Document:

prosper-ex1023_927.htm

10.23

Investor Registration Agreement

This Investor Registration Agreement (this “Agreement”) is made and entered into between 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.

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. 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.

Prosper has filed with the U.S. Securities and Exchange Commission a registration statement on Form S-1 (No. 333-204880-01) (as amended from time to time, 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 29, 2015 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 same 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 www.prosper.com and any subdomain thereof (collectively, the “Prosper Terms and Conditions”), and the Prospectus carefully. You should print and retain a copy of these documents for your records.

 

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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:

	
 
	
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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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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

	
 
	
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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.

 

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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 website, such as attempted fraud or a failure to verify information upon request.

3. Terms of the Notes.

	
 
	
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Each Note shall have the terms and conditions described in the Prospectus, the Indenture and the Note itself. The Indenture and the form of Note are exhibits to the Registration Statement of which the Prospectus forms a part. The Registration Statement is available for your review on the Prosper website (the Note is included as an exhibit to the Indenture). 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.

	
 
	
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Each PMI Management Right shall have the terms and conditions described in the Prospectus, the Indenture and the Administration Agreement. The Indenture and the Administration Agreement are exhibits to the Registration Statement of which the Prospectus forms a part. The Registration Statement is available for your review on the Prosper 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.

 

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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:

	
 
	
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Prosper has complied in all material respects with applicable federal, state and local laws in connection with the offer and sale of the Note.

	
 
	
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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.

	
 
	
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The proceeds from the sale of the Note have been used to facilitate the funding of the Borrower Loan you have designated.

	
 
	
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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.

	
 
	
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If you have used an automated bidding tool or order execution service that we offer, such as 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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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.

	
 
	
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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.

	
 
	
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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 

 

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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.

	
 
	
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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.

	
 
	
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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.

	
 
	
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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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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. 

 

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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.

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 

 

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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.

	
 
	
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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.

	
 
	
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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.

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 website. 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 

 

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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.

 

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13. Recommendations from Prosper Friends. Prosper allows borrower members to create a network of Prosper friends, and obtain bids and recommendations from one or more of the borrower member’s designated Prosper friends. Recommendations accompanying bids from borrower members’ Prosper friends are displayed with loan listings. Prosper friends do not guarantee payments on any Note or on any corresponding Borrower Loan, and a bid or recommendation from a borrower member’s Prosper friend does not obligate the individual making the bid or recommendation to guarantee or make any payments on any Note or on any corresponding Borrower Loan.

14. 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:

	
 
	
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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;

	
 
	
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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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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

	
 
	
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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.

15. 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.

 

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16. 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.

17. 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.

18. 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 20. 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.

19. Member Web Page Display and Content. You may, but are not required to, maintain a member web page on the Prosper website, where you can post content, logos or links to websites. If you elect to do so, you authorize Prosper to display on the Prosper website all such material you provide to Prosper. Any material you display on 

 

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your member page must conform to the Prosper Terms and Conditions, as amended from time to time, and material you display or link to must not (i) infringe on Prosper’s or any third party’s copyright, patent, trademark, trade secret or other proprietary rights or right of publicity or privacy; (ii) violate any applicable law, statute, ordinance or regulation; (iii) be defamatory or libelous; (iv) be lewd, hateful, violent, pornographic or obscene; (v) violate any laws regarding unfair competition, anti-discrimination or false advertising; (vi) promote violence or contain hate speech; or (vii) contain viruses, trojan horses, worms, time bombs, cancelbots or other similarly harmful or deleterious programming routines.

20. 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 website or will be posted on the Prosper website, 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 website 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 compliance@prosper.com 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 support@prosper.com 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.

21. 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.

22. Limitation on Liability. IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANOTHER PARTY FOR ANY LOST PROFITS OR SPECIAL, EXEMPLARY, 

 

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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.

23. 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.

24. 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.

25. Arbitration. To resolve any ambiguity, this Section 25 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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In this Resolution of Disputes provision:

	
 
	
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I, “me” and “my” mean the person entering into this Agreement, as well as any second person claiming through such first person;

 

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You and “your” mean Prosper Funding LLC and its respective parent, subsidiaries, affiliates, predecessors, successors, and assigns, as well as their officers, directors, and employees;

	
 
	
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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 25.

	
 
	
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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.

	
 
	
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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.

	
 
	
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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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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 

 

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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.

	
 
	
6.
	
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.

	
 
	
7.
	
If any portion of this Section 25 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 25 is deemed invalid or unenforceable in whole or in part, then this entire Section 25 shall be deemed invalid and unenforceable. The terms of this Section 25 will prevail if there is any conflict between the Rules and this section.

	
 
	
8.
	
You and I acknowledge and agree that the arbitration agreement set forth in this Section 25 is made pursuant to a transaction involving interstate commerce, and thus the Federal Arbitration Act shall govern the interpretation and enforcement of this Section 25. This Section 25 shall survive the termination of this Agreement.

26. 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.

27. 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 

 

10.23

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: October 29, 2015prosper-ex1029_924.htm

Exhibit 10.29

PROSPER MARKETPLACE, INC.

 

STOCK OPTION AGREEMENT

 

This Stock Option Agreement (the “Agreement”) between Prosper Marketplace, Inc. (the “Company”) and the individual identified below as the “Optionee” evidences the grant of a stock option under the Prosper Marketplace, Inc. 2015 Equity Incentive Plan (the “Plan”).  This Agreement is subject to the terms of the Plan.  To the extent that there is a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern.

 

		
	
 

Name of Optionee (the “Optionee”)

 
	
 

	
 

No. of shares of Common Stock subject to this Option (“Option Shares”)

 
	
 

	
 

Exercise price per Share (“Exercise Price”)

 
	
$____

	
 

Grant Date

 
	
 

	
 

Vesting Commencement Date

 
	
 

	
 

Vesting Schedule

 
	
 

Subject to Section 4, the Option shall vest as follows: 

 

[To Be Determined At Time of Grant].

 

	
 

Type of Option
	
 

_____    Incentive Stock Option

 

_____    Non-Qualified Stock Option

 

 

 

1.Definitions.  Capitalized terms not defined in this Agreement have the meaning provided in the Plan. In this Agreement, additional terms are defined as follows:  

 

(a)“Agreement” means this Stock Option Agreement.

(b)“Cause” will have the meaning ascribed to such term in any written agreement between Optionee and the Company defining such term and, in the absence of such agreement, such term means, with respect to Optionee, the occurrence of any of the following events:  (i) Optionee’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) Optionee’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) Optionee’s material violation of any contract or agreement between Optionee and the Company or any fiduciary or statutory duty owed to the Company; (iv) Optionee’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) Optionee’s gross misconduct. The determination that a termination of Optionee’s Continuous Service is either for Cause or without Cause will be made by the Administrator or the CEO, in that party’s sole discretion.  Any determination by the Company that the Continuous Service of Optionee was terminated with or without Cause for the purposes of this Award will have no effect upon any determination of the rights or obligations of the Company or Optionee for any other purpose.

(c)“CEO” means the chief executive officer of the Company.

(d)“Continuous Service” means that Optionee’s service with the Company or any Subsidiary or Parent of the Company, whether as an Employee, Director or Consultant, is not interrupted or terminated.  If the Optionee takes actions that would give the Company the right to terminate the Optionee’s relationship with the Company as a Service Provider for Cause, then the Optionee will not be deemed to be in Continuous Service following the date on which the Optionee takes such actions.   To the extent permitted by law, the Administrator or the CEO, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Administrator or the CEO, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, any Subsidiary or Parent.  Notwithstanding the foregoing, a leave of absence will be treated as Continuous Service for purposes of vesting in Option Shares only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to Optionee, or as otherwise required by law.

(e)“Date of Exercise” means the date on which the Company receives notice of and payment for the exercise, in whole or in part, of the Option pursuant to Section 6(a) of this Agreement.

(f)“Exercise Notice” means the form of Exercise Notice and Agreement attached to this Agreement as Schedule 1 or such other form as the Administrator designates to be used to exercise the Option.

(g)“Expiration Date” means the date that is ten (10) years after the Grant Date.

 

 

(h)“Public Offering” means a firm commitment public offering of the Common Stock pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission. 

2.Grant of Option.  Pursuant to the Plan and subject to the terms of this Agreement, the Company grants to the Optionee, as of the Grant Date, the Option to purchase from the Company Shares in an amount equal to the number of Option Shares, exercisable at the Exercise Price.

3.Type of Option.  If designated above as a “Non-Qualified Stock Option,” the Option is not an incentive stock option under section 422 of the Code (an “ISO”) and shall be treated as a non-statutory stock option.  If designated above as an “Incentive Stock Option,” the option is intended to be an ISO; however, to the extent that the Option does not satisfy the requirements applicable to ISOs, the Option shall be treated as a non-statutory stock option. 

4.Vesting; Exercise Period and Termination.

(a)Requirement of Vesting.  This Option may be exercised before termination to the extent that the Option has become vested.  

(b)Vesting Schedule.  The Option Shares shall vest in one or more installments pursuant to the vesting schedule specified above.  The Option shall cease to vest immediately in the event that the Optionee ceases to provide Continuous Service.

(c)Termination of Option.  The Option, if not previously exercised, shall terminate on the Expiration Date (or, if earlier, in connection with a Corporate Transaction in accordance with the Plan), except that, if the Optionee ceases to provide Continuous Service while the Option is outstanding, the Option shall terminate on the date the Optionee’s Continuous Service terminates or, if later, immediately after the last day on which the Option is exercisable as set forth below: 

i.If the Optionee’s Continuous Service terminates by reason of the Optionee’s death or disability (as defined in Section 422(c) of the Code), the Option may be exercised, to the extent vested on the date of such termination, by the Optionee, the Optionee’s legal representative or legatee for a period of 12 months from the date of death or disability or until the Expiration Date, if earlier.

ii.If the Optionee’s Continuous Service terminates for any reason other than death or disability, the Option may be exercised, to the extent vested on the date of termination, for a period of three (3) months from the date of termination or until the Expiration Date, if earlier; provided however, if the Optionee’s employment is terminated for Cause, (i) the Option shall terminate immediately upon the date of such termination and (ii) any Shares purchased under the Option for which the Company has not yet delivered the share certificates will be immediately and automatically forfeited and the Company will refund to the Optionee the exercise price paid for the Shares, if any.

(d)Non-transferability.  The Option is not transferable by the Optionee other than by will or by the laws of descent and distribution, and is exercisable, during the Optionee’s lifetime, 

 

 

only by the Optionee, or, in the event of the Optionee’s disability, by the Optionee’s legal representative. 

5.Adjustments.  The number of Option Shares as to which the Option has not been exercised, the Exercise Price, and the type of stock or other consideration to be received on exercise of the Option shall be subject to such adjustment pursuant to the Plan in the manner determined to be appropriate by the Administrator, in its sole discretion.  Any adjustment determined to be appropriate by the Administrator shall be conclusive and shall be binding on the Optionee.  In addition, in the event Optionee’s regular level of time commitment in the performance of Optionee’s services for the Company or any Subsidiary or Parent of the Company is reduced (for example, and without limitation, if Optionee is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee), the Administrator or the CEO has the right in that party’s sole discretion to (x) make a corresponding reduction in the number of Option Shares that are scheduled to vest after the date of such change in time commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting schedule applicable to such Option Shares.

6.Exercise.

(a)Notice.  The Option shall be exercised, in whole or in part, by the delivery to the Company of written notice of such exercise, in such form as the Administrator may from time to time prescribe, accompanied by full payment of the Exercise Price with respect to that portion of the Option being exercised and payment of any applicable withholding in accordance with Section 6(c) below.  Unless the Administrator notifies the Optionee to the contrary, the form of Exercise Notice attached to this Agreement as Schedule 1 shall be used to exercise the Option.  Optionee acknowledges that any Option Shares delivered to Optionee upon exercise of the Option shall be subject to, among other things, a right of first refusal in favor of the Company as set forth in the Notice of Exercise.

(b)Payment.  Payment of the Exercise Price and any applicable withholding shall be made by cash or check.  If the Common Stock is registered under Section 12 of the Exchange Act at the time the Option is exercised, then the Exercise Price may also be paid as follows: 

i.in shares of Common Stock held by Optionee (or any other person or persons exercising the option) for the requisite period necessary to avoid a charge to the Company’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or 

ii.to the extent the option is exercised for vested Option Shares, through a special sale and remittance procedure pursuant to which Optionee (or any other person or persons exercising the option) shall concurrently provide irrevocable instructions to a Company-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Company by reason of such exercise and to the Company to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale.

 

 

(c)Withholding.  The Optionee agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining the Optionee) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements applicable to the Option exercise.  The Optionee acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such withholding amounts are not delivered at the time of exercise. 

(d)Notice of Disqualifying Disposition of an ISO.  If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Option Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Grant Date, or (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee.

(e)Securities Laws Restrictions.  Unless the Option Shares are covered by an effective registration statement under the Securities Act at the time of exercise of the Option, the Option Shares shall constitute “restricted securities,” as such term is defined in Rule 144 of the Securities Act.  The Optionee acknowledges that (i) the Option Shares have not been registered under the Securities Act or the securities laws of any state, (ii) there may not exist a market for resale of the Option Shares, and (iii) such Option Shares may need to be held indefinitely unless the Option Shares are subsequently registered under the Securities Act or an exemption from registration is available.  The Company shall have no obligation to register the Option Shares under the Securities Act or otherwise.  In connection with any transfer of Option Shares, the Company may require the Optionee to provide to the Company at its expense an opinion of counsel, satisfactory to the Company, that such transfer is in compliance with all applicable federal and state securities laws (including, without limitation, the Securities Act).  Any attempted disposition of Option Shares not in accordance with the terms and conditions of this Section 6(d) shall be null and void, and the Company shall not reflect on its records any change in record ownership of any Option Shares as a result of any such disposition, shall otherwise refuse to recognize any such disposition and shall not in any way give effect to any such disposition of any Option Shares. 

(f)Whole Shares.  The Optionee may exercise the Option only for whole shares of Common Stock.

7.Lock-Up Agreement.The Optionee hereby agrees that the Optionee will not, without the prior written consent of the managing underwriter of any Public Offering, during the period commencing on the date of the final prospectus relating to such Public Offering and ending on the date specified by the Company and the managing underwriter (such period not to exceed (i) one hundred eighty (l80) days (or in the case of an initial Public Offering for which the rules of the NASD or any other regulatory authority or stock exchange having jurisdiction over the securities of the Company are applicable, such longer period as the underwriters or the Company shall require in order to facilitate compliance with NASD Rule 2711 or other rule, as the case may be)) with respect to the Company’s initial Public Offering and (ii) ninety (90) days with respect to a Public Offering other than the initial Public Offering: (A) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Option Shares or (B) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences 

 

 

of ownership of the Option Shares, whether any such transaction described in clause (A) or (B) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise.  The underwriters in connection with any Public Offering are intended third party beneficiaries of this Section 7 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.  The Optionee further agrees to execute such agreements as may be reasonably requested by the underwriters in any Public Offering that are consistent with this Section 7 or that are necessary to give further effect thereto. 

In order to enforce the foregoing covenant, the Company may impose stop transfer instructions with respect to the Option Shares until the end of such period.  

8.Rights as Stockholder.  The Optionee shall have no rights as a stockholder with respect to any shares of Common Stock subject to the Option until and unless a certificate or certificates representing such shares are issued to the Optionee pursuant to this Agreement and the Notice of Exercise.

9.No Guarantee of Continuing Service.  Neither the grant of the Option evidenced by this Agreement nor any term or provision of this Agreement shall constitute or be evidence of any understanding, express or implied, on the part of the Company to employ or retain the Optionee for any period.

10.Notices.  All notices, requests, consents and other communications shall be in writing and be deemed given when delivered personally, by facsimile transmission or when received if mailed by first class registered or certified mail, postage prepaid.  Notices to the Company or the Optionee shall be addressed as set forth underneath their signatures below, or to such other address or addresses as may have been furnished by such party in writing to the other. 

11.Amendments.  This Agreement may not be orally amended, modified or terminated, nor shall any oral waiver of any of its terms be effective.  This Agreement may be amended, modified or terminated only by an agreement in writing signed by the Company and the Optionee.

12.

 

 

Representation of Optionee.  Optionee acknowledges that Optionee has received, read and understood the Plan and this Option Agreement and agrees that Optionee is bound by and subject to their respective terms and conditions.  

 

Submitted by:Accepted by:

OPTIONEEPROSPER MARKETPLACE, INC.

 

SignatureBy

Print NamePrint Name

Title

Address:Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Stock Option Agreement]

 

 

 

Exhibit 10.29

EXERCISE OF OPTION

 

 

SCHEDULE 1

PROSPER MARKETPLACE, INC.

2015 EQUITY INCENTIVE PLAN 

EXERCISE NOTICE AND AGREEMENT

Prosper Marketplace, Inc.
221 Main Street, Suite 300

San Francisco, CA 94105

 

Attention: Chief Executive Officer

1.Exercise of Option.  Effective as of today, the undersigned (“Optionee”) hereby elects to exercise Optionee’s option (the “Option”) to purchase ________________ shares of the Common Stock (the “Shares”) of Prosper Marketplace, Inc. (the “Company”) under and pursuant to the Prosper Marketplace, Inc. 2015 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement dated ______________, _____ (the “Option Agreement”).

2.Delivery of Payment.  Optionee herewith delivers to the Company a check in the amount of the full purchase price of the Shares, as set forth in the Option Agreement, plus any and all withholding taxes due in connection with the exercise of the Option.

3.Company’s Right of First Refusal. Before any Shares held by Optionee or any permitted transferee under this Section 3 (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section 3 (the “Right of First Refusal”).

(a)Notice of Proposed Transfer.  The Holder of the Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).

(b)Opinion of Counsel.  At the Company’s request, the Holder of the Shares shall deliver to the Company an opinion of counsel reasonably satisfactory to the Company stating that the proposed sale or other transfer is in accordance with any applicable securities laws (the “Opinion”).

(c)Exercise of Right of First Refusal.  At any time within thirty (30) days after receipt of the later of the Notice or the Opinion, if requested by the Company, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of 

 

 

the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below. 

(d)Purchase Price.  The purchase price (“Purchase Price”) for the Shares purchased by the Company or its assignee(s) under this Section 3 shall be the Offered Price.  If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.

(e)Payment.  Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice.

(f)Holder’s Right to Transfer.  If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section 3, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within one hundred and twenty (120) days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section 3, and the other terms and conditions of this Agreement, shall continue to apply to the Shares in the hands of such Proposed Transferee.  If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.

(g)Exception for Certain Family Transfers.  Anything to the contrary contained in this Section 3 notwithstanding, the transfer of any or all of the Shares during the Optionee’s lifetime or on the Optionee’s death by will or intestacy to the Optionee’s immediate family or a trust for the benefit of the Optionee’s immediate family shall be exempt from the provisions of this Section 3.  “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister.  In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section 3 and the other terms and conditions of this Agreement, and there shall be no further transfer of such Shares except in accordance with the terms of this Section 3.

(h)Termination of Right of First Refusal.  The Right of First Refusal shall terminate as to any Shares upon the earlier of (i) consummation of an initial Public Offering (as defined in the Option Agreement), or (ii) consummation of a Corporate Transaction (as defined in the Plan).

4.Tax Consultation.  Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.

5.Investment Representations.  In connection with the purchase of the above-listed Shares, the undersigned Optionee represents to the Company the following:

2

 

(a)Optionee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares.  Optionee is acquiring these Securities for investment for Optionee’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act. 

(b)Optionee acknowledges and understands that the Shares constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee’s investment intent as expressed herein.  Optionee further understands that the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available.  Optionee further acknowledges and understands that the Company is under no obligation to register the Shares. Optionee understands that the certificate evidencing the Shares shall be imprinted with any legend required under applicable state securities laws.

(c)Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions.

6.Restrictive Legends and Stop-Transfer Orders.

(a)Legends.  Optionee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE SECURITIES ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE AND AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.  SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER FOR A PERIOD OF TIME FOLLOWING THE 

3

 

EFFECTIVE DATE OF THE UNDERWRITTEN PUBLIC OFFERING OF THE COMPANY’S SECURITIES SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF BY THE HOLDER PRIOR TO THE EXPIRATION OF SUCH PERIOD WITHOUT THE CONSENT OF THE COMPANY OR THE MANAGING UNDERWRITER.

(b)Stop-Transfer Notices.  Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c)Refusal to Transfer.  The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. 

7.Successors and Assigns.  The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.

8.Interpretation.  Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting.  The resolution of such a dispute by the Administrator shall be final and binding on all parties.

9.Governing Law; Severability.  This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Delaware.  In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Exercise Notice shall continue in full force and effect.

10.

4

 

Entire Agreement.  The Plan and Option Agreement are incorporated herein by reference.  This Exercise Notice, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee. 

Submitted by:Accepted by:

OPTIONEEPROSPER MARKETPLACE, INC.

 

SignatureBy

Print NamePrint Name

Title

Address:Address:

 

 

 

 

Date Received

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Exercise Notice and Agreement]

5

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