and permitted assigns and is not intended to and will not entitle any other party hereto to any defense, claim or counterclaim, or confer any rights or benefits on any other party hereto. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or such other number of Lenders as may be expressly provided hereby or thereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders. The provisions of this paragraph are in addition to, and not in limitation of, the other exculpatory provisions set forth herein.

1.05.<u>Delegation of Duties</u>.

Each Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by such Agent. Each Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article IX and <u>Section 10.04</u> shall apply to any such sub-agent and to the Related Parties of the Agents and any such sub-agent. Any delegation by an Agent of its rights and powers shall not preclude the subsequent exercise of those rights and powers by such Agent, any revocation of such delegation or any subsequent delegation of any such rights or powers. Each party to this Agreement acknowledges and agrees that the Agents may from time to time use one or more outside service providers for the tracking of all UCC financing statements (and/or other collateral related filings and registrations from time to time) required to be filed or recorded pursuant to the Loan Documents and the notification to any Agent, of, among other things, the upcoming lapse or expiration thereof, and that each of such service providers will be deemed to be acting at the request and on behalf of the Borrower and the other Loan Parties. No Agent shall be liable for any action taken or not taken by any such service provider. The Agents shall not be responsible for the supervision, negligence or misconduct of any sub-agent except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that such Agent acted with gross negligence or willful misconduct in the selection of such sub-agent.

1.06.<u>Resignation or Removal of Agents</u>.

Any Agent may at any time give notice of its resignation to the Lenders and the Borrower and at any time the Required Lenders may remove any Agent by giving written notice to such Agent. Upon receipt of any such notice of resignation by the Lenders (in the case of resignation) or notice of removal by the applicable Agent (in the case of removal), the Required Lenders shall have the right, with the consent of the Borrower so long as no Event of Default has occurred and is continuing (such consent not to be unreasonably withheld or delayed), to appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may (but shall not be required to), on behalf of the

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Lenders, appoint a successor Agent, with the consent of the Borrower so long as no Event of Default has occurred and is continuing (such consent not to be unreasonably withheld or delayed, and the Borrower shall use commercially reasonable efforts to respond to any such consent request within ten (10) Business Days of receiving such request). Whether or not a successor has been appointed, the resignation of any Agent shall nonetheless become effective on the date that is 30 days following the retiring Agent's notice of resignation and, in the case of removal, such removal shall become effective upon the applicable date of removal set forth by the Required Lenders in the notice of removal (provided that such date is not later than 30 days following receipt of such notice by the Agent being removed) and (1) the retiring or removed Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents, (2) all payments, communications and determinations provided to be made by, to or through the retiring or removed Agent shall instead be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Agent as provided for above in this <u>Section 9.06</u> and (3) in no event shall the retiring or removed Agent or any of its Affiliates or any of their respective officers, directors, employees, agents, advisors or representatives have any liability to the Loan Parties, any Lender or any other Person or entity for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the failure of a successor Agent to be appointed and to accept such appointment. Upon the acceptance of a successor's appointment as Administrative Agent or Collateral Agent, as applicable, hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) or removed Agent, and the retiring or removed Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this <u>Section 9.06</u>). The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After any Agent's resignation or removal hereunder and under the other Loan Documents, the provisions of this <u>Article IX</u> and <u>Section 10.04</u> shall continue in effect for the benefit of such retiring or removed Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Agent was acting as such Agent.

1.07.<u>Non-Reliance on Agents and Lenders</u>.

Each Lender acknowledges that it has, independently and without reliance upon any Agent or any Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

1.08.<u>Agents May File Proofs of Claim</u>.

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent and the Collateral Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent or the Collateral Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated), by intervention in such proceeding or otherwise:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Agents (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Agents and their respective agents and counsel and all other amounts due the Lenders and the Agents under <u>Section 10.04</u>) allowed in such judicial proceeding; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

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and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agents and their agents and counsel, and any other amounts due the Agents under <u>Section 10.04</u>. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Agents, their agents and counsel, and any other amounts due the Agents under this Agreement out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Lenders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise.

Nothing contained herein shall be deemed to authorize any Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize any Agent to vote in respect of the claim of any Lender in any such proceeding.

1.09.<u>Collateral and Guaranty Matters</u>.

The Secured Parties irrevocably authorize the Collateral Agent:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)to release any Lien on any Collateral granted to or held by the Collateral Agent under any Loan Document (i) upon payment in full of all Obligations (other than contingent indemnification obligations for which no underlying claim has been asserted), (ii) that is transferred or to be transferred as part of or in connection with any Disposition permitted hereunder or any Involuntary Disposition (*provided* that, upon request by the Collateral Agent, the Borrower shall certify in an officer's certificate to the Collateral Agent and Lenders constituting Required Lenders that such Disposition or Involuntary Disposition is permitted under this Agreement (and each Lender agrees that the Collateral Agent may rely conclusively on any such certificate, without further inquiry)) or (iii) as approved in accordance with <u>Section 10.01</u>; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)to release any Guarantor from its obligations under the Guaranty and Collateral Agreement if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder (*provided* that, upon request by the Administrative Agent, the Borrower shall deliver to the Collateral Agent a certificate of a Responsible Officer certifying that such transaction has been or was consummated in compliance with the Loan Documents (it being agreed and understood that the Agents may conclusively rely without further inquiry on such certificate)).

Upon request by the Collateral Agent at any time, the Required Lenders will confirm in writing the Collateral Agent's authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty and Collateral Agreement, pursuant to this <u>Section 9.09</u>.

Should any Lender obtain possession or control of any assets of the Loan Parties in which, in accordance with the UCC or any other applicable law a security interest can be perfected by possession or control, such Lender shall notify the Collateral Agent thereof, and, promptly following the Collateral Agent's request (acting at the direction of the Required Lenders) therefor, shall deliver such Collateral to the Collateral Agent or otherwise deal with such Collateral in accordance with the Collateral Agent's instructions.

No Agent shall have any obligation whatsoever to any Lender or to any other Person to assure that the Collateral exists or is owned (whether in fee or by leasehold) by the Person purporting to own it or is cared for, protected, or insured or has been encumbered or that the Liens granted to the Collateral Agent pursuant to the Loan Documents have been properly or sufficiently or lawfully created, perfected, protected or enforced, or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights granted or available to any Agent in any of the Loan Documents. Without limiting the foregoing and notwithstanding anything contained in the Loan Documents or otherwise to the contrary, the Agents shall have no obligation or duty to

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(a) perfect, maintain, monitor, preserve or protect any security interest, right or Lien granted under this Agreement, any other Loan Document, or any agreement or instrument contemplated hereby or thereby or take any action to protect against any diminution in value of the Collateral; (b) file, record or continue any document, financing statement, continuation statement, mortgage, assignment, notice, instrument of further assurance, or other instrument in any public office at any time or times; or (c) provide, maintain, monitor or preserve insurance on or the payment of taxes with respect to any Collateral.

The powers conferred on the Collateral Agent under this Agreement and the other Loan Documents are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral and shall be relieved of all responsibility for any Collateral in its possession upon surrendering it or tendering surrender of it to any of the Loan Parties (or whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct). The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property, it being understood that Collateral Agent shall not have responsibility for ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not Collateral Agent has or is deemed to have knowledge of such matters. The Collateral Agent will not be liable or responsible for any loss or damage to any Collateral or for any diminution in the value thereof, by reason of any act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by the Collateral Agent, except to the extent a court of competent jurisdiction determines in a final and non-appealable judgment that the Collateral Agent acted with gross negligence or willful misconduct in the selection of such warehouseman, carrier, forwarding agency, consignee or other agent or bailee.

1.10.<u>Force Majeure</u>.

In no event shall any Agent be responsible or liable for any failure or delay in the performance of its obligations hereunder or under the other Loan Documents arising out of or caused by, directly or indirectly, forces beyond its control, including strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, pandemics, interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services, government action or the unavailability of the Federal Reserve Bank wire or telex or other wire or communication facility; it being understood such Agent shall use reasonable efforts to resume efforts as soon as practicable under the circumstances.

1.11.<u>Erroneous Payments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Each Lender hereby agrees that (i) if the Administrative Agent notifies such Lender that the Administrative Agent has determined in its sole discretion that any funds received by such Lender from the Administrative Agent or any of its Affiliates were erroneously or mistakenly transmitted to, or otherwise erroneously or mistakenly received by, such Lender (whether or not known to such Lender) (whether as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, an "<u>Erroneous Payment</u>") and demands the return of such Erroneous Payment (or a portion thereof), such Lender shall promptly, but in no event later than one Business Day thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Administrative Agent in same day funds at a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect and (ii) to the extent permitted by applicable law, such Lender shall not assert any right or claim to the Erroneous Payment, and hereby waives any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payments received, including waiver of any defense based on "discharge for value" or any similar theory or doctrine. A notice of the Administrative Agent to any Lender under this <u>clause (a)</u> shall be conclusive, absent manifest error.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Without limiting immediately preceding <u>clause (a)</u>, each Lender hereby further agrees that if it receives a payment from the Administrative Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Administrative Agent, (y) that was not preceded or accompanied by notice of payment, or (z) that such Lender otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part), then in each case, if an error has been made each such Lender is deemed to have knowledge of such error at the time of receipt of such Erroneous Payment, and to the extent permitted by applicable law, such Lender shall not assert any right or claim to the Erroneous Payment, and hereby waives, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payments received, including waiver of any defense based on "discharge for value" or any similar theory or doctrine. Each Lender agrees that, in each such case, it shall promptly (and, in all events, within one Business Day of its knowledge (or deemed knowledge) of such error) notify the Administrative Agent of such occurrence and, upon demand from the Administrative Agent, it shall promptly, but in all events no later than one Business Day thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Administrative Agent in same day funds at a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)The Borrower and each other Loan Party hereby agrees that (x) in the event an Erroneous Payment (or portion thereof) is not recovered from any Lender that has received such Erroneous Payment (or portion thereof) for any reason (and without limiting the Administrative Agent's rights and remedies under this <u>Section 9.11</u>), the Administrative Agent shall be subrogated to all the rights of such Lender with respect to such amount and (y) an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower or any other Loan Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)In addition to any rights and remedies of the Administrative Agent provided by law, Administrative Agent shall have the right, without prior notice to any Lender, any such notice being expressly waived by such Lender to the extent permitted by applicable law, with respect to any Erroneous Payment for which a demand has been made in accordance with this <u>Section 9.11</u> and which has not been returned to the Administrative Agent, to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final but excluding trust accounts), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Administrative Agent or any Affiliate, branch or agency thereof to or for the credit or the account of such Lender. Administrative Agent agrees promptly to notify the Lender after any such setoff and application made by Administrative Agent; provided, that the failure to give such notice shall not affect the validity of such setoff and application.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Each party's obligations under this <u>Section 9.11</u> shall survive the resignation or replacement of the Administrative Agent, the termination of the Commitments or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Loan Document.

1.12.<u>Enforcement</u>. Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with <u>Section 8.02</u> and the Collateral Documents for the benefit of all the Lenders or Secured Parties, as applicable; *provided*, *however*, that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) any Lender from exercising setoff rights in accordance with <u>Section 10.08</u> , or (c) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to the Loan Parties under any federal, state or foreign bankruptcy, insolvency, receivership or similar law; and *provided*, *further*, that if at any time there is no Person acting as the Administrative Agent hereunder and under the other Loan Documents, then the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to <u>Section 8.02</u> and the Collateral Documents, as applicable.

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1.13.<u>Survival</u>. The agreements in this Article IX shall survive the resignation of any Agent, the replacement of any Lender and the repayment, satisfaction or discharge of all the Obligations.

ARTICLE X<br>MISCELLANEOUS

1.01.<u>Amendments</u>.

No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders (except as otherwise set forth in <u>clauses (a)</u> through <u>(d)</u> below) and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; <u>provided</u> that

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)no such amendment, waiver or consent shall:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)increase the Commitment of any Lender without the written consent of such Lender;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)reduce the principal of, or the rate of interest specified herein on, any Loan, or (subject to clause (i) of the final proviso to this <u>Section 10.01</u>) any fees, premiums (including any Prepayment Premium) or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender entitled to receive such payment of principal, interest, fees or other amounts; <u>provided</u>, however<u>,</u> that only the consent of the Required Lenders shall be necessary (i) to amend the definition of "Default Rate" or to waive any obligation of the Borrower to pay interest at the Default Rate or (ii) waive a Default or Event of Default or any mandatory prepayment required by <u>Section 2.03(b)</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)postpone any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees, premiums (including any Prepayment Premium) or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender entitled to receive such payment; <u>provided</u>, <u>however</u>, that only the consent of the Required Lenders shall be necessary to waive a Default or Event of Default or any mandatory prepayment required by <u>Section 2.03(b)</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)change <u>Section 2.09</u> or <u>Section 8.03</u> in a manner that would alter the *pro rata* sharing of payments required thereby without the written consent of each Lender directly and adversely affected thereby;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)change <u>Section 10.06</u> in a manner that would impose additional restrictions on a Lender's ability to assign any of its rights or obligations under this Agreement or any other Loan Document without the written consent of each Lender directly and adversely affected thereby;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)change any provision of this <u>Section 10.01(a)</u> or the definition of "Required Lenders" without the written consent of each Lender directly and adversely affected thereby;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)release all or substantially all of the Collateral without the written consent of each Lender; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)release the Borrower or all or substantially all of the Guarantors without the written consent of each Lender;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)unless also signed by the Administrative Agent and the Collateral Agent, no amendment, waiver or consent shall affect the rights or duties of the Administrative Agent or the Collateral Agent under this Agreement or any other Loan Document;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)the Administrative Agent and the Borrower may amend or modify this Agreement and any other Loan Document to cure any ambiguity, omission, defect or inconsistency therein; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)the Agent Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the respective parties thereto;

<u>provided</u> that notwithstanding anything to the contrary herein, (i) each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code of the United States supersedes the unanimous consent provisions set forth herein and (ii) the Required Lenders shall determine whether or not to allow a Loan Party to use cash collateral in the context of a bankruptcy or insolvency proceeding and such determination shall be binding on all of the Lenders.

Further, notwithstanding any provision herein to the contrary, the Borrower may, by written notice to the Administrative Agent from time to time, make one or more offers (each, a "<u>Loan Modification Offer</u>") to all of the Lenders to make one or more Permitted Amendments pursuant to procedures reasonably specified by the Borrower and reasonably acceptable to the Administrative Agent. Such notice shall set forth (i) the terms and conditions of the requested Permitted Amendment and (ii) the date on which such Permitted Amendment is requested to become effective (which shall not be less than ten (10) Business Days nor more than thirty (30) Business Days after the date of such notice, or such shorter periods as are acceptable to the Administrative Agent). Permitted Amendments shall become effective only with respect to the Loans of the Lenders that accept the applicable Loan Modification Offer (the "<u>Loan Modification Accepting Lenders</u>"), and only with respect to the Loans as to which such Lender's acceptance has been made. The Borrower and each Loan Modification Accepting Lender shall execute and deliver to the Administrative Agent an agreement reasonably satisfactory to the Administrative Agent giving effect to the Permitted Amendment (a "<u>Loan Modification Agreement</u>") and such other documentation as the Administrative Agent shall reasonably specify to evidence the acceptance of the Permitted Amendments and the terms and conditions thereof. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Loan Modification Agreement. Each of the parties hereto hereby agrees that, upon the effectiveness of any Loan Modification Agreement, this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Permitted Amendment evidenced thereby.

1.02.<u>Notices and Other Communications</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Notices Generally</u>. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by email as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)if to the Borrower or any other Loan Party, or any Agent, to the address or electronic mail address specified for such Person on <u>Schedule 10.02</u>; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)if to any Lender, to the address, electronic mail address or telephone number set forth in the Administrative Questionnaire as amended from time to time in writing to the Administrative Agent.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received. Notices delivered through electronic communications, to the extent permitted by subsection (b) below, shall be effective as provided in such subsection (b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Electronic Communications; Platform</u>. Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; <u>provided</u> that the foregoing shall not apply to notices to any Lender pursuant to <u>Article II</u> if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. Any Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; <u>provided</u> that approval of such procedures may be limited to particular notices or communications. Each

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Lender agrees that notice to it (in the form of electronic communications) specifying that any required deliverables have been posted to the Platform (as defined below) shall constitute effective delivery of such deliverables to such Lender for purposes of the Loan Documents.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgement from the intended recipient (such as by the "return receipt requested" function, as available, return e-mail or other written acknowledgement), <u>provided</u> that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

Each Loan Party agrees that the Administrative Agent may make any deliverables available to the Lenders by posting such deliverables on IntraLinks, Debtdomain, SyndTrak or a substantially similar electronic transmission system (the "***Platform***"). Each Loan Party hereby acknowledges that (i) the Administrative Agent will make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively, "***Borrower Materials***") by posting the Borrower Materials on the Platform and (ii) certain of the Lenders may have personnel who do not wish to receive material non-public information with respect to the Borrower or its securities (each, a "***Public Lender***"). The Borrower hereby agrees that if it or any of its parent companies has publicly traded equity or debt securities in the United States, it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that all such Borrower Materials shall be clearly and conspicuously marked "PUBLIC". By marking Borrower Materials "PUBLIC," the Borrower authorizes such Borrower Materials to be made available to a portion of the Platform designated "Public Investor," which is intended to contain only information that is publicly available or not material information (though it may be sensitive and proprietary) with respect to the Borrower or its securities for purposes of United States federal and state securities laws or is of a type that would be publicly available if the Borrower were a public reporting company (in each case, as reasonably determined by the Borrower). Notwithstanding the foregoing, the Borrower shall not be under any obligation to mark any Borrower Materials "PUBLIC"; *provided*, that the Administrative Agent shall be entitled to treat any Borrower Materials that are not marked "PUBLIC" as being suitable only for posting on a portion of the Platform not marked as "Public Investor". Each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the "Private Side Information" or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender's compliance procedures and applicable law, including United States federal and state securities laws, to make reference to communications that are not made available through the "Public Side Information" portion of the Platform and that may contain material non-public information with respect to the Borrower or its Subsidiaries or their securities for purposes of United States federal or state securities laws. The following Borrower Materials shall be deemed to be marked "PUBLIC" unless the Borrower notifies the Administrative Agent promptly that any such document contains material nonpublic information: (1) the Loan Documents (excluding schedules, certificates, computations and any documents related to the foregoing, unless consented to by the Borrower in writing), and (2) the information delivered pursuant to <u>Sections 6.01(a) and (b)</u>.

The Platform is provided "as is" and "as available." The Agents and their Related Parties do not warrant the adequacy of the Platform. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by any Agent or their Related Parties in connection with the Platform. In no event shall any Agent or their Related Parties have any liability to the Loan Parties, any Lender or any other Person for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the Loan Parties' or the Administrative Agent's or the Collateral Agent's transmission of communications through the internet, except to the extent the liability of any Agent is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted primarily from such Agent's gross negligence or willful misconduct.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Change of Address, Etc</u>. Each of the Borrower and the Agents may change its address or electronic mail address for notices and other communications hereunder by notice to the other parties hereto. Each Lender may change its address or electronic mail address for notices and other communications hereunder by notice to the Borrower and by amendment to its Administrative Questionnaire as to the Administrative Agent. In addition, each Lender agrees to update its Administrative Questionnaire from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Reliance by Agents and Lenders</u>. The Agents and the Lenders shall be entitled to rely and act upon any notices (including telephonic notices) purportedly given by or on behalf of any Loan Party even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Loan Parties shall indemnify each Agent, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of a Loan Party. All telephonic notices to and other telephonic communications with any Agent may be recorded by such Agent, and each of the parties hereto hereby consents to such recording.

1.03.<u>No Waiver; Cumulative Remedies</u>.

No failure by any Lender or any Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

1.04.<u>Expenses; Indemnity; Damage Waiver</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Costs and Expenses</u>. The Loan Parties shall pay (i) all reasonable and documented out-of-pocket costs and expenses incurred by the Secured Parties (but limited to (x) one primary counsel each for (I) the Administrative Agent and the Collateral Agent (which shall be Ballard Spahr LLP for any and all of the foregoing in connection herewith and other matters, to occur on or prior to or otherwise in connection with the Closing Date) and (II) the Lenders, and (y) one local counsel each for (I) the Administrative Agent and the Collateral Agent and (II) the Lenders, in each case, as reasonably necessary in each relevant jurisdiction material to the interests of the Lenders taken as a whole (and solely in the case of a conflict of interest, one additional counsel in each relevant jurisdiction that is material to each group of similarly situated affected Lenders)); <u>provided</u>, <u>however</u>, that the fees, charges and disbursements of counsel for the Lender in connection with the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof shall not exceed $300,000, and (ii) all reasonable and documented out-of-pocket costs and expenses incurred by the Secured Parties (including the fees, charges and disbursements of any counsel for the Secured Parties) in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this <u>Section 10.04</u>, or (B) in connection with the Loans made hereunder, including all such out-of-pocket costs and expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Indemnification by the Loan Parties</u>. **THE LOAN PARTIES SHALL INDEMNIFY EACH AGENT (AND ANY SUB-AGENT THEREOF), EACH LENDER AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN "<u>INDEMNITEE"</u>) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES (INCLUDING THE REASONABLE FEES, CHARGES AND DISBURSEMENTS OF (X) ONE PRIMARY OUTSIDE COUNSEL FOR THE AGENTS AND THEIR RELATED PARTIES, TAKEN AS A WHOLE, (Y) ONE PRIMARY OUTSIDE COUNSEL FOR THE OTHER INDEMNITEES AND THEIR RELATED PARTIES, TAKEN AS A WHOLE, AND (Z) IN THE CASE OF ACTUAL OR** 

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**POTENTIAL CONFLICT OF INTEREST, SEPARATE COUNSEL FOR INDEMNITEES TO THE EXTENT NEEDED TO AVOID SUCH CONFLICT), INCURRED BY ANY INDEMNITEE OR ASSERTED AGAINST ANY INDEMNITEE BY ANY THIRD PARTY OR BY THE BORROWER OR ANY OTHER LOAN PARTY ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (I) THE EXECUTION OR DELIVERY OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, THE PERFORMANCE BY THE PARTIES HERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR, IN THE CASE OF THE AGENTS (AND ANY SUB-AGENT THEREOF) AND THEIR RELATED PARTIES ONLY, THE ADMINISTRATION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS OR THE ENFORCEMENT OF THE LOAN DOCUMENTS, (II) ANY LOAN OR THE USE OR PROPOSED USE OF THE PROCEEDS THEREFROM, (III) ANY ACTUAL OR ALLEGED RELEASE OF HAZARDOUS MATERIALS AT, ON, UNDER OR FROM ANY PROPERTY OWNED, LEASED OR OPERATED BY A LOAN PARTY OR ANY SUBSIDIARY, OR ANY ENVIRONMENTAL LIABILITY RELATED TO A LOAN PARTY OR ANY SUBSIDIARY OR THEIR RESPECTIVE FACILITIES AND/OR PROPERTIES, (IV) ANY BREACH BY ONE OR MORE OF THE LOAN PARTIES OF THEIR OBLIGATIONS UNDER THE LOAN DOCUMENTS, (V) ANY CLAIM, SUIT, OR ACTION BASED ON A VIOLATION OR ALLEGED VIOLATION OF ANY CONSUMER CREDIT LAWS OR OTHERWISE ARISING OUT OF ANY REGULATORY INVESTIGATION OR PROCEEDING**, **OR (VI) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, WHETHER BROUGHT BY A THIRD PARTY OR BY THE BORROWER OR ANY OTHER LOAN PARTY, AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE INDEMNITEE; <u>PROVIDED</u> THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE (X) DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE BAD FAITH (OTHER THAN WITH RESPECT TO THE AGENTS AND THEIR RELATED PARTIES), GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR, OTHER THAN WITH RESPECT TO THE AGENTS AND THEIR RELATED PARTIES, THE MATERIAL BREACH OF SUCH INDEMNITEE'S FUNDING OBLIGATIONS UNDER THE LOAN DOCUMENTS, OR (Y) THAT ARISE OUT OF DISPUTES SOLELY AMONG THE INDEMNITEES AND NOT ARISING OUT OF ANY ACT OR OMISSION OF THE BORROWER OR ANY OF ITS SUBSIDIARIES (OTHER THAN CLAIMS AGAINST AN INDEMNITEE ACTING IN ITS CAPACITY AS ADMINISTRATIVE AGENT OR COLLATERAL AGENT). THIS <u>SECTION 10.04(B)</u> SHALL NOT APPLY WITH RESPECT TO TAXES OTHER THAN ANY TAXES THAT REPRESENT LOSSES, CLAIMS, DAMAGES, ETC. ARISING FROM ANY NON-TAX CLAIM. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY LOAN DOCUMENTS, ANY RIGHTS TO REIMBURSEMENT OR INDEMNIFICATION OF ANY INDEMNITEE THAT IS A LENDER UNDER ANY LOAN DOCUMENTS SHALL ONLY APPLY TO EXPENSES, LOSSES, CLAIMS, DAMAGES AND LIABILITIES INCURRED OR ARISING OUT OF ANY SUCH INDEMNITEE'S STATUS AS A DEBT FINANCING PROVIDER TO THE LOAN PARTIES (AND NOT AS AN EQUITY HOLDER OF BORROWER).**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Reimbursement by Lenders</u>. To the extent that the Loan Parties for any reason fail to indefeasibly pay any amount required under <u>clauses (a)</u> or <u>(b)</u> of this Section to be paid by them to any Agent (or any sub-agent thereof) or any Related Party thereof, each Lender severally agrees to pay to,

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indemnify or hold harmless such Agent (or any such sub-agent) or such Related Party, as the case may be, such Lender's pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought (or if such expense or indemnity payment is sought after the date on which the Obligations have been paid in full and the Commitments have been terminated, determined as of the day immediately prior to the date on which the Obligations were paid in full)) of such unpaid amount, <u>provided</u> that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Agent (or any such sub-agent) in its capacity as such, or against any Related Party thereof acting for such Agent (or any such sub-agent) in connection with such capacity. For purposes hereof, a Lender's "pro rata share" shall be determined based upon its share of the sum of the outstanding Loans and unused Commitments (if any) at the time or, if such expense or indemnity payment is sought after the date on which the Obligations have been paid in full and the Commitments have been terminated, determined as of the day immediately prior to the date on which the Obligations were paid in full. The obligations of the Lenders under this <u>clause (c)</u> are subject to the provisions of <u>Section 2.08(d)</u>. Each Lender hereby authorizes the Administrative Agent and the Collateral Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent or the Collateral Agent to such Lender from any source against any amount due to the Administrative Agent or the Collateral Agent under this <u>clause (c)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Waiver of Consequential Damages, Etc</u>. **TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, NONE OF THE PARTIES HERETO SHALL ASSERT, AND EACH SUCH PARTY HEREBY WAIVES, ANY CLAIM AGAINST ANY OTHER PARTY OR THEIR RESPECTIVE RELATED PARTIES, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, ANY LOAN OR THE USE OF THE PROCEEDS THEREOF. NO SUCH PARTY NOR ANY OF THEIR RESPECTIVE RELATED PARTIES SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY UNINTENDED RECIPIENTS OF ANY INFORMATION OR OTHER MATERIALS DISTRIBUTED BY IT THROUGH TELECOMMUNICATIONS, ELECTRONIC OR OTHER INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY SO LONG AS SUCH PERSON IS IN COMPLIANCE WITH <u>SECTION 10.07</u> HEREOF.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Payments</u>. All amounts due under this <u>Section 10.04</u> shall be payable not later than ten (10) Business Days after demand therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Survival</u>. The agreements in this <u>Section 10.04</u> shall survive the resignation of any Agent, the replacement of any Lender and the repayment, satisfaction or discharge of all the Obligations.

1.05.<u>Payments Set Aside</u>.

To the extent that any payment by or on behalf of any Loan Party is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, <u>plus</u> interest thereon from the date of such demand to the date such payment is made at a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. The obligations of the Lenders under <u>clause (b)</u> of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

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1.06.<u>Successors and Assigns</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Successors and Assigns Generally</u>. The provisions of this Agreement and the other Loan Documents shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder or thereunder without the prior written consent of the Administrative Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of <u>Section 10.06(b)</u> or (ii) by way of pledge or assignment of a security interest subject to the restrictions of <u>Section 10.06(d)</u> (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Assignments by Lenders</u>. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including all or a portion of the Loans); <u>provided</u> that any such assignment shall be subject to the following conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Minimum Amounts</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)in the case of an assignment of the entire remaining amount of the Loans at the time owing to the assigning Lender or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)in any case not described in <u>Section 10.06(b)(i)(A),</u> the aggregate amount of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent shall not be less than $1,000,000 (and integral multiples in excess thereof) unless the Administrative Agent consents (such consent not to be unreasonably withheld or delayed); <u>provided</u> that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single assignee (or to an assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>Assignment and Assumption</u>. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500 payable to the Administrative Agent by the assignee with respect to such assignment (other than with respect to assignments pursuant to <u>Section 10.13,</u> in which case such fee shall be payable to the Administrative Agent by the Borrower); <u>provided</u> that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire, all requested "know your customer" documentation and the applicable tax forms under <u>Section 3.01(e)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)<u>Borrower's Consent</u>. So long as no Event of Default has occurred and is continuing, the Borrower shall have provided its prior written consent to any such assignment (other than any assignment to any Lender, Affiliate of a Lender or Approved Fund), such consent not to be unreasonably conditioned, withheld or delayed, and shall be deemed given if not affirmatively denied by the Borrower within ten (10) Business Days after request therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)<u>No Assignment to Borrower</u>. No such assignment shall be made to the Borrower or any of Borrower's Affiliates or Subsidiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)<u>No Assignment to Natural Persons</u>. No such assignment shall be made to a natural person.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)<u>No Assignment to Disqualified Institutions</u>. No such assignment shall be made to a Disqualified Institution. The Administrative Agent shall have no responsibility for or duty to ascertain or inquire into compliance by any Lender or other person with the restrictions and limitations relating to Disqualified Institutions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)<u>Taxes</u>. Assignee shall be entitled to the benefit of <u>Section 3.01</u> only if the Borrower is notified of the assignment and such assignee complies with the requirements of <u>Section 3.01(e),</u> and in no event shall an assignee be entitled to receive any greater payment under <u>Section 3.01(a)</u> than the assignor would be entitled to receive.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to <u>Section 10.06(c)</u>, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of <u>Sections 3.01</u> (subject to the requirements of <u>Section 3.01</u>), <u>3.02</u>, and <u>10.04</u> with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Register</u>. The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices in the United States a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of (and stated interest on) the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "<u>Register</u>"). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding any notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior written notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Certain Pledges; Participations</u>. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; <u>provided</u> that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. If any Lender sells (or is deemed to have sold) a participation in all or a portion of its rights or obligations under this Agreement to any Person, except as otherwise expressly provided herein, (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Agents and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any Lender that sells (or is deemed to have sold) to any Person a participation in all or a portion of such Lender's rights and/or obligations under this Agreement shall, as a non-fiduciary agent of the Borrower, maintain a register ("<u>Participation Register</u>") with respect to the ownership and transfer of each participation containing the information set forth in the Register described in <u>Section 10.06(c)</u>; <u>provided</u> that no Lender shall have any obligation to disclose all or any portion of the Participation Register (including the identity of any Person holding a participation interest or any information relating to a Person's interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the U.S. Treasury Regulations and Section 1.163-5(b) of the Proposed Treasury Regulations (or any amended or successor version). No transfer of a participation shall be effective unless recorded in such Participation Register. The entries in the Participation Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participation

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Register as the owner of such participation for all purposes of this Credit Agreement notwithstanding any notice to the contrary. No transfer of a participation shall be effective if made to (i) a natural person or (ii) only if the list of Disqualified Institutions has been made available to each Lender, a Disqualified Institution. For the avoidance of doubt, the Administrative Agent shall have no responsibility for maintaining a Participation Register.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Electronic Execution of Assignments</u>. The words "execution," "signed," "signature," and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; <u>provided</u> that notwithstanding anything contained herein to the contrary, no Agent is obligated to agree to accept electronic signatures in any form or in any format unless expressly agreed to by such Agent pursuant to procedures approved by it.

1.07.<u>Treatment of Certain Information; Confidentiality</u>.

Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its attorneys, professional advisors, independent auditors and Affiliates and to its and its Affiliates' respective partners, directors, officers, employees, agents, advisors, sub-advisors, lenders, and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and shall agree to keep such Information confidential prior to any such disclosure), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners) or pursuant to legal process, in which case it shall notify the Borrower of the disclosure thereof unless such notification is prohibited by law, (c) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process, in which case it shall notify the Borrower of the disclosure thereof unless such notification is prohibited by law, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this <u>Section 10.07</u>, to any assignee of, or any prospective assignee of, any of its rights or obligations under this Agreement, (g) with the prior written consent of the Borrower, (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this <u>Section 10.07</u> or (y) becomes available to any Agent, any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than a Loan Party, (i) consisting of general portfolio information that does not identify any Loan Party or (j)(A) to an investor or prospective investor in securities issued by an Approved Fund of any Lender that also agrees that Information shall be kept confidential and used solely for the purpose of evaluating an investment in such securities issued by an Approved Fund of any Lender, (B) to a trustee, collateral manager, servicer, backup servicer, noteholder or secured party in securities issued by an Approved Fund of any Lender in connection with the administration, servicing and reporting on the assets serving as collateral for securities issued by such Approved Fund, or (C) to a nationally recognized rating agency that requires access to information regarding the Loan Parties, the Loans and Loan Documents in connection with ratings issued in respect of securities issued by an Approved Fund of any Lender.

For purposes of this <u>Section 10.07</u>, "<u>Information</u>" means all information received from a Loan Party relating to the Loan Parties, any Subsidiary or any of their respective Affiliates or any of their respective businesses, other than any such information that is available to any Agent or any Lender on a nonconfidential basis prior to disclosure by such Loan Party or any Subsidiary and not due to a known breach of this <u>Section 10.07</u>. Any Person required to maintain the confidentiality of Information as provided in this <u>Section 10.07</u> shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

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Each Agent and the Lenders acknowledges that (a) the Information may include material non-public information concerning the Loan Parties, any Subsidiary or any of their respective Affiliates, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including United States Federal and state securities Laws.

1.08.<u>Set-off</u>.

If an Event of Default shall have occurred and be continuing, each Agent, Lender and each of their Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final at any time held and other obligations at any time owing by such Agent, Lender or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender, irrespective of whether or not such Agent or Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Agent or Lender different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Agent, Lender and their Affiliates under this <u>Section 10.08</u> are in addition to other rights and remedies (including other rights of setoff) that such Agent, Lender or their Affiliates may have. Each Lender agrees to notify the applicable Loan Party and the Administrative Agent promptly after any such setoff and application, <u>provided</u> that the failure to give such notice shall not affect the validity of such setoff and application.

1.09.<u>Interest Rate Limitation</u>.

Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the "<u>Maximum Rate</u>"). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

1.10.<u>Counterparts; Integration; Effectiveness; Electronic Signature</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in <u>Article IV</u>, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Any signature to this Agreement may be delivered by facsimile, electronic mail (including pdf) or as any electronic signature complying with the U.S. federal ESIGN Act of 2000 or the New York Electronic Signature and Records Act or any other similar state laws based on the Uniform Electronic Transactions Act or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and electronic signatures or the keeping of records in electronic form shall be valid and effective for all purposes to the fullest extent permitted by applicable law. For the

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avoidance of doubt, the foregoing also applies to any amendment, extension or renewal of this Agreement. Each of the parties hereto hereby represents and warrants to the other parties hereto that it has the corporate capacity and authority to execute this Agreement through electronic means and there are no restrictions for doing so in such party's constitutive documents, including having the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system.

1.11.<u>Survival of Representations and Warranties</u>.

All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of the making of any Loan, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied.

1.12.<u>Severability</u>.

If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

1.13.<u>Replacement of Lenders</u>.

If (i) any Lender requests compensation under <u>Section 3.02,</u> (ii) the Borrower is required to pay any Indemnified Taxes or additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to <u>Section 3.01</u>, or (iii) any Lender does not consent to an amendment of the terms of this Agreement sought by the Borrower in accordance with the procedures set forth in <u>Section 10.01</u> or (iv) any Lender is a Defaulting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, <u>Section 10.06</u>), all of its interests, rights (other than its existing rights to payments pursuant to Section 3.01 or Section 3.02) and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), <u>provided</u> that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)the Borrower shall have paid to the Administrative Agent the assignment fee specified in <u>Section 10.06(b)</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)in the case of any such assignment resulting from a claim for compensation under <u>Section 3.02</u> or payments required to be made pursuant to <u>Section 3.01</u>, such assignment will result in a reduction in such compensation or payments thereafter; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)such assignment does not conflict with applicable Laws.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

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1.14.<u>GOVERNING LAW; JURISDICTION</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>GOVERNING LAW</u>. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>SUBMISSION TO JURISDICTION</u>. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY AGENT OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>WAIVER OF VENUE</u>. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS <u>SECTION 10.14</u>. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>SERVICE OF PROCESS</u>. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN <u>SECTION 10.02</u>. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

1.15.<u>WAIVER OF RIGHT TO TRIAL BY JURY</u>.

EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS <u>SECTION 10.15</u>.

1.16.<u>USA Patriot Act Notice</u>.

Each Lender that is subject to the Patriot Act (as hereinafter defined) and/or the Beneficial Ownership Regulation and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56

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(signed into law October 26, 2001)) (the "<u>Patriot Act</u>") and/or the Beneficial Ownership Regulation, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Patriot Act and/or the Beneficial Ownership Regulation.

1.17.<u>No Advisory or Fiduciary Relationship</u>.

In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), the Borrower acknowledges and agrees, on behalf of itself and its Subsidiaries, that: (a)(i) the arranging and other services regarding this Agreement provided by the Secured Parties are arm's-length commercial transactions between the Borrower and certain of its Subsidiaries, on the one hand, and the Secured Parties, on the other hand, (ii) the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (iii) the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (b)(i) the Secured Parties are and have been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not and will not be acting as an advisor, agent or fiduciary, for the Borrower or any of its Subsidiaries or any other Person and (ii) the Secured Parties have no obligation to the Borrower or any of its Subsidiaries with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (c) the Secured Parties and their Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Subsidiaries, and no Agent has any obligation to disclose any of such interests to the Borrower or its Subsidiaries. To the fullest extent permitted by law, the Borrower hereby waives and releases any claims that it may have against the Secured Parties with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

1.18.<u>Acknowledgement and Consent to Bail-In of Affected Financial Institutions</u>.

Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;the effects of any Bail-In Action on any such liability, including, if applicable:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;a reduction in full or in part or cancellation of any such liability;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.

1.19.<u>Entire Agreement</u>. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. Any previous agreement among or representations from the parties or their Affiliates with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement

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or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.

[SIGNATURE PAGES FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

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| | |
|:---|:---|
| BORROWER: | **PROSPER MARKETPLACE, INC.** |
|  | By:&nbsp;&nbsp;&nbsp;&nbsp;<u>/s/ David Kimball&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> |
|  | Name: David Kimball <br>Title: &nbsp;&nbsp;&nbsp;&nbsp;Chief Executive Officer |

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Signature Page to Credit Agreement

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| | |
|:---|:---|
| AGENTS: | **WILMINGTON TRUST**, as Administrative Agent and as Collateral Agent |
|  | By:&nbsp;&nbsp;&nbsp;&nbsp;<u>/s/ Jay Campbell&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> |
|  | Name: Jay Campbell |
|  | Title: Assistant Vice President |

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Signature Page to Credit Agreement

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| | |
|:---|:---|
| LENDERS: | **NB SPECIALTY FINANCE FUND II LP**, as a Lender |
|  | By:&nbsp;&nbsp;&nbsp;&nbsp;<u>/s/ Zhengyuan Lu&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> |
|  | Name: Zhengyuan Lu |
|  | Title: Authorized Signatory |

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Signature Page to Credit Agreement

## Exhibit 10.1

**EXHIBIT 10.1**

Borrower Registration Agreement and Limited Power of Attorney

This Personal Loan Borrower Registration Agreement (this "Agreement") is made and entered into between you ("you" and "your" refer to each and every borrower, including any joint applicant/co-borrower) and Prosper Funding LLC ("Prosper").

The Prosper marketplace is an online credit platform (the "Platform") operated by Prosper. Among other things, Prosper offers access to unsecured personal loans in the form of the promissory note attached hereto as Exhibit A (the "Promissory Note"). All personal loans originated through the Platform are made by WebBank, a Utah-chartered industrial bank ("WebBank" or "Bank"). A separate legal entity, Prosper Marketplace, Inc. ("PMI"), provides services to Bank in connection with the origination of such personal loans. Prosper services all personal loans made through the Platform, but has engaged certain third parties (including PMI) to act as agents of Prosper in the performance of such servicing. The following Agreement describes those services as well as your rights and obligations should you elect to register as a personal loan borrower on the Platform. For purposes of clarity, this Agreement shall apply to personal loans offered through the Platform, and all references to "loan" shall mean personal loan, unless otherwise stated. Except for Section 24, when used in this Agreement "we" or "us" refers to Prosper, Bank and their respective agents and affiliates (including without limitation PMI in its capacity as agent of Prosper or Bank).

**1. Registration as a Prosper Borrower.** You are registering with Prosper as a borrower so that you can make loan requests ("listings") through the Platform. In entering into this Agreement, you are agreeing to comply with the Terms of Use and Electronic Consent ("Terms of Use") for the Platform as well as any other rules or policies set forth on Prosper's website (<u>www.prosper.com</u>)(collectively, the "Prosper Terms and Conditions"). The Prosper Terms and Conditions are accessible on Prosper's website.

**2. Authorization to Obtain Credit Report.** By registering on the Platform as a borrower, you authorize us or our agents (including PMI), to obtain credit reports from one or more consumer credit reporting agencies (a) in connection with an application for an extension of credit, (b) in order to consider your eligibility for and to present you with other credit products, offers or services, or (c) at any other time in our sole discretion during the term of your loan. We may use the credit reports for any purpose, including but not limited to (i) for authentication purposes, to make sure you are who you say you are; (ii) to make credit decisions; (iii) for modeling, audit and analysis purposes; (iv) in connection with the sale of any Borrower Payment Dependent Notes ("Notes") associated with your loan or the sale of your loan in its entirety; (v) to obtain and display information and characteristics from your credit report to potential investors in your loan or Notes associated with your loan including purchasers on a secondary trading platform or to other third parties as permitted by applicable law; and (vi) to market products or services to you. Information from your credit report will be displayed on the Prosper website with your listing. You authorize us to verify information in your credit report and your listing, and you agree that we may contact third parties without further notice to you to verify any such information.

**3. Appointment of Limited Power of Attorney and Note Registrar. If your listing receives sufficient investor commitments to fund, and you do not withdraw your listing prior to expiration of the listing period, you hereby authorize each of Prosper and PMI (and their affiliates) to act as your true and lawful Attorney-in-Fact and agent, with full power of delegation and substitution, for you in your name, place and stead, in any and all capacities, to complete and execute a Promissory Note containing the material terms set forth on the attached Exhibit A on your behalf in favor of Bank and reflecting the debt obligation reflected on your final Truth in Lending disclosure(s). You further authorize Prosper and PMI (and their affiliates) to (i) perform each and every act necessary to be done in connection with executing such Promissory Note as you might or could do in person and (ii) approve, execute and deliver the provisions of any instruments,** 

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**documents, agreements, powers, releases and certificates related to the Promissory Note and to perform each and every action regarding the same, including but not limited to, any legal or beneficial assignment of the Promissory Note. This Power of Attorney is limited to the purpose described above.**

**This Power of Attorney may be revoked by contacting Prosper by emailing us at <u>support@prosper.com</u> or calling us at 1-866-615-6319 and closing your account only if done prior to the origination of your loan and execution of the Promissory Note on your behalf. If you choose to revoke this Power of Attorney prior to execution, we will be unable to process your loan request and any pending loan request will be considered withdrawn. Any act or thing lawfully done hereunder prior to any revocation and within the powers herein by any attorney in fact shall be binding on you and your heirs, legal and personal representatives and assigns.**

**You further appoint Prosper as your authorized agent (in such capacity the "Note Registrar") to maintain a book-entry system (the "Register") identifying the owners of such Promissory Note and the owners' addresses and payment instructions. The person or persons identified as owners of such Promissory Note in the Register shall be deemed to be the owner(s) of the Promissory Note for purposes of receiving payment of principal and interest on such Promissory Note and for all other purposes. Any transfer of such Promissory Note shall be effective only upon being recorded in the Register. The Note Registrar may retain the services of another party to fulfill its duties as Note Registrar. The Note Registrar's recordkeeping obligations will be unaffected by any transfers of the Promissory Note.**

**4. Listings.** The Platform connects applicants who wish to obtain loans with investor members who wish to commit funds to loan listings. To receive a loan, you, a borrower member, must submit a loan listing through the Platform. The listing is a request by you for a loan in the amount and at the interest rate specified in the listing. In order to submit a listing through the Platform, you must have a good faith intent to obtain and repay your loan, and your listing must be consistent with that intent.

In order for your listing to become a loan, your listing must receive aggregate funding commitments from Prosper investor members that equal or exceed the minimum funding amount applicable to your listing. After you submit your listing and complete certain verification stages, Prosper will allocate your listing to one of three funding channels, based upon an allocation methodology determined by Prosper: (i) the first channel allows investor members to commit to purchase Notes from Prosper, the payments of which are dependent on the payments you make on your loan (the "Note Channel"); (ii) the second channel allows investor members to commit to purchase 100% of your loan directly from Prosper ("Active Loan Channel"); and (iii) the third channel reserves your loan for sale to an investor member who has already committed to purchase loans like yours from Prosper ("Passive Loan Channel"). Prosper may add or remove funding channels and modify the allocation process at any time in its sole discretion. If your listing receives sufficient commitments to fund, Bank will originate a loan to you in an amount equal to the total amount of those commitments. If your listing is allocated to Passive Loan Channel, it will automatically be considered to have received a commitment equal to the amount of the loan requested.

If your listing is allocated to the Note Channel, investor members who purchase Notes tied to your loan may resell those Notes to other investor members on a secondary trading platform. Prosper may add or remove secondary trading platforms at any time in its sole discretion.

*<u>Information Included in Listings.</u>* To submit a listing, you must provide the amount of the loan you are requesting as well as your annual income, occupation and employment status. The minimum and maximum loan amounts you may request are posted on the Prosper website and are subject to change by us at any time without notice. We reserve the right to restrict the submission of listings through the Platform to applicants who meet minimum credit guidelines and other criteria, as determined by us in our sole discretion.

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You authorize and agree that we may include in your listing any information from the credit report we obtain pursuant to Section 2 above, including but not limited to the following information:

(i) Your Prosper Rating, which is calculated by us but based on information from your credit report;

(ii) Your debt-to-income ratio, expressed as a percentage, reflecting the ratio between the amount of your monthly non-mortgage debt, as compared to the amount of monthly income that you indicated when completing your listing;

(iii) The number of accounts on which you are currently late on a payment;

(iv) The total past-due amount you owe on all delinquent and charged-off accounts;

(v) The number of 90+ days past due delinquencies on your credit report;

(vi) The number of public records (e.g., bankruptcies, liens, and judgments) on your credit report;

(vii) The month and year the oldest account on your credit report (e.g., revolving, installment, or mortgage credit) was opened;

(viii) The total number of credit lines appearing on your credit report, along with the number that are open and current;

(ix) The total balance on all of your open revolving credit lines;

(x) Your bankcard utilization ratio, expressed as a percentage, reflecting the ratio of the total balance used, to the aggregate credit limit on, all of your open bankcards; and

(xi) The number of inquiries made by creditors to your credit report in the last six months.

In addition, you authorize and agree that we may display any of the above information in a listing for a Note corresponding to your loan on a secondary trading platform, and that we may display updated information from your credit report, as well as information about the payment history and status of your loan, in any such listing.

Listings displayed on either Platform may also include any information we ask you to provide. You authorize us to verify your residence, income, employment and any other information you provide in connection with a listing or your registration as a borrower, and you agree that we may contact third parties to verify information you provide. If any such information changes after you submit a listing but before the listing expires, you must either (i) promptly notify us of the change, or (ii) if possible, withdraw your listing.

In creating your listing, or posting content anywhere on Prosper's website, you may not include (i) any personally identifiable information, including, without limitation, your name, address, phone number, email address, Social Security number, driver's license number, bank account number or credit card number, (ii) any information that reveals your race, color, religion, national origin, sex, marital status, age, sexual orientation, military status, source of income, or plans for having a family, and (iii) any information that is inconsistent with your obligations to refrain from engaging in any Prohibited Activities (as defined below) (any information of the type described in parts (i), (ii) or (iii) being, "Prohibited Information"). We may take remedial action with respect to any Prohibited Information you post on Prosper's web site, including without limitation canceling any listing containing Prohibited Information or deleting or modifying all or any portion of a listing description or other content that contains Prohibited Information; provided, however, that we are under no obligation to take any such action, and any posting of Prohibited Information by you on Prosper's web site is done solely at your own risk.

*<u>Listings Allocated to the Note Channel.</u>* Any person who visits the Prosper website will be able to view your listing and see your Prosper Rating as well as certain information about the loan you have requested; provided, however, information from your credit report will only be viewable by investor members.

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We may elect in our sole discretion to give you a partial funding option, which means your loan will be funded if it receives commitments totaling less than the full amount of your requested loan but equal to or exceeding 70% of that amount (subject to the loan size minimum). Each loan listing related to a borrower who was offered the partial funding option will indicate the minimum amount required for the loan to fund. The current percentage threshold for partial funding is 70%, but we may change that threshold from time to time. Any such change will only affect listings created after the change is made.

*<u>Duration of Listings.</u>* A listing will expire at the earlier of (a) the time at which it has received commitments equal to the full amount of the loan requested (which could be immediately after being listed) or (b) if allocated to the Note Channel, 14 days after being allocated, unless the listing is withdrawn by you or cancelled by us prior to either of those events. If a listing is allocated to Active Loan Channel and does not receive commitments sufficient to fund within a reasonable amount of time determined in Prosper's sole discretion after being allocated, it may be reallocated to the Note Channel.

*<u>WITHDRAWAL OF LISTINGS.</u>* YOU HAVE THE RIGHT TO WITHDRAW YOUR LISTING AT ANY TIME PRIOR TO THE EXPIRATION OF THE LISTING PERIOD AS DESCRIBED ABOVE. AFTER THE LISTING PERIOD EXPIRES, YOU WILL NO LONGER HAVE THE RIGHT TO WITHDRAW YOUR LISTING. IF A LOAN IS MADE TO YOU, YOU DO NOT HAVE ANY RIGHT TO RESCIND THE LOAN.

If you elect to withdraw your listing, the inquiry posted on your credit profile upon your acceptance of this Agreement will not be removed. We reserve the right, in our sole discretion, to limit the number of listings you submit or attempt to submit through the Platform.

*<u>Additional Loans.</u>* Additional loans are subject to additional restrictions. The guidelines and eligibility requirements for additional loans are posted on the Prosper website and are subject to change by us in our sole discretion at any time without notice. Subject to these requirements, you may have up to two loans outstanding at any one time, provided that the aggregate outstanding principal balance of your loans does not exceed the maximum loan amount then in effect. You may not submit a listing for a second loan unless you meet the eligibility requirements then in effect as of the date of such submission.

*<u>Prohibited Activities.</u>* You agree that you will not, in connection with any listings, investor commitments, loans or other transactions involving or potentially involving Prosper or Bank, (i) make any false, misleading or deceptive statements or omissions of material fact; (ii) misrepresent your identity, or describe, present or portray yourself as a person other than yourself; (iii) give to or receive from, or offer or agree to give to or receive from, any Prosper investor member or other person any fee, bonus, additional interest, kickback or thing of value of any kind, including in exchange for such person's commitment, or offer or agreement to make a commitment with respect to your listing; and (iv) represent yourself to any person as a director, officer or employee of Prosper, PMI or Bank, unless you are such director, officer or employee.

**5. Right to Verify Information and Cancel Funding.**

a. We reserve the right to verify the accuracy of all information provided by borrower and investor members in connection with listings, investor commitments and loans. We also reserve the right to determine in our sole discretion whether a registered user is using, or has used, the Prosper website illegally or in violation of any order, writ, injunction or decree of any court or governmental instrumentality, for purposes of fraud or deception, or otherwise in a manner inconsistent with the Prosper Terms and Conditions or any agreement between Prosper or Bank and such user. We may conduct our review at any time - before, during or after the submission of a listing, or before or after the funding of a loan. You agree to respond promptly to our requests for information in connection with any such review by us. We reserve the right to cancel your listing if we determine, under our sole discretion, that you have failed to respond to our requests for information in a timely manner in connection with our verification process.

b. In the event we determine that a listing, or an investor commitment for the listing, contains materially inaccurate information (including but not limited to inaccuracies related to your income, residence or creditworthiness, whether or not due to changes in circumstance) or was

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submitted illegally, in violation of any order, writ, injunction or decree of any court or governmental instrumentality, for purposes of fraud or deception, or otherwise in a manner inconsistent with the Prosper Terms and Conditions or any member agreement, or was generated in error or is otherwise inconsistent with the applicable credit policy and criteria, or verification process, we may cancel the listing and/or cancel all investor commitments with respect to that listing.

c. When a listing receives commitments equal to or exceeding the minimum amount required for the loan to fund, we may conduct a "pre-funding" review prior to funding of the loan. Loan funding occurs when loan proceeds are disbursed to you or at your direction. We may, at any time and in our sole discretion, delay funding of a loan (i) in order to enable us to verify the accuracy of information provided by you, or provided by investor members in connection with the listing; (ii) in order to reconfirm investor commitments made with respect to the listing; (iii) to determine whether there are any irregularities with respect to the listing or the investor commitments; or (iv) if we become aware of information concerning you or the listing during our pre-funding review, as a result of which we determine, in our sole discretion, that the likelihood of you not making payments on the loan is materially greater than would be expected based on the assigned Prosper Rating. We may cancel or proceed with funding the loan, depending on the results of our pre-funding review. If funding is cancelled, the listing will be removed from the Platform and all investor commitments against the listing will be cancelled. In the event we cancel funding of a loan, we will notify you, and all investor members who made commitments with respect to the listing of such cancellation.

d. We may verify any of the information you provide in applying for a loan and creating a listing, and may require that you submit evidence sufficient to permit us to verify the information you provided or other information we deem necessary. We have sole discretion to determine what evidence suffices, and it is your obligation to provide that evidence. If you fail to do so within a reasonable timeframe within our discretion, we may cancel your listing. However, if we are able to obtain the information we require from other sources, or determine that the information is no longer necessary, your loan may originate even though you have not submitted the required documents.

e. If you provide your bank login credentials to a bank verification vendor hosted on Prosper's site, you agree that Prosper (including PMI), its agents and affiliates, and the Bank may access and obtain your bank account information, including without limitation your account and routing number, account holder name, and transactional history. We may access and obtain this information for any bank account available through your bank login credentials. You authorize Us to use this information for any lawful purpose, including to verify your bank account (including ownership), income and employment, identity, for anti-fraud purposes, and to determine or verify eligibility (including for a loan or for specific terms such as pricing). We may access and obtain this information throughout the term of your loan.

Depending on which service you select and which vendor Prosper utilizes, you may use/authorize Plaid Inc. ("Plaid") to gather your bank account information from certain financial institutions and provide that information to Prosper. You grant Plaid and Us the right, power and authority to act on your behalf to access and transmit your personal and financial information from the relevant financial institution, as described above. By using the Plaid service, you agree that you are providing your bank login credentials to Plaid and that your personal and financial information will be transferred, stored and accessed by Plaid in accordance with the Plaid Privacy Policy. For information on how Plaid stores and uses your bank credentials and account information, please review Plaid's privacy policy, available at https://plaid.com/legal.

You understand that if you provide inaccurate credentials, your bank may restrict your ability to access your account information until you can establish your identity and reset your credentials, and we may be unable to process your loan application. If we are not able to verify necessary items through this process, you may be required to undergo manual verification.

**6. Matching of Investor Commitments and Listings; Loan Funding.**

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a. If your listing is allocated to the Note Channel, Prosper investor members will be able to view your listing and commit funds to purchase Notes issued by Prosper, the payments on which will be dependent on payments Prosper receives from you on your loan. In other words, the Prosper investor members who committed funds will receive payments on their Notes only to the extent you make payments on your loan. If your listing is allocated to the Active Loan Channel or the Passive Loan Channel, Prosper investor members will commit funds to purchase from Prosper a Promissory Note evidencing the loan made by Bank to you.

b. A match of your listing with one or more investor commitments equal to or exceeding the minimum amount required for the loan to fund, will result in a loan from Bank to you, subject to our right to verify information as described above. The loan will be evidenced by a Promissory Note in the form set forth on the attached Exhibit A. Depending on the loan product you receive, loan proceeds are disbursed into your designated deposit account or they are paid directly to a merchant in satisfaction of your purchase of goods and/or services from that merchant. The loan may be sold by Bank to Prosper, and Prosper may hold the loan or sell it to one of its investor members. Prosper or its agents will service the loan on behalf of the loan's owner.

c. We do not warrant or guaranty that your listing will be matched with any investor commitments. Your listing must receive one or more investor commitments equal to or exceeding the minimum amount required for the loan to fund in order for a loan to be made.

d. To safeguard your privacy rights, your name and address will not be included in your listing. Only your Prosper screen name will appear on your listing, and only the screen name of the investor members will appear with investor commitments.

**7. Compensation.** If you receive a loan, you must pay Bank a non-refundable origination fee. The amount of the estimated origination fee is stated in the disclosures provided to you at the time you apply. This amount will decline if you've been offered a partial funding option and your loan is not 100% funded. Notwithstanding the foregoing, no amount of the finally determined fee is refundable. The finally determined fee will be stated in your Truth in Lending disclosure. This fee will be deducted from your loan proceeds, so the loan proceeds delivered to you or at your direction will be less than the full amount of your issued loan. You acknowledge that the origination fee will be considered part of the principal on your loan and is subject to the accrual of interest.

**8. Making Your Loan Payments.** At the time you register as a borrower, you (or your joint applicant/co-borrower, as applicable) must provide your bank account information to facilitate transfers of funds to and from your bank account. Your loan payments will be made by the payment method you choose, as described in Section 7 of the Promissory Note. Prosper or its agents will act as the servicer for all loans you obtain through the Platform, and all communications regarding your loan must be made to Prosper or its agents.

**9. Collection & Reporting of Delinquent Loans.** In the event you do not make your loan payments on time, Bank or any subsequent owner of the loan will have all remedies authorized or permitted by the Promissory Note and applicable law. In addition, if you fail to make timely payments on your loan, your loan may be referred to a collection agency for collection. Prosper or its agents may report loan payment delinquencies in excess of thirty (30) days to one or more credit reporting agencies in accordance with applicable law. See the "Permission to Contact" section below for additional important information.

**10. No Guarantee.** Neither Prosper nor Bank warrants or guarantees (1) that your listing will be matched with any investor commitments, or (2) that you will receive a loan as a result of submitting a listing.

**11. Restrictions on Use.** You are not authorized or permitted to use the Prosper website to obtain, or attempt to obtain, a loan for someone other than yourself. You are not authorized or permitted to use the Prosper website to obtain, or attempt to obtain, a loan for the purpose of (i) buying, carrying or trading in securities or for the purpose of buying or carrying any part of an investment contract security, (ii) paying for postsecondary educational expenses (i.e., tuition, fees, required equipment or supplies, or room and board) at a college/university/vocational school, as the term "postsecondary educational expenses" is defined in Bureau of Consumer

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Financial Protection Regulation Z, 12 C.F.R. § 1026.46(b)(3), or (iii) engaging in any illegal activity or gambling, and you warrant, represent and agree that you will not use the proceeds of any loan for such purposes. You must be an owner of the deposit account you designate for electronic transfers of funds, with authority to direct that loan payments be made from the account. Although you are registering as a borrower member, you may also register and participate on the Platform as an investor member. If you participate on the Platform as an investor member, any amounts in your Prosper funding account are subject to set-off against any delinquent amounts owing on any loans you obtain as a Prosper borrower. You will not receive further notice in advance of our exercising our right to set-off amounts in your Prosper funding account against any delinquent amounts owing on any loans you obtain. If you obtain a loan and fail to pay your loan in full, whether due to default, bankruptcy or other reasons, you will not be eligible to submit any further listings or re-register with Prosper as a borrower or investor member. We may in our sole discretion, with or without cause and with or without notice, restrict your access to the Prosper website or Platform.

**12. Authority.** You warrant and represent that you have the legal competence and capacity to execute and perform this Agreement.

**13. Termination of Registration.** Prosper may, in its sole discretion, with or without cause, terminate this Agreement at any time by giving you notice as provided below. In addition, upon our determination that you committed fraud or made a material misrepresentation in connection with a listing, investor commitment or loan, performed any prohibited activity, or otherwise failed to abide by the terms of this Agreement or the Prosper Terms and Conditions, we may, in our sole discretion, immediately and without notice, take one or more of the following actions: (i) terminate or suspend your right to submit listings or otherwise participate on the Platform; or (ii) terminate this Agreement and your registration with Prosper. Upon termination of this Agreement and your registration with Prosper, any listings you have submitted through the Platform shall be cancelled, and will be removed from the Platform immediately. Any loans you obtain prior to the effective date of termination resulting from listings you had placed on the Platform shall remain in full force and effect in accordance with their terms.

**14. Change-In-Terms.** No provision of this Agreement shall be modified, changed, or limited except by a written agreement signed by both you and Prosper.

**15. Posting of Personal Information.** You may not include or display any personally identifying information of any Prosper member anywhere on the Prosper website, including, without limitation, any Prosper member's name, address, phone number, email address, Social Security number, driver's license number, bank account number or credit card number.

**16. Notices.** All notices and other communications hereunder shall be given either by: (1) email to your registered email address; (2) deposit with U.S. mail or other nationally recognized courier, and shall be deemed to have been duly given and effective upon transmission; or (3) any other means authorized by you. It is your responsibility to monitor these areas. You can contact us by sending an email to <u>support@prosper.com</u>. You agree to notify Prosper if your registered email address changes, and you agree to update your registered residence address, mailing address and telephone number on the Prosper website if any of those items changes. You also acknowledge and agree that, for loans with joint applicants/co-borrowers, notice may be given to either of you and shall be deemed to have been duly given to and effective for all parties, except as otherwise provided by applicable law.

**17. No Warranties.** Except for the representations contained in this Agreement, Prosper does not make any representations or warranties to you or any other party with regard to your use of the Prosper website or the Platform, including, but not limited to, any implied warranties of merchantability or fitness for a particular purpose.

**18. Limitation on Liability.** In no event shall any party to this Agreement be liable to any other party for any lost profits or special, exemplary, consequential or punitive damages, even if informed of the possibility of such damages. Furthermore, neither party makes any representation or warranty to any other party regarding the effect that the Agreement may have

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upon the foreign, federal, state or local tax liability of the other. For purposes of clarity, the term "party" in this Section shall mean you or Prosper.

**19. Joint and Several Liability.** Each joint applicant/co-borrower shall be jointly and severally liable for all obligations under this Agreement, and we may proceed against either of you to enforce any such obligation without waiving our right to proceed against the other. We may also proceed against either of you to enforce any obligation under this Agreement without first proceeding against the other.

**20. STATE NOTICES**

<u>California Residents</u>: Married registrants may apply for a separate account.

<u>Maine Residents</u>: NOTICE TO CONSUMER: Do not sign this agreement before you read it. You are entitled to a copy of this agreement. Maine law requires that the following disclosures be provided to you before any contract is signed with, and before any money is paid to, Prosper or to third parties. The agreement between you and Prosper must be in writing and signed, and must contain a description of the services to be performed, payment details, any guarantees, the time frame of the contract, and offers of full or partial refunds, as well as a notice informing you of the importance of reading the contract and retaining a copy. Prosper has a $25,000 consumer protection bond on file with the State of Maine. If you have a claim against Prosper that cannot be resolved through informal means, you may institute an action to recover your loss from that bond by filing a written complaint with the Superintendent, Bureau of Consumer Credit Protection, 35 State House Station, Augusta, Maine 04333-0035.

<u>North Dakota Residents</u>: NOTICE: MONEY BROKERS ARE LICENSED AND REGULATED BY THE DEPARTMENT OF FINANCIAL INSTITUTIONS, 2000 SCHAFER STREET, SUITE G, BISMARCK, NORTH DAKOTA 58501-1204. THE DEPARTMENT OF FINANCIAL INSTITUTIONS HAS NOT PASSED ON THE MERITS OF THE CONTRACT AND LICENSING DOES NOT CONSTITUTE AN APPROVAL OF THE TERMS OR OF THE BROKER'S ABILITY TO ARRANGE ANY LOAN. COMPLAINTS REGARDING THE SERVICES OF MONEY BROKERS SHOULD BE DIRECTED TO THE DEPARTMENT OF FINANCIAL INSTITUTIONS.

<u>South Dakota Residents</u>: Any improprieties in the making of this loan or loan practices related to this loan may be referred to the South Dakota Division of Banking. The Division of Banking is located at 1601 N. Harrison Avenue, Suite 1, Pierre, SD 57501. Phone: 605.773.3421.

<u>Ohio Residents</u>: The Ohio laws against discrimination require that all creditors make credit equally available to all credit worthy customers, and that credit reporting agencies maintain separate credit histories on each individual upon request. The Ohio civil rights commission administers compliance with this law.

<u>Texas Residents</u>: For questions or complaints about this loan, contact Prosper Marketplace, Inc. at 1-866-615-6319 or <u>support@prosper.com</u>. Prosper Marketplace, Inc. is licensed and examined under Texas law by the Office of Consumer Credit Commissioner (OCCC), a state agency. If a complaint or question cannot be resolved by contacting Prosper Marketplace, Inc., consumers can contact the OCCC to file a complaint or ask a general credit-related question. OCCC address: 2601 N. Lamar Blvd., Austin, Texas 78705. Phone: (800) 538-1579. Fax: (512) 936-7610. Website: occc.texas.gov. E-mail: consumer.complaints@occc.texas.gov

<u>Wisconsin Residents</u>: No provision of a marital property agreement, a unilateral statement or a court decree adversely affects the interest of the creditor unless the creditor, prior to the time the credit is granted, is furnished a copy of the agreement, statement or decree or has actual knowledge of the adverse provision when the obligation to the creditor is incurred.

**Please see the attached Promissory Note for additional important state notices.**

**21. Miscellaneous.** You may not assign, transfer, sublicense or otherwise delegate your rights under this Agreement to another person without Prosper's prior written consent. Prosper may assign this Agreement at any time without your permission, unless prohibited by applicable law. Any such assignment, transfer, sublicense or delegation in violation of this Section 21 shall be

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null and void. This Agreement shall be governed by federal law and, to the extent that state law applies, the laws of the State of Delaware. Any waiver of a breach of any provision of this Agreement will not be a waiver of any other breach. Failure or delay by either party to enforce any term or condition of this Agreement will not constitute a waiver of such term or condition. If any part of this Agreement is determined to be invalid or unenforceable under applicable law, then the invalid or unenforceable provision will be deemed superseded by a valid enforceable provision that most closely matches the intent of the original provision, and the remainder of the Agreement shall continue in effect. Bank is not a party to this Agreement, but you agree that Bank is a third-party beneficiary and is entitled to rely on the provisions of this Agreement, including without limitation your representations, covenants and agreements herein. There are no third party beneficiaries to this Agreement other than Bank.

**22. Performance by Prosper and Bank.** You acknowledge and agree that any obligations of or actions by Prosper under this Agreement may be performed by PMI on behalf of Prosper in PMI's capacity as servicer or agent of Prosper under any administrative services or similar agreement entered into between PMI and Prosper pursuant to which Prosper appoints PMI as servicer or agent to provide administrative, management, servicing or other services to Prosper. You also acknowledge and agree that any obligations of or actions by Bank under this Agreement may be performed by PMI on behalf of Bank in PMI's capacity as agent of Bank under any loan program or similar agreement entered into between PMI and Bank pursuant to which Bank appoints PMI as agent to provide services to Bank.

**23. Separate Entities.** Notwithstanding Section 22, you acknowledge and agree that Prosper, Bank and PMI are separate legal entities and that neither entity has guaranteed the performance by the other entity of its obligations hereunder.

**24. Arbitration Section.**<br>**RESOLUTION OF DISPUTES: YOU ACKNOWLEDGE THAT YOU HAVE READ THIS ARBITRATION SECTION (the "Arbitration Agreement") CAREFULLY, UNDERSTAND THAT IT CONSTITUTES A BINDING AGREEMENT BETWEEN YOU AND US TO ARBITRATE WHENEVER YOU OR WE ELECT TO ARBITRATE A CLAIM (AS DEFINED BELOW), AND UNDERSTAND THAT IT LIMITS YOUR RIGHTS IN THE EVENT OF A DISPUTE BETWEEN YOU AND US. YOU UNDERSTAND THAT YOU HAVE THE RIGHT TO REJECT THIS ARBITRATION AGREEMENT, AS PROVIDED IN PARAGRAPH (P) BELOW.**

(A) Definitions. This Arbitration Agreement incorporates the defined terms within the Agreement unless specifically defined below. In this Arbitration Agreement:

(i) "You" and "your" mean each individual entering into this Arbitration Agreement (Section 24), as well as any person claiming through such individual;

(ii) "We" and "us" mean Bank and Prosper Funding LLC and each of their respective parents, subsidiaries, affiliates, predecessors, successors, and assigns, as well as the officers, directors, and employees of each of them;

(iii) "Claim" means any dispute, claim, or controversy (whether based on contract, tort, intentional tort, constitution, statute, ordinance, common law, or equity, whether pre-existing, present, or future, and whether seeking monetary, injunctive, declaratory, or any other relief) arising from or relating in any way to the Agreement or your relationship with us. The term "Claim" has the broadest possible meaning, and includes initial claims, counterclaims, cross claims, and third party claims. It includes disputes based upon contract, tort, consumer rights, fraud and other intentional torts, constitution, statute, regulation, ordinance, common law and equity (including any claim for injunctive or declaratory relief). The term "Claim" also includes any dispute related to the scope, validity, or enforceability of this Arbitration Agreement; thus, all such disputes are expressly delegated to an arbitrator for decision, with two exceptions noted below in the sections entitled "Class and Representative Action Waiver" and "Public Injunctive Relief Requests".

(B) Agreement to Arbitrate. You and we agree that in the event a Claim arises, either you or we may, without the other's consent, elect to resolve the Claim by binding arbitration. This agreement to arbitrate is binding on both you and us, and applies to all Claims (as defined

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above) except for those claims mentioned in paragraph (C) below entitled "Non-Arbitrable Claims."

(C) Non-Arbitrable Claims. This Arbitration Agreement shall not apply to covered borrowers as defined in the Military Lending Act, 10 U.S.C. § 987. Further, this Arbitration Agreement shall not apply to an individual Claim filed by you in a small claims or similar court (if any), so long as the Claim is pending on an individual basis only in such court.

(D) JURY WAIVER AND LIMITATION OF RIGHTS. YOU AND WE AGREE THAT, BY ENTERING INTO THIS ARBITRATION AGREEMENT, THE PARTIES ARE EACH WAIVING THE RIGHT TO A TRIAL BY JURY OR A TRIAL BEFORE A JUDGE IN COURT. YOU AND WE ACKNOWLEDGE THAT ARBITRATION WILL LIMIT OUR LEGAL RIGHTS, INCLUDING THE RIGHT TO PARTICIPATE IN A CLASS ACTION, THE RIGHT TO A JURY TRIAL, THE RIGHT TO CONDUCT FULL DISCOVERY, AND THE RIGHT TO APPEAL (EXCEPT AS PERMITTED IN PARAGRAPH (N) OR UNDER THE FEDERAL ARBITRATION ACT).

(E) Arbitration Forum and Rules. Any Claim shall be resolved, upon the election of either us or you, by binding arbitration administered by the American Arbitration Association ("AAA") or JAMS, under the applicable arbitration rules of the administrator in effect at the time a Claim is filed ("Rules"). Any arbitration under Arbitration Agreement will take place on an individual basis; class arbitrations and class actions are not permitted. If you file a claim, you may choose AAA or JAMS as the administrator; if we file a claim, we may choose the administrator, but we agree to change to the other permitted administrator at your request (assuming that the other administrator is available). You can obtain the Rules and other information about initiating arbitration by contacting the American Arbitration Association at 1633 Broadway, 10th Floor, New York, NY 10019, www.adr.org; or by contacting JAMS at 1920 Main Street, Suite 300, Irvine, CA 92614, (949) 224-1810, www.jamsadr.com. Further, to the extent there is any conflict between the Rules and this Arbitration Agreement, this Arbitration Agreement will prevail.

(F) Arbitrator Selection. Claims will be arbitrated by a single, neutral arbitrator, who shall be a retired judge or a lawyer with at least ten years' experience. The arbitrator shall be selected in accordance with the administrator's rules.

(G) Arbitration Fees and Expenses. You agree to pay the initial filing fee charged by the administrator for any arbitration you commence, up to a cap of $300. If the initial filing fee is more than $300, we will pay the balance over that amount. We will pay all other fees charged by the administrator or arbitrator, including any filing, administration, and/or arbitrator fees. We will pay the entire initial filing fee if: (1) you claim to be unable to afford it; and (2) you seek but cannot obtain a waiver of that fee from the administrator.

(H) Arbitration Hearing Location. Any in-person arbitration hearing will be held in the county in which you reside, or in such other location as you and we may mutually agree.

(I) Commencing Arbitration. The party electing arbitration must notify the other of such election. This notice may be given before or after a lawsuit has been filed concerning the Claim or with respect to other Claims brought later in the lawsuit, and it may be given by papers filed in the lawsuit such as a motion to compel arbitration. If you elect to initiate arbitration you must notify us in writing. Your notice must be sent to Prosper Marketplace, Inc., 221 Main Street, Suite 300, San Francisco, CA 94105, Attention: Legal Department. If we commence arbitration we will notify you in writing at your last known address on file or, if we do so by moving to compel arbitration in a case you have brought in court, we will notify you by providing service of process as required by the rules of the applicable jurisdiction.

(J) Governing Law. You and we acknowledge and agree that the arbitration agreement set forth in this Arbitration Agreement is made pursuant to a transaction involving interstate commerce, and that the Federal Arbitration Act, 9 U.S.C. § 1-16 ("FAA"), shall govern the interpretation and enforcement of this Arbitration Agreement. The arbitrator shall apply applicable substantive law consistent with FAA and the governing law clause set forth in Section 21 (Miscellaneous) of the Agreement. Further, if requested by either party, the arbitrator must provide written reasoned findings of fact and conclusions of law. In the event that a dispute does not proceed to arbitration, the Agreement shall be governed by and construed in accordance with the laws of

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the United States and, to the extent state law applies, to the laws of the State of Delaware, without regard to its conflict of laws rules.

(K) Available Relief. Except as set forth below in paragraph (L) (entitled "CLASS ACTION AND REPRESENTATIVE ACTION WAIVER"), the arbitrator shall have the power to award any relief available to a claimant in court under applicable law, including but not limited to equitable and injunctive relief.

(L) CLASS ACTION AND REPRESENTATIVE ACTION WAIVER. YOU AND WE AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN OUR INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING. Further, unless both you and we agree otherwise in writing, the arbitrator may not consolidate more than one person's claims, except that claims brought by joint applicants or co-borrowers relating to the same loan transaction shall be consolidated. The arbitrator shall have no authority to conduct any class, private attorney general or other representative proceeding. The validity, enforceability, and effect of this paragraph (L) shall be determined exclusively by a court, and not by the administrator or any arbitrator. This paragraph does not apply to requests for public injunctive relief, which are addressed in the paragraph below entitled "Public Injunctive Relief Requests."

(M) PUBLIC INJUNCTIVE RELIEF REQUESTS. If you or we seek public injunctive relief as a remedy for any Claim against one another (a "Public Injunctive Relief Request,") you and we agree that Public Injunctive Relief Request cannot be arbitrated. Instead, that Public Injunctive Relief Request shall be adjudicated by a court after all other Claims to be decided in arbitration under this Arbitration Agreement are resolved in arbitration. You and we agree to jointly request that the court stay the Public Injunctive Relief request until after the remaining Claims have been finally resolved in arbitration, and that the parties will only seek to lift the stay and request that the court resolve the Public Injunctive Relief Request if an arbitrator finds that one of them is liable for a Claim for which public injunctive relief is an available remedy. The enforceability, validity and effect of this paragraph (M) shall be determined exclusively by a court, and not by the administrator or any arbitrator.

(N) Enforcement and Appeals. Any appropriate court may enter judgment upon the arbitrator's award. The arbitrator's decision will be final and binding except that: (1) any party may exercise any appeal right under the FAA; and (2) any party may appeal any award relating to a claim for more than $100,000 to a three-arbitrator panel appointed by the administrator, which will reconsider de novo any aspect of the appealed award. The panel's decision will be final and binding, except for any appeal right under the FAA. The parties shall bear their own attorneys' fees and costs of any appeal.

(O) Severability and Survivability. This Arbitration Agreement shall survive: (i) termination or changes in the Agreement or the relationship between you and us concerning the Agreement; and (ii) the bankruptcy of any party. If any portion of this Arbitration Agreement (except for paragraph (L) above) is deemed invalid or unenforceable for any reason, it shall not invalidate the remaining portions of this Arbitration Agreement. However, if paragraph (L) of this Arbitration Agreement is deemed invalid or unenforceable in whole or in part, then this entire Arbitration Agreement shall be deemed invalid and unenforceable.

(P) Opt-Out Right. You understand that you may reject the provisions of this Arbitration Agreement, in which case neither we nor you will have the right to elect arbitration. Rejection of this Arbitration Agreement will not affect the remaining parts of the Agreement. To reject this Arbitration Agreement, you must send us written notice of your rejection within 30 days after the date that the Agreement was made. You must include your name, address, and account number. The notice of rejection must be mailed to Prosper Marketplace, Inc., 221 Main Street, Suite 300, San Francisco, CA 94105, Attention: Legal Department. This is the only way that you can reject this Arbitration Agreement.

(Q) Pre-Dispute Notice. You agree that you will notify us in writing of any Claim and give us a reasonable period of time to address it BEFORE bringing any legal action, either individually, as a class member or representative, or as a private attorney general, against us.

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(R) Amendment. Section 14 (Change-In-Terms) does not apply to this Arbitration Agreement. Instead, the following terms apply to amendment of this Arbitration Agreement. You and we agree that we have the right to amend this Arbitration Agreement, and that if we make any amendment to this Arbitration Agreement (other than an amendment to any notice address or website link provided herein), that amendment shall be effective upon our provision of written notice to you. We will notify you of amendments to this Arbitration Agreement by providing notice via email to your registered email address. You agree to notify us if your registered email address changes. Any amendment shall not apply to any claim against us that accrued prior to the effective date of the amendment. Instead, the amendment shall apply to all other disputes or claims governed by this Arbitration Agreement that have arisen or may arise between you and us. If you do not agree to these amended terms, you may reject the amended Arbitration Agreement and you will not be bound by it. To reject the amended terms, you must send us written notice of your rejection within 30 days after the date we provided notice of the amendment. You must include your name, address, and account number. The notice of rejection must be mailed to Prosper Marketplace, Inc., 221 Main Street, Suite 300, San Francisco, CA 94105, Attention: Legal Department. This is the only way that you can reject amendments to this Arbitration Agreement.

**25. Electronic Transactions. This Agreement includes your express consent to electronic transactions and disclosures, which consent is set forth in the section entitled "Consent to Doing Business Electronically" as disclosed in our <u>Terms of Use</u> on our website. The terms and conditions of the "Consent to Doing Business Electronically" section are expressly incorporated herein in their entirety. You expressly agree that each of (a) this Agreement and (b) any Promissory Note in the form set forth on the attached Exhibit A that we sign on your behalf, may comprise a "transferable record" for all purposes under the Electronic Signatures in Global and National Commerce Act and the Uniform Electronic Transactions Act.**

**26. Permission to Contact. When you give us your contact information (including but not limited to home and/or mobile phone number, work phone number, address and email address), we have your permission to contact you at any of those numbers or addresses, and any other number, address or email address that you provide in the future or that we believe we may reach you through (unless prohibited by applicable law), about your Prosper accounts. Your consent allows us to use written, electronic or verbal means to contact you, including but not limited to text messaging, artificial or prerecorded voice messages, automatic dialing technology and emails, for all purposes not prohibited by applicable law. Message and data rates may apply. Some of the purposes for calls and messages include (but are not limited to): suspected fraud or identity theft; obtaining information; transactions on or servicing of your account; and collecting on your account. Our rights under this Section extend to our affiliates, subsidiaries, parents, agents, vendors, and anyone so affiliated with the owner of any note evidencing a loan you obtain. Notify us immediately of any changes to your contact information by changing your contact information on your Prosper account information – settings page.**

**27. Military Lending Act.** The Military Lending Act provides specific protections for active duty service members and their dependents in consumer credit transactions. This Section includes information on the protections provided to covered borrowers as defined in the Military Lending Act.

(a) <u>Statement of MAPR.</u>

Federal law provides important protections to members of the Armed Forces and their dependents relating to extensions of consumer credit. In general, the cost of consumer credit to a member of the Armed Forces and his or her dependent may not exceed an annual percentage rate of 36 percent. This rate must include, as applicable to the credit transaction or account: The costs associated with credit insurance premiums; fees for ancillary products sold in connection with the credit transaction; any application fee charged (other than certain application fees for specified credit transactions or accounts); and any participation fee charged (other than certain participation fees for a credit card account).

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(b) The following sections of this Agreement and the Promissory Note shall not be applicable to, and shall not be enforceable against, a covered borrower as defined in the Military Lending Act: Section 24 of this Agreement and Section 18 of the Promissory Note.

(c) <u>Oral Disclosures.</u> Please call 1-855-993-2967 to obtain oral disclosures, including the statement of MAPR and the payment schedule applicable to your loan, required under the Military Lending Act.

**28. Borrower Authorizations and Instructions.** For loans with joint applicants/co-borrowers, any authorization or instruction that either of you provides to us may be treated by us as effective for both of you.

**29. Authorization to Correct Clerical Errors.** You authorize us to correct obvious clerical errors appearing in information you provide to us, without notice to you, although we expressly undertake no obligation to identify or correct such errors.

**30. Entire Agreement.** This Agreement, along with the Prosper Terms of Use, represents the entire agreement between you and Prosper regarding your participation as a borrower on the Platform, and supersedes all prior or contemporaneous communications, promises and proposals, whether oral, written or electronic, between you and Prosper with respect to your involvement as a borrower on the Platform.

Date: __________________

By: Prosper Funding LLC

(Signed Electronically)

_______________________________________ [Borrower]

(Signed Electronically)

_______________________________________ [Co-Borrower]

(Signed Electronically)

**________________________________________**

**EXHIBIT A**

Promissory Note

Loan ID: ____________

Borrower Address: ______________________________________________.

Co-Borrower Address: ______________________________________________.

1. **Promise to Pay.** In return for a loan I (each "I" or "me" shall include all parties obligated hereunder, including any joint applicant/co-borrower) have received, I promise to pay WebBank ("you") the principal sum of ___________________ Dollars ($__________), together with interest thereon commencing on the date of origination at the rate of ____ percent (___%) per annum simple interest. I understand that, as a borrower or co-borrower, I am liable for repayment of this loan. I also understand that references in this Promissory Note ("Note") to you shall also include any person to whom you transfer this Note.

2. **Payments.** I will pay the principal, interest, and any late charges or other fees on this Note when due. This Note is payable in ___ monthly installments of $___________ each, consisting of principal and interest, commencing on the ________ day of _____________, and continuing until the final payment of __________________ on, which is the maturity date of this Note. Because of the daily accrual of interest on my loan and the effect of rounding, my final payment may be more or less than my regular payment. My final payment shall consist of the then remaining principal, unpaid accrued interest and other charges due under this Note. All payments will be applied first to any unpaid fees then due, whether they are incurred as a result

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of failed payments, as provided in Paragraph 11, payment processing fees assessed, or any late payments, as provided in Paragraph 4; then to any interest then due; and then to principal. However, if I am delinquent, the application of my payments may change. No unpaid interest, fees or charges will be added to principal. I further acknowledge that, if I make my payments after the scheduled due date, or incur a charge/fee, this Note will not amortize as originally scheduled, which may result in a substantially higher final payment amount.

3. **Interest.** Interest will be charged on unpaid principal until the full amount of principal has been paid. Interest under this Note will accrue daily, on the basis of a 365-day year. The interest rate I will pay will be the rate I will pay both before and after any default.

4. **Late Charge.** If the full amount of any monthly payment is not made by its due date, I will pay you a late charge of the greater of $15 or 5.00% of the unpaid portion of the monthly payment. I will pay this late charge when it is assessed but only once on each late payment.

5. **Claims and Defenses; Waiver of Defenses; Exception to Waiver** Except as otherwise provided in this Note, you are not responsible or liable to me for the quality, safety, legality, or any other aspect of any property or services purchased with the proceeds of my loan. If I have a dispute with any person from whom I have purchased such property or services, I agree to settle the dispute directly with that person.

**If and only if the proceeds of my loan will be applied in whole or part to purchase property or services from a person or entity that has entered into a contractual relationship with you or Prosper related to financing of such property or services, the following notice may apply:**

**NOTICE**

**ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.**

6. **Certifications.** I certify that the proceeds of my loan will not be applied in whole or in part to postsecondary educational expenses (i.e., tuition, fees, required equipment or supplies, or room and board) at a college/university/vocational school, as the term "postsecondary educational expenses" is defined in Bureau of Consumer Financial Protection Regulation Z, 12 C.F.R. § 1026.46(b)(3). I also certify that the proceeds of my loan will be received by me or otherwise used for my benefit. For purposes of clarity, the words "I", "me" and "my" in this Section shall include any co-borrower.

7. **Method of Payment.** I may make payments (i) by electronic fund transfer from an account that I designate using an automated clearinghouse (ACH), or (ii) by check.

I understand that payments by check may incur an additional processing fee of up to $5.00 for each payment by check. Currently applicable fees are available at <u>www.prosper.com</u> or by calling 1-866-615-6319. I will make all checks payable to Prosper Funding LLC and send them to Prosper Marketplace Inc., P.O. Box 886081, Los Angeles, CA 90088-6081 in a manner so as to ensure that it is received with sufficient time to process prior to my scheduled payment due date. To ensure efficient processing of my check, I will reference my loan number on the check.

I recognize that if I have automated withdrawal enabled, it is my responsibility to ensure that all amounts I owe are paid when due, even if not debited from my account.

If I close my account or if my account changes or is otherwise inaccessible such that you are unable to withdraw my payments from that account or process my check, I will notify you at least three (3) business days prior to any such closure, change or inaccessibility of my account, and authorize you to withdraw my payments, or I will provide a check, from another account that I designate.

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With regard to payments made by automatic withdrawals from my account, I have the right to (i) stop payment of a preauthorized automatic withdrawal, or (ii) revoke my prior authorization for automatic withdrawals with regard to all further payments under this Note, by notifying the financial institution where my account is held, orally or in writing at least three (3) business days before the scheduled date of the transfer. I agree to notify you orally or in writing, at least three (3) business days before the scheduled date of the transfer, of the exercise of my right to stop a payment or to revoke my prior authorization for further automatic withdrawals.

8. **Default and Remedies.** If I fail to make any payment when due in the manner required by Paragraph 7, I will be delinquent. If I (a) am delinquent, (b) file or have instituted against me (which, for purposes of clarity, shall mean either party obligated under this Note) a bankruptcy or insolvency proceeding or make any assignment for the benefit of creditors, or (c) in the event of my death (which, for purposes of clarity, shall mean either party obligated under this Note), you may in your sole discretion deem me in default and accelerate the maturity of this Note and declare all principal, interest and other charges due under this Note immediately due and payable. You also have sole discretion to proceed against any party obligated under this Note. If you deem me in default due to delinquency and if you exercise the remedy of acceleration, you will use reasonable efforts to provide prior notice of acceleration.

9. **Prepayments.** I may prepay this Note in full or in part at any time without penalty. I acknowledge that partial prepayments will not change the due date or amount of my monthly payment.

10. **Waivers.** You may accept late payments or partial payments, even though marked "paid in full," without losing any rights under this Note, and you may delay enforcing any of your rights under this Note without losing them. You do not have to (a) demand payment of amounts due (known as "presentment"), (b) give notice that amounts due have not been paid (known as "notice of dishonor"), or (c) obtain an official certification of nonpayment (known as "protest"). I hereby waive presentment, notice of dishonor and protest. Even if, at a time when I am in default, you do not require me to pay immediately in full as described above, you will still have the right to do so if I am in default at a later time. Neither your failure to exercise any of your rights, nor your delay in enforcing or exercising any of your rights, will waive those rights. Furthermore, if you waive any right under this Note on one occasion, that waiver will not operate as a waiver as to any other occasion.

11. **Insufficient Funds Charge.** If I attempt to make a payment, whether by automated withdrawal from my designated account or by other means, and the payment cannot be made due to (i) insufficient funds in my account, (ii) the closure, change or inaccessibility of my account without my having notified you as provided in Paragraph 7, or (iii) for any other reason (other than an error by you), I will pay you an additional fee of $15 for each returned or failed automated withdrawal or other item, unless prohibited by applicable law. I will pay this fee when it is assessed.

12. **Attorneys' Fees.** To the extent permitted by law, I am liable to you for your legal costs if you refer collection of my loan to a lawyer who is not your salaried employee. These costs may include reasonable attorneys' fees as well as costs and expenses of any legal action.

13. **Loan Charges.** If a law that applies to my loan and sets maximum loan charges is finally interpreted so that the interest or other loan charges collected or to be collected in connection with my loan exceed the permitted limits, then: (a) any such loan charge shall be reduced by the amount necessary to reduce the charge to the permitted limit; and (b) any sums already collected from me that exceeded permitted limits will be refunded to me. You may choose to make this refund by reducing the principal I owe under this Note or by making a direct payment to me.

14. **Assignment.** I may not assign any of my obligations under this Note without your written permission. You may assign this Note at any time without my permission. Unless prohibited by applicable law, you may do so without telling me. My obligations under this Note apply to all of my heirs and permitted assigns. Your rights under this Note apply to each of your successors and assigns.

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15. **Notices.** All notices and other communications hereunder shall be given in writing and shall be deemed to have been duly given and effective (i) upon receipt, if delivered in person or by facsimile, email or other electronic transmission, or (ii) one day after deposit prepaid for overnight delivery with a national overnight express delivery service. Except as expressly provided otherwise in this Note, notices to me may be addressed to my registered email address or to my address set forth above unless I provide you with a different address for notice by giving notice pursuant to this Paragraph, and notices to you must be addressed to WebBank at legal@prosper.com or c/o Prosper Marketplace, Inc., 221 Main Street, Third Floor, San Francisco, CA 94105, Attention: Legal Department. I also acknowledge and agree that, if this loan has both a borrower and a co-borrower, notice may be given to either of us and that such notice shall be deemed to have been duly given to and effective for both of us, except as otherwise provided by applicable law.

16. **Governing Law.** This Note is governed by federal law and, to the extent that state law applies, the laws of the State of Utah.

17. **Miscellaneous.** No provision of this Note shall be modified or limited except by an agreement signed by both you and me. The unenforceability of any provision of this Note shall not affect the enforceability or validity of any other provision of this Note.

18. **Arbitration Section**<br>**RESOLUTION OF DISPUTES: I ACKNOWLEDGE THAT I HAVE READ THIS ARBITRATION SECTION (the "Arbitration Agreement") CAREFULLY, UNDERSTAND THAT IT CONSTITUTES A BINDING AGREEMENT BETWEEN ME AND YOU TO ARBITRATE WHENEVER YOU OR I ELECT TO ARBITRATE A CLAIM (AS DEFINED BELOW), AND UNDERSTAND THAT IT LIMITS MY RIGHTS IN THE EVENT OF A DISPUTE BETWEEN YOU AND ME. I UNDERSTAND THAT I HAVE THE RIGHT TO REJECT THIS ARBITRATION AGREEMENT, AS PROVIDED IN PARAGRAPH (P) BELOW.**

(A) Definitions. This Arbitration Agreement incorporates the defined terms within the Note unless specifically defined below. In this Arbitration Agreement:

(i) "I," "me" and "my" mean the promisor under this Note, as well as any person claiming through such promisor;

(ii) "You" and "your" mean WebBank, any person servicing this Note for WebBank, any subsequent holders of this Note or any interest in this Note, any person servicing this Note for such subsequent holder of this note, and each of their respective parents, subsidiaries, affiliates, predecessors, successors, and assigns, as well as the officers, directors, and employees of each of them; and

(iii) "Claim" means any dispute, claim, or controversy (whether based on contract, tort, intentional tort, constitution, statute, ordinance, common law, or equity, whether pre-existing, present, or future, and whether seeking monetary, injunctive, declaratory, or any other relief) arising from or relating in any way to this Note or my relationship with you. The term "Claim" has the broadest possible meaning, and includes initial claims, counterclaims, cross claims, and third party claims. It includes disputes based upon contract, tort, consumer rights, fraud and other intentional torts, constitution, statute, regulation, ordinance, common law and equity (including any claim for injunctive or declaratory relief). The term "Claim" also includes any dispute related to the scope, validity, or enforceability of this Arbitration Agreement; thus, all such disputes are expressly delegated to an arbitrator for decision, with two exceptions noted below in the sections entitled "Class and Representative Action Waiver" and "Public Injunctive Relief Requests".

(B) Agreement to Arbitrate. You and I agree that in the event a Claim arises, either you or I may, without the other's consent, elect to resolve the Claim by binding arbitration. This agreement to arbitrate is binding on both you and I, and applies to all Claims (as defined above) except for those claims mentioned in paragraph (C) below entitled "Non-Arbitrable Claims."

(C) Non-Arbitrable Claims. This Arbitration Agreement shall not apply to covered borrowers as defined in the Military Lending Act, 10 U.S.C. § 987. Further, this Arbitration Agreement shall not

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apply to an individual Claim filed by me in a small claims or similar court (if any), so long as the Claim is pending on an individual basis only in such court.

(D) JURY WAIVER AND LIMITATION OF RIGHTS. YOU AND I AGREE THAT, BY ENTERING INTO THIS ARBITRATION AGREEMENT, THE PARTIES ARE EACH WAIVING THE RIGHT TO A TRIAL BY JURY OR A TRIAL BEFORE A JUDGE IN COURT. YOU AND I ACKNOWLEDGE THAT ARBITRATION WILL LIMIT OUR LEGAL RIGHTS, INCLUDING THE RIGHT TO PARTICIPATE IN A CLASS ACTION, THE RIGHT TO A JURY TRIAL, THE RIGHT TO CONDUCT FULL DISCOVERY, AND THE RIGHT TO APPEAL (EXCEPT AS PERMITTED IN PARAGRAPH (N) OR UNDER THE FEDERAL ARBITRATION ACT).

(E) Arbitration Forum and Rules. Any Claim shall be resolved, upon the election of either you or me, by binding arbitration administered by the American Arbitration Association ("AAA") or JAMS, under the applicable arbitration rules of the administrator in effect at the time a Claim is filed ("Rules"). Any arbitration under this Arbitration Agreement will take place on an individual basis; class arbitrations and class actions are not permitted. If I file a claim, I may choose the administrator; if you file a claim, you may choose the administrator, but you agree to change to the other permitted administrator at my request (assuming that the other administrator is available). I can obtain the Rules and other information about initiating arbitration by contacting the American Arbitration Association at 1633 Broadway, 10th Floor, New York, NY 10019, www.adr.org; or by contacting JAMS at 1920 Main Street, Suite 300, Irvine, CA 92614, (949) 224-1810, www.jamsadr.com. Further, to the extent there is any conflict between the Rules and this Arbitration Agreement, this Arbitration Agreement will prevail.

(F) Arbitrator Selection. Claims will be arbitrated by a single, neutral arbitrator, who shall be a retired judge or a lawyer with at least ten years' experience. The arbitrator shall be selected in accordance with the administrator's rules.

(G) Arbitration Fees and Expenses. I agree to pay the initial filing fee charged by the administrator for any arbitration I commence, up to a cap of $300. If the initial filing fee is more than $300, you will pay the balance over that amount. You will pay all other fees charged by the administrator or arbitrator, including any filing, administration, and/or arbitrator fees. You will pay the entire initial filing fee if: (1) I claim to be unable to afford it; and (2) I seek but cannot obtain a waiver of that fee from the administrator.

(H) Arbitration Hearing Location. Any in-person arbitration hearing will be held in the county in which I reside, or in such other location as you and I may mutually agree.

(I) Commencing Arbitration. The party electing arbitration must notify the other of such election. This notice may be given before or after a lawsuit has been filed concerning the Claim or with respect to other Claims brought later in the lawsuit, and it may be given by papers filed in the lawsuit such as a motion to compel arbitration. If I elect to initiate arbitration I must notify you in writing. My notice must be sent to Prosper Marketplace, Inc., 221 Main Street, Suite 300, San Francisco, CA 94105, Attention: Legal Department. If you commence arbitration you will notify me in writing at my last known address on file or, if you do so by moving to compel arbitration in a case I have brought in court, you will notify me by providing service of process as required by the rules of the applicable jurisdiction.

(J) Governing Law. You and I acknowledge and agree that the arbitration agreement set forth in this Arbitration Agreement is made pursuant to a transaction involving interstate commerce, and that the Federal Arbitration Act, 9 U.S.C. § 1-16 ("FAA"), shall govern the interpretation and enforcement of this Arbitration Agreement. The arbitrator shall apply applicable substantive law consistent with the FAA and the Governing Law clause of the Note. Further, if requested by either party, the arbitrator must provide written reasoned findings of fact and conclusions of law. In the event that a dispute does not proceed to arbitration, the Note shall be governed by and construed in accordance with the laws of the United States and, to the extent state law applies, to the laws of the State of Utah, without regard to its conflict of laws rules.

(K) Available Relief. Except as set forth below in paragraph (L) (entitled "CLASS ACTION AND REPRESENTATIVE ACTION WAIVER"), the arbitrator shall have the power to award any relief

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available to a claimant in court under applicable law, including but not limited to equitable and injunctive relief.

(L) CLASS ACTION AND REPRESENTATIVE ACTION WAIVER. YOU AND I AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN OUR INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING. Further, unless both you and I agree otherwise in writing, the arbitrator may not consolidate more than one person's claims, except that claims brought by joint applicants or co-borrowers relating to the same loan transaction shall be consolidated. The arbitrator shall have no authority to conduct any class, private attorney general or other representative proceeding. The validity, enforceability, and effect of this paragraph (L) shall be determined exclusively by a court, and not by the administrator or any arbitrator. This paragraph does not apply to requests for public injunctive relief, which are addressed in the paragraph below entitled "Public Injunctive Relief Requests."

(M) PUBLIC INJUNCTIVE RELIEF REQUESTS. If you or I seek public injunctive relief as a remedy for any Claim against one another (a "Public Injunctive Relief Request,") you and I agree that Public Injunctive Relief Request cannot be arbitrated. Instead, that Public Injunctive Relief Request shall be adjudicated by a court after all other Claims to be decided in arbitration under this Arbitration Agreement are resolved in arbitration. You and I agree to jointly request that the court stay the Public Injunctive Relief request until after the remaining Claims have been finally resolved in arbitration, and that the parties will only seek to lift the stay and request that the court resolve the Public Injunctive Relief Request if an arbitrator finds that one of them is liable for a Claim for which public injunctive relief is an available remedy. The enforceability, validity and effect of this paragraph (M) shall be determined exclusively by a court, and not by the administrator or any arbitrator.

(N) Enforcement and Appeals. Any appropriate court may enter judgment upon the arbitrator's award. The arbitrator's decision will be final and binding except that: (1) any party may exercise any appeal right under the FAA; and (2) any party may appeal any award relating to a claim for more than $100,000 to a three-arbitrator panel appointed by the administrator, which will reconsider de novo any aspect of the appealed award. The panel's decision will be final and binding, except for any appeal right under the FAA. The parties shall bear their own attorneys' fees and costs of any appeal.

(O) Severability and Survivability. This Arbitration Agreement shall survive: (i) termination or changes in the Note or the relationship between you and I concerning the Note; and (ii) the bankruptcy of any party. If any portion of this Arbitration Agreement (except for paragraph (L) above) is deemed invalid or unenforceable for any reason, it shall not invalidate the remaining portions of this Arbitration Agreement. However, if paragraph (L) of this Arbitration Agreement is deemed invalid or unenforceable in whole or in part, then this entire Arbitration Agreement shall be deemed invalid and unenforceable.

(P) Opt-Out Right. I understand that I may reject the provisions of this Arbitration Agreement, in which case neither you nor I will have the right to elect arbitration. Rejection of this Arbitration Agreement not affect the remaining parts of this Note. To reject this Arbitration Agreement, I must send you written notice of my rejection within 30 days after the date that this Note was made. I must include my name, address, and account number. The notice of rejection must be mailed to WebBank, c/o Prosper Marketplace, Inc., 221 Main Street, San Francisco, CA 94105, Attention: Legal Department. This is the only way that I can reject this Arbitration Agreement.

(Q) Pre-Dispute Notice. I agree that I will notify you in writing of any claim or dispute concerning or relating to this Note, and give you a reasonable period of time to address it BEFORE bringing any legal action, either individually, as a class member or representative, or as a private attorney general, against you.

19. **Electronic Transactions.** THIS NOTE INCLUDES YOUR EXPRESS CONSENT TO ELECTRONIC TRANSACTIONS AND DISCLOSURES, WHICH CONSENT IS SET FORTH IN THE PARAGRAPH ENTITLED "CONSENT TO DOING BUSINESS ELECTRONICALLY" AS DISCLOSED IN PROSPER'S TERMS OF USE ON PROSPER.COM. THE TERMS AND

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CONDITIONS OF THE "CONSENT TO DOING BUSINESS ELECTRONICALLY" SECTION ARE EXPRESSLY INCORPORATED HEREIN IN THEIR ENTIRETY. YOU EXPRESSLY AGREE THAT THIS NOTE MAY COMPRISE A "TRANSFERABLE RECORD" FOR ALL PURPOSES UNDER THE ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT AND THE UNIFORM ELECTRONIC TRANSACTIONS ACT.

20. **Registration of Note Owners.** I have appointed Prosper Funding LLC as my authorized agent (in such capacity, the "Note Registrar") to maintain a book-entry system (the "Register") for recording the beneficial owners of interests in this Note (the "Note Owners"). The person or persons identified as the Note Owners in the Register shall be deemed to be the owner(s) of this Note for purposes of receiving payment of principal and interest on such Note and for all other purposes. With respect to any transfer by a Note Owner of its beneficial interest in this Note, the right to payment of principal and interest on this Note shall not be effective until the transfer is recorded in the Register.

21. **Joint and Several Liability.** I acknowledge and agree that if this loan has both a borrower and a co-borrower, (a) each of us shall be jointly and severally liable for all obligations under this Note, (b) you may proceed against either of us to enforce such obligations without waiving your right to proceed against the other, and (c) you may proceed against either of us without first proceeding against the other.

22. **State Notices**

<u>California Residents</u>

Married registrants may apply for a separate account. As required by law, I am hereby notified that a negative credit report reflecting on my credit record may be submitted to a credit reporting agency if I fail to fulfill the terms of my credit obligations.

<u>Iowa Residents</u>

NOTICE TO CONSUMER: 1. Do not sign this paper before you read it. 2. You are entitled to a copy of this paper. 3. You may prepay the unpaid balance at any time without penalty and may be entitled to receive a refund of unearned charges in accordance with law.

**IMPORTANT: READ BEFORE SIGNING. The terms of this agreement should be read carefully because only those terms in writing are enforceable. No other terms or oral promises not contained in this written contract may be legally enforced. I may change the terms of this agreement only by another written agreement.**

<u>Kansas Residents</u>

NOTICE TO CONSUMER: 1. Do not sign this agreement before you read it. 2. You are entitled to a copy of this agreement. 3. You may prepay the unpaid balance at any time without penalty.

<u>Missouri Residents</u>

**Oral or unexecuted agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt including promises to extend or renew such debt are not enforceable. To protect me (borrower(s)) and you (creditor) from misunderstanding or disappointment, any agreements we reach covering such matters are contained in this writing, which is the complete and exclusive statement of the agreement between us, except as we may later agree in writing to modify it.**

<u>Nebraska Residents</u>

A credit agreement must be in writing to be enforceable under Nebraska law. To protect you and me from any misunderstandings or disappointments, any contract, promise, undertaking, or offer to forebear repayment of money or to make any other financial accommodation in connection with this loan of money or grant or extension of credit, or any amendment of, cancellation of, waiver of, or substitution for any or all of the terms or provisions of any instrument or document

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executed in connection with this loan of money or grant or extension of credit, must be in writing to be effective.

<u>New Jersey Residents</u>

Because certain provisions of this Note are subject to applicable laws, they may be void, unenforceable or inapplicable in some jurisdictions. None of these provisions, however, is void, unenforceable or inapplicable in New Jersey.

<u>Ohio Residents</u>

The Ohio laws against discrimination require that all creditors make credit equally available to all credit worthy customers, and that credit reporting agencies maintain separate credit histories on each individual upon request. The Ohio civil rights commission administers compliance with this law.

<u>Utah Residents</u>

As required by Utah law, I am hereby notified that a negative credit report reflecting on my credit record may be submitted to a credit reporting agency if I fail to fulfill the terms of my credit obligations.

This Note is the final expression of the agreement between the parties and may not be contradicted by evidence of any alleged oral agreement.

<u>Vermont Residents:</u> *NOTICE TO CO-SIGNER: YOUR SIGNATURE ON THIS NOTE MEANS THAT YOU ARE EQUALLY LIABLE FOR REPAYMENT OF THIS LOAN. IF THE BORROWER DOES NOT PAY, THE LENDER HAS A LEGAL RIGHT TO COLLECT FROM YOU.*

<u>Washington Residents:</u>

For primarily non-consumer purpose loans: Oral agreements or oral commitments to loan money, extend credit or to forbear from enforcing repayment of a debt are not enforceable under Washington law.

<u>Wisconsin Residents</u>

No provision of a marital property agreement, a unilateral statement or a court decree adversely affects the interest of the creditor unless the creditor, prior to the time the credit is granted, is furnished a copy of the agreement, statement or decree or has actual knowledge of the adverse provision when the obligation to the creditor is incurred.

23. **Military Lending Act.** The Military Lending Act provides specific protections for active duty service members and their dependents in consumer credit transactions. This Section includes information on the protections provided to covered borrowers as defined in the Military Lending Act.

(a) <u>Statement of MAPR.</u>

Federal law provides important protections to members of the Armed Forces and their dependents relating to extensions of consumer credit. In general, the cost of consumer credit to a member of the Armed Forces and his or her dependent may not exceed an annual percentage rate of 36 percent. This rate must include, as applicable to the credit transaction or account: The costs associated with credit insurance premiums; fees for ancillary products sold in connection with the credit transaction; any application fee charged (other than certain application fees for specified credit transactions or accounts); and any participation fee charged (other than certain participation fees for a credit card account).

(b) Section 18 of this Note shall not be applicable to, and shall not be enforceable against, a covered borrower as defined in the Military Lending Act.

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(c) <u>Oral Disclosures.</u> Please call 1-855-993-2967 to obtain oral disclosures, including the statement of MAPR and the payment schedule applicable to your loan, required under the Military Lending Act.

24. **Borrower Authorizations and Instructions.** If this loan has both a borrower and a co-borrower, any authorization or instruction that either of us provides to you may be treated by you as effective for both of us.

25. By signing this Note, I acknowledge that I (i) have read and understand all terms and conditions of this Note, (ii) agree to the terms set forth herein, and (iii) acknowledge receipt of a completely filled-in copy of this Note.

Wisconsin Residents: NOTICE TO CUSTOMER: (a) DO NOT SIGN THIS IF IT CONTAINS ANY BLANK SPACES. (b) YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN. (c) YOU HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THIS AGREEMENT AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE.

**CAUTION -- IT IS IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT BEFORE YOU SIGN IT.**

Date: __________________

By: Prosper Marketplace, Inc.

Attorney-in-Fact for Borrower and Co-Borrower (if applicable)

_____________________________________ [Borrower]

(Signed Electronically)

_____________________________________ [Co-Borrower]

(Signed Electronically)

<br>Last Updated: November 2021

## Exhibit 10.2

**Exhibit 10.2**

Investor Registration Agreement

This Investor Registration Agreement (this "Agreement") is made and entered into among you, Prosper Funding LLC ("Prosper", "we", or "us"), and Prosper Marketplace, Inc. (a separate legal entity that is the parent company of Prosper). This Agreement will govern all purchases of Borrower Payment Dependent Notes ("Notes") that you may, from time to time, make from Prosper, and all purchases of PMI Management Rights that you may, from time to time, make from Prosper Marketplace, Inc.

<u>Any Note you purchase will be a special, limited obligation of Prosper only and not an obligation of Prosper Marketplace, Inc. or of the borrower on the corresponding Borrower Loan (as defined below). The Note will be unsecured; you will not own the corresponding Borrower Loan and you will have no right to pursue the borrower on the corresponding Borrower Loan for payment of such loan or the Note tied to such loan.</u>

Prosper and Prosper Marketplace, Inc. have filed with the U.S. Securities and Exchange Commission registration statements on Form S-1 (Nos. 333-225797 and 333-225797-01) (as amended from time to time, collectively, the "Registration Statement") to register the continuous offering and sale of Notes issued by Prosper. The Notes are offered pursuant to a prospectus (as supplemented from time to time, the "Prospectus") which forms a part of the Registration Statement. The Registration Statement became effective on September 27, 2018 pursuant to the rules and regulations of the U.S. Securities and Exchange Commission under the Securities Act of 1933, as amended. Pursuant to the Registration Statement and Prospectus, Prosper Marketplace, Inc. has registered its continuous issuance of PMI Management Rights that are deemed to be attached to the Notes issued and sold by Prosper (including any Notes purchased pursuant to this Agreement), but as to which no purchase price is payable. The PMI Management Rights do not comprise a guarantee of payments on any Notes or corresponding Borrower Loans. Assets of Prosper Marketplace, Inc. are not available to satisfy Prosper's obligations in relation to Notes. Prosper will be the sole issuer of the Notes and Prosper Marketplace, Inc. will be the sole issuer of the PMI Management Rights. You should review this Agreement, the Terms of Use and any policies posted on Prosper's website at <u>www.prosper.com</u>, any subdomain thereof and any associated websites, desktop or mobile applications (collectively, the "Prosper Terms and Conditions"), and the Prospectus carefully. You should print and retain a copy of these documents for your records.

In consideration of the covenants, agreements, representations and warranties hereinafter set forth, and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows:

**1. Purchase and Sale of Notes.** Subject to the terms and conditions of this Agreement, Prosper will provide you the opportunity through its website and any associated websites, desktop or mobile applications (collectively, the "Prosper websites"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• To review and bid on loan listings, which are requests for loans ("Borrower Loans") that Prosper has received from its borrower members, with each such bid being at least $25;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• To purchase Notes from Prosper in the principal amount of the bids you place on loan listings, each such Note associated with, and dependent on, a specific Borrower Loan; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• To instruct Prosper to apply the proceeds from the sale of each Note you purchase to facilitate the funding of a specific Borrower Loan you have designated.

Any bid you place on a loan listing is a commitment by you to purchase a Note from Prosper in the principal amount of the bid you placed on the loan listing. If the amount available for further bidding on a loan listing is less than the amount of your bid, your bid will be deemed to be in the amount still available for bidding. You must commit to purchase a Note to fund a Borrower Loan prior to the origination of that Borrower Loan. At the time you commit to purchase a Note, you must have sufficient funds on deposit in your account with Prosper to complete the purchase. The funds on deposit in your account with Prosper will be placed in an FDIC-insured non-interest bearing account at Wells Fargo Bank, N. A. (the "funding account") separate from Prosper's own funds. Once you bid on a loan listing, it is irrevocable regardless of whether the full amount of the loan listing is funded, and you will not have access to the funds used to support your bid unless and until Prosper has notified you that the Borrower Loan will not be funded. If a loan listing on which you've bid does not fund, Prosper will inform you and release you from your purchase commitment. Prosper does not warrant or guaranty that you will be able to place a bid on any loan listing before that loan listing receives bids totaling the requested loan amount. Prosper may allocate some of its loan listings to other investor funding channels. If it does so, it will allocate loan listings among its various investor channels, including this channel, automatically, based upon a random allocation methodology determined by Prosper.

All Notes are issued pursuant to an indenture (the "Indenture") between Prosper and an indenture trustee.

**2. Issuance.** Each time you purchase a Note, it will be issued immediately following the closing of the corresponding Borrower Loan. All Borrower Loans are originated by WebBank, an FDIC insured, Utah-chartered industrial bank. Prosper will use the proceeds of the sale of each series of Notes to purchase the corresponding Borrower Loan from WebBank. Borrower Loans generally close at the end of their 14-day listing period unless (1) the borrower member withdraws the loan request prior to funding; (2) bids for the entire amount of the borrower member's loan request have been received earlier, in which case the Borrower Loan will close earlier; or (3) the loan request is canceled by Prosper, WebBank or their respective agents for reasons relating to the operation and integrity of the Prosper websites, such as attempted fraud or a failure to verify information upon request.

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**3. Terms of the Notes.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.Each Note shall have the terms and conditions described in the Prospectus, the Indenture and the Note itself. The Prospectus, the Indenture and form of Note are available for your review in the "Legal Agreements & Notices" page on Prosper's website. The interest rate, maturity and other terms of the corresponding Borrower Loan will be described in the loan listing on Prosper's website and the Promissory Note executed by the borrower. Subject to our obligation to use commercially reasonable efforts to service and collect Borrower Loans, you understand and agree that we may, in our sole discretion, at any time and from time to time, amend or waive any term of a Borrower Loan, and we may in our sole discretion charge off any Borrower Loan that we deem uncollectible.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.Each PMI Management Right shall have the terms and conditions described in the Prospectus, the Indenture and the Administration Agreement. The Administration Agreement is an exhibit to the Registration Statement that was filed with the U.S. Securities and Exchange Commission, a copy of which can be found on the U.S. Securities and Exchange Commission website. The Prospectus, Indenture and form of Note are available for your review in the "Legal Agreements & Notices" page on Prosper's website. The PMI Management Rights are attached to the Notes and are not severable from the Notes. The PMI Management Rights are not separately represented by any contract or instrument deliverable to holders of Notes, do not provide for any separate payments, proceeds or funds to be delivered to holders of Notes in support of payments on Borrower Loans or Notes and are not transferable apart from the Notes.

**4. Representations and Warranties as to Notes Sold.** Prosper makes the following representations and warranties to you, with respect to each Note sold to you under this Agreement, as of the date the Note is sold to you:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.Prosper has complied in all material respects with applicable federal, state and local laws in connection with the offer and sale of the Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.The Note has been duly authorized and, following payment of the purchase price by you and electronic delivery by Prosper to you, will constitute a valid and binding obligation of Prosper enforceable against Prosper in accordance with its terms, except as the enforcement of the Note may be limited by applicable bankruptcy, insolvency or similar laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.The proceeds from the sale of the Note have been used to facilitate the funding of the Borrower Loan you have designated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.If you bid on a loan listing by browsing online through available loan listings displayed on our website, the Note sold to you will be in the principal amount of the bid you placed on the loan listing and dependent for payment on the Borrower Loan identified in the loan listing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.If you have used an automated bidding tool or order execution service that we offer, such as Auto Invest, Recurring Investment, Quick Invest, Auto Quick Invest or Premier, to identify the Notes you are purchasing, each of those Notes conforms to the investment criteria you provided through the applicable tool or service.

**5. Remedies.**

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.In the event of a breach by Prosper of any of the representations and warranties contained in paragraphs (a) through (c) of Section 4 that materially and adversely affects your interest in a Note sold to you by Prosper (an "Interest Breach"), Prosper shall, at its option, either (i) cure the Interest Breach, if it is susceptible to cure; (ii) repurchase the Note from you; or (iii) indemnify and hold you harmless against all losses (including losses resulting from the nonpayment of the Note), damages, expenses, legal fees, costs and judgments resulting from any claim, demand or defense arising as a result of the Interest Breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.In the event of a breach by Prosper of any of the representations and warranties contained in paragraphs (d) and (e) of Section 4 that results in (i) the sale of a Note to you that is materially different from the Note that would have been sold to you had there been no such breach; or (ii) the sale of a Note to you that you would not have purchased had there been no such breach ("Sale Breach"), Prosper shall, at its option, either (i) cure the Sale Breach, if it is susceptible to cure; (ii) repurchase the Note from you; or (iii) indemnify and hold you harmless against all losses (including losses resulting from the nonpayment of the Note), damages, expenses, legal fees, costs and judgments resulting from any claim, demand or defense arising as a result of the Sale Breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.The decision whether an Interest Breach or Sale Breach is susceptible to cure, or whether Prosper shall cure or repurchase a Note or indemnify you with respect to the Note, shall be in Prosper's sole discretion. Upon discovery by Prosper of an Interest Breach or Sale Breach, Prosper shall give you notice of such breach, and of Prosper's election to indemnify, repurchase the Note or cure, no later than ninety (90) days after our discovery of the breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.In the event Prosper repurchases a Note pursuant to paragraph (a) or (b) of this Section 5, Prosper will pay you a repurchase price equal to the remaining outstanding principal balance of the Note as of the date of repurchase. The repurchase price will be paid to you by remittance into the Prosper funding account. Upon any such repurchase, the Note shall be automatically transferred and assigned by you to Prosper, in each case without recourse, and you authorize and agree that Prosper may execute any endorsements or assignments necessary to effectuate the transfer and assignment of the Note to Prosper.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.In the event Prosper indemnifies you and holds you harmless against all losses with respect to a Note pursuant to paragraph (a) or (b) of this Section 5, Prosper shall not be required to take any action with respect to losses you may suffer resulting from nonpayment of a Note until the Note is at least 120 days past due, provided, however, that Prosper may in its sole discretion elect to take action at an earlier time. For purposes of indemnification, Prosper shall calculate losses resulting from the nonpayment of a Note based upon the outstanding principal balance of the Note. If Prosper makes an indemnification payment to you as a result of losses you suffered resulting from the nonpayment of a Note, Prosper shall be entitled to retain any subsequent recoveries on the Note. Any indemnification payments will be paid to you by remittance into the Prosper funding account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.If Prosper repurchases any Notes as provided in this Section 5, Prosper Marketplace, Inc. will concurrently repurchase the related PMI Management Right.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g.The remedies provided for in this Section 5 are your sole protection with respect to a breach of the representations and warranties set forth in Section 4 above. Prosper may have additional repurchase and indemnification obligations under the terms of the Indenture and the Notes themselves.

**6. Your Covenants and Acknowledgements.** YOU AGREE THAT WHEN MAKING BIDS ON LOAN LISTINGS YOU WILL NOT DISCRIMINATE AGAINST ANY BORROWER MEMBER OR GROUP ON THE BASIS OF RACE, COLOR, RELIGION, NATIONAL ORIGIN, SEX, MARITAL STATUS, AGE, SEXUAL ORIENTATION, MILITARY STATUS, THE BORROWER MEMBER'S SOURCE OF INCOME, OR ANY OTHER BASIS PROHIBITED BY AN APPLICABLE FEDERAL, STATE OR LOCAL FAIR LENDING LAW, REGULATION, RULE OR ORDINANCE, INCLUDING WITHOUT LIMITATION THE EQUAL CREDIT OPPORTUNITY ACT AND REGULATION B. YOU AGREE THAT YOU HAVE NO RIGHT TO, AND SHALL NOT, MAKE ANY ATTEMPT, DIRECTLY OR THROUGH ANY THIRD PARTY, TO COLLECT FROM BORROWER MEMBERS ON YOUR NOTES OR THE CORRESPONDING BORROWER LOANS. YOU UNDERSTAND AND AGREE THAT BORROWER MEMBERS MAY DEFAULT ON THEIR PAYMENT OBLIGATIONS UNDER BORROWER LOANS AND THAT SUCH DEFAULTS WILL REDUCE THE AMOUNTS, IF ANY, YOU MAY RECEIVE UNDER THE TERMS OF ANY NOTES YOU HOLD THAT CORRESPOND TO THOSE BORROWER LOANS.

**7. Your Financial Suitability Representations and Warranties.** You represent and warrant that you satisfy the minimum financial suitability standards applicable to the state in which you reside, if any, and you covenant that you will abide by any applicable maximum investment amount, each as set forth in the Prospectus. You agree to provide any additional documentation reasonably requested by us, or as may be required by the Securities and Exchange Commission or the securities administrator of any state, to confirm that you meet such minimum financial suitability standards and have abided by such maximum investment limit. You represent and warrant that, based on your overall investment objectives, portfolio structure and financial situation, you can reasonably benefit from, and can bear the economic risk of, an investment in Notes. You represent and warrant, as of the date of this Agreement and as of any date that you commit to purchase Notes, that you have received the Prospectus, the Indenture and the form of the Note, including the information contained therein regarding the background and qualifications of Prosper Funding LLC, the experience and qualifications of Prosper Marketplace, Inc. who will be acting in various capacities as agent on behalf of Prosper Funding LLC and as agent on behalf of WebBank, the tax consequences of purchasing Notes, and the risks attendant to purchasing Notes (including, but not limited to, the risk that you may lose your entire investment). You understand that the Notes will not be listed on any securities exchange, that there may be no, or only a limited, secondary market for the Notes, that any trading of Notes must be conducted in accordance with federal and applicable state securities laws and that Note purchasers should be prepared to hold the Notes they purchase until the Notes mature.

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**8. Your Other Representations and Warranties.** You warrant and represent to Prosper, as of the date of this Agreement and as of any date that you commit to purchase Notes, that (i) you have the power to enter into and perform your obligations under this Agreement; (ii) this Agreement has been duly authorized, executed and delivered by you; (iii) you have received the Prospectus, the Indenture, and the form of the Note; and (iv) in connection with this Agreement you have complied in all material respects with applicable federal, state and local laws. In addition, if the person entering this Agreement is a corporation, partnership, limited liability company or other entity (each, an "institution"), the institution warrants and represents that (i) the individual executing this Agreement on behalf of the institution has all necessary power and authority to execute and perform this Agreement on the institution's behalf; (ii) the execution and performance of this Agreement will not violate any provision in the institution's charter documents, by-laws, indenture of trust or partnership agreement, or other constituent agreement or instrument governing the institution's formation or administration; and (iii) the execution and performance of this Agreement will not constitute or result in a breach or default under, or conflict with, any order, ruling or regulation of any court or other tribunal or of any governmental commission or agency, or any agreement or other undertaking to which the institution is a party or by which it is bound.

**9. No Advisory Relationship.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.You acknowledge and agree that (i) the purchase and sale of Notes is an arms-length transaction between you and Prosper; (ii) in connection with the purchase and sale of Notes, Prosper is not acting as your agent or fiduciary; (iii) Prosper assumes no advisory or fiduciary responsibility with respect to you in connection with the purchase and sale of Notes; (iv) Prosper has not provided you with any legal, accounting, regulatory or tax advice with respect to Notes; and (v) you have consulted your own legal, accounting, regulatory and tax advisors with respect to the Notes to the extent you have deemed it appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.You acknowledge and agree that (i) the purchase and sale of PMI Management Rights is an arms-length transaction between you and Prosper Marketplace, Inc.; (ii) in connection with the purchase and sale of PMI Management Rights, Prosper Marketplace, Inc. is not acting as your agent or fiduciary; (iii) Prosper Marketplace, Inc. assumes no advisory or fiduciary responsibility with respect to you in connection with the purchase and sale of PMI Management Rights; (iv) Prosper Marketplace, Inc. has not provided you with any legal, accounting, regulatory or tax advice with respect to PMI Management Rights; and (v) you have consulted your own legal, accounting, regulatory and tax advisors with respect to the PMI Management Rights to the extent you have deemed it appropriate.

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**10. Restrictions on Use.** Prosper may in its sole discretion, with or without cause and with or without notice, restrict your access to the platform or the Prosper websites. Except as provided in Section 8 above, (i) you are not authorized or permitted to use Prosper to bid on loan listings or to purchase Notes for someone other than yourself; and (ii) you must be an owner of the deposit account you designate for electronic transfers of funds, with authority to direct that funds be transferred to or from the account. Individuals who are registered investors may also register and participate on the Prosper platform as a borrower member. If you obtain one or more Borrower Loans through the platform, amounts in your Prosper funding account are subject to set-off against any delinquent amounts owing on your Borrower Loans. Amounts in your Prosper funding account are also subject to set-off against any shortfall resulting from ACH returns of transfers or deposits of funds to your Prosper funding account. You will not receive further notice in advance of our exercise of our right to set-off amounts in your Prosper funding account against any delinquent amounts owing on any Borrower Loans you obtain.

**11. Prosper's Representations and Warranties.** Prosper represents and warrants to you, as of the date of this Agreement and as of any date that you commit to purchase Notes, that: (i) it is duly organized and is validly existing as a limited liability company in good standing under the laws of Delaware and has power to enter into and perform its obligations under this Agreement; (ii) this Agreement has been duly authorized, executed and delivered by Prosper; and (iii) the Indenture has been duly authorized by Prosper and qualified under the Trust Indenture Act of 1939 and constitutes a valid and binding agreement of Prosper, enforceable against Prosper in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency or similar laws.

**12. No Guarantee of Returns or Payments.** NEITHER PROSPER NOR PROSPER MARKETPLACE, INC. WARRANTS OR GUARANTEES THAT YOU WILL RECEIVE ANY RATE OF RETURN, ANY MINIMUM AMOUNT OF PRINCIPAL OR INTEREST OR ANY PRINCIPAL OR INTEREST AT ALL ON ANY NOTE. THE AMOUNT YOU RECEIVE ON A NOTE IS WHOLLY DEPENDENT UPON THE BORROWER MEMBER'S PAYMENT PERFORMANCE ON THE BORROWER LOAN CORRESPONDING TO YOUR NOTE. NEITHER PROSPER NOR PROSPER MARKETPLACE, INC. GUARANTEES ANY BORROWER LOANS OR NOTES AND DOES NOT ACT AS A GUARANTOR OF ANY LOAN PAYMENT OR PAYMENTS BY ANY BORROWER MEMBER. YOU FURTHER UNDERSTAND AND ACKNOWLEDGE THAT BORROWER MEMBERS MAY DEFAULT ON THE BORROWER LOANS CORRESPONDING TO YOUR NOTES, AND THAT SUCH DEFAULTS MAY NEGATIVELY AFFECT THE AMOUNT OF PRINCIPAL AND INTEREST YOU RECEIVE ON YOUR NOTES.

**13. Prohibited Activities.** You agree that you will not do the following, in connection with any loan listings, bids, Notes, Borrower Loans or other transactions involving or potentially involving Prosper:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.Represent yourself to any person, as a director, officer or employee of Prosper, Prosper Marketplace, Inc. or WebBank, unless you are such director, officer or employee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.Charge, or attempt to charge, any Prosper borrower member any fee in exchange for your agreement to bid on or recommend a borrower member's loan listing, or propose or agree to accept any fee, bonus, additional interest, kickback or thing of value of any kind, in exchange for your agreement to bid on or recommend a borrower member's loan listing;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.Engage in any activities in connection with a Borrower Loan that require a license as a loan broker, credit services organization, credit counselor, credit repair organization, lender or other regulated entity, including but not limited to soliciting loans or loan applications, quoting loan terms and rates and counseling borrower members on credit issues or loan options or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.Violate any applicable federal, state or local laws, including but not limited to, the Equal Credit Opportunity Act and other fair lending laws, the Truth in Lending Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, federal and state consumer privacy laws, state usury and loan fee statutes, state licensing laws and state unfair and deceptive trade practices statutes.

**14. Tax Treatment.** The parties agree that the Notes are intended to be indebtedness of Prosper that have original issue discount for U.S. federal income tax purposes. You agree that you will not take any position inconsistent with such treatment of the Notes for tax, accounting, or other purposes, unless required by law. You further acknowledge that the Notes will be subject to the original issue discount rules of the Internal Revenue Code of 1986, as amended, as described in the Prospectus. You acknowledge that you are prepared to bear the risk of loss of your entire purchase price for any Notes you purchase.

**15. Termination of Agreement.** Prosper may in its sole discretion, with or without cause, immediately, take one or more of the following actions: (i) terminate this Agreement by giving you notice as provided below; or (ii) terminate or suspend your right to bid on loan listings or otherwise participate on the Prosper platform immediately and without notice. Any Notes you purchase from Prosper prior to the effective date of any such action by Prosper shall remain in full force and effect in accordance with their terms.

**16. Indemnification by You.** In addition to your indemnification obligations set forth in Prosper's Terms and Conditions, you agree to indemnify, defend, protect and hold harmless Prosper, its parent company, Prosper Marketplace, Inc., any affiliates, any subsidiaries and their respective officers, directors, members, shareholders, employees and agents (collectively, the "Prosper Parties") against all claims, liabilities, actions, costs, damages, losses, demands and expenses of every kind, known or unknown, contingent or otherwise, (i) resulting from any material breach of any obligation you undertake in this Agreement, including but not limited to your obligation to comply with applicable laws; (ii) relating to the contents of your Prosper member web page, your own website or your business; (iii) resulting from your acts, omissions and representations (and those of your employees, agents or representatives) relating to the Prosper Parties; or (iv) asserted by third parties against the Prosper Parties alleging that the trademarks, trade names, logos or branding you use, display, link to or advertise infringes upon the intellectual property rights of any such third party. Your obligation to indemnify the Prosper Parties shall survive termination of this Agreement, regardless of the reason for termination.

**17. Prosper's Right to Modify Terms.** Prosper has the right to change any term or provision of this Agreement. Prosper will give you notice of material changes to this Agreement in the manner set forth in Section 18. You authorize Prosper to correct obvious clerical errors appearing in information you provide to Prosper, without notice to you, although Prosper expressly undertakes no obligation to identify or correct such errors.

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**18. Notices.** All notices, requests, demands, required disclosures and other communications from Prosper to you will be transmitted to you by email to the email address you have registered on the Prosper websites or will be posted on the Prosper websites, and shall be deemed to have been duly given and effective upon such transmission or posting. All notices, required disclosures and other communications to you from the trustee under the Indenture relating to Notes you own will be transmitted to you by email to your registered email address or mailed to you at your registered residence/mailing address. If your registered email address changes, you must notify Prosper promptly. You also agree to promptly update your registered residence/mailing address on the Prosper websites if you change your residence/mailing address. You shall send all notices or other communications required to be given hereunder to Prosper via email at <u>compliance@prosper.com</u> or by writing to: Prosper Funding LLC, c/o Prosper Marketplace, Inc., 221 Main Street, Suite 300, San Francisco, CA 94105, Attention: Compliance. You may contact Prosper by sending an email to <u>support@prosper.com</u> or calling us toll-free at (866) 615-6319, but such communications may not satisfy your obligation to provide notice hereunder or otherwise preserve your rights.

**19. No Warranties.** EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, NO PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES TO THE OTHER PARTIES, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

**20. Limitation on Liability.** IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANOTHER PARTY FOR ANY LOST PROFITS OR SPECIAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE DAMAGES, EVEN IF INFORMED OF THE POSSIBILITY OF SUCH DAMAGES. FURTHERMORE, NO PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER PARTIES REGARDING THE EFFECT THAT THE AGREEMENT MAY HAVE UPON THE FOREIGN, FEDERAL, STATE OR LOCAL TAX LIABILITY OF THE OTHER.

**21. Entire Agreement.** Except as otherwise expressly provided herein, this Agreement represents the entire agreement between you and Prosper regarding the subject matter hereof and supersedes any prior investor or lender registration agreement between you and Prosper Marketplace, Inc. as well as all prior or contemporaneous communications, promises and proposals, whether oral, written or electronic, between us.

**22. Miscellaneous.** The parties acknowledge that there are no third party beneficiaries to this Agreement. You may not assign, transfer, sublicense or otherwise delegate your rights under this Agreement to another person without Prosper's prior written consent. Prosper may assign this Agreement at any time without your permission, unless prohibited by applicable law. Any such assignment, transfer, sublicense or delegation in violation of this Section shall be null and void. This Agreement shall be governed by the laws of the State of New York. Any waiver of a breach of any provision of this Agreement will not be a waiver of any other subsequent breach. Failure or delay by either party to enforce any term or condition of this Agreement will not constitute a waiver of such term or condition. If any part of this Agreement is determined to be invalid or unenforceable under applicable law, then the invalid or unenforceable provision will be deemed superseded by a valid enforceable provision that most closely matches the intent of the original provision, and the remainder of the Agreement shall continue in effect. The parties agree to execute and deliver such further documents and information as may be reasonably required in order to effectuate the purposes of this Agreement.

**23. Arbitration.** To resolve any ambiguity, this Section 23 does not in any way affect any party's ability to bring an action against Prosper or Prosper Marketplace, Inc., or their respective officers and directors, under the federal securities laws.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.In this Resolution of Disputes provision:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.I, "me" and "my" mean the person entering into this Agreement, as well as any second person claiming through such first person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.You and "your" mean Prosper Funding LLC and its parent, subsidiaries, affiliates, predecessors, successors, and assigns, as well as their officers, directors, and employees;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.Claim means any dispute, claim, or controversy (whether based on contract, tort, intentional tort, constitution, statute, ordinance, common law, or equity, whether pre-existing, present, or future, and whether seeking monetary, injunctive, declaratory, or any other relief) arising from or relating to this Agreement or the relationship between you and me (including claims arising prior to or after the date of the Agreement, and claims that are currently the subject of purported class action litigation in which you are not a member of a certified class), and includes claims that are brought as counterclaims, cross claims, third party claims or otherwise, as well as disputes about the validity or enforceability of this Agreement or the validity or enforceability of this Section 23.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.Any Claim may be resolved, upon the election of both you and me, by binding arbitration administered by the American Arbitration Association or JAMS, under the applicable arbitration rules of the administrator in effect at the time a Claim is filed ("Rules"). Any arbitration under this Agreement will only take place with respect to a single person; class arbitrations and class actions are not permitted. If I file a claim, I may choose the administrator; if you file a claim, you may choose the administrator, but you agree to change to another permitted administrator at my request (assuming that the other administrator is available). I can obtain the Rules and other information about initiating arbitration by contacting the American Arbitration Association at 1633 Broadway, 10th Floor, New York, NY 10019, (800) 778-7879, www.adr.org; or by contacting JAMS at 1920 Main Street, Suite 300, Irvine, CA 92614, (949) 224-1810, www.jamsadr.com. Your address for serving any arbitration demand or claim is Prosper Funding LLC, c/o, Prosper Marketplace, Inc., 221 Main Street, Suite 300, San Francisco, CA 94105, Attention: Compliance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.Claims submitted for arbitration will be arbitrated by a single, neutral arbitrator, who shall be a retired judge or a lawyer with at least ten years' experience.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.You will pay all filing and administration fees charged by the administrator and arbitrator fees up to $1,000, and you will consider my request to pay any additional arbitration costs. If an arbitrator issues an award in your favor, I will not be required to reimburse you for any fees you have previously paid to the administrator or for which you are responsible. If I receive an award from the arbitrator, you will reimburse me for any fees paid by me to the administrator or arbitrator. Each party shall bear its own attorney's, expert's and witness fees, which shall not be considered costs of arbitration; however, if a statute gives me the right to recover these fees, or fees paid to the administrator or arbitrator, then these statutory rights will apply in arbitration.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e.Any in-person arbitration hearing will be held in the city with the federal district court closest to my residence, or in such other location as you and I may mutually agree. The arbitrator shall apply applicable substantive law consistent with the Federal Arbitration Act, 9 U.S.C. § 1-16, and, if requested by either party, provide written reasoned findings of fact and conclusions of law. The arbitrator shall have the power to award any relief authorized under applicable law. Any appropriate court may enter judgment upon the arbitrator's award. The arbitrator's decision will be final and binding except that: (i) any party may exercise any appeal right under the FAA; and (ii) any party may appeal any award relating to a claim for more than $100,000 to a three-arbitrator panel appointed by the administrator, which will reconsider de novo any aspect of the appealed award. The panel's decision will be final and binding, except for any appeal right under the FAA. Unless applicable law provides otherwise, the appealing party will pay the appeal's cost, regardless of its outcome. However, you will consider any reasonable written request by me for you to bear the cost.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f.YOU AND I AGREE THAT EACH MAY BRING ARBITRATION CLAIMS AGAINST THE OTHER ONLY IN OUR CAPACITY AS A SINGLE PERSON, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING. Further, unless both you and I agree otherwise in writing, the arbitrator may not consolidate more than one person's claims. The arbitrator shall have no power to arbitrate any Claims on a class action basis or Claims brought in a purported representative capacity on behalf of the general public, other investors, or other persons similarly situated. The validity and effect of this paragraph f shall be determined exclusively by a court, and not by the administrator or any arbitrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g.If any portion of this Section 23 is deemed invalid or unenforceable for any reason, it shall not invalidate the remaining portions of this section. However, if paragraph f of this Section 23 is deemed invalid or unenforceable in whole or in part, then this entire Section 23 shall be deemed invalid and unenforceable. The terms of this Section 23 will prevail if there is any conflict between the Rules and this section.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h.You and I acknowledge and agree that the arbitration agreement set forth in this Section 23 is made pursuant to a transaction involving interstate commerce, and thus the Federal Arbitration Act shall govern the interpretation and enforcement of this Section 23. This Section 23 shall survive the termination of this Agreement.

**24. State Notices.**

Maine: The Maine Office of Securities recommends that an investor's aggregate investment in this offering and similar offerings not exceed 10% of the investor's liquid net worth. For this purpose, "liquid net worth" is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities.

------

**25. Permission to Contact. When you give us your home, mobile, work and/or other phone number, we have your permission to contact you at that number or numbers, and any other number we believe we may reach you through (unless prohibited by applicable law), about your Prosper accounts. Your consent allows us to use text messaging, artificial or prerecorded voice messages and automatic dialing technology, for all purposes not prohibited by applicable law. Message and data rates may apply. You may contact us anytime to change these preferences. We may also send an email to any address where we reasonably believe we can contact you. Some of the purposes for calls and messages include: obtaining information; transactions on or servicing of your account; and collecting on your account. Our rights under this Section extend to our affiliates, subsidiaries, parents, agents and vendors. Notify us immediately of any changes to your contact information by changing your contact information on your Prosper account information – settings page.**

**26. No Guarantee of Payments by Prosper Marketplace, Inc.**

PROSPER WILL BE THE SOLE ISSUER OF THE NOTES. THE NOTES ARE SPECIAL, LIMITED OBLIGATIONS OF PROSPER ONLY AND ARE NOT OBLIGATIONS OF ITS PARENT COMPANY, PROSPER MARKETPLACE, INC. OR OF THE BORROWERS UNDER THE CORRESPONDING BORROWER LOANS. PROSPER'S OBLIGATION TO MAKE PAYMENTS ON A NOTE WILL BE LIMITED TO AN AMOUNT EQUAL TO THE NOTE HOLDER'S PRO RATA SHARE OF AMOUNTS PROSPER RECEIVES WITH RESPECT TO THE CORRESPONDING BORROWER LOAN, NET OF ANY SERVICING FEES. PROSPER MARKETPLACE, INC. WILL BE THE SOLE ISSUER OF THE PMI MANAGEMENT RIGHTS. THE PMI MANAGEMENT RIGHTS WILL NOT BE SEPARABLE FROM THE NOTES OFFERED ON THE PLATFORM AND WILL NOT BE ASSIGNED A VALUE SEPARATE FROM THE NOTES. THE PMI MANAGEMENT RIGHTS RELATE SOLELY TO THE SERVICES PROVIDED BY PROSPER MARKETPLACE, INC. TO PROSPER PURSUANT TO THE ADMINISTRATION AGREEMENT DESCRIBED IN THE PROSPECTUS. PROSPER MARKETPLACE, INC. IS NOT A PARTY TO THIS AGREEMENT, HAS NO PAYMENT OBLIGATIONS IN RELATION TO ANY BORROWER LOAN OR ANY NOTE, AND DOES NOT GUARANTEE PAYMENT OF THE CORRESPONDING BORROWER LOANS OR THE NOTES. PROSPER MARKETPLACE, INC. DOES NOT WARRANT OR GUARANTEE THAT YOU WILL RECEIVE ANY RATE OF RETURN, ANY MINIMUM AMOUNT OF PRINCIPAL OR INTEREST OR ANY PRINCIPAL OR INTEREST AT ALL ON ANY NOTE.

Last Updated: September 6, 2019

## Exhibit 21.1

**Exhibit 21.1** 

**PROSPER MARKETPLACE, INC. SUBSIDIARIES** 

---

| | |
|:---|:---|
| **Entity Name** | **State of Organization** |
| BillGuard, Inc. | Delaware |
| Prosper Funding LLC | Delaware |
| Prosper Healthcare Lending LLC | Delaware |
| Prosper Warehouse I Trust | Delaware |
| Prosper Warehouse II Trust | Delaware |

---

## Exhibit 21.2

**Exhibit 21.2** 

**PROSPER FUNDING LLC SUBSIDIARIES** 

---

| | |
|:---|:---|
| **Entity Name** | **State of Organization** |
| Prosper Depositor LLC | Delaware |

---

## Exhibit 23.1

**Exhibit 23.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in the Registration Statement Nos. 333-213141, 333-210715, 333-204079, 333-203532, and 333-223904 on Form S-8 of our report dated March 29, 2023 relating to the consolidated financial statements of Prosper Marketplace, Inc. and subsidiaries, and our report dated March 29, 2023 relating to the consolidated financial statements of Prosper Funding LLC (a wholly owned subsidiary of Prosper Marketplace, Inc.) and subsidiaries (which report expresses an unqualified opinion on the consolidated financial statements and includes an explanatory paragraph referring to certain related party transactions with its parent, Prosper Marketplace, Inc.) appearing in this Annual Report on Form 10-K of Prosper Marketplace, Inc. and Prosper Funding LLC for the year ended December 31, 2022.

/s/ Deloitte & Touche LLP

San Francisco, California

March 29, 2023

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATIONS**

I, David Kimball, certify that:

1.&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this Annual Report on Form 10-K of Prosper Marketplace, Inc.;

2.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: March 29, 2023 | /s/ David Kimball |
| | David Kimball |
| | Chief Executive Officer of Prosper Marketplace, Inc. |
| | *(Principal Executive Officer)* |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATIONS**

I, Usama Ashraf, certify that:

1.&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this Annual Report on Form 10-K of Prosper Marketplace, Inc.;

2.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: March 29, 2023 | /s/ Usama Ashraf |
| | Usama Ashraf |
| | President and Chief Financial Officer of Prosper Marketplace, Inc. |
| | *(Principal Financial Officer)* |

---

## Exhibit 31.3

**Exhibit 31.3**

**CERTIFICATIONS**

I, David Kimball, certify that:

1.&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this Annual Report on Form 10-K of Prosper Funding LLC;

2.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: March 29, 2023 | /s/ David Kimball |
| | David Kimball |
| | Chief Executive Officer of Prosper Funding LLC |
| | *(Principal Executive Officer)* |

---

## Exhibit 31.4

**Exhibit 31.4**

**CERTIFICATIONS**

I, Usama Ashraf, certify that:

1.&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this Annual Report on Form 10-K of Prosper Funding LLC;

2.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: March 29, 2023 | /s/ Usama Ashraf |
| | Usama Ashraf |
| | President, Chief Financial Officer and Treasurer of Prosper Funding LLC |
| | *(Principal Financial Officer)* |

---

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report of Prosper Marketplace, Inc. ("PMI") on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of PMI certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of PMI.

---

| | |
|:---|:---|
| Date: March 29, 2023 | /s/ David Kimball |
|  | David Kimball |
|  | Chief Executive Officer of Prosper Marketplace, Inc. |
|  | *(Principal Executive Officer)* |
|  | /s/ Usama Ashraf |
|  | Usama Ashraf |
|  | President and Chief Financial Officer of Prosper Marketplace, Inc. |
|  | *(Principal Financial Officer)* |

---

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report of Prosper Funding LLC ("Prosper Funding") on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of Prosper Funding certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Prosper Funding.

---

| | |
|:---|:---|
| Date: March 29, 2023 | /s/ David Kimball |
|  | David Kimball |
|  | Chief Executive Officer of Prosper Funding LLC |
|  | *(Principal Executive Officer)* |
|  | /s/ Usama Ashraf |
|  | Usama Ashraf |
|  | President, Chief Financial Officer and Treasurer of Prosper Funding LLC |
|  | *(Principal Financial Officer)* |

---

<br>