Document:

ex4_3.htm

Exhibit 4.3

 

 

Prosper Funding LLC

 

Borrower Payment Dependent Notes

 

Indenture

 

Dated as of ________, 2012

 

Wells Fargo Bank, National Association

as Trustee

  

  

  

 

TABLE OF CONTENTS

 

	
Section

	
Heading

	
Page

	  	  	  
	
Article I

	
Definitions and Incorporation by Reference

	
1

	  	  	  
	
Section 1.1.

	
Definitions

	
1

	
Section 1.2.

	
Other Definitions

	
6

	
Section 1.3.

	
Incorporation by Reference of Trust Indenture Act

	
6

	
Section 1.4.

	
Rules of Construction

	
7

	  	  	  	  
	
Article II

	
The Securities

	
7

	  	  	  
	
Section 2.1.

	
Forms Generally

	
7

	
Section 2.2.

	
Title, Terms and Denominations

	
7

	
Section 2.3.

	
Execution, Authentication, Delivery and Dating

	
9

	
Section 2.4.

	
Registrar

	
10

	
Section 2.5.

	
Company to Hold Money and Securities in Trust

	
11

	
Section 2.6.

	
Securityholder Lists

	
11

	
Section 2.7.

	
Transfer

	
11

	
Section 2.8.

	
Outstanding Securities; Determinations of Holders’ Action

	
11

	
Section 2.9.

	
Cancellation

	
12

	
Section 2.10.

	
Payments

	
12

	
Section 2.11.

	
Persons Deemed Owners

	
12

	
Section 2.12.

	
CUSIP Numbers

	
13

	  	  	  
	
Article III

	
Covenants

	
13

	  	  	  
	
Section 3.1.

	
Payment of Securities

	
13

	
Section 3.2.

	
SEC Reports

	
13

	
Section 3.3.

	
Compliance Certificate; Statement by Officers as to Default

	
13

	
Section 3.4.

	
Further Instruments and Acts

	
14

	
Section 3.5.

	  	
Maintenance of Office or Agency

	
14

	
Section 3.6.

	
Borrower Loan Servicing

	
14

	
Section 3.7.

	
Separateness Covenants

	
15

	  	  	  
	
Article IV

	
Successor Corporation

	
16

	  	  	  
	
Section 4.1.

	
When Company May Merge or Transfer Assets

	
16

	  	  	  
	
Article V

	
Defaults and Remedies

	
16

	  	  	  	  
	
Section 5.1.

	
Events of Default

	
16

	
Section 5.2.

	
Acceleration

	
18

	
Section 5.3.

	
Other Remedies

	
18

	
Section 5.4.

	
Waiver of Past Defaults

	
19

	
Section 5.5.

	
Control by Majority

	
19

 

  

-i-

  

 

	
Section 5.6.

	
Limitation on Suits

	
19

	
Section 5.7.

	
Rights of Holders to Receive Payment

	
20

	
Section 5.8.

	
Collection Suit by Trustee

	
20

	
Section 5.9.

	
Trustee May File Proofs of Claim

	
20

	
Section 5.10.

	
Priorities

	
21

	
Section 5.11.

	
Undertaking for Costs

	
21

	
Section 5.12.

	
Waiver of Stay, Extension or Usury Laws

	
21

	 	  	  	  
	
Article VI

	
Trustee

	
22

	  	  	  
	
Section 6.1.

	
Duties of Trustee

	
22

	
Section 6.2.

	
Rights of Trustee

	
23

	
Section 6.3.

	
Individual Rights of Trustee, Etc.

	
24

	
Section 6.4.

	
Trustee’s Disclaimer

	
24

	
Section 6.5.

	
Notice of Defaults

	
25

	
Section 6.6.

	
Reports by Trustee to Holders

	
25

	
Section 6.7.

	
Compensation and Indemnity

	
25

	
Section 6.8.

	
Replacement of Trustee

	
26

	
Section 6.9.

	
Successor Trustee by Merger

	
27

	
Section 6.10.

	
Eligibility; Disqualification

	
27

	
Section 6.11.

	
Preferential Collection of Claims Against Company

	
28

	
Section 6.12.

	
Security Interest

	
28

	
Section 6.13.

	
Release of Collateral

	
29

	  	  	  
	
Article VII

	
Satisfaction and Discharge

	
30

	  	  	  
	
Section 7.1.

	
Discharge of Liability on Securities

	
30

	
Section 7.2.

	
Repayment to the Company

	
31

	  	  	  
	
Article VIII

	
Supplemental Indentures

	
31

	  	  	  
	
Section 8.1.

	
Supplemental Indentures Without Consent of Holders

	
31

	
Section 8.2.

	
Supplemental Indentures with Consent of Holders

	
32

	
Section 8.3.

	
Compliance with Trust Indenture Act

	
33

	
Section 8.4.

	
Revocation and Effect of Consents, Waivers and Actions

	
33

	
Section 8.5.

	
Notation on or Exchange of Securities

	
34

	
Section 8.6.

	
Trustee to Sign Supplemental Indentures

	
34

	
Section 8.7.

	
Effect of Supplemental Indentures

	
34

	  	  	  
	
Article IX

	
Miscellaneous

	
34

	  	  	  
	
Section 9.1.

	
Trust Indenture Act Controls

	
34

	
Section 9.2.

	
Notices

	
34

	
Section 9.3.

	
Communication by Holders with Other Holders

	
36

	
Section 9.4.

	
Certificate and Opinion as to Conditions Precedent

	
36

	
Section 9.5.

	
Form of Documents Delivered to Trustee

	
36

	
Section 9.6.

	
Statements Required Certificate or Opinion

	
36

	
Section 9.7.

	
Separability Clause

	
37

 

  

-ii-

  

 

	
Section 9.8.

	
Rules by Trustee

	
37

	
Section 9.9.

	
Legal Holidays

	
37

	
Section 9.10.

	
Governing Law and Jurisdiction; Waiver of Jury Trial

	
37

	
Section 9.11.

	
No Recourse Against Others

	
38

	
Section 9.12.

	
No Petition

	

38

	
Section 9.13.

	
Successors

	

38

	
Section 9.14.

	
Effect of Headings and Table of Contents

	

38

	
Section 9.15.

	
Benefits of Indenture

	

38

	
Section 9.16.

	
Multiple Originals

	

38

	
Section 9.17.

	
Force Majeure

	
38

	
Section 9.18.

	
U.S.A. Patriot Act

	
39

	 	 	 
	
Exhibit A—Form of Borrower Payment Dependent Note Security

  

-iii-

  

 

Indenture dated as of ________, 2012, by and between Prosper Funding LLC, a Delaware limited liability company (“Company”), and Wells Fargo Bank, National Association, a national banking association incorporated and existing under the laws of the United States of America, as trustee (“Trustee”).

 

Recitals of the Company

 

The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of special limited obligations of the Company referred to as Borrower Payment Dependent Notes (herein, individually and collectively, the “Securities”), to be issued in series as in this Indenture provided.

 

For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and ratable benefit of the Holders of the Securities or each series thereof as follows:

 

Article I

 

Definitions and Incorporation by Reference

 

Section 1.1.   Definitions.

 

“ACH System” means the Automated Clearing House system of the U.S. Federal Reserve Board or a successor system providing electronic funds transfers between banks.

 

“Administration Agreement” means the Administration Agreement dated as of _____, 2012, between the Company and the Servicer, as from time to time amended, restated or supplemented.

 

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For the purposes of this definition, “Control” when used with respect to any specified Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “Controlling” and “Controlled” have meanings correlative to the foregoing.

 

“Board of Directors” means the board of directors of the Company or any committee of such board authorized with respect to any matter to exercise the powers of the Board of Directors of the Company.

 

“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.

 

  

  

  

 

“Borrower Loan” means a direct loan originated through the Company’s platform on its website www.prosper.com or any successor website, with a borrower that is an individual.

 

“Borrower Loan Net Payment” means with respect to each Borrower Loan, all Borrower Loan Payments net of Other Payments and Charges and the Servicing Fee.

 

“Borrower Loan Payment” means, with respect to each Borrower Loan, all amounts received by the Company, and not reversed through the ACH System or by virtue of checks returned unpaid due to insufficient funds or for other reasons, in connection with the repayment of such Borrower Loan, including without limitation, all payments or prepayments of principal and interest, any late fees and any amounts received by the Company upon collection efforts or as proceeds of Borrower Loans.

 

“Business Day” means, except as otherwise specified as contemplated by Section 2.2(c), with respect to any place of payment or any other particular location referred to in this Indenture or in the Securities, each Monday, Tuesday, Wednesday, Thursday and Friday that is (1) not a day on which the ACH System is closed and (2) not a day on which banking institutions are authorized or obligated by law or executive order to close in San Francisco, California or New York, New York.

 

“Capital Stock” for any corporation or limited liability company means any and all stock or membership interests issued by that corporation or limited liability company and any rights to purchase, warrants, options, participations or similar interests (however designated) pertaining to any such stock or membership interests.

 

“Company” means the party named as the “Company” in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor.

 

“Company Request” or “Company Order” means a written request or order signed in the name of the Company (i) by its President or a Vice President, and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee or, with respect to Section 6.2, any other employee of the Company named in an Officers’ Certificate delivered to the Trustee.

 

“Corresponding Borrower Loan” means the Borrower Loan upon which a series of Securities is dependent for payment.

 

“Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.

 

“Deposit Account” means the deposit account, as defined in Section 9-108 of the UCC, in the name of the Company held by the Trustee, or such additional or replacement account as may from time to time exist, provided such account is deemed a deposit account under Section 9-108 of the UCC and is held by the Trustee.  The Trustee’s jurisdiction for purposes of the Deposit Account and Article 9 of the UCC shall be deemed to be the State of New York.

 

  

-2-

  

 

“Dollar” or “$” means a dollar or other equivalent unit in such coin or currency of the United States as at the time shall be legal tender for the payment of public and private debts.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“FBO Account” means the account maintained by the Company at Wells Fargo Bank, National Association, titled “Prosper Funding LLC for the benefit of its lender members”, or such alternate account of the Holder designated by the Trustee in accordance with the Indenture.

 

“Fee Account” means the deposit account, as defined in Section 9-108 of the UCC, maintained by the Company at Wells Fargo Bank, National Association, titled “Prosper Funding LLC Fee Account”, or such additional or replacement account as may from time to time exist, provided such account is deemed a deposit account under Section 9 108 of the UCC.

 

“Final Maturity” means the date to which the Initial Maturity Date may be extended, as provided in any Security.

 

“Final Maturity Date” when used with respect to any Security, means the date on which its Final Maturity occurs.

 

“Holder” or “Securityholder” when used with respect to any Security, means the person in whose name a Security is registered on the Company’s books.

 

“Indenture” means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof and shall include the terms of a particular series of Securities established as contemplated in Section 2.2(c).

 

“Initial Maturity Date” means the scheduled due date on which the final installment of principal and interest is payable on any Security.

 

“Interest Payment Date” when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security.

 

“LLC Agreement” means Limited Liability Company Agreement of the Company, dated as of March 1, 2012, as from time to time amended, restated or supplemented.

 

“Lien” means, with respect to any property or assets, any mortgage, charge, hypothecation, pledge or other security interest or encumbrance on such property or assets.

 

“Maturity” when used with respect to any Security, means the date on which an installment of Principal thereof or interest thereon becomes due and payable as therein or herein provided, whether at the Stated Maturity, Initial Maturity or Final Maturity, by declaration of acceleration, or otherwise.

 

“Member” means Prosper Marketplace, Inc., in its capacity as the sole equity member of the Company under the LLC Agreement.

 

  

-3-

  

 

“Non-sufficient Funds Fees” means any fee imposed by the Company or a third-party servicer or collection agency in respect of a Borrower Loan when the Company’s payment request is denied for any reason, including but not limited to non-sufficient funds in the borrower’s bank account or the closing of such bank account.

 

“Note Trader Platform” means the internet-based trading platform operated and maintained by FOLIOfn Investments, Inc., on which the Company’s lender members may offer their Securities for sale or bid on and purchase Securities offered for sale by other lender members of the Company, or any successor to such platform.

 

“Officer” means the President, any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company.

 

“Officers’ Certificate” means a written certificate containing the information specified in Sections 9.4 and 9.6, signed in the name of the Company (i) by its President or a Vice President, and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.

 

“Opinion of Counsel” means a written opinion containing the information specified in Sections 9.4 and 9.6, from legal counsel who is acceptable to the Trustee.  The counsel may be an employee of, or counsel to, the Company or the Trustee.

 

“Other Payments and Charges” means (i) any Non-sufficient Funds Fees or fees charged to the borrower for making payments in a manner other than as provided in the Borrower Loan, which are received by the Company, a third-party servicer or collection agency in respect of such Borrower Loan, and (2) attorneys’ fees or any collection fees imposed in connection with collection efforts on a delinquent Borrower Loan by the Company, a third-party servicer or collection agency, other than late payment fees specifically included in Borrower Loan Payments.

 

“Payment Date” means any Principal Payment Date or Interest Payment Date.

 

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, or government or any agency or political subdivision thereof.

 

 “Platform” means the Company’s online marketplace through which an individual who registers with the Company as a borrower can request a Borrower Loan, and Persons who register with the Company as lenders can facilitate the funding of that Borrower Loan by committing to purchase Securities corresponding to the Borrower Loan.

 

“Principal” or “Principal Amount” of a Security, except as otherwise specifically provided in this Indenture, means the outstanding principal of the Security.

 

“Principal Payment Date” when used with respect to any Security, means the Stated Maturity of an installment of Principal on such Security.

 

  

-4-

  

 

“Program Documents” has the meaning set forth in the LLC Agreement.

 

“Prosper Rating” means the proprietary rating assigned by the Company to each Borrower Loan at the time it is posted for bids on the Platform.

 

“Prosper Score” means the proprietary credit score assigned by the Company to each Borrower Loan and used by the Company in the calculation of Prosper Ratings.

 

“Record Date” for the amounts payable on any Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 2.2(c).

 

“Sales Report” means a prospectus supplement filed with the SEC by the Company pursuant to Rule 424 under the Securities Act of 1933, as amended, containing the information listed in Section 2.2(c) hereof with respect to one or more series of Securities. 

 

“SEC” means the Securities and Exchange Commission.

 

“Security” or “Securities” means the special limited obligations of the Company referred to as Borrower Payment Dependent Notes to be issued in series and authenticated and delivered under this Indenture.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Securityholder” or “Holder” when used with respect to any Security, means a person in whose name a Security is registered on the Company’s books.

 

“Servicer” means Prosper Marketplace, Inc., or any successor or permitted assign, in its capacity as the Loan and Note Servicer under the Administration Agreement.

 

“Servicing Fee” means, with respect to any Borrower Loan, an annualized percentage rate, as specified by the Company and, if applicable, a third-party servicer with respect to a series of Securities, of the outstanding principal balance of the Borrower Loan.

 

“Stated Maturity” when used with respect to any installment of Principal thereof or interest thereon, means the date specified in such Security as the fixed date on which an amount equal to such installment of Principal thereof or interest thereon is due and payable.

 

“Subsidiary” means, with respect to any Person, a corporation or limited liability company of which a majority of the Capital Stock having voting power under ordinary circumstances to elect a majority of the board of directors of such corporation or the board of directors or managers of such limited liability company is owned by (i) such Person, (ii) such Person and one or more Subsidiaries or (iii) one or more Subsidiaries of such Person.

 

“TIA” means the Trust Indenture Act of 1939 as in effect on the date of this Indenture, except as provided in Section 8.3.

 

  

-5-

  

 

“Trust Officer” means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

 

“Trustee” means the party named as the “Trustee” in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor.

 

“UCC” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York, except with respect to perfection matters which shall be governed by the Uniform Commercial Code of the relevant jurisdiction necessary to effect the perfection of a security interest.

 

“United States” means the United States of America, its territories, its possessions (including the Commonwealth of Puerto Rico), and other areas subject to its jurisdiction.

 

Section 1.2.   Other Definitions.

 

“Bankruptcy Law” defined in Section 5.1.

 

“Custodian” defined in Section 5.1.

 

“Defaulted Payment” defined in Section 2.10.

 

“Event of Default” defined in Section 5.1.

 

“Legal Holiday” defined in Section 9.9.

 

“Notice of Default” defined in Section 5.1.

 

“Outstanding” defined in Section 2.8.

 

“Collateral” defined in Section 6.12.

 

Section 1.3.   Incorporation by Reference of Trust Indenture Act.  Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.  The following TIA terms used in this Indenture have the following meanings:

 

“Commission” means the SEC.

 

“Indenture Securities” means the Securities.

 

  

-6-

  

 

“Indenture Security Holder” means a Holder or Securityholder.

 

“Indenture to be Qualified” means this Indenture.

 

“Indenture Trustee” or “Institutional Trustee” means the Trustee.

 

“Obligor” on the indenture securities means the Company.

 

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

 

Section 1.4.   Rules of Construction.  Unless the context otherwise requires:

 

(a)    a term has the meaning assigned to it;

 

(b)    an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in the United States as in effect from time to time;

 

(c)    “or” is not exclusive;

 

(d)    “including” means including, without limitation; and

 

(e)    words in the singular include the plural, and words in the plural include the singular.

 

Article II

 

The Securities

 

Section 2.1.   Forms Generally.  The Securities of each series and the certificate of authentication in respect thereof shall be in substantially the form set forth on Exhibit A, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the Officers executing such Securities as evidenced by their execution of the Securities.  The Securities shall be in fully registered form only and shall be printed, lithographed, engraved, word processed or evidenced in electronic form or produced by any combination of these methods or may be produced in any other manner, all as determined by the Officers executing such Securities as evidenced by their execution of such Securities.

 

Section 2.2.   Title, Terms and Denominations.  (a) The aggregate Principal Amount of Securities that may be authenticated and delivered under this Indenture shall be unlimited.

 

  

-7-

  

 

(b)The Securities shall be special limited obligations of the Company and no payments of Principal and interest on the Securities of any series shall be payable unless the Company has received Borrower Loan Payments in respect of the Corresponding Borrower Loan, and then shall be payable equally and ratably on the Securities of such series only to the extent of the Borrower Loan Net Payments related to the Borrower Loan corresponding to such series.  No Holder of a Security shall have any recourse against the Company unless and then only to the extent that the Company (1) has failed to pay such Holder the Holder’s pro rata share of the Borrower Loan Net Payments in respect of the Corresponding Borrower Loan or (2) has otherwise breached a covenant in this Indenture.  Notwithstanding any provision of this Indenture to the contrary, no payments (whether of principal, interest or other amounts) shall be made on any Security after its Final Maturity Date regardless of whether the Company receives Borrower Loan Net Payments on the Corresponding Borrower Loan after such date and, if the Company does receive any such Borrower Loan Net Payments, it may retain them for its own account.

 

(c)For each series of Securities there shall be established and, subject to Section 2.3, set forth in a Sales Report:

 

(i)     the aggregate Principal Amount of the Securities of the series;

 

(ii)    the Borrower Loan that corresponds to Securities of the series;

 

(iii)   the Initial Maturity Date and Payment Dates of the Securities of the series and the Record Date for any amounts payable on any Payment Date;

 

(iv)   the stated rate at which the Securities of the series shall bear interest;

 

(v)   any restrictions on the transfer or transferability of Securities of the series;

 

(vi)   the Servicing Fee;

 

(vii)  the obligation, if any, of the Company to redeem Securities of the series at the option of a Holder thereof, the conditions, if any, giving rise to such obligation, and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be purchased, in whole or in part;

 

(viii) the denominations in which any Securities of the series shall be issuable;

 

(ix)   any addition to or change in the Events of Default which apply to any Securities of the series and any change in the right of the Trustee or the requisite Holders of such Securities to declare the principal amount thereof due and payable pursuant to Section 5.2;

 

(x)   any addition to or change in the covenants set forth in Article III which apply to Securities of the series; and

 

  

-8-

  

 

(xi)   any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 8.1(g)).

 

All Securities of a series shall be substantially identical except as to denomination and except as may otherwise be provided in a Sales Report pursuant to this Section 2.2(c) or in any indenture supplemental hereto.

 

(d)Prior to the issuance of the initial series of Securities under this Indenture, a copy of the Board Resolution authorizing the execution, delivery and performance of this Indenture, shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of an Officers’ Certificate setting forth the general terms of the Securities.  Such Board Resolution and Officers’ Certificate shall provide general terms for Securities and provide that the specific terms of each series shall be specified in a Sales Report.

 

Section 2.3.   Execution, Authentication, Delivery and Dating.  The Securities shall be executed on behalf of the Company by its President or one of its Vice Presidents, or the Treasurer or any Assistant Treasurer.  The signature of any of these officers on the Securities may be electronic, manual or facsimile.

 

Securities bearing the electronic, manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.

 

At any time and from time to time after the execution and delivery of this Indenture (and subject to delivery of the Board Resolution and Officers’ Certificate as set forth in Section 2.2 prior to the issuance of the initial series of Securities), the Company may authenticate and deliver Securities of any series.  Not later than January 15th and July 15th of each calendar year, the Company shall provide a record of all such Securities executed and authenticated by the Company to the Trustee during the preceding semiannual period of July 1st through December 31st, or January 1st through June 30th, as applicable; provided that the first such certificate delivered by the Company shall pertain to the period from the date of this Indenture through December 31, 2012.

 

In addition, prior to the issuance of the initial series of Securities, the Trustee shall receive, and shall be fully protected in conclusively relying upon, an Opinion of Counsel stating:

 

(a)    that the forms of such Securities have been, and the terms of such Securities will have been, duly authorized by the Company and established in conformity with the provisions of this Indenture;

 

(b)    that such Securities, when (1) executed by the Company, (2) completed, authenticated and delivered by the Company in accordance with this Indenture, and (3) issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to customary exceptions; and

 

  

-9-

  

 

(c)    that all laws and requirements in respect of the execution and delivery by the Company of such Securities have been complied with.

 

The Trustee may conclusively rely, as to the authorization by the Company of any series of Securities, the form and terms thereof and the legality, validity, binding effect and enforceability thereof, upon the Opinion of Counsel and other documents delivered pursuant to Sections 2.2(c) and 2.2(d) and this Section, as applicable, at or prior to the time of the first authentication of Securities of the initial series of Securities unless and until it has received written notification that such opinion or other documents have been superseded or revoked.  In connection with the authentication and delivery of Securities, the Trustee shall be entitled to assume, unless it has received written notice to the contrary or any of its Trust Officers has actual knowledge to the contrary, that the Company’s authentication and delivery of such Securities do not violate any rules, regulations or orders of any governmental agency or commission having jurisdiction over the Company.

 

Each Security shall be dated the date of its authentication.

 

The Company may appoint an authenticating agent acceptable to the Trustee to authenticate Securities.  Unless otherwise provided in the appointment, an authenticating agent may authenticate Securities whenever the Company may do so.  Each reference in this Indenture to authentication by the Company includes authentication by such agent.

 

No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Company (or, as provided above, by another authenticating agent) by electronic or manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder.  The Company’s certificate of authentication shall be in substantially the following form:

 

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

 

	 	
Prosper Funding LLC,

	 
	 	
as Authenticating Agent

	 
	 	 	 	 
	 	By:	 	 
	 	 	Name:	 	 
	 	 	Title:	 	 

 

Section 2.4.   Registrar.  The Company shall maintain a register of all series of Securities executed and authenticated hereunder and any transfer of Securities effected pursuant to Section 2.7.

 

  

-10-

  

 

Section 2.5.   Company to Hold Money and Securities in Trust.  If the Company, a Subsidiary or an Affiliate of either of them acts as paying agent for a series of Securities, it shall segregate the money held by it as paying agent with respect to such Securities and hold such money in trust for the benefit of the Holders of the Securities.

 

Section 2.6.   Securityholder Lists.  The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders of each series of Securities.  The Company shall cause to be furnished to the Trustee not later than January  15th and July  15th in each calendar year a list of the names and addresses of the Securityholders of each series of Securities Outstanding as of the immediately preceding January 1 or July 1.  In addition, the Company shall cause to be furnished to the Trustee at such times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Securityholders of each series of Securities Outstanding.

 

Section 2.7.   Transfer.  Except as stated in the immediately following paragraph, the Securities will only be transferable through the Note Trader Platform.  The Company may (1) impose a reasonable administrative fee for any such transfer, which fee shall be described on the Company’s website www.prosper.com and may be changed or waived from time to time and (2) require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer of the Securities from the Securityholder requesting such transfer.  

 

In addition, the Company may, in its sole discretion, (i) permit a transfer of Securities through a means other than the Note Trader Platform; or (ii) permit any other Person to establish a platform on which a secondary market may be made with respect to the Securities. 

 

Any Security transferred in accordance with this Section 2.7 shall be the valid obligation of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Security so transferred.

 

Section 2.8. Outstanding Securities; Determinations of Holders’ Action.  Securities of any series “Outstanding” at any time are, as of the date of determination, all the Securities of such series theretofore authenticated by the Company for such series except for those cancelled by it, those delivered to it for cancellation and those described in this Section 2.8 as not outstanding.  A Security does not cease to be “Outstanding” because the Company or an Affiliate thereof is the Holder of the Security; provided, however, that in determining whether the Holders of the requisite Principal Amount of Outstanding Securities have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in conclusively relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Trust Officer of the Trustee actually knows to be so owned shall be so disregarded.  Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Securities and that the pledgee is not the Company or any Affiliate of the Company.  Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination.

 

  

-11-

  

 

If, on the final Stated Maturity for a series of Securities, the Company has deposited money into the FBO Account sufficient to pay those Securities in full, then on and after that date such Securities shall cease to be Outstanding.  In addition, Securities shall cease to be Outstanding if the Company, pursuant to Section 3.6(a), has written off in full all unpaid principal and interest on the Corresponding Borrower Loan and has notified the Trustee of such action; provided, that in the event the Company has written off in full all unpaid principal and interest on a Borrower Loan prior to the Final Maturity Date of the related series of Securities, such series of Securities shall remain Outstanding until the Final Maturity Date thereof.

 

Section 2.9.   Cancellation.  The Company may at any time cancel any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever and may cancel any Securities previously authenticated hereunder that the Company has not issued and sold.  The Company may not reissue, or issue new Securities to replace, Securities it has cancelled.

 

No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted in the form of Securities for any particular series or as permitted by this Indenture.

 

Section 2.10.   Payments.  Except as otherwise provided herein (including, without limitation,  in Section 2.2(b)), prior to or on each Payment Date in respect of any series of Securities, the Company shall deposit into the FBO Account with respect to such Securities a sum of money sufficient to satisfy the installment of Principal thereof or interest thereon that is due on such Payment Date.  Payment of Principal and interest on any Security which is payable, and is punctually paid or duly provided for, on any Payment Date shall be paid to the person in whose name that Security is registered at the close of business on the Record Date for such Payment Date.

 

Any payment on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Payment Date (herein called “Defaulted Payment”) shall forthwith cease to be payable to the Holder on the relevant Record Date, and such Defaulted Payment may be paid by the Company to the Holder of the Security on a record date chosen by the Company and in any lawful manner, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this paragraph, such manner of payment shall be deemed practicable by the Trustee.

 

Section 2.11.   Persons Deemed Owners.  The Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name a Security is registered as the owner of such Security for the purpose of receiving payment of Principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

 

  

-12-

  

 

Section 2.12.  CUSIP Numbers.  The Company in issuing the Securities may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers.  The Company will promptly notify the Trustee in writing of any change in the “CUSIP” numbers.

 

Article III

 

Covenants

 

Section 3.1.   Payment of Securities.  The Company shall promptly make all payments in respect of each series of Securities in lawful money of the United States on the dates and in the manner provided in the Securities but solely from the sources provided pursuant to Section 2.2(b).  The Company shall have no liability or obligation with respect to the payment of principal and interest on any Securities except to the extent of the Borrower Loan Net Payments in respect of the Corresponding Borrower Loan.  The Company shall make payments of Principal or interest on the Securities by transfer of funds from the Deposit Account into the FBO Account for the benefit of the applicable Holders.

 

Section 3.2.   SEC Reports.  The Company shall deliver to the Trustee, within 15 days after the end of each calendar quarter, copies of all Sales Reports filed with the SEC by the Company during such quarter as well as copies of any information, documents or reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company was required to file with the SEC during such quarter pursuant to Section 13 or 15(d) of the Exchange Act.  The Company also shall comply with the other provisions of TIA Section 314(a).

 

Without limitation to the foregoing paragraph, the Company shall each year provide to the Trustee copies of its audited financial statements for the preceding fiscal year promptly after the same become available.

 

Section 3.3.   Compliance Certificate; Statement by Officers as to Default.  The Company shall deliver to the Trustee within 120 days after the end of each fiscal year (beginning with the fiscal year ending on December 31, 2012) an Officers’ Certificate, one of the signers of which shall be the principal executive officer, principal financial officer or principal accounting officer of the Company, stating whether or not the signers know of any Default that occurred during such period.  If they do, such Officers’ Certificate shall describe the Default and its status.

 

The Company shall deliver to the Trustee, as soon as possible and in any event within five days after the Company becomes aware of the occurrence of any Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers’ Certificate setting forth the details of such Event of Default or default and the action which the Company proposes to take with respect thereto.

 

  

-13-

  

 

Section 3.4.   Further Instruments and Acts.  Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.

 

Section 3.5.   Maintenance of Office or Agency.  The Company will maintain an office or agency where notices and demands to or upon the Company in respect of the Securities of any series and this Indenture may be served.  The office of the Company at 111 Sutter Street, 22nd Floor, San Francisco, California 94104 shall be such office or agency for all of the aforesaid purposes unless the Company shall maintain some other office or agency for such purposes and shall give prompt written notice to the Trustee of the location, and any change in the location, of such other office or agency.

 

The Company may also from time to time designate one or more other offices or agencies for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Securities of any series for such purposes.  The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

 

Section 3.6.   Borrower Loan Servicing.  (a) With respect to each series of Securities, the Company or a third-party servicer (including, without limitation, the Servicer) shall use commercially reasonable efforts to service and collect the Borrower Loan corresponding to such series, in good faith, accurately and in accordance with industry standards customary for servicing loans such as the Borrower Loans.  Notwithstanding the generality of the foregoing, (1) referral of a delinquent Borrower Loan to a collection agency within five (5) Business Days after it becomes thirty days past-due shall be deemed to constitute commercially reasonable servicing and collection efforts; and (2) the Company and any third-party servicer of a Borrower Loan shall have the right, at any time and from time to time and subject to the foregoing servicing standard, to change the Stated Maturity of the principal of, or any installment of principal or interest on, any Borrower Loan, or reduce the principal amount thereof or the rate of interest thereon, or change the coin or currency in which, any installment of principal and interest on any such Security is payable or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof, or amend or waive any terms of such Borrower Loan, or write off and cancel such Borrower Loan without the consent of any Holder of any Securities of the series corresponding to such Borrower Loan.

 

(b)    With respect to each series of Securities, the Company shall use commercially reasonable efforts to maintain backup servicing arrangements providing for the Borrower Loan corresponding to such series to be serviced and collected in good faith, accurately and in accordance with industry standards customary for servicing loans such as the Borrower Loans.

 

(c)    The Company shall cause all Borrower Loan Payments to be promptly deposited in the Deposit Account.  Without limitation to the foregoing, the Company shall direct that any Borrower Loan Payments to be remitted to the Company by electronic transfer be transmitted directly to the Deposit Account.

 

  

-14-

  

 

Section 3.7.   Separateness Covenants.  The Company agrees that it will at all times when any Securities are Outstanding (i) maintain its own separate books and records and bank accounts separate from those of the Member or any other Person; (ii) hold itself out to the public and all other Persons as a legal entity separate from the Member and any other Person; (iii) have a Board of Directors separate from that of the Member and any other Person; (iv)  file its own tax returns, if any, as may be required under applicable law, to the extent (A) not part of a consolidated group filing a consolidated return or returns or (B) not treated as a division for tax purposes of another taxpayer, and pay any taxes so required to be paid under applicable law; (v)  except as contemplated by the Program Documents, not commingle its assets with assets of any other Person and maintain its funds and other assets such that they shall be separately identified and segregated from those of the Member and any other Person; (vi) conduct its business in its own name so as not to mislead third parties as to the identity of the entity with which such third parties are dealing and strictly comply with all organizational formalities to maintain its separate existence; (vii) maintain separate financial statements and ensure that such financial statements indicate (in the notes thereto or otherwise) the separate existence of the Company and the Member and their respective assets and liabilities and to the extent the assets and liabilities of the Company are represented on the financial statements of the Member, ensure that such financial statements indicate (in the notes or otherwise) the separate existence of the Company and the Member and their separate assets and liabilities; (viii) pay its operating expenses and own liabilities only out of its own funds and not from the funds of any other Person; (ix) maintain an arm’s length relationship with its Affiliates and the Member and ensure that all transactions between the Company and its Affiliates are in terms and conditions that are not materially more favorable to the Affiliate than the terms and conditions that would be expected to have been obtained under similar circumstances, from a non-Affiliate; (x) pay the salaries of its own employees, if any; (xi)  not hold out its credit or assets as being available to satisfy the obligations of others; (xii) allocate fairly and reasonably any overhead for shared office space and pay for its share of such overhead; (xiii)  so as not to mislead third parties as to the identity of the entity with which such third parties are dealing, maintain and utilize separate stationery, invoices and checks; (xiv)  except as contemplated by the Program Documents, not pledge its assets for the benefit of any other Person; (xv) correct any known misunderstanding regarding its separate identity; (xvi) maintain adequate capital in light of its contemplated business purpose, transactions and liabilities; (xvii) ensure that it does not enter into any agreement to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy covering the property of any other Person; (xviii) ensure that it will not conceal from creditors any of its assets or participate in concealing the assets of any other person or entity; (xix) cause its Board of Directors to meet at least annually or act pursuant to written consent and keep minutes of such meetings and actions and observe all other Delaware limited liability company formalities; (xx)  not acquire any securities of the Member (other than the purchase or other acquisition of certain direct loans originated through the Member’s platform on its website www.prosper.com or any successor website, and the related promissory notes issued by the Member.); and (xxi)  cause the directors, officers, agents and other representatives of the Company to act at all times with respect to the Company consistently and in furtherance of the foregoing and in the best interests of the Company.  The Company further agrees that at all times when any Securities are Outstanding the Board of Directors will include at least two Independent Directors (as defined in the LLC Agreement) and that the Company will not take any action that, under the terms of the LLC Agreement, requires the written consent of all of the Independent Directors unless such consent is obtained 

 

  

-15-

  

 

Article IV

 

Successor Corporation

 

Section 4.1.   When Company May Merge or Transfer Assets.  The Company shall not consolidate with or merge with or into any other person or convey, transfer or lease its properties and assets substantially as an entirety to any person, unless:

 

(a)    either (1) the Company shall be the continuing corporation or limited liability company or (2) the person (if other than the Company) formed by such consolidation or into which the Company is merged or the person which acquires by conveyance, transfer or lease the properties and assets of the Company substantially as an entirety (i) shall be a corporation, limited liability company, partnership or trust organized and validly existing under the laws of the United States or any state thereof or the District of Columbia and (ii) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company under the Securities and this Indenture;

 

(b)    immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and

 

(c)    the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been satisfied.

 

The successor person formed by such consolidation or into which the Company is merged or the successor person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Indenture with the same effect as if such successor had been named as the Company herein; and thereafter, except in the case of a lease of its properties and assets substantially as an entirety, the Company shall be discharged from all obligations and covenants under this Indenture, and the Securities.

 

Article V

 

Defaults and Remedies

 

Section 5.1.   Events of Default.  Unless otherwise specified as contemplated by Section 2.2(c) with respect to any series of securities, an “Event of Default” occurs, with respect to each series of the Securities individually, if:

 

  

-16-

  

 

(a)    the Company defaults, subject in each case, to the limitations set forth in Sections 2.2(b) and 3.1 and in the Securities in the payment of any Principal of, or interest upon, any Security of such series when the same becomes due and payable and continuance of such default for a period of 30 days;

 

(b)    the Company fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in clause (a) above and other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has been expressly included in this Indenture solely for the benefit of a series of Securities other than such series) and such failure continues for 90 days after receipt by the Company of a Notice of Default; provided, however, that if the Company shall proceed to take curative action which, if begun and prosecuted with due diligence, cannot be completed within a period of 90 days, then such period shall be increased to such extent as shall be necessary to enable the Company diligently to complete such curative action;

 

(c)    there shall have been the entry by a court of competent jurisdiction of (i) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Bankruptcy Law or (ii) a decree or order adjudging the Company bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or (other similar official) of the Company or of any substantial part of its property, or ordering the wind up or liquidation of its affairs, and any such decree or order for relief shall continue to be in effect, or any such other decree or order shall be unstayed and in effect, for a period of 60 consecutive days;

 

(d)    (i) the Company commences a voluntary case or proceeding under any applicable Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or insolvent, (ii) the Company consents to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Bankruptcy Law or to the commencement of any bankruptcy or insolvency case or proceeding against it, (iii) the Company files a petition or answer or consent seeking reorganization or substantially comparable relief under any applicable federal state law, (iv) the Company (1) consents to the filing of such petition or the appointment of, or taking possession by, a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, (2) makes an assignment for the benefit of creditors or (3) admits in writing its inability to pay its debts generally as they become due or (v) the Company takes any corporate action in furtherance of any such actions in this clause (d); or

 

(e)    any other Event of Default specifically provided with respect to Securities of that series occurs.

 

  

-17-

  

 

“Bankruptcy Law” means Title 11, United States Code, or any similar federal or state law for the relief of debtors.  “Custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

 

A Default under clause (b) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate Principal Amount of the Outstanding Securities of all series for which such Default exists notify the Company and the Trustee, of the Default and the Company does not cure such Default within the time specified in clause (b) above after receipt of such notice.  Any such notice must specify the Default, demand that it be remedied and state that such notice is a “Notice of Default.”

 

Section 5.2.   Acceleration.  If an Event of Default specified in Section 5.1(c) or (d) occurs and is continuing, the Principal (or portion thereof) of all the Securities shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders, notwithstanding, for purposes of the effectiveness of such acceleration, the second sentence of Section 3.1 hereof and without respect to whether there are or will be Borrower Loan Net Payments in respect of the Borrower Loans corresponding to the Securities.  The Holders of a majority in aggregate Principal Amount of all Outstanding Securities, by notice to the Trustee (and without notice to any other Securityholder) may rescind an acceleration and its consequences if (a) the rescission would not conflict with any judgment or decree, and (b) all Events of Default specified in Section 5.1(c) or (d) have been cured or waived.  No such rescission shall affect any subsequent Default or impair any right consequent thereto.  For avoidance of doubt, (i) there shall be no acceleration of the Principal (or portion thereof) of any Securities upon the occurrence of and Event of Default other than an Event or Default specified in Section 5.1(c) or (d), and (ii) the acceleration of any Securities shall not limit the application of the second sentence of Section 3.1 to the calculation of the amounts actually payable on any Securities or limit or affect the conditions to the right of any Holder to receive such amounts in respect of its Securities.

 

Section 5.3.   Other Remedies.  If an Event of Default with respect to a series of Outstanding Securities occurs and is continuing, the Trustee may pursue any available remedy to (a) collect the payment of the whole amount then due and payable on such Securities for Principal and interest, with interest upon the overdue Principal and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest from the date such interest was due, at the rate or rates prescribed therefor in such Securities and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including amounts due the Trustee under Section 6.7, (b) exercise any and all rights of a secured party under the UCC and other applicable law pursuant to the security interest granted to the Trustee under Section 6.12, or (c) enforce the performance of any provision of the Securities or this Indenture.

 

The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of the Securities in the proceeding.  A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default.  No remedy is exclusive of any other remedy.  All available remedies are cumulative.

 

  

-18-

  

 

Section 5.4.   Waiver of Past Defaults.  The Holders of a majority in aggregate Principal Amount of the Outstanding Securities of any series, by notice to the Trustee (and without notice to any other Securityholder), may on behalf of the Holders of all the Securities of such series waive an existing Default with respect to such series and its consequences except (a) an Event of Default described in Section 5.1(a) with respect to such series or (b) a Default in respect of a provision that under Section 8.2 cannot be amended without the consent of the Holder of each Outstanding Security of such series affected.  When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.

 

Section 5.5.   Control by Majority.  The Holders of a majority in aggregate Principal Amount of the Outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee with respect to the Securities.  However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability.

 

Section 5.6.   Limitation on Suits.  A Holder of any Security of any series may not pursue any remedy with respect to this Indenture or the Securities unless:

 

(a)    the Holder gives to the Trustee written notice stating that an Event of Default with respect to the Securities of that series is continuing;

 

(b)   the Holders of at least 25% in aggregate Principal Amount of the Outstanding Securities of that series make a written request to the Trustee to pursue the remedy;

 

(c)    such Holder or Holders offer to the Trustee security or indemnity satisfactory to it against any loss, liability or expense satisfactory to the Trustee;

 

(d)   the Trustee does not comply with the request within 60 days after receipt of the notice, the request and the offer of security or indemnity; and

 

(e)   the Holders of a majority in aggregate Principal Amount of the Outstanding Securities of that series do not give the Trustee a direction inconsistent with such request during such 60-day period.

 

A Securityholder may not use this Indenture to prejudice the rights of any other Securityholder or to obtain a preference or priority over any other Securityholder (it being understood that the Trustee does not have an affirmative duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders).

 

  

-19-

  

 

Section 5.7.   Rights of Holders to Receive Payment.  Subject to Section 3.6(a), the right, which is absolute and unconditional, of any Holder of any Security to receive payment of the Principal of and interest on (subject to Sections 2.2(b) and 2.10) such Security on the Stated Maturity or Maturities expressed in such Security held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected adversely without the consent of each such Holder.

 

Section 5.8.   Collection Suit by Trustee.  If an Event of Default described in Section 5.1(a) with respect to Securities of any series occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount owing with respect to such series of Securities and the amounts provided for in Section 6.7.

 

Section 5.9.   Trustee May File Proofs of Claim.  In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the Principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue Principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,

 

(a)    to file and prove a claim for the whole amount of Principal and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amount due the Trustee under Section 6.7) and of the Holders of Securities allowed in such judicial proceeding,

 

(b)    to terminate the Company’s rights to service the Borrower Loans and require the substitution of a backup servicer in place of the Company, and

 

(c)    to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder of Securities to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders of Securities, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.7.

 

Nothing herein contained shall be deemed to authorize the Trustee or the holders of Securities to authorize or consent to or accept or adopt on behalf of any Holder of a Security any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of a Security in any such proceeding.

 

  

-20-

  

 

Section 5.10.   Priorities.  If the Trustee collects any money pursuant to this Article V, it shall pay out the money in the following order:

 

First:     to the Trustee for amounts due under Section 6.7;

 

Second:     to Securityholders for amounts due and unpaid for the Principal and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for Principal and interest, respectively; and

 

Third:      the balance, if any, to the Company.

 

The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 5.10.  At least 15 days before such record date, the Company shall mail or electronically transmit to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid.

 

Section 5.11.   Undertaking for Costs.  In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant.  This Section 5.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 5.7 or a suit by Holders of more than 10% in aggregate Principal Amount of the Outstanding Securities of any series, or to any suit instituted by any Holder of any Security for the enforcement of the payment of the Principal of or interest on any Security on or after the Stated Maturity or Maturities expressed in such Security.

 

Section 5.12.   Waiver of Stay, Extension or Usury Laws.  The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

 

  

-21-

  

 

Article VI

 

Trustee

 

Section 6.1.   Duties of Trustee.  (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

 

(b)    Except during the continuance of an Event of Default with respect to Securities of any series:

 

(i)    the Trustee need perform only those duties that are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

 

(ii)    in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture.  However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

 

(c)    The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

 

(i)     this paragraph (c) does not limit the effect of paragraph (b) of this Section 6.1;

 

(ii)    the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

 

(iii)   the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.5 or exercising any trust or power conferred upon the Trustee under this Indenture.

 

(d)    Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 6.1.

 

(e)    The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives indemnity satisfactory to it against any loss, liability or expense.

 

  

-22-

  

 

(f)Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law.  The Trustee shall not be liable for any interest on any money received by it except as the Trustee may otherwise agree in writing with the Company.

 

Section 6.2.   Rights of Trustee.  (a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person.  The Trustee need not investigate any fact or matter stated in the document.

 

(b)Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate and an Opinion of Counsel.  The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers’ Certificate and Opinion of Counsel.

 

(c)The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers.

 

(d)The Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, Officers’ Certificate, Opinion of Counsel (or both), Company Order or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security or other paper believed to be genuine and to have been signed or presented by the proper party or parties.

 

(e)Any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers’ Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the secretary or an assistant secretary of the Company.

 

(f)The Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in reliance thereon in accordance with such advice or Opinion of Counsel.

 

(g)The Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred therein or thereby.

 

(h)Prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, security or other paper or document unless requested in writing to do so by the Holders of not less than a majority in the aggregate principal amount of the Securities of such series then Outstanding; provided, that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of any such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require indemnity satisfactory to it against such expense or liabilities as a condition to proceeding; the reasonable expense of every such investigation shall be paid by the Company or, if paid by the Trustee or any predecessor trustee, shall be repaid by the Company upon demand.

 

  

-23-

  

 

(i)The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder.

 

(j)The Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture.

 

(k)In no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

 

(l)The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by the Trustee at the designated corporate trust office of the Trustee, and such notice references the Securities and this Indenture.

 

(m)The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

 

(n)The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

 

(o)The Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture.

 

Section 6.3.   Individual Rights of Trustee, Etc.  The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.  Any authenticating agent or any other agent of the Company may do the same with like rights.  However, the Trustee must comply with Sections 6.10 and 6.11.

 

Section 6.4.   Trustee’s Disclaimer.  The recitals contained herein and in the Securities shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same.  The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities.  The Trustee shall not be accountable for the Company’s use of the proceeds from the Securities and shall not be responsible for any statement in the registration statement for the Securities under the Securities Act of 1933, as amended, or in the Indenture or the Securities or for the determination as to which beneficial owners are entitled to receive any notices hereunder.

 

  

-24-

  

 

Section 6.5.   Notice of Defaults.  If a Default with respect to the Securities of any series occurs and is continuing and if it is actually known to the Trustee, the Trustee shall give to each Holder of Securities of such series notice of such Default in the manner set forth in TIA Section 315(b) within 90 days after it occurs.  Except in the case of a Default described in Section 5.1(a) with respect to any Security of such series or a Default in the payment of any sinking fund installment with respect to any Security of such series, the Trustee may withhold the notice if and so long as it determines in good faith that withholding the notice is in the interests of the Holders of Securities of such series.

 

Section 6.6.   Reports by Trustee to Holders.  If required by Section 313(a) of the TIA, within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail or transmit electronically to each Holder of Securities a brief report dated as of such May 15 that complies with TIA Section 313(a).  If the Trustee is required to prepare such report pursuant to Section 313(a) of the TIA and if it chooses to transmit such report electronically, the Trustee appoints the Company, and the Company agrees to act as the Trustee’s agent to transmit such report electronically to each Holder of Securities and to the SEC as provided in the immediately following paragraph.  Promptly following such transmissions, the Company shall certify, in writing, to the Trustee that it has effected each of such transmissions to Holders of Securities and to the SEC.  The Trustee also shall comply with TIA Section 313(b) and (c).

 

A copy of each report at the time of its mailing or transmission to Holders of Securities shall be filed with the SEC.

 

Section 6.7.   Compensation and Indemnity.  The Company agrees:

 

(a)    to pay to the Trustee from time to time such compensation as shall be agreed in writing between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

 

(b)    to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses, advances and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct; and

 

(c)    to indemnify the Trustee for, and to hold it harmless against, any and all loss, liability, damage, claim or expense incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim (whether asserted by the Company, a Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder.

 

  

-25-

  

 

To secure the Company’s payment obligations in this Section 6.7, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay the Principal of or interest, if any, on particular Securities.

 

The Company’s obligations pursuant to this Section 6.7 shall survive the discharge or other termination of this Indenture or the resignation or removal of the Trustee.  When the Trustee incurs expenses after the occurrence of a Default specified in Section 5.1(c) or (d), the expenses are intended to constitute expenses of administration under any Bankruptcy Law. 

 

Section 6.8.   Replacement of Trustee.  The Trustee may resign by so notifying the Company; provided, however, no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 6.8.  The Holders of a majority in aggregate Principal Amount of the Outstanding Securities at the time outstanding may remove the Trustee with respect to the Securities by so notifying the Trustee and may appoint a successor Trustee, which successor Trustee shall, in the absence of an Event of Default, be reasonably acceptable to the Company.  The Company shall remove the Trustee if: 

 

(a)    the Trustee fails to comply with Section 6.10;

 

(b)   the Trustee is adjudged bankrupt or insolvent;

 

(c)   a receiver or public officer takes charge of the Trustee or its property; or 

 

(d)   the Trustee otherwise becomes incapable of acting. 

 

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, with respect to the Securities of one or more series, the Company shall promptly appoint, by resolution of its Board of Directors, a successor Trustee with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any series).

 

In the case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company.  Thereupon, the resignation or removal of the retiring Trustee shall become effective and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture.  The successor Trustee shall mail or electronically transmit a notice of its succession to Holders of Securities of the particular series with respect to which such successor Trustee has been appointed.  The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 6.7. 

 

  

-26-

  

 

In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest, in each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall he deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees as co-Trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, subject, nevertheless, to its lien, if any, provided for in Section 6.7. 

 

If a successor Trustee with respect to the Securities of any series does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate Principal Amount of the Outstanding Securities of such series at the time outstanding may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. 

 

If the Trustee fails to comply with Section 6.10, any Holder of a Security of such series may petition any court of competent jurisdiction for the removal of such Trustee and the appointment of a successor Trustee. 

 

Section 6.9.   Successor Trustee by Merger.  If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.

 

Section 6.10.  Eligibility; Disqualification.  The Trustee shall at all times satisfy the requirements of TIA Section 310(a)(1) and 310(a)(5).  The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition.  The Trustee shall comply with TIA Section 310(b), including the optional provision permitted by the second sentence of TIA Section 310(b)(9).  In determining whether the Trustee has conflicting interests as defined in TIA Section 310(b)(1), the provisions contained in the proviso to TIA Section 310(b)(1) shall be deemed incorporated herein. 

 

  

-27-

  

 

Section 6.11.  Preferential Collection of Claims Against Company.  The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b).  A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. 

 

Section 6.12.  Security Interest.  The Company hereby pledges, assigns and grants to the Trustee, as security for the due payment and performance of all the Company’s obligations under this Indenture and the Securities, for the benefit of the Holders of the Securities, as their interests may appear, a security interest in and to all of its right, title and interest, whether now owned or hereafter acquired, and whether now existing or hereafter arising, in, to and under the following: (a) the Borrower Loans, including any and all promissory notes executed by or on behalf of the related borrowers evidencing such Borrower Loans and all rights of the Company under the related Borrower Registration Agreements (as defined in the Servicing Agreement), (b) the Deposit Account and all money and other property from time to time credited to the Deposit Account, (c) all money, cash, instruments, interest, income and other property from time to time due or to become due, received or receivable, or otherwise distributed in respect of or in exchange for any or all of the foregoing held for the benefit and security of the Holders of the Securities, (d) all present and continuing right, power and authority of the Company, in the name and on behalf of the Company, as agent and attorney-in-fact, or otherwise, to make claim for and demand performance on, under or pursuant to any of the foregoing held for the benefit and security of the Holders of the Securities, to bring actions and proceedings thereunder or for the specific or other enforcement thereof, or with respect thereto, to make all waivers and agreements, to grant or refuse requests, to give or withhold notices, and to exercise all rights, remedies, powers, privileges and options, to grant or withhold consents and approvals and do any and all things and exercise all other discretionary rights, options, privileges or benefits which the Company is or may become entitled to do with respect to the foregoing held for the benefit of the Holders of the Securities without notice to, consent or approval by or joinder of the Company, and (e) all revenues, issues, products, accessions, substitutions, replacements, profits and proceeds (including “proceeds” as defined in the applicable UCC) of and from all of the foregoing (the “Collateral”).  At the expense of the Company, the Company agrees to execute, deliver and file such further agreements, instruments and certificates as may be necessary to preserve, perfect and protect the title and interests of the Trustee on behalf of the Holders of the Securities, including but not limited to, the execution by the Company of an instrument of assignment to the Trustee and the execution by the Company and the filing of financing statements pursuant to the UCC.  The Company shall, at its expense, do any further acts and execute, acknowledge, deliver, file, register and record any further documents as are necessary in order to protect the Trustee’s title to and first priority perfected security interest in the Collateral, subject to no Liens or charges of any type whatsoever except for Liens pursuant to and permitted by this Indenture.  For the avoidance of doubt, and notwithstanding the security interest hereby granted, (i) the Company shall be authorized at all times to (or to cause the Servicer on its behalf to) withdraw from or transfer from (or to instruct the Trustee to withdraw from or transfer from) the Deposit Account the excess of the Borrower Loan Payments over the related Borrower Loan Net Payments (the “Excess Amounts”), and to deposit such amounts into the Fee Account, and (ii) upon any instruction from the Company (or the Servicer on its behalf) to transfer Excess Amounts from the Deposit Account to the Fee Account, the Trustee will reasonably promptly transfer such Excess Amounts to the Fee Account and without further action on its part, the Trustee will be deemed to have released the lien and security interest created by this Section 6.12 (the “Security Interest”) in such amounts.

 

  

-28-

  

 

In furtherance of the grant of the security interest in the Collateral for the Securities, upon and during continuance of an Event of Default, the Company grants to the Trustee on behalf of the Holders the full, exclusive and irrevocable right, power and authority to exercise any and all rights of the Company with respect to the Collateral held for the benefit of the Holders of Securities, and each contract, agreement or other document or instrument included therein.  The Trustee agrees that, except upon and during the continuance of an Event of Default, it shall not exercise the power of attorney, or any rights granted to the Trustee pursuant to this Section 6.12.

 

Section 6.13.  Release of Collateral.  (a) The Company may sell, transfer or otherwise dispose of any Borrower Loans and the related promissory notes (together, “Sold Loans”) free and clear of the Security Interest , if such sale, transfer or disposition of Sold Loans is made by the Company (or by the Servicer on its behalf) for the purpose of realizing the value of the Sold Loans in accordance with the Servicing Agreement (or any successor or equivalent agreement).  Any Borrower Loan Payments that the Company pays to a collection agent (or that it permits a collection agent to retain) as compensation for collection services, or that the Company otherwise applies to cover collection expenses (all such Borrower Loan Payments, “Collection Amounts”), shall, upon such payment or application, automatically be released from the Security Interest.  In addition, any Borrower Loan that remains unpaid on its Final Maturity Date (each, a “Charged-Off Loan” and, together with the Sold Loans and the Collection Amounts, the “Released Collateral”) shall automatically on such Final Maturity Date be released from the Security Interest.  The Company is not required to obtain the consent of the Trustee to effect the release of any Released Collateral from the Security Interest as contemplated hereby and any such release of Released Collateral shall not be deemed to impair the security granted under this Indenture in contravention of its provisions.

 

(b)The Company shall deliver to the Trustee not later than January 15th and July 15th in each calendar a year a certificate signed by its President, its Treasurer or any Vice President confirming that to the best of such officer’s knowledge after due investigation, all Released Collateral released from the Security Interest during the preceding semiannual period of July 1st through December 31st, or January 1st through June 30th, as applicable, other than any Released Collateral described in the immediately following sentence, was released by the Company in the ordinary course of the Company’s business and that all proceeds realized by the Company from each such release were applied by the Company in accordance with the Indenture; provided that the first such certificate delivered by the Company shall pertain to the period from the date of this Indenture through December 31, 2012.  The Company shall deliver to the Trustee in connection with any release of Collateral from the Security Interest other than Released Collateral, and in connection with any release of Released Collateral that is not (in the Company’s good faith view) being made in the ordinary course of the Company’s business, such certificates or opinions as shall be required in connection therewith by TIA Section 314(d).  Any Company officer (including, without limitation, its Treasurer) who has significant responsibility for (i) the determination of the Company’s credit underwriting criteria, and (ii) the evaluation of the financial performance of the Company’s Borrower Loan portfolio, shall be deemed to constitute an “expert” for purposes of TIA Section 314(d).  For the avoidance of doubt, the Company shall not be required to deliver any certificates or opinions under TIA Section 314(d) in respect of any Released Collateral that is released from the Security Interest in the ordinary course of the Company’s business but shall remain obligated to deliver the certificates contemplated by the first and second sentences of this paragraph.

 

  

-29-

  

 

Article VII

 

Satisfaction and Discharge

 

Section 7.1.   Discharge of Liability on Securities.  This Indenture shall upon Company Request cease to be of further effect as to all Outstanding Securities or all Outstanding Securities of any series, as the case may be (except as to any surviving rights of registration of transfer of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: 

 

(a)    either (i) all Outstanding Securities or all Outstanding Securities of any series, as the case may be, theretofore authenticated and delivered (other than Securities or Securities of such series, as the case may be, for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 7.2) have been delivered to the Company or the Trustee for cancellation; or (ii) all such Securities not theretofore delivered to the Company or the Trustee for cancellation:

 

(1)    have become due and payable, or 

 

(2)    will become due and payable at their Stated Maturity within one year; 

 

and the Company, in the case of (1) or (2) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose, an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee or the Company for cancellation, for principal and any interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity, as the case may be; 

 

(b)   the Company has paid or caused to be paid all other sums payable hereunder by the Company; and 

 

  

-30-

  

 

(c)    the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. 

 

The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers’ Certificate and Opinion of Counsel and at the cost and expense of the Company. 

 

Notwithstanding the satisfaction and discharge of this Indenture with respect to the Securities of any series, the obligations of the Company to the Trustee with respect to the Securities of that series under Section 6.7, the obligations of the Company to any authenticating agent and, if money shall have been deposited with the Trustee pursuant to clause (b) of this Section, Section 7.2 shall survive.  The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of Outstanding Securities. 

 

Section 7.2.   Repayment to the Company.  The Trustee shall return to the Company on Company Request any money held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years.  After return to the Company, Holders entitled to the money must look to the Company for payment as general creditors with limited recourse as described herein and in the Securities unless an applicable abandoned property law designates another person. 

 

Article VIII

 

Supplemental Indentures 

 

Section 8.1.   Supplemental Indentures Without Consent of Holders.  Without the consent of any Holders of Securities, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: 

 

(a)    to evidence the succession of any corporation or limited liability company to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or 

 

(b)    to add to the covenants, agreements and obligations of the Company for the benefit of the Holders of all of the Securities or any series thereof, or to surrender any right or power herein conferred upon the Company; or 

 

(c)    to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 2.2(c), respectively; or 

 

  

-31-

  

 

(d)    to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.8; or

 

(e)   to cure any ambiguity, defect or inconsistency; or

 

(f)    to amend restrictions on transferability of any Securities on any series in any manner that does not adversely affect the rights of any Securityholder in any material respect; or 

 

(g)   to add to, change or eliminate any of the provisions of this Indenture (which addition, change or elimination may apply to one or more series of Securities), provided that any such addition, change or elimination shall neither (i) apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (ii) modify the rights of the Holder of any such Security with respect to such provision; or 

 

(h)   to secure the Securities (including through the grant of a security interest over collateral that is additional to the Collateral); or 

 

(i)    to make any other change that does not adversely affect the rights of any Securityholder in any material respect.

 

Section 8.2.   Supplemental Indentures With Consent of Holders.  With the written consent of the Holders of at least a majority in aggregate Principal Amount of the Outstanding Securities of each series affected by such supplemental indenture, the Company and the Trustee may amend this Indenture or the Securities of any series or may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Securities of such series and under this Indenture; provided, however, that no such amendment or supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby: 

 

(a)    Subject to Section 3.6(a), change the Stated Maturity of the Principal of, or any installment of Principal or interest on, any such Security, or reduce the Principal Amount thereof or the rate of interest thereon that would be due and payable upon a declaration of acceleration of maturity thereof pursuant to Section 5.2, or change the coin or currency in which any installment of principal of or interest on, any such Security is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof; 

 

(b)    reduce the percentage in Principal Amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such amendment or supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) with respect to the Securities of such series provided for in this Indenture; or 

 

  

-32-

  

 

(c)    modify any of the provisions of this Section, Section 5.4 (clauses (a) and (b)) or 5.7, except to increase the percentage of Outstanding Securities of such series required for such actions or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. 

 

A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. 

 

It shall not be necessary for the consent of the Holders under this Section 8.2 to approve the particular form of any proposed amendment or supplemental indenture, but it shall be sufficient if such consent approves the substance thereof. 

 

After an amendment or supplemental indenture under this Section 8.2 becomes effective, the Company shall mail or electronically transmit to each Holder of the particular Securities affected thereby a notice briefly describing the amendment. 

 

Section 8.3.   Compliance with Trust Indenture Act.  Every supplemental indenture executed pursuant to this Article shall comply with the TIA as then in effect.

 

Section 8.4.   Revocation and Effect of Consents, Waivers and Actions.  Until an amendment or waiver with respect to a series of Securities becomes effective, a consent to it or any other action by a Holder of a Security of that series hereunder is a continuing consent by the Holder and every subsequent Holder of that Security or portion of that Security that evidences the same obligation as the consenting Holder’s Security, even if notation of the consent, waiver or action is not made on the Security.  However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder’s Security or portion of the Security if the Trustee receives the notice of revocation before the Company or an agent or the Company certifies to the Trustee that the consent of the requisite aggregate Principal Amount of the Securities of that series has been obtained.  After an amendment, waiver or action becomes effective, it shall bind every Holder of Securities of that series. 

 

The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment or waiver with respect to a series of Securities.  If a record date is fixed, then notwithstanding the first two sentences of the immediately preceding paragraph, those persons who were Holders of Securities of that series at such record date (or their duly designated proxies), and only those persons, shall be entitled to revoke any consent previously given, whether or not such persons continue to be Holders after such record date.  No such consent shall be valid or effective for more than 90 days after such record date. 

 

  

-33-

  

 

Section 8.5.   Notation on or Exchange of Securities.  Securities of any series authenticated and delivered after the execution of any supplemental indenture with respect to such series pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture.  If the Company shall so determine, new Securities of such series so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared, executed, authenticated and delivered by the Company in exchange for outstanding Securities of that series. 

 

Section 8.6.   Trustee to Sign Supplemental Indentures.  The Trustee shall sign any supplemental indenture authorized pursuant to this Article VIII if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee.  If it does, the Trustee may, but need not, sign it.  In signing such amendment, the Trustee shall receive, and shall be fully protected in conclusively relying upon, an Officers’ Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and is the legal, valid and binding obligation of the Company, enforceable in accordance with its terms. 

 

Section 8.7.   Effect of Supplemental Indentures.  Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby, except to the extent otherwise set forth thereon. 

 

Article IX

 

Miscellaneous 

 

Section 9.1.   Trust Indenture Act Controls.  If any provision of this Indenture limits, qualities or conflicts with another provision hereof which is required to be included in this Indenture by the TIA, the required provision shall control. 

 

Section 9.2.   Notices.  Any notice or communication shall be in writing and delivered in person, mailed by first-class mail, postage prepaid or transmitted electronically to any Holder at the registered address maintained in the Company’s records; provided, that any notice or communication by and among the Trustee and the Company may be made by telecopy and shall be effective upon receipt thereof and shall be confirmed in writing, mailed by first-class mail, postage prepaid, and addressed as follows: 

 

  

-34-

  

 

	
if to the Company: 

	
Prosper Funding LLC

	 	111 Sutter Street, 22nd Floor 
	 	San Francisco, CA  94104 
	 	Attention: __________ 
	 	Facsimile:  (415) __________ 
	 	Email:  compliance@prosper.com
	 	 
	
if to the Trustee:

	
Wells Fargo Bank, National Association 

	 	45 Broadway, 14th Floor 
	 	New York, NY 10006 
	 	Attention:  Corporate Trust Services 
	 	Facsimile:  (212) 515-1589 

 

The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. 

 

Any notice or communication given to a Holder of Securities shall be transmitted electronically to or mailed to such Securityholder at the Securityholder’s address as it appears on the registration books of the Company and shall be sufficiently given if so mailed within the time prescribed. 

 

Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice.  Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. 

 

Failure to electronically transmit or mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Holders of Securities of the same series.  If a notice or communication is electronically transmitted or mailed in the manner provided above, it is duly given, whether or not received by the addressee. 

 

If the Company electronically transmits or mails a notice or communication to the Holders of Securities of a particular series, it shall electronically transmit or mail a copy to the Trustee with respect to such series. 

 

In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give notice to Holders of Securities as set forth above, then such notification as shall be made with the acceptance of the Trustee shall constitute a sufficient notification for every purpose hereunder.  In any case where notice to Holders of Securities is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder of a Security shall affect the sufficiency of such notice with respect to other Holders of Securities. 

 

The Trustee acknowledges that any notices, instructions or other communications that may be provided by the Company under this Indenture may be provided to the Trustee by the Servicer on the Company’s behalf.

 

  

-35-

  

 

Section 9.3.   Communication by Holders with Other Holders.  Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities.  The Company and the Trustee with respect to a particular series of Securities, and anyone else, shall have the protection of TIA Section 312(c). 

 

Section 9.4.   Certificate and Opinion as to Conditions Precedent.  Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: 

 

(a)    an Officers’ Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

 

(b)    an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. 

 

Section 9.5.   Form of Documents Delivered to Trustee.  In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or governed by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

 

Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous.  Any such Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

 

Section 9.6. Statements Required Certificate or Opinion.  Each Officers’ Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include: 

 

(a)    a statement that each person making such Officers’ Certificate or Opinion of Counsel has read such covenant or condition;

 

(b)    a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers’ Certificate or Opinion of Counsel are based;

 

  

-36-

  

 

(c)    a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and 

 

(d)   a statement that, in the opinion of such person, such covenant or condition has been complied with.

 

Section 9.7.   Separability Clause.  In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.  

 

Section 9.8.   Rules by Trustee.  With respect to the Securities of a particular series, the Trustee with respect to such series of Securities may make reasonable rules for action by or a meeting of Holders of such series of Securities.  

 

Section 9.9.   Legal Holidays.  A “Legal Holiday” is any day other than a Business Day.  If any specified date (including an Interest Payment Date or Stated Maturity of any Security, or a date for giving notice) is a Legal Holiday at any place for giving notice or taking any other action required hereunder or under any series of Securities, then (notwithstanding any other provision of this Indenture or of the Securities other than a provision in the Securities of any series which specifically states that such provision shall apply in lieu of this Section) such action need not be taken, on such date, but the action shall be taken on the next succeeding day that is not a Legal Holiday at such place with the same force and effect as if made on such date. 

 

Section 9.10.  Governing Law and Jurisdiction; Waiver of Jury Trial.  This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, as applied to contracts made and performed within the State of New York, without regard to any principle of conflicts of law that would require or permit the application of the laws of any other jurisdiction.  The Company, the Trustee, and each Holder of a Security (by acceptance thereof), (i) submits to the exclusive jurisdiction of the federal and New York state courts located in the Borough of Manhattan in the City of New York in connection with any suit, action or proceeding related to this Indenture, (ii) irrevocably waives any defense of lack of personal jurisdiction in such suits and (iii) irrevocably waives to the fullest extent it may effectively do so under applicable law, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding brought in the federal and New York state courts located in the Borough of Manhattan in the City of New York that such suit, action or proceeding has been brought in an inconvenient forum. 

 

Each of the Company and the Trustee hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Indenture, the Notes or the transaction contemplated hereby. 

 

  

-37-

  

 

Section 9.11.  No Recourse Against Others.  The obligations of the Company under this Indenture and (subject to Sections 2.2(b), 3.1 and 3.6(a)) the Securities are solely obligations of the Company and are not obligations of any other Person.  Neither Prosper Marketplace, Inc., in its capacity as Servicer or otherwise, nor any director, officer, employee, organizer, member or affiliate, as such, of the Company, shall have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation.  By executing this Indenture the Trustee, and by accepting a Security each Holder of such Security, waives and releases all such liability.  Such waiver and release shall be part of the consideration for the execution by the Company of this Indenture and the issue of the Securities.  The terms of this Section 9.11 shall survive the termination of this Indenture and/or the resignation or removal of the Trustee.

 

Section 9.12.  No Petition.  The Trustee agrees that it will not institute against, or join any other Person in instituting against, the Company any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other similar proceeding under the laws of any jurisdiction, for one year and one day after all of the Securities have been paid in full or, if not paid in full, fully retired in accordance with their terms.  The obligations of the Trustee under this Section 9.12 shall survive the termination of this Indenture and/or the resignation or removal of the Trustee.

 

Section 9.13.  Successors.  All agreements of the Company in this Indenture and the Securities shall bind its successor.  All agreements of the Trustee in this Indenture shall bind its successor.

 

Section 9.14.  Effect of Headings and Table of Contents.  The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

 

Section 9.15.  Benefits of Indenture.  Nothing in this Indenture or in the Securities, express or implied, shall give to any person, other than the parties hereto and their successors hereunder and the Holders of Securities, any benefits or any legal or equitable right, remedy or claim under this Indenture.

 

Section 9.16.  Multiple Originals.  The parties may sign any number of copies of this Indenture.  Each signed copy shall be an original, but all of them together represent the same agreement.  One signed copy is enough to prove this Indenture.  The exchange of copies of this Indenture and the signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes.  Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

 

Section 9.17.  Force Majeure.  In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software or hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

 

  

-38-

  

 

Section 9.18. U.S.A. Patriot Act.  The parties hereto acknowledge that in accordance with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee.  The parties to this Indenture agree that they will provide the Trustee with such information as it may request in order for the Trustee to satisfy the requirements of the U.S.A. Patriot Act.

 

[Signatures appear on the following page]

 

  

-39-

  

 

 

	 	
Prosper Funding LLC

	 
	 	 	 	 
	 	By	 	 
	 	 
Name:  

	 	 
	 	 
Title:

	 	 

 

	
Attest:

	 
	
By

	 	  
	
Name:  

	 	  
	
Title:

	 	  

 

	
  

	 

	  	
Wells Fargo Bank, National Association, 

as Trustee

	 	 	 
	  	
By

	  	  
	  	 
Name:  

	 	  
	  	 
Title:

	 	  

 

  

-40-

  

 

Exhibit A

Form of Borrower Payment Dependent Note

 

For purposes of Sections 1272, 1273 and 1275 of the Internal Revenue Code of 1986, as amended, this Borrower Payment Dependent Note (this “Note”) is being issued with original issue discount because payments on this Note are dependent on payments on the Corresponding  Borrower Loan.  The issue price of this Note  is the stated principal amount of this Note, and the issue date is the original issue date.  Upon request, the Company will promptly make available to the Holder the amount of OID and yield to maturity of this Note.  A Holder should contact Prosper Member support at (866) 615-6319 or support@prosper.com.

 

Any transfer, pledge or other use of this note for value or otherwise by or to any person is wrongful unless such transfer is effected through the Note Trader Platform or is otherwise permitted by the indenture.

 

Borrower Payment Dependent Note Series No. _______1

Prosper Funding LLC

 

	
No. __________________

	
[CUSIP ___________]

	 	 
	
Holder:  __________________2

	 
	
Corresponding Borrower Loan:  __________________3

	 
	
Stated Principal Amount of this Note:  U.S. $__________________4

	 
	
Aggregate Principal Amount of this Series of Notes:  U.S. $__________________5

	 
	
Interest Rate:  _______________6

	 
	
Servicing Fee:  An Annualized Rate applied to the Outstanding Principal Amount of the Corresponding Prosper Borrower Loan:  _________________7

	 
	
Original Issue Date:  __________________8

	 
	
Initial Maturity Date:  __________________9

 

	
1

	
Insert loan ID Number for Corresponding Borrower Loan.

	
2

	
Insert lender member’s screen name and member identification number.

	
3

	
Insert description of Corresponding Borrower Loan.

	
4

	
Insert principal amount of lender member’s corresponding Note.

	
5

	
Insert aggregate principal amount of Corresponding Borrower Loan.

	
6

	
Insert final yield percentage.

	
7

	
Insert total servicing fee rate to be charged by Company.

	
8

	
Insert date corresponding to date of funding Corresponding Borrower Loan.

 

  

 

  

 

	
Final Maturity Date:  __________________10

 

Extension of Maturity Date:   Each Note will mature on the Initial Maturity Date, unless the maturity of the Note is extended to the Final Maturity Date subject to conditions described below.  In no event will the maturity of the Notes be extended beyond the Final Maturity Date.

 

Payment Dates:   Subject to the limitations on payment described below, the Company will make payments of principal and interest on or before the sixth Business Day following receipt of any Borrower Loan Net Payments by the Company in accordance with the payment schedule for this Note, which is available on the Holder’s account page at www.prosper.com, subject to prepayment at any time without penalty.

 

Prosper Funding LLC, a limited liability company duly organized and existing under the laws of the State of Delaware (herein called the “Company”), for value received, hereby promises to pay to the person identified as the “Holder” above (the “Holder”), principal and interest on this Note in U.S. dollars in an amount equal to the Holder’s equal and ratable share of the Borrower Loan Net Payments on each Payment Date (in accordance with the payment schedule for this Note, which is available on the Holder’s account page at www.prosper.com and subject to prepayment) until the Initial Maturity Date or, if the maturity of the Note has been extended, until the Final Maturity Date.  For the avoidance of doubt, (1) no payments of principal and interest on this Note shall be payable unless the Company has received Borrower Loan Payments, and then only to the extent of Borrower Loan Net Payments in respect of those Borrower Loan Payments related to the Corresponding Borrower Loan identified above that have been received by the Company, (2) no Holder of this Note shall have any recourse against the Company unless, and then only to the extent that, the Company has failed to pay such Holder the Holder’s pro rata share of Borrower Loan Net Payments or otherwise breached a covenant in the Indenture described below that is applicable to the series of Notes of which this Note forms a part, and (iii) if the maturity of this Note is extended, no payments will be made on this Note after its Final Maturity Date even if the Company receives Borrower Loan Net Payments related to the Corresponding Borrower Loan after such Final Maturity Date.  Subject to certain exceptions provided in the Indenture referred to below, the principal and interest payable on any Payment Date will be paid to the person in whose name this Note is registered at the close of business on the Record Date next preceding such Payment Date.

 

“Record Date” shall mean the second Business Day immediately preceding each Interest Payment Date or Principal Payment Date (as applicable).

 

“Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday that is (1) not a day on which the Automated Clearing House system operated by the U.S. Federal Reserve Bank (the “ACH System”) is closed and (2) not a day on which banking institutions are authorized or obligated by law or executive order to close in San Francisco, California or New York, New York.

 

	
9

	
Insert date corresponding to stated maturity of Corresponding Borrower Loan.

	
10

	
Insert date that is the first anniversary of the stated maturity of Corresponding Borrower Loan.

 

  

-2-

  

 

If, on the Initial Maturity Date, any principal or interest payments in respect of the Corresponding Borrower Loan remain due and payable to the Company, the maturity date of this Note will be extended to the Final Maturity Date identified above.

 

If, on the Initial Maturity Date, no principal or interest payments in respect of the Corresponding Borrower Loan remain due and payable to the Company, the Note will mature on the Initial Maturity Date and no Borrower Loan Net Payments that the Company receives in respect of the Corresponding Borrower Loan after such Initial Maturity Date shall be required to be paid to the Holder of the Note.

 

All payments of principal and interest on this Note due to the Holder hereof shall be made in U.S. dollars, in immediately available funds, by intra-institution book-entry transfer to the Holder’s designated sub-account in the FBO Account.

 

All U.S. dollar amounts used in or resulting from the calculation of amounts due in respect of this Note shall be rounded to the nearest cent (with one-half cent being rounded upward).

 

This Note is one of a duly authorized series of a class of special limited obligations of the Company referred to as Borrower Payment Dependent Notes (hereinafter called the “Securities”) all issued or to be issued under and pursuant to an Indenture dated as of _______, 2012 (hereinafter called the “Indenture”), duly executed and delivered by the Company and Wells Fargo Bank, National Association, as trustee (hereinafter called the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, duties and immunities thereunder of the Trustee and the rights thereunder of the holders of the Securities.  The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the “TIA”), as in effect on the date of the Indenture.  The Securities are subject to, and qualified by, all such terms, certain of which are summarized hereon, and Holders are referred to the Indenture and the TIA for a statement of such terms.  As provided in the Indenture, the Securities may be issued in one or more separate series, which different series may be issued in various aggregate principal amounts, mature at different times, bear interest at different rates, be subject to different covenants and events of default, and otherwise vary as provided or permitted in the Indenture.

 

If an Event of Default described in Section 5.1(c) or (d) of the Indenture occurs and is continuing, the unpaid stated principal amount hereof will become and be immediately due and payable in the manner, with the effect and subject to the conditions provided in the Indenture.

 

  

-3-

  

 

The Indenture provides that the Company or a third-party servicer shall use commercially reasonable efforts to service and collect the Corresponding Borrower Loan in good faith, accurately and in accordance with industry standards customary for servicing loans such as the Borrower Loans, and may in applying that standard amend or waive any term of such Borrower Loan, and without limitation to the foregoing, shall have authority to write off and cancel such Borrower Loan without the consent of any Holder of any Securities of the series corresponding to such Borrower Loan.  The Indenture contains provisions permitting (subject to the servicing standard) the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of each series of Securities affected thereby, at the time Outstanding, evidenced as provided in the Indenture, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any indenture supplemental thereto or modifying in any manner the rights of the holders of this Note; provided, however, that no such supplemental indenture shall (1) change the Stated Maturity of the principal of, or any installment of principal or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon that would be due and payable upon a declaration of acceleration of maturity thereof or change the place of payment where, or change the coin or currency in which, any installment of principal and interest on any such Security is payable or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof, (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such amendment or supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of the Indenture or certain defaults thereunder and their consequences) with respect to the Securities, or (3) modify any of the provisions of Section 8.2, Section 5.4 (clauses (a) and (b)) or Section 5.7 of the Indenture, except to increase the percentage of Outstanding Securities required for such actions or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby.  The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Securities of all affected series at the time outstanding, on behalf of the holders of all the Securities of such series, to waive, insofar as those series are concerned, compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences.  Any such consent by the Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future holders and owners of this Note and any Notes which may be issued upon the registration of transfer hereof, irrespective of whether or not any notation thereof is made upon this Note or other such Notes.

 

  

-4-

  

 

This Note is not entitled to any sinking fund.  This Note is not redeemable at the option of the Holder.  If (1) a Prosper Rating different from the Prosper Rating calculated by the Company for the listing on the Platform of the Corresponding Borrower Loan was inserted in such Corresponding Borrower Loan listing, (2) the Company incorrectly inputted data into its formula or incorrectly applied its formula to determine the Prosper Rating, resulting in a Prosper Rating different from the Prosper Rating that should have appeared in the Corresponding Borrower Loan listing, or (3) the Corresponding Borrower Loan has been obtained as a result of verifiable identity theft on the part of the purported borrower member and a material default under the Note occurs (any such event described in clause (1), (2) or (3) a “Breach”) and, in the case of a Breach described in clause (1) or (2), such Breach materially and adversely affects the interest of the Holder in this Note, the Company will in its discretion either (i) repurchase this Note from the Holder, or (ii) indemnify and hold the Holder harmless against any losses resulting from nonpayment of this Note, and against any losses, damages, expenses, legal fees, costs and judgments resulting from any claim, demand or defense arising as a result of the Breach (collectively, “Damages”).  The determination of whether verifiable identity theft has occurred shall be in the Company’s sole discretion.  In addition, the Company may, in its reasonable discretion, require proof of the identity theft, such as a copy of a police report filed by the person whose identity was wrongfully used to obtain the fraudulently-induced Corresponding Borrower Loan, an identity theft affidavit or a bank verification letter (or all of the above) in order to determine that verifiable identity theft has occurred.  In the event the Company repurchases this Note pursuant to this paragraph, the repurchase price will be equal to the remaining outstanding principal balance of this Note as of the date of repurchase, and this Note shall be transferred and assigned by the Holder to the Company without recourse.  Upon such repurchase, the Company may execute any endorsements or assignments necessary to effectuate the transfer and assignment of this Note to the Company.  In the event the Company indemnifies and holds the Holder harmless against any Damages arising from an Interest Breach or Default Breach, the Company shall not be required to take any action with respect to losses the Holder may suffer resulting from nonpayment of this Note until this Note is at least 120 days past due; provided, however, that the Company may in its sole discretion elect to take action at an earlier time.  The Company shall calculate losses resulting from nonpayment of this Note based upon the outstanding principal balance of this Note.  If the Company makes an indemnification payment to the Holder as a result of losses suffered resulting from the nonpayment of this Note, the Company shall be entitled to retain any subsequent recoveries on this Note.  Any repurchase or indemnification payment will be made by remittance into the FBO Account for the benefit of the Holder.  

 

The Notes are in registered form without coupons in denominations of $25 to $25,000.  The Notes may not be transferred and the transfer of Notes shall not be registered as provided in the Indenture unless such transfer is effected through the Note Trader Platform or is otherwise permitted by the Indenture.  The Company may (1) impose a reasonable administrative fee for any such transfer, which fee shall be described on the Company’s website www.prosper.com and may be changed or waived from time to time and (2) require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer of the Notes from the Holder requesting such transfer.

 

The Company, the Trustee, and any paying agent may deem and treat the registered Holder hereof as the absolute owner of this Note at the Holder’s address as it appears on the register books of the Company as kept by the Company or duly authorized agent of the Company (whether or not this Note shall be overdue), for the purpose of receiving payment of or on account hereof and for all other purposes, and neither the Company nor the Trustee nor any paying agent shall be affected by any notice to the contrary.  All payments made to or upon the order of such registered Holder shall, to the extent of the sum or sums paid, effectively satisfy and discharge liability for moneys payable on this Note.

 

No recourse under or upon any obligation, covenant or agreement contained in the Indenture or any indenture supplemental thereto or in any Note, or because of any indebtedness evidenced thereby, shall be had against any past, present or future organizer, member, officer, director or employee, as such, of the Company, either directly or through the Company, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or penalty or otherwise, all such personal liability of every such organizer, member, officer, director and employee, as such, being expressly waived and released by the acceptance hereof and as a condition of and as part of the consideration for the issuance of this Note.

 

  

-5-

  

 

Unless otherwise defined herein, terms used herein which are defined in the Indenture shall have the respective meanings assigned thereto in the Indenture.  To the extent that provisions contained in this Note are inconsistent with the provisions set forth in the Indenture, the provisions contained herein will apply.

 

This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to any principle of conflict of laws that would require or permit the application of the laws of any other jurisdiction.

 

This Note shall not be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by an authorized officer of the Company or its duly authorized agent under the Indenture referred to above.

 

In Witness Whereof, Prosper Funding LLC has caused this instrument to be signed by its duly authorized officers.

 

	
Dated:  

	 	  	  	  	  
	 	 	 	 	 	 
	  	  	
Prosper Funding LLC

	  
	 	 	 	 
	  	  	
By

	  	  
	  	  	 
Name:  

	 	  
	  	  	 
Title:  

	 	  

 

	
Certificate of Authentication

	 	  
	 	 	 
	Dated:	 	 	  
	 	 	 
	
This is one of the Securities of the series of Securities designated therein referred to in the within-mentioned Indenture.

	  
	 	 	 
	
Prosper Funding LLC, 

	 	  
	
as Authenticating Agent

	 	  
	 	 	 
	By	 	 	  
	 
Name:  

	 	 	 
	 
Title:

	 	 	 

 

 

-6-ex10_7.htm

Exhibit 10.7

ADMINISTRATION AGREEMENT

among

 

PROSPER FUNDING LLC,

as the Company and as the Licensor

 

PROSPER MARKETPLACE, INC.,

in its capacity as the Licensee

 

PROSPER MARKETPLACE, INC.,

in its separate capacity as the Corporate Administrator

 

PROSPER MARKETPLACE, INC.,

in its separate capacity as the Loan Platform Administrator

 

and

 

PROSPER MARKETPLACE, INC.,

in its separate capacity as the Loan and Note Servicer

 

 

Dated as of _________, 2012

 

  

  

  

TABLE OF CONTENTS

	  	  	  	
Page

	  	  	  	  
	
ARTICLE I

	
DEFINITIONS

	
1

	  	
1.1

	
Certain Defined Terms

	
1

	
ARTICLE II

	
LICENSE OF THE PROSPER SYSTEM

	
8

	  	
2.1

	
Grant of License

	
8

	  	
2.2

	
License Fee

	
8

	  	
2.3

	
Termination of License

	
8

	  	
2.4

	
Standard of Liability; Indemnification

	
9

	  	
2.5

	
Additional Transfer Agreements

	
10

	
ARTICLE III

	
AGREEMENTS OF THE CORPORATE ADMINISTRATOR

	
11

	  	
3.1

	
General Agreements of the Corporate Administrator

	
11

	  	
3.2

	
Corporate Administration Services

	
11

	  	
3.3

	
Corporate Administrator Books and Records

	
14

	  	
3.4

	
Corporate Administrator Advances

	
15

	  	
3.5

	
Fees and Reimbursement of the Corporate Administrator

	
15

	  	
3.6

	
Corporate Administrator’s Licenses

	
16

	  	
3.7

	
Corporate Administrator’s Power of Attorney

	
16

	  	
3.8

	
Indemnification by the Corporate Administrator

	
16

	  	
3.9

	
Termination of the Corporate Administrator

	
17

	  	
3.10

	
Transfer upon Termination

	
19

	
ARTICLE IV

	
AGREEMENTS OF THE LOAN PLATFORM ADMINISTRATOR

	
20

	  	
4.1

	
General Agreements of the Loan Platform Administrator

	
20

	  	
4.2

	
Platform Administration Services

	
21

	  	
4.3

	
Securities-Related Services by the Loan Platform Administrator

	
23

	  	
4.4

	
Posting and Funding of Borrower Loans

	
24

	  	
4.5

	
Prosper Ratings, Prosper Scores and Borrower Verification

	
25

	  	
4.6

	
Loan Platform Administrator Books and Records

	
25

	  	
4.7

	
Loan Platform Administrator Advances

	
26

	  	
4.8

	
Fees and Reimbursement of the Loan Platform Administrator

	
27

	  	
4.9

	
Loan Platform Administrator’s Licenses

	
27

	  	
4.10

	
Loan Platform Administrator’s Power of Attorney

	
28

  

-i-

  

TABLE OF CONTENTS

(continued)

	  	  	  	
Page

	  	  	  	  
	  	
4.11

	
Indemnification by the Loan Platform Administrator

	
28

	  	
4.12

	
Termination of the Loan Platform Administrator

	
29

	  	
4.13

	
Transfer upon Termination

	
31

	
ARTICLE V

	
AGREEMENTS OF THE LOAN AND NOTE SERVICER

	
32

	  	
5.1

	
General Agreements of the Loan and Note Servicer

	
32

	  	
5.2

	
General Services of the Loan and Note Servicer

	
32

	  	
5.3

	
Securities-Related Services by the Loan and Note Servicer

	
33

	  	
5.4

	
Servicing of Borrower Loans and Securities

	
34

	  	
5.5

	
Collection of Borrower Loan Payments

	
36

	  	
5.6

	
Delinquency Control

	
36

	  	
5.7

	
Loan and Note Servicer Reports; Additional Duties

	
37

	  	
5.8

	
Loan and Note Servicer Books and Records

	
38

	  	
5.9

	
Repurchase Obligation

	
39

	  	
5.10

	
Loan and Note Servicer Advances

	
39

	  	
5.11

	
Fees and Reimbursement of the Loan and Note Servicer

	
40

	  	
5.12

	
Loan and Note Servicer’s Licenses

	
41

	  	
5.13

	
Loan and Note Servicer’s Power of Attorney

	
41

	  	
5.14

	
Indemnification by the Loan and Note Servicer

	
41

	  	
5.15

	
Termination of the Loan and Note Servicer

	
42

	  	
5.16

	
Transfer upon Termination

	
44

	
ARTICLE VI

	
AGREEMENTS OF THE COMPANY

	
45

	  	
6.1

	
Documentation

	
45

	
ARTICLE VII

	
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND LICENSOR

	
45

	  	
7.1

	
Authority

	
45

	  	
7.2

	
Authorization, Enforceability and Execution

	
46

	  	
7.3

	
No Conflict

	
46

	  	
7.4

	
No Consent

	
46

	  	
7.5

	
No Litigation

	
46

	  	
7.6

	
The Borrower Loans and Securities

	
47

  

-ii-

  

TABLE OF CONTENTS

(continued)

	  	  	
Page

	  	  	  
	
ARTICLE VIII

	
REPRESENTATIONS AND WARRANTIES OF THE LICENSEE AND THE SERVICE PROVIDERS

	
47

	  	
8.1

	
Representations and Warranties of the Licensor

	
47

	  	
8.2

	
Representations and Warranties of Service Providers

	
49

	
ARTICLE IX

	
ANNUAL REPORTING

	
50

	  	
9.1

	
Service Providers’ Compliance Statement

	
50

	
ARTICLE X

	
MISCELLANEOUS

	
50

	  	
10.1

	
Independence of Parties

	
50

	  	
10.2

	
Assignment of Duties

	
51

	  	
10.3

	
Entire Agreement

	
51

	  	
10.4

	
Invalidity

	
51

	  	
10.5

	
Effect

	
51

	  	
10.6

	
Damage Limitation

	
51

	  	
10.7

	
Applicable Law; Jurisdiction; Waiver of Jury Trial

	
52

	  	
10.8

	
Notices

	
52

	  	
10.9

	
Waivers

	
52

	  	
10.10

	
Binding Effect

	
53

	  	
10.11

	
Headings and Section References

	
53

	  	
10.12

	
Exhibits

	
53

	  	
10.13

	
Counterparts

	
53

	  	
10.14

	
Confidentiality

	
53

	  	
10.15

	
Insurance

	
55

	  	
10.16

	
Disaster Recovery

	
55

	  	
10.17

	
Background Check

	
55

	  	
10.18

	
Separate Identity

	
56

	  	
10.19

	
No Third-party Beneficiary

	
56

	  	
10.20

	
Limited Recourse

	
56

	  	
10.21

	
No Petition

	
57

	  	
10.22

	
Informal Dispute Resolution

	
57

	  	
10.23

	
Taxes

	
57

	  	
10.24

	
Severability

	
57

  

-iii-

  

 

	
Exhibit A:

	
Borrower Registration Agreement

	
A-1

	
Exhibit B:

	
Lender Registration Agreement

	
B-1

	
Exhibit C:

	
Loan and Note Servicing Fee

	
C-1

  

-iv-

  

 

This ADMINISTRATION AGREEMENT is made as of ________, 2012 by and among PROSPER FUNDING LLC (the “Company” and the “Licensor”), PROSPER MARKETPLACE, INC., in its capacity as licensee  (the “Licensee”), PROSPER MARKETPLACE, INC., in its separate capacity as the corporate administrator  (the “Corporate Administrator”), PROSPER MARKETPLACE, INC., in its separate capacity as the Loan Platform Administrator (the “Loan Platform Administrator”) and PROSPER MARKETPLACE, INC., in its separate capacity as the Loan and Note Servicer (the “Loan and Note Servicer”).

 

RECITALS:

 

WHEREAS, the Licensor and the Licensee desire PMI to be able to access and operate the Prosper System (i) in connection with its performance of its duties hereunder in its capacities as Corporate Administrator, Loan Platform Administrator and Loan and Note Servicer, and (ii) to enable PMI to facilitate, as agent of the Bank, the origination and funding of Borrower Loans by the Bank; and

 

WHEREAS, the Company and the Corporate Administrator desire for the Corporate Administrator to provide certain ministerial and administrative services in the nature of “back office” support to the Company relating to the Company’s day-to-day operations, including, among other aspects thereof, maintenance of its corporate existence, legal compliance functions, cash management and account maintenance, keeping of books and records (including accounting records), and performance on behalf of the Company of certain reporting, ministerial and other duties under contracts and agreements of the Company, in each case subject to the terms and conditions hereof;

 

WHEREAS, the Company and the Loan Platform Administrator desire for the Loan Platform Administrator to provide certain services to the Company relating to the operation of the Prosper System, in each case subject to the terms and conditions hereof;

 

WHEREAS, the Company and the Loan and Note Servicer desire for the Loan and Note Servicer to provide certain services to the Company relating to the acquisition, maintenance, collection, liquidation and other servicing of Borrower Loans and the issuance and sale of Securities and the Company’s payment and performance of its other obligations in relation to such Securities, in each case subject to the terms and conditions hereof;

 

NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1           Certain Defined Terms.

 

Each term defined in this Section 1.1, when used in this Agreement, shall have the meaning set forth below.  Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Indenture (as defined below).

 

  

1

  

 

“Account Bank” means the Trustee or any other Eligible Bank at which the Company maintains the FBO Account.

 

“Account Bank City” means the city in which the Account Bank maintains the FBO Account (which, for the avoidance of doubt, on the Closing Date is San Francisco, California).

 

“Affiliate” means with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person.  For the purposes of this definition, “control” when used with respect to any specified Persons means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

“Agreement” means this Administration Agreement, including all exhibits hereto, as the same may be from time to time amended, restated or supplemented.

 

“Applicable Requirements” means, as of any time of reference, all of the following, as applicable: (i) all of the Corporate Administrator’s contractual obligations under this Agreement and each other Program Document, (ii) all federal, state and local legal and regulatory requirements (including statutes, rules, regulations and ordinances) binding upon the Corporate Administrator in relation to the administrative services it provides to the Company, (iii) all of the Loan Platform Administrator’s contractual obligations under this Agreement and each other Program Document, (iv) all federal, state and local legal and regulatory requirements (including statutes, rules, regulations and ordinances) binding upon the Loan Platform Administrator in relation to the Prosper System, (v) all of the Loan and Note Servicer’s contractual obligations under this Agreement and each other Program Document, and (vi) all federal, state and local legal and regulatory requirements (including statutes, rules, regulations and ordinances) binding upon the Loan and Note Servicer in relation to the Borrower Loans and the Securities.

 

“Asset Transfer Agreement” means that certain Asset Transfer Agreement dated as of _______, 2012, between PMI and PFL.

 

“Back-Up Administration Agreement” means the Amended and Restated Processing Agreement, dated as of the Closing Date, among the Company, Prosper Marketplace, Inc. and CSC Logic, Inc., in their respective capacities thereunder, as from time to time amended, restated or supplemented.

 

“Bank” means WebBank, a Utah-chartered industrial bank.

 

“Borrower” means, with respect to any Borrower Loan, the Borrower-Member obligated to make payments on such Borrower Loan.

 

“Borrower Loan Documents” means, with respect to any Borrower Loan, the Borrower Registration Agreement and the Loan Note executed by the applicable Borrower.

 

“Borrower Loan” means a direct loan originated through the Company’s platform on its website www.prosper.com or any successor website, with a borrower that is an individual. , or a direct loan that has otherwise been acquired or assumed by the Company (including pursuant to the Asset Transfer Agreement)

 

  

2

  

 

“Borrower-Member” means any Person who has executed a Borrower Registration Agreement with the Company or PMI.

 

“Borrower Registration Agreement” means an agreement in the form of Exhibit A hereto or in such other form as the Company and the Loan Platform Administrator may approve in writing.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which banking and savings and loan institutions in San Francisco, California or the Account Bank City are authorized or obligated by law or executive order to be closed.

 

“Closing Date” means ______, 2012.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company” means Prosper Funding LLC, a Delaware limited liability company.

 

“Corporate Administrator” means PMI, in its capacity as Corporate Administrator under this Agreement, or any successor or permitted assign in such capacity under this Agreement.

 

“Corporate Administration Fee” shall have the meaning assigned thereto in Section 3.5(a).

 

“Corporate Administration Standard” shall have the meaning assigned thereto in Section 3.1(c).

 

“Delinquent Loan” means any Borrower Loan on which one or more payments is past due.

 

“Eligible Bank” means any federal or State-chartered depository institution that (i) has combined capital and surplus of at least $200,000,000, and (ii) short-term debt ratings of at least (A) “P-2” by Moody’s (or, if such institution does not have a Moody’s short-term debt rating, a long-term debt rating from Moody’s of at least “A3”), and (B) “A-2” by S&P (or, if such institution does not have an S&P short-term debt rating, a long-term debt rating from S&P of at least “A-“).

 

“FBO Account” means the special purpose segregated, non-interest-bearing account established at the Account Bank in the Account Bank City and which shall never be considered a general deposit account and as such shall not be available for set off by the Account Bank or garnishment by creditors of the Account Bank, such account being entitled “Prosper Funding LLC for the benefit of its lender members” (Account No. _____).

 

“Fee Account” means the special purpose segregated, non-interest-bearing account established at an Eligible Bank and which shall never be considered a general deposit account and as such shall not be available for set off by the Eligible Bank or garnishment by creditors of the Eligible Bank, such account being entitled “Prosper Funding LLC Fee Account” (Account No. _____).

 

  

3

  

 

“Hosting Services Agreement” means the Amended and Restated Hosting Services Agreement, dated as of the Closing Date, among the Company, Prosper Marketplace, Inc. and FOLIOfn Investments, Inc., in their respective capacities thereunder, as from time to time amended, restated or supplemented.

 

“Indenture” means the Indenture, dated as of _____, 2012, between the Company and the Trustee, as from to time amended, restated or supplemented.

 

“Lender” means any Person who holds a Security (including, for the avoidance of doubt, Persons who have purchased Securities through the Prosper System or through the Note Trader Platform).

 

“Lender Registration Agreement” means an agreement in the form of Exhibit B hereto or in such other form as the Company and the Loan Platform Administrator may approve in writing.

 

“Lender-Member” means any Person who has executed a Lender Registration Agreement with the Company or PMI.

 

“License” shall have the meaning assigned thereto in Section 2.1(a).

 

“Licensee” means PMI, in its capacity as Licensee under this Agreement, or any successor or permitted assign in such capacity under this Agreement.

 

“License Agreement” means the Amended and Restated License Agreement, dated as of the Closing Date, among the Company, Prosper Marketplace, Inc. and FOLIOfn Investments, Inc., in their respective capacities thereunder, as from time to time amended, restated or supplemented.

 

“License Fee” shall have the meaning assigned thereto in Section 2.2.

 

“Licensor” means the Company, as owner and licensor of the property that is the subject of the license granted under Article II of this Agreement, or any successor or permitted assign in such capacity under this Agreement.

 

“Loan Account Program Agreement” means the Second Amended and Restated Loan Account Program Agreement, between the Bank and Prosper Marketplace, Inc., as from time to time amended, restated or supplemented.

 

“Loan and Note Servicer” means PMI, or any successor or permitted assign under the terms of this Agreement.

 

“Loan and Note Servicing Fee” shall have the meaning assigned thereto in Section 5.11(a).

 

  

4

  

 

“Loan Funding Date” means any date on which the principal amount of a Borrower Loan is funded.

 

“Loan Listing” means any loan requested by a Borrower-Member through the Prosper System.

 

“Loan Note” means the original executed promissory note evidencing the indebtedness of a Borrower under a Borrower Loan (it being understood that each Loan Note will be executed electronically).

 

“Loan Rate” means the annual rate of interest borne by a Loan Note as set forth therein.

 

“Loan Sale Agreement” means the Second Amended and Restated Loan Sale Agreement, dated as of the Closing Date, among the Bank, the Company and Prosper Marketplace, Inc., as from time to time amended, restated or supplemented.

 

 “Servicing Standard” shall have the meaning assigned thereto in Section 5.1(c).

 

“Member” means any Borrower-Member or Lender-Member.

 

“Moody’s” means Moody’s Investors Service, Inc., or any successor thereto.

 

“Note Trader Platform” means the Folio Investing Note Trader platform operated and maintained by FOLIOfn Investments, Inc. or any additional or successor system approved by the Company and the Loan and Note Servicer through which Lender-Members may resell their Securities.

 

“Party” means, individually, each of the Company, the Licensor, the Licensee, the Corporate Administrator, the Loan Platform Administrator or the Loan and Note Servicer.

 

“Parties” means, collectively, all of the Company, the Licensor, the Licensee, the Corporate Administrator, the Loan Platform Administrator and the Loan and Note Servicer.

 

“Performance Information” means information regarding the payment performance of any Borrower (or group of Borrowers) on any Borrower Loan (or group of Borrower Loans).

 

“Person” means an individual, partnership, corporation (including a statutory trust), joint stock company, limited liability company, trust, association, joint venture, governmental authority or any other entity of whatever nature.

 

“PFL” means Prosper Funding LLC, a Delaware limited liability company.

 

“Loan Platform Administrator” means PMI, or any successor or permitted assign under the terms of this Agreement.

 

“Loan Platform Servicing Fee” shall have the meaning assigned thereto in Section 4.8(a).

 

“Platform Administration Standard” shall have the meaning assigned thereto in Section 4.1(c).

 

  

5

  

 

“PMI” means Prosper Marketplace, Inc., a Delaware corporation.

 

“PMI Indenture” means the Indenture, dated as of June 15, 2009, between PMI and the Trustee, as from to time amended, restated or supplemented.

 

“Privacy Policy” means the written privacy policies employed by the Company to protect the confidentiality of Member information and to comply with applicable privacy laws, both as in effect on the Closing Date and as from time to time amended.

 

“Program Documents” means this Agreement, the Back-Up Administration Agreement, the Indenture, the PMI Indenture, the Borrower Registration Agreements, the Loan Notes, the Lender Registration Agreements, the Hosting Services Agreement, the License Agreement, the Loan Sale Agreement, the Loan Account Program Agreement, the Services Agreement and any other agreements or instruments related to or arising from any of the foregoing or otherwise related to the Company’s operation of the Prosper System, purchase of Borrower Loans, or issuance, sale or payment of the Securities and/or the servicing of Borrower Loans.

 

“Prohibited Information” shall have the meaning assigned thereto in the Borrower Registration Agreements.

 

“Prospectus” means the prospectus included in the registration statement pursuant to which the Company has registered the Securities under the Securities Act.

 

“Prosper Account” means the bookkeeping account maintained by the Company for each Member pursuant to the Prosper System.

 

“Prosper Rating” means the proprietary credit rating assigned by the Loan Platform Administrator to each Loan Listing.

 

“Prosper System” means the person-to-person online credit platform developed by and for the Licensee prior to and as of the Closing Date, and transferred to the Company pursuant to the Asset Transfer Agreement, and currently owned by the Company (the “Current System”), that the Licensee will access and use pursuant to the License.  For purposes of Article II hereof and the License, “Prosper System” means and includes both the Current System and all improvements, enhancements, updates, error corrections, and other changes and additions to the Current System from and after the Closing Date (collectively, “Improvements”), regardless of whether such Improvements are conceived, developed and/or made by, for or on behalf of the Company or the Licensee.  The Company is and shall be the sole owner of all right, title and interest in all Improvements, subject to the rights of the Licensee to access and use the Improvements as part of the Prosper System pursuant to  the License.

 

“Prosper Website” means the Company’s website on which Borrower-Members may submit requests for Loans and Lender-Members may purchase Securities.

 

“Rating Procedures” means the proprietary rating procedures that the Loan Platform Administrator, on behalf of the Company, uses to determine Prosper Ratings for Loan Listings.

 

  

6

  

 

“Responsible Officer” means, as applicable, (i) any executive officer of the Corporate Administrator and any non-executive officer or employee of the Corporate Administrator regularly engaged in providing administrative services to the Company under this Agreement, (ii) any executive officer of the Loan Platform Administrator and any non-executive officer or employee of the Loan Platform Administrator regularly engaged in providing services to the Company under this Agreement, and (iii) any executive officer of the Loan and Note Servicer and any non-executive officer or employee of the Loan and Note Servicer regularly engaged in providing services to the Company under this Agreement.

 

“Rule 15Ga-1” means Rule 15Ga-1 under the Securities Exchange Act of 1934, as amended.

 

“S&P” means Standard and Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor thereto.

 

“Scheduled Termination Date” means May 31, 2023 or, if applicable, such later date as the Company, the Corporate Administrator, the Loan Platform Administrator and the Loan and Note Servicer shall agree upon in writing.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Security” or “Securities” means the special limited obligations of the Company referred to as Borrower Payment Dependent Notes to be issued in series and authenticated and delivered under the Indenture, and the special limited obligations of PMI referred to as Borrower Payment Dependent Notes issued in series and authenticated and delivered under the PMI Indenture that have been acquired or assumed by the Company (including pursuant to the Asset Transfer Agreement).

 

“Service Provider” means, individually, each of the Corporate Administrator, the Loan Platform Administrator or the Loan and Note Servicer.

 

“Service Provider” means, collectively, all of the Corporate Administrator, the Loan Platform Administrator and the Loan and Note Servicer.

 

“Services Agreement” means the Amended and Restated Services Agreement, dated as of the Closing Date, among the Company, Prosper Marketplace, Inc. and FOLIOfn Investments, Inc., in their respective capacities thereunder, as from time to time amended, restated or supplemented.

 

“Termination Date” means the date on which this Agreement terminates and shall be the earliest of (i) the Scheduled Termination Date, or (ii) (A) the date fixed for such termination pursuant to the unanimous written consent of the Company, the Licensor, the Licensee, the Corporate Administrator, the Loan Platform Administrator and the Loan and Note Servicer, (B) termination by the Licensor pursuant to Section 2.3(b) or (C) termination of any or all of Articles III, IV and V with respect to the relevant Service Provider or all Service Providers, as the case may be, pursuant to the termination provisions or Articles III, IV and V; provided that termination of only Article III, IV or V shall result in termination only of the provisions of such Article and the rights, duties and obligations of the relevant Service Provider appointed by the Company thereunder, and shall not result in termination of other Articles, Sections, terms or provisions of this Agreement or of the rights, duties or obligations of any other Service Provider.

 

  

7

  

 

“Trustee” means Well Fargo Bank, National Association, as Trustee under the Indenture and the PMI Indenture, or any successor thereto in such capacity.

 

ARTICLE II

 

LICENSE OF THE PROSPER SYSTEM

 

2.1           Grant of License.

 

(a)           Licensor hereby grants to Licensee a non-exclusive, non-transferable (except as contemplated herein), worldwide license to access and use the Prosper System, including, without limitation, all software, intellectual property and other property of the Licensor comprising the Prosper System, including any and all associated logos, trademarks and tradenames, (the “License”).  Licensee shall use the Prosper System exclusively (i) for and in the course of the fulfillment by Licensee of its duties as Corporate Administrator, Loan Platform Administrator and Loan and Note Servicer pursuant to Articles III, IV and V hereof for so long as such Articles of this Agreement remain in full force and effect and so long as Licensee continues timely to pay the License Fee, and (ii) for and in the course of its facilitation of Borrower Loan originations and fundings by the Bank for so long as the Licensee is contractually bound to facilitate such lending by the Bank and continues to pay the License Fee.  If a third party succeeds the Licensee as Corporate Administrator, Loan Platform Administrator or Loan and Note Servicer under this Agreement or pursuant to any other Agreement of Licensor following termination of Licensee in such capacity hereunder, then such third party shall also automatically be granted a license hereunder, in order to enable  such third party to fulfill its duties in such capacity under Articles III, IV or V hereof, as applicable, and thereafter such third party shall be deemed to be a Licensee for purposes of such provisions, and the License granted to the initial Licensee shall automatically be restricted in scope to the performance of its remaining duties and obligations hereunder.

 

(b)           The Licensee acknowledges that Licensor owns any and all tangible and intangible property and assets of whatever nature, including all patents, copyrights, trademarks, trade secrets and other proprietary rights comprising the Prosper System (as of the date hereof, such property and assets being those identified as transferred assets in the Asset Transfer Agreement) as well as any documentation relating to the Prosper System included in the Transferred Assets (as defined in the Asset Transfer Agreement).

 

2.2           License Fee.

 

The Licensee shall pay to Licensor from time to time the License Fee described in Exhibit C hereto (the “License Fee”).

 

  

8

  

 

2.3 Termination of License.

(a)           The License shall terminate for any Licensee (i) automatically on termination of its services under Articles III, IV or V hereof (except that it shall continue during any related transition period during which any of the services performed by such Licensee under Articles III, IV or V hereof are transferred to any third party specified by Licensor or the Licensor, as provided in Section 2.3(c)), or (ii) on the date of any earlier termination that occurs pursuant to Section 2.3(b).

 

(b)           The Licensor may by written notice to the Licensee terminate the License if (i) the Licensee assigns, or attempts to assign, the License to any other Person without the Licensor’s prior written consent, (ii) the Licensee ceases to operate the Prosper System or declines to make the Prosper System available to new registrants, or announces an intention to take any such action, in each case without the Licensor’s prior written consent, (iii) the Licensee operates the Prosper System in violation of any applicable laws and such violation (A) materially impairs the value of the Prosper System or materially reduces the availability of the Prosper System to existing or potential registrants, and (B) did not result from any breach by the Loan Platform Administrator of its obligations under this Agreement or (iv) the Licensee operates the Prosper System for any purpose other than those purposes contemplated in Articles II, III, IV or V hereof.

 

(c)           Licensor and the Licensee agree that, if the License terminates for any reason prior to the Scheduled Termination Date, the Licensee may nonetheless continue to operate the Prosper System in relation to any Borrower Loans or Securities that are then outstanding or, if the Licensor so directs, the Licensor, directly or through other agents, will assume the operation of the Prosper System in relation to such Borrower Loans and Securities or the License will be transferred to a new licensee selected by the Licensor, in each case in a manner that does not adversely affect the Borrowers under such Borrower Loans or the Holders of such Securities.

 

2.4           Standard of Liability; Indemnification.

 

(a)           Each Licensee agrees to indemnify, defend and hold the Licensor and its successors, assigns, officers, directors, employees and agents harmless from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel), joint or several (collectively, “License Damages”), directly or indirectly resulting from or arising out of (i) the failure of such Licensee to perform its duties in accordance with the terms of this Agreement, (ii) the material breach of any of such Licensee’s representations, warranties, covenants or agreements  contained in this Agreement including, but not limited to, confidentiality provisions, (iii) the infringement or misappropriation by such Licensee of any patent, copyright, trademark, servicemark, trade secret or other proprietary right of Licensor, (iv) the violation of any federal, state and local legal and regulatory requirements (including statutes, rules, regulations and ordinances) binding on such Licensee, (v) the inappropriate use of the Prosper System by such Licensee, (vi) the misuse, neglect, or lack of maintenance of the Prosper System by such Licensee, (vii) the addition, introduction or use of hardware or software that corrupts, damages, negatively interferes or otherwise negatively affect the Prosper System by such Licensee; provided, however, that such Licensee shall not be responsible for any License Damages resulting from or arising out of (i) the failure of the Licensor to perform its duties in accordance with the terms of this Agreement (unless such failure resulted from the actions or omissions of such Licensee), or (ii) the material breach of any of the Licensor’s representations, warranties, covenants or agreements contained in this Agreement.

 

  

9

  

 

(b)           Except as otherwise expressly provided herein, each Licensee shall not be under any obligation to appear in, prosecute or defend any legal action that does not relate to its duties in relation to the foregoing License of the Prosper System in accordance with this Agreement and which in its opinion may involve it in any expense or liability; provided, however, that any Licensee may, with the consent of the Licensor, which consent may be exercised by the Licensor in its sole and exclusive discretion, undertake any such action that it may deem necessary or desirable in respect of this Agreement and the rights and duties of the parties hereto.  In such event, or if a Licensee deems it necessary to defend any such action, such Licensee shall be entitled to reimbursement from the Licensor for its reasonable legal expenses and costs of such action.

 

(c)           Promptly upon receipt of notice of any claim, demand or assessment or the commencement of any suit, demand, action or proceeding in respect of which indemnity may be sought pursuant to Section 2.4, the Licensor will use its best efforts to notify the applicable Licensee in writing thereof in sufficient time for such Licensee to respond to such claim or answer or otherwise plead in such action.  Except to the extent that the applicable Licensee is prejudiced thereby, the omission of the Licensor to promptly notify such Licensee of any such claim or action shall not relieve such Licensee from any liability which it may have to the Licensor in connection therewith.  If any claim, demand or assessment shall be asserted or suit, action or proceeding commenced against the Licensor, the applicable Licensee will be entitled to participate therein, and to the extent it may wish to assume the defense, conduct or settlement thereof, with counsel reasonably satisfactory to the Licensor.  After notice from the applicable Licensee to the Licensor of its election to assume the defense, conduct, or settlement thereof, such Licensee will not be liable to the Licensor for any legal or other expenses consequently incurred by the Licensor in connection with the defense, conduct or settlement thereof.  The Licensor will cooperate with the applicable Licensee in connection with any such claim and make its personnel, books and records relevant to the claim available to such Licensee.  In the event the applicable Licensee does not wish to assume the defense, conduct or settlement of any claim, demand or assessment, the Licensor will not settle such claim, demand or assessment without the prior written consent of such Licensee, which consent shall not be unreasonably withheld.

 

2.5           Additional Transfer Agreements.

 

Each of the Licensor and the Licensee hereby acknowledges and agrees that it will negotiate in good faith and enter into one or more transfer agreements, if necessary, to document any contributions or transfers of additional property to the Licensor from the Licensee that may include, without limitation, any and all improvements, enhancements, updates, error corrections, and other changes and additions to the Prosper System from and after the Closing Date (regardless of whether such improvements, enhancements, updates, error corrections, and other changes and additions are conceived, developed and/or made by, for or on behalf of the Licensor or the Licensee), or any additional hardware, software or other property related to the Prosper System.  The Licensor and the Licensee hereby acknowledge and agree that any such agreement shall be substantially similar to the Asset Transfer Agreement.

 

  

10

  

 

ARTICLE III

 

AGREEMENTS OF THE CORPORATE ADMINISTRATOR

 

3.1           General Agreements of the Corporate Administrator.

 

(a)           Appointment of the Corporate Administrator.  The Company hereby appoints PMI as the initial Corporate Administrator, and PMI hereby accepts such appointment, to provide the ministerial and administrative services to the Company described in this Article III in accordance with the terms of this Agreement.

 

(b)           Authority of the Corporate Administrator.  The Corporate Administrator shall have full power and authority, acting alone or through agents (but subject to Section 10.2), to do or cause to be done any and all things in connection with such ministerial and administrative services that the Corporate Administrator may deem necessary or desirable, subject to and consistent with the terms of this Agreement and the Corporate Administration Standard, and any and all things that may or must otherwise be authorized by the Company.

 

(c)           Corporate Administration Standard.  The Corporate Administrator shall use commercially reasonable efforts to provide such services to the Company in accordance with industry standards customary for administrative services of the same general type and character as those to be provided hereunder, in each case (i) as long as PMI is the Corporate Administrator, in accordance with the provisions of the Company’s Limited Liability Company Agreement (in particular the sections governing the limitations on the Company’s activities), (ii) as long as PMI is the Corporate Administrator, in accordance with the provisions of the Unanimous Written Consent of the Board of Directors of Prosper Marketplace, Inc. dated [TBD], (iii) in accordance with the Applicable Requirements, and (iv) without regard to:

 

(A)           any relationship that the Corporate Administrator or any Affiliate of the Corporate Administrator may have with the Company; or

 

(B)           the Corporate Administrator’s right to receive compensation for its administrative services hereunder.

 

The standard set forth in the immediately preceding sentence shall be referred to herein as the “Corporate Administration Standard.”

 

3.2           Corporate Administration Services.

 

The Company and the Corporate Administrator agree that the duties of the Corporate Administrator under this Agreement shall include the following:

 

(a)            administering the Company’s day-to-day operations, including supervision of the payment of the Company’s related fees and expenses, in each case including the specific duties set forth below;

 

  

11

  

 

(b)           giving on the Company’s behalf such notices and communications as the Company may from time to time be required to give under this Agreement and the other Program Documents or that the Corporate Administrator, in accordance with the Applicable Requirements, deems it appropriate for the Company to give;

(c)            maintaining the general accounting records of the Company and preparing such monthly, quarterly and annual financial statements as may be necessary or appropriate (it being understood that the Corporate Administrator shall not have any responsibility for the auditing of such financial statements other than to provide the same to the Company’s independent accountants for certification by such accountants);

 

(d)           retaining on behalf of and for the account of the Company an accounting firm to audit the Company’s year-end financial statements;

 

(e)            (i) preparing, or arranging for the preparation of, such income, franchise or other tax returns of the Company as shall be required to be filed by applicable law, (ii) filing, or arranging for the filing of, any such required tax returns, (iii) causing to be paid (but only from Company funds available for such purpose) any taxes required to be paid by the Company under applicable law, and (iv) not knowingly causing the Company to engage in any activity that would cause the Company to be subject to income or franchise tax on a net income basis by any taxing jurisdiction outside of the United States;

 

(f)            retaining on behalf of and for the account of the Company outside counsel to provide on behalf of the Company such services as the Corporate Administrator from time to time deems appropriate;

 

(g)            reviewing and analyzing any agreements entered into by the Company and establishing, in consultation with the Company, operating procedures to enable the Company to comply with the terms of such agreements;

 

(h)           providing recordkeeping and maintenance, as required, to maintain the Company’s limited liability company existence;

 

(i)            preparing resolutions for consideration by the Company’s board of directors in accordance with the Company’s limited liability company agreement;

 

(j)            preparing and having executed and filed all documents necessary to qualify the Company to do business in any jurisdiction in which such qualification is necessary or appropriate in connection with the Company’s issuance of Securities, purchase of Borrower Loans or other activities under the Program Documents;

 

(k)           maintain copies of all material agreements, contracts and other documents of the Company;

 

(l)            in conjunction with the Company’s counsel, monitoring (A) the federal and State licensing requirements that apply or may apply to the Company, including lender licensing requirements, and (B) the Company’s compliance with applicable consumer protection laws including, without limitation, the Consumer Credit Protection Act, the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act and the Electronic Signatures in Global and National Commerce Act, and arranging for the Company to obtain such licenses, to make such disclosures, to file such reports, and otherwise to take or refrain from taking all such actions, as will, to the best of the Corporate Administrator’s knowledge, result in compliance with all such licensing requirements and laws;

 

  

12

  

 

(m)           receiving notices on the Company’s behalf to the extent that any Program Document designates the Corporate Administrator as the person to whom notices to the Company thereunder are to be directed;

 

(n)           notifying the Company promptly, and in any event not more than one Business Day after becoming aware of the institution thereof, of the institution of any action, suit or proceeding against, or regulatory investigation of, the Company;

 

(o)           establishing and maintaining all necessary bank accounts of the Company and manage the Company’s cash in accordance with the terms and provisions of all material contracts of the Company;

 

(p)           confirming that the Account Bank at all times remains an Eligible Bank; and if the Account Bank ceases to be an Eligible Bank, arranging for the transfer of the FBO Account and any funds therein to an Eligible Bank;

 

(q)           to the extent that a Responsible Officer of the Corporate Administrator has actual knowledge of any failure of a party to a Core Document to perform any of its obligations to the Company, notifying the Company, as soon as practicable, of such failure;

 

(r)            from time to time taking at the Company’s expense such actions as the Company may reasonably request, or as the Corporate Administrator deems appropriate under the Corporate Administration Standard, to enforce the Company’s rights under any Program Document or document related thereto;

 

(s)           arranging for the execution by the Company of any documents and instruments necessary or incidental to the Program Documents and arranging for the execution of amendments to and waivers of the Program Documents deliverable by the Company thereunder or in connection therewith; provided that the Corporate Administrator shall not execute on behalf of the Company any amendment to this Agreement or waiver hereunder;

 

(t)            at the direction of the Company, from time to time designating employees and agents of the Corporate Administrator to as act as attorneys-in-fact for the Company;

 

(u)           otherwise assisting the Company to the extent provided in this Agreement to enable the Company to perform its obligations and duties under and in connection with, and to comply with the terms of, each of the Program Documents;

 

  

13

  

 

 

(v) developing, planning and implementing marketing programs designed to increase traffic to Company websites, applications for Borrower Loans, Listings, fundings of Borrower Loans and Note issuances, whether in the nature of social media outreach, web-based advertising and search engine advertisements, email campaigns, direct mail campaigns, the production and publication of newsletters and blogs, participation in interviews, and participation in and presentations at conferences and through webcasts and webinars, including engagement of third party marketing and advertising companies or consultants, but in all cases in a manner that PMI determines is likely to minimize confusion in all markets about the legal separateness of PMI and the Company and PMI’s actions in these efforts being those of an agent of the Company and not as the owner or operator of the Prosper System or websites owned by the Company.

 

3.3           Corporate Administrator Books and Records.

 

(a)           The Corporate Administrator shall provide to the Company an audited financial statement not later than ninety (90) days after the close of each of the Corporate Administrator’s fiscal years.  The Corporate Administrator shall make its corporate administration personnel available during regular business hours to respond to reasonable inquiries from the Company and upon the Company’s request shall give the Company’s authorized representative(s) opportunity upon notice at any time during the Corporate Administrator’s normal business hours to examine the Corporate Administrator’s books and records relating to its services hereunder.  The Corporate Administrator will keep records in accordance with industry standards pertaining to the administrative services provided hereunder, and such records shall be the property of the Company and upon termination of this Agreement shall be delivered to the Company at the Company’s expense.

 

(b)           Without limiting the generality of Section 3.3(a), the Corporate Administrator shall permit any officer, employee or designated representative of the Company, as well as any governmental regulator having supervisory authority over the Company, at any reasonable time during regular business hours and upon reasonable advance notice by the Company, to conduct an audit and examination on the Corporate Administrator’s premises of the Corporate Administrator’s books and records and operating procedures including, but not limited to, the Corporate Administrator’s compliance with the terms, conditions, requirements, procedures, covenants, representations and warranties of this Agreement, with respect to the administrative services provided by the Corporate Administrator; provided, however, that any such examination or audit shall be conducted upon prior notice and during normal business hours and shall be conducted so as not to materially disrupt the Corporate Administrator’s business activities.  The Corporate Administrator shall make its officers, employees and/or designated representatives available to the Company for all such audits and examinations and shall cooperate with the Company in all such audits and examinations.  All such access, audits or examinations shall be conducted without charge to the Company.  For the purposes of this Agreement with respect to any such examination or audit, the regular business hours of the Corporate Administrator are Monday through Friday, 9:00 am to 5:00 pm Pacific Standard Time; provided, however, that any audit and examination of the Corporate Administrator’s books and records and operating procedures, and the Corporate Administrator’s compliance with the terms, conditions, requirements, procedures, covenants, representations and warranties of this Agreement, by the Company, any regulatory agency having supervisory authority over the Company or the Corporate Administrator or by any third party engaged by the Company shall in no way diminish, reduce, eliminate or nullify the Corporate Administrator’s liabilities or indemnification obligations or other obligations, responsibilities or duties under this Agreement.

 

  

14

  

 

3.4           Corporate Administrator Advances.

 

For as long as PMI is the Corporate Administrator, the Corporate Administrator may (but is not obligated to) advance from its own funds amounts due from the Company to third-party service providers in connection with the administration of the Company’s business; provided that (i) the Corporate Administrator reasonably expects the Company to repay such advances in the foreseeable future from the Company’s cash flow from operations and (ii) the Company is not insolvent at the time the Corporate Administrator makes any such advance.  Subject to Section 3.5, the Company shall reimburse the Corporate Administrator upon request for any amounts so paid by the Corporate Administrator but no such reimbursement shall be paid from any funds that, under the Indenture or the PMI Indenture, are allocated to the payment of Securities.

 

3.5           Fees and Reimbursement of the Corporate Administrator.

 

(a)           The Company shall pay to the Corporate Administrator from time to time the fee described in Exhibit C hereto (the “Corporate Administration Fee”).  The Company hereby authorizes the Corporate Administrator to deduct and withdraw from the Fee Account any Corporate Administrator Fees due to the Corporate Administrator.

 

(b)           In the event the Corporate Administrator is entitled under this Agreement to reimbursement for any expenses incurred by it under this Agreement, it shall send the Company a written request for such reimbursement reasonably documented by the Corporate Administrator in accordance with the Corporate Administration Standard.  The Company may request additional information if the same is reasonably required by the Company to determine the accuracy and validity of the reimbursement request.

 

(c)           If the Company in good faith disputes the Corporate Administrator’s right to reimbursement for any charge or the amount of any requested reimbursement, it shall notify the Corporate Administrator within ten (10) Business Days after receipt of the request for reimbursement.  Initial notification should be verbal, followed by written notification by such deadline, describing the basis of the dispute and the disputed amount if such dispute cannot be resolved immediately.  The Company shall pay the amounts due under this Agreement less the amount disputed, and the parties shall diligently and in good faith proceed to resolve such disputed amount.

 

(d)           The Corporate Administrator is authorized to pay to itself from the Fee Account, in the same manner as the Corporate Administration Fee (but only from funds not allocated to the payment of Securities), any reimbursement amount not disputed by the Company within ten (10) Business Days of the date the Corporate Administrator submits the related reimbursement request to the Company and any disputed amount that is resolved in the Corporate Administrator’s favor.  If the Company determines after such tenth Business Day that it has good cause to dispute any reimbursement amount submitted by the Corporate Administrator, it shall promptly so notify the Corporate Administrator and the parties shall diligently and in good faith proceed to resolve the disputed amount.  Any such disputed amount that has previously been paid by the Company and is resolved in the Company’s favor shall be promptly refunded to the Company by the Corporate Administrator.

 

  

15

  

 

3.6           Corporate Administrator’s Licenses.

 

The Corporate Administrator shall maintain at all times during the term of this Agreement all material licenses and approvals required by applicable regulatory agencies and governmental authorities, including all material licenses and approvals necessary in each state where the laws of such state require licensing or qualification in order for the Corporate Administrator to provide administrative services to the Company as contemplated in this Agreement, and in any event the Corporate Administrator shall remain in compliance with the laws and regulations of any such state to the extent necessary to ensure the valid conduct of the Company’s business.

 

3.7           Corporate Administrator’s Power of Attorney.

 

The Company shall furnish the Corporate Administrator with any reasonably required documents related to the administrative services provided hereunder as the Corporate Administrator shall reasonably request to enable the Corporate Administrator to carry out its administrative duties hereunder.  The Company shall execute any documentation furnished to it by the Corporate Administrator for recordation by the Corporate Administrator in the appropriate jurisdictions, as shall be necessary to effectuate the foregoing.

 

3.8           Indemnification by the Corporate Administrator.

 

(a)           The Corporate Administrator and any director, officer, employee or agent of the Corporate Administrator may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder, except to the extent the Corporate Administrator knows that such document is false, misleading, inaccurate or incomplete.

 

(b)           The Corporate Administrator agrees to indemnify, defend and hold the Company and its successors, assigns, officers, directors, employees and agents harmless from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel), joint or several (collectively, “Corporate Administrator Damages”), directly or indirectly resulting from or arising out of, (i) the failure of the Corporate Administrator to perform its duties in accordance with the terms of this Agreement, (ii) the material breach of any of the Corporate Administrator’s representations, warranties, covenants or agreements  contained in this Agreement including, but not limited to, confidentiality provisions, or (iii) infringement or misappropriation by the Corporate Administrator of any patent, copyright, trademark, servicemark, trade secret or other proprietary right of any other Person; provided, however, that the Corporate Administrator shall not be responsible for any Corporate Administrator Damages resulting from or arising out of (i) the failure of the Company to perform its duties in accordance with the terms of this Agreement (unless such failure resulted from the actions or omissions of the Corporate Administrator), (ii) the material breach of any of the Company’s representations, warranties, covenants or agreements contained in this Agreement, or (iii) compliance with any instructions of the Company to the extent that compliance with such instructions does not comply with Applicable Requirements.

 

  

16

  

 

(c)           Except as otherwise expressly provided herein, the Corporate Administrator shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its duties to provide administrative services in accordance with this Agreement and which in its opinion may involve it in any expense or liability; provided, however, that the Corporate Administrator may, with the consent of the Company, which consent may be exercised by the Company in its sole and exclusive discretion, undertake any such action that it may deem necessary or desirable in respect of this Agreement and the rights and duties of the parties hereto.  In such event, or if the Corporate Administrator deems it necessary to defend any such action, the Corporate Administrator shall be entitled to reimbursement from the Company for its reasonable legal expenses and costs of such action.

 

(d)           Promptly upon receipt of notice of any claim, demand or assessment or the commencement of any suit, demand, action or proceeding in respect of which indemnity may be sought pursuant to Section 3.8, the Company will use its best efforts to notify the Corporate Administrator in writing thereof in sufficient time for the Corporate Administrator to respond to such claim or answer or otherwise plead in such action.  Except to the extent that the Corporate Administrator is prejudiced thereby, the omission of the Company to promptly notify the Corporate Administrator of any such claim or action shall not relieve the Corporate Administrator from any liability which it may have to the Company in connection therewith.  If any claim, demand or assessment shall be asserted or suit, action or proceeding commenced against the Company, the Corporate Administrator will be entitled to participate therein, and to the extent it may wish to assume the defense, conduct or settlement thereof, with counsel reasonably satisfactory to the Company.  After notice from the Corporate Administrator to the Company of its election to assume the defense, conduct, or settlement thereof, the Corporate Administrator will not be liable to the Company for any legal or other expenses consequently incurred by the Company in connection with the defense, conduct or settlement thereof.  The Company will cooperate with the Corporate Administrator in connection with any such claim and make its personnel, books and records relevant to the claim available to the Corporate Administrator.  In the event the Corporate Administrator does not wish to assume the defense, conduct or settlement of any claim, demand or assessment, the Company will not settle such claim, demand or assessment without the prior written consent of the Corporate Administrator, which consent shall not be unreasonably withheld.

 

3.9           Termination of the Corporate Administrator.

 

(a)           This Article III shall be effective from the date hereof and shall extend until the Company or the Corporate Administrator terminates it pursuant to and in accordance with this Section 3.9.

 

(b)           In the event that the Corporate Administrator breaches any of its obligations under this Agreement in any material respect, the Company shall give prompt written notice to the Corporate Administrator.  If the Corporate Administrator breaches any of its obligations under this Agreement in any material respect and does not cure such breach within thirty (30) days from the date that the Corporate Administrator receives the Company’s notice of breach, the Company may terminate this Article III.

 

  

17

  

 

(c)           Upon one hundred eighty (180) calendar days’ notice to the Corporate Administrator, the Company may terminate this Article III without cause and at its sole option; provided, however, that the Company may not terminate this Article III pursuant to this Section 3.9(c) prior to the third anniversary of the effective date of the Agreement.

 

(d)           This Article III shall terminate automatically and immediately, without the need for a notice from the Company, (i) upon the entry by a court having jurisdiction over the Corporate Administrator of (A) a decree or order for relief in respect of the Corporate Administrator in an involuntary case or proceeding under any applicable delinquency, bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudicating the Corporate Administrator as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of or for the Corporate Administrator under any applicable law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Corporate Administrator or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order not stayed or dismissed and in effect for a period of more than 60 consecutive days, or (ii) the commencement by the Corporate Administrator of a voluntary case or proceeding under any applicable delinquency, bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated bankrupt or insolvent, or the consent by the Corporate Administrator to the entry of a decree or order for relief in respect of the Corporate Administrator in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Corporate Administrator, or the filing by the Corporate Administrator of a petition or answer or consent seeking reorganization or relief under any applicable law, or the consent by the Corporate Administrator to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of or for the Corporate Administrator or of any substantial part of the Corporate Administrator’s property, or the making by the Corporate Administrator of an assignment for the benefit of creditors, or the admission by the Corporate Administrator in writing of the Corporate Administrator’s inability to pay its debts generally as they become due, or the taking of corporate action by the Corporate Administrator in furtherance of any such action.

 

(e)            In the event that the Company materially breaches any of its obligations under this Agreement with respect to the Corporate Administrator, the Corporate Administrator shall give prompt written notice to the Company.  If the Company commits any material breach of its obligations under this Agreement with respect to the Corporate Administrator, and such breach is not cured by the Company within thirty (30) days from the date that the Company receives the Corporate Administrator’s notice of breach, the Corporate Administrator may terminate its obligations under this Article III.

 

(f)            Upon one hundred eighty (180) calendar days’ notice to the Company, the Corporate Administrator may terminate its obligations under this Article III without cause and at its sole option; provided, however, that no such termination by the Corporate Administrator shall be effective unless a successor service provider acceptable to the Company has accepted appointment on terms acceptable to the Company.

 

  

18

  

 

(g)           This Article III shall terminate automatically and immediately, without the need for a notice from the Corporate Administrator, (i) upon the entry by a court having jurisdiction over the Company of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable delinquency, bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudicating the Company as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of or for the Company under any applicable law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order not stayed or dismissed and in effect for a period of more than 60 consecutive days, or (ii) the commencement by the Company of a voluntary case or proceeding under any applicable delinquency, bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated bankrupt or insolvent, or the consent by the Company to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable law, or the consent by the Company to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of or for the Company or of any substantial part of the Company’s property, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing of the Company’s inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action.

 

3.10          Transfer upon Termination.

 

(a)           The Corporate Administrator agrees in connection with any termination of its obligations under this Article III to transfer the administrative services to the Company or a successor service provider designated by the Company as soon as reasonably practicable.  Until such time of transfer, the services and obligations of the Corporate Administrator and the Corporate Administrator’s obligations to provide termination assistance shall continue in full force and effect, provided that Company shall use good faith, commercially reasonable efforts to cause the transfer of services and obligations as promptly as possible, and shall pay all fees, compensation or other amounts due under this Article III, and otherwise perform all of its obligations under this Article III, during such period.  Upon termination of the Corporate Administrator’s services and obligations under this Article III, the Corporate Administrator shall prepare, execute and deliver to the successor entity designated by the Company any and all Borrower Loan Documents and other instruments in its possession with respect to the Borrower Loans, place in such successor’s possession all of the documents, information and records relating to the Company that are in its possession, and, in a timely manner, do or cause to be done all other acts or things necessary or appropriate to effect the purposes of such notice of termination, (i) at the Corporate Administrator’s sole cost and expense if the termination is pursuant to Sections 3.9(b), (d) or (f), or (ii) at the Company’s sole cost and expense if the termination is for any other reason.  Upon any transfer of services upon the termination of the Corporate Administrator’s obligations under this Article III, the Company and the Corporate Administrator shall cooperatively send all transfer of services notices from the transferor service provider required by the Applicable Requirements to the Borrowers entitled to said notice.  Notwithstanding anything in this Agreement to the contrary, no termination fees shall be payable by any party upon any termination of this Agreement.

 

  

19

  

 

(b)           In connection with any termination or transfer, on the services transfer date, the Company shall reimburse the terminated or terminating Corporate Administrator for all related expenses subject to recovery or reimbursement hereunder, as well as any related unpaid fees, net of any amounts owed to the Company by the Corporate Administrator pursuant to this Article III.

 

(c)           The indemnification of the Corporate Administrator set forth in this Article III and the representations and warranties of the parties set forth in this Agreement, and any obligations of the parties in this Agreement that by their terms survive termination, shall survive the termination or assignment of this Article III.

 

ARTICLE IV

 

AGREEMENTS OF THE LOAN PLATFORM ADMINISTRATOR

 

4.1           General Agreements of the Loan Platform Administrator.

 

(a)           Appointment of the Loan Platform Administrator.  The Company hereby appoints PMI as the initial Loan Platform Administrator, and PMI hereby accepts such appointment, to manage the Prosper System on the Company’s behalf and otherwise provide services to the Company in accordance with the terms of this Agreement.

 

(b)           Authority of the Loan Platform Administrator.  The Loan Platform Administrator shall have full power and authority, acting alone or through agents (but subject to Section 10.2), to do or cause to be done any and all things in connection with such management which the Loan Platform Administrator may deem necessary or desirable, subject to and consistent with the terms of this Agreement and the Platform Administration Standard, and any and all things that may or must otherwise be authorized by the Company.

 

(c)            Platform Administration Standard.  The Loan Platform Administrator shall use commercially reasonable efforts to manage the Prosper System in accordance with industry standards customary for online credit platforms of the same general type and character as the Prosper System, in each case (i) as long as PMI is the Loan Platform Administrator, in accordance with the provisions of the Company’s Limited Liability Company Agreement (in particular the sections governing the limitations on the Company’s activities), (ii) as long as PMI is the Loan Platform Administrator, in accordance with the provisions of the Unanimous Written Consent of the Board of Directors of Prosper Marketplace, Inc. dated [TBD], (iii) in accordance with the Applicable Requirements, and (iv) without regard to:

 

  

20

  

 

(A)           any relationship that the Loan Platform Administrator or any Affiliate of the Loan Platform Administrator may have with the Company; or

 

(B)           the Loan Platform Administrator’s right to receive compensation for its services hereunder.

 

The standard set forth in the immediately preceding sentence shall be referred to herein as the “Platform Administration Standard.”

 

4.2           Platform Administration Services.

 

The Company and the Loan Platform Administrator agree that the duties of the Loan Platform Administrator under this Agreement shall include the following:

 

(a)            managing, maintaining and operating the Prosper System on the Company’s behalf;

 

(b)            auditing and supervising the operation of, and the input, generation and storage of data and information into, the Prosper System;

 

(c)            inputting all data and information into the Prosper System with respect to the Borrowers, the Borrower Loans, the Borrower Loan Documents;

 

(d)           supervising the maintenance of the hardware and software that comprise the Prosper System;

 

(e)            causing the periodic back-up of the Prosper System and the information contained therein;

 

(f)            supervising the issuance, sale and timely payment of the Securities;

 

(g)           assisting with the purchase by the Company of Borrower Loans;

 

(h)           supervising the maintenance, operation and periodic updating with new content and information of the Prosper Website;

 

(i)             paying, or causing the payment of, the Company’s related fees and expenses (with the Company’s own funds);

 

(j)            preparing and delivering on the Company’s behalf such certifications, communications, notices, reports and other documents as the Company may from time to time be required to give under this Agreement and the other Program Documents or that the Loan Platform Administrator, in accordance with the Applicable Requirements, deems it appropriate for the Company to give;

 

  

21

  

 

(k)            in conjunction with the Company’s counsel, (i) confirming that the Lender-Members will not, solely by reason of their purchase of Securities through the Prosper System, become subject to lender licensing requirements or other licensing requirements in any State in which Securities are offered for sale, (ii) undertaking periodic reviews of the federal, state and local legal and regulatory requirements (including statutes, rules, regulations and ordinances) binding upon the Company to identify any changes thereof and (iii) prepare, draft and implement changes in the Company’s policies and procedures to reflects changes in applicable laws and regulations or to improve the Company’s business operations;

 

(l)             receiving audit results, certifications, notices, reports and other documents on the Company’s behalf to the extent that any Program Document designates the Loan Platform Administrator as the person to whom notices to the Company thereunder are to be directed, and (i) forwarding such audit results, certifications, notices, reports and other documents to the relevant employees, agents, independent contractors or third parties that perform work on behalf of the Company and (ii) update the Prosper System and the Prosper Website, as appropriate, based on the information contained in such audit results, certifications, notices, reports and other documents;

 

(m)           monitoring the disclosures concerning the Company made on the Prosper Website and confirming on the Company’s behalf that all such disclosures are accurate and complete in all material respects; and further confirming, on a continuing basis, that the Prosper System is so structured and operated that (i) Borrower Loans cannot be obtained except by Borrower-Members, and (ii) Securities cannot be purchased except by Lender-Members;

 

(n)            monitoring the operating terms of the Note Trader Platform; advising the Company if it determines, at any time, that any changes to such terms are desirable; and confirming, on a continuing basis, that Securities cannot be purchased through the Note Trader Platform except by Lender-Members;

 

(o)           arranging for the Company to comply with the Privacy Policy in the operation of the Prosper System and, in conjunction with the Company’s counsel, updating the Privacy Policy as needed to conform to changes in applicable law;

 

(p)           to the extent that a Responsible Officer of the Loan Platform Administrator has actual knowledge of any failure of a party to a Program Document to perform any of its obligations to the Company, notifying the Company, as soon as practicable, of such failure;

 

(q)           from time to time, taking at the Company’s expense such actions as the Company may reasonably request, or as the Loan Platform Administrator deems appropriate under the Platform Administration Standard, to enforce the Company’s rights under any Program Document or document related thereto;

 

(r)            arranging for the execution by the Company of any documents and instruments necessary or incidental to the Program Documents and arranging for the execution of amendments to and waivers of the Program Documents deliverable by the Company thereunder or in connection therewith; provided that the Loan Platform Administrator shall not execute on behalf of the Company any amendment to this Agreement or waiver hereunder;

 

  

22

  

 

(s)            at the direction of the Company, from time to time designating employees and agents of the Loan Platform Administrator to as act as attorneys-in-fact for the Company; and

 

(t)            otherwise assisting the Company to the extent provided in this Agreement to enable the Company to perform its obligations and duties under and in connection with, and to comply with the terms of, each of the Program Documents.

 

4.3           Securities-Related Services by the Loan Platform Administrator.

 

The Loan Platform Administrator’s duties on behalf of the Company in connection with the Company’s issuance and sale of its Securities shall include:

 

(a)            from time to time facilitate the issuance by the Company of Securities pursuant to the Prosper System and the Indenture and applying the proceeds of each series of Securities to the Company’s purchase of the Corresponding Borrower Loan from the Bank pursuant to the Loan Sale Agreement;

 

(b)           confirming prior to the issuance of any series of Securities that each Lender-Member who is purchasing any such Security has sufficient available funds in the FBO Account to pay the purchase price of its Security;

 

(c)            supervising the preparation, and arranging for the filing, of all registration statements, prospectus supplements, consents or other documents that the Company is required to prepare or file in connection with its offering of Securities, including any required filings with the SEC (including, for the avoidance of doubt, any filings required under the Securities Act or Rule 15Ga-1) and State securities commissions;

 

(d)           supervising the preparation, and arranging for the filing, of all periodic reports or other documents that the Company is required to prepare or file under the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder or as otherwise required by any State securities commission;

 

(e)            without limitation to Section 4.3(d), in conjunction with the Company’s counsel confirming that, at the time any Securities are issued, (i) the Company’s registration statement with the SEC remains effective, and (ii) the Company’s registration statement in each State in which such Securities will be sold (other than any such State in which registration is not required) remains effective;

 

(f)            in conjunction with the Company’s counsel, (i) confirming that any eligibility criteria that apply under the laws of any State to Lender-Members located in such State are appropriately disclosed on the Prosper Website; and further confirming that each Lender-Member located in any such State is required to confirm, as a condition precedent to the purchase of any Securities, that it satisfies the applicable eligibility criteria, (ii) undertaking periodic reviews of the laws of any State that apply to Lender-Members to identify any changes thereof or any new public guidance or interpretation of such laws and (iii) prepare, draft and implement changes in the Company’s policies and procedures to reflect such changes in State laws, public guidance or interpretation;

 

  

23

  

 

(g)           holding, maintaining and preserving books and records with respect to the Company’s issuance and sale of the Securities;

 

(h)           interact with and supervise FOLIOfn with respect to the transfer of any Security that occurs in FOLIOfn’s Note Transfer Platform;

 

(i)            in conjunction with the Company’s counsel, (i) reviewing and confirming from time to time that any accessibility and suitability rules that FOLIOfn has put into effect for purposes of effecting transfer of Securities are up to date, (ii) undertaking periodic reviews of any federal, state and local laws and regulations that apply to Lender-Members that trade Securities in FOLIOfn’s note trading platform, and identify any changes thereof or any new public guidance or interpretation of such laws, (iii) prepare, draft and implement changes in the Company’s policies and procedures to reflect such changes in law, public guidance or interpretation and (iv) inform FOLIOfn of any such changes; and

 

(j)            supervising and auditing FOLIOfn’s performance under, and compliance with, the Program Documents to which FOLIOfn is a party, and informing the Company of any material breaches by FOLIOfn of its obligations under the Program Documents.

 

4.4           Posting and Funding of Borrower Loans.

 

The Loan Platform Administrator’s duties in connection with the posting of Loan Listings on the Prosper Website and the funding of Borrower Loans shall include the following:

 

(a)            confirming that each Borrower-Member for whom any Loan Listing is posted satisfies the eligibility criteria then applicable to borrowers under the Prosper System (including any required minimum credit score);

 

(b)           determining with reference to (i) the applicable Prosper Rating and (ii) such other factors as the Loan Platform Administrator deems appropriate in accordance with the Prosper System, the Loan Rate for each Loan Listing;

 

(c)           causing each Loan Listing to include the requested loan amount, the Loan Rate, the Prosper Score, the Prosper Rating, the lender’s yield percentage, whether partial funding will be permitted and such other relevant information as the Prosper System or the Prospectus may then require (including any disclosures required for the Company to satisfy its undertakings regarding the content of loan listings set forth in the Prospectus under the heading “About Prosper — Posted Borrower Loan Listings” (as such disclosure is from time to time amended or replaced));

 

(d)           except as the Company and the Loan Platform Administrator may otherwise agree in writing, confirming that each Borrower Loan has a term of between one month and seven years, is repayable in monthly installments and has the origination fee and interest rate that appropriately corresponds to the Prosper Rating assigned to the related Loan Listing;

 

  

24

  

 

(e)            monitoring the transfer from the Bank to the applicable Borrower on the Loan Funding Date of the principal amount of the relevant Borrower Loan, net of any origination fees or other fees and expenses then payable by the Borrower pursuant to the Borrower Registration Agreement;

 

(f)            on behalf of the Company as authorized agent for each Borrower under its Borrower Registration Agreement, executing a Loan Note on each Loan Funding Date to evidence the applicable Borrower Loan;

 

(g)           holding, maintaining and preserving records with respect to the Company’s purchase of Borrower Loans and all related funds transfers; and

 

(h)            assisting the Loan and Note Servicer to post on or make available through the Prosper Website certain information, as directed by the Loan and Note Servicer from time or as specified in this Agreement.

 

4.5           Prosper Ratings, Prosper Scores and Borrower Verification.

 

The Loan Platform Administrator shall assign a Prosper Rating and a Prosper Score to each Loan Listing in accordance with the Rating Procedures.  The Company acknowledges that the Loan Platform Administrator has disclosed to it the Rating Procedures that are in effect on the Closing Date.  The Loan Platform Administrator shall follow such Rating Procedures and not amend the Rating Procedures without the Company’s prior written consent; provided that (i) the Company shall not unreasonably withhold any such consent, and (ii) the Company’s consent shall not be required in connection with (A) technical changes to the Rating Procedures that correct any errors, inconsistencies or ambiguities therein (as determined by the Loan Platform Administrator in its sole good faith discretion), or (B) changes made to the Prosper Rating or Prosper Score of any Loan Listing to correct any error made in the Prosper Rating or Prosper Score originally assigned to it.  The Loan Platform Administrator agrees to monitor the performance of the Loans, relative to their respective Prosper Ratings and Prosper Scores, and from time to time to notify the Company if it determines that changes should be made to the Rating Procedures to improve the accuracy of the Prosper Ratings and Prosper Scores.  The Loan Platform Administrator further agrees that it will verify the identity of each Borrower and will verify income and employment information for a subset of Borrowers, and based on the results of its investigations will cancel certain Loan Listings, in each case in the manner, and to the extent, contemplated by the Company’s disclosures under the heading “About the Platform — Borrower Identity and Financial Information Verification” in the Prospectus (as such disclosure is from time to time amended or replaced).

 

4.6           Loan Platform Administrator Books and Records.

 

(a)            Except when the Contract Administrator and the Loan Platform Administrator are the same Person, the Loan Platform Administrator shall provide to the Company an audited financial statement not later than ninety (90) days after the close of each of the Loan Platform Administrator’s fiscal years.  The Loan Platform Administrator shall make its platform management personnel available during regular business hours to respond to reasonable inquiries from the Company and upon the Company’s request shall give the Company’s authorized representative(s) opportunity upon notice at any time during the Loan Platform Administrator’s normal business hours to examine the Loan Platform Administrator’s books and records relating to its services hereunder.  The Loan Platform Administrator will keep records in accordance with industry standards pertaining to each Borrower Loan and Security, and such records shall be the property of the Company and upon termination of this Agreement shall be delivered to the Company at the Company’s expense.

 

  

25

  

 

(b)           Without limiting the generality of Section 4.6(a), the Loan Platform Administrator shall permit any officer, employee or designated representative of the Company, as well as any governmental regulator having supervisory authority over the Company, at any reasonable time during regular business hours and upon reasonable advance notice by the Company, to conduct an audit and examination on the Loan Platform Administrator’s premises of the Loan Platform Administrator’s books and records and operating procedures including, but not limited to, the Loan Platform Administrator’s compliance with the terms, conditions, requirements, procedures, covenants, representations and warranties of this Agreement, with respect to the Borrower Loans, the Securities and the Loan Platform Administrator’s management of the Prosper System; provided, however, that any such examination or audit shall be conducted upon prior notice and during normal business hours and shall be conducted so as not to materially disrupt the Loan Platform Administrator’s business activities.  The Loan Platform Administrator shall make its officers, employees and/or designated representatives available to the Company for all such audits and examinations and shall cooperate with the Company in all such audits and examinations.  All such access, audits or examinations shall be conducted without charge to the Company.  For the purposes of this Agreement with respect to any such examination or audit, the regular business hours of the Loan Platform Administrator are Monday through Friday, 9:00 am to 5:00 pm Pacific Standard Time; provided, however, that any audit and examination of the Loan Platform Administrator’s books and records, operating procedures, practices, the Borrower Loan Documents, the Securities or the Prosper System, and the Loan Platform Administrator’s compliance with the terms, conditions, requirements, procedures, covenants, representations and warranties of this Agreement, by the Company, any regulatory agency having supervisory authority over the Company or the Loan Platform Administrator or by any third party engaged by the Company shall in no way diminish, reduce, eliminate or nullify the Loan Platform Administrator’s liabilities or indemnification obligations or other obligations, responsibilities, or duties under this Agreement.

 

4.7           Loan Platform Administrator Advances.

 

For as long as PMI is the Loan Platform Administrator, the Loan Platform Administrator may (but is not obligated to) advance from its own funds amounts due from the Company to third party service providers in connection with the administration of the Company’s business; provided that (i) the Loan Platform Administrator reasonably expects the Company to repay such advances in the foreseeable future from the Company’s cash flow from operations and (ii) the Company is not insolvent at the time the Loan Platform Administrator makes any such advance.  Subject to Section 4.8, the Company shall reimburse the Loan Platform Administrator upon request for any amounts so paid by the Loan Platform Administrator but no such reimbursement shall be paid from any funds that, under the Indenture  or the PMI Indenture, are allocated to the payment of Securities.

 

  

26

  

 

4.8           Fees and Reimbursement of the Loan Platform Administrator.

 

(a)           The Company shall pay to the Loan Platform Administrator from time to time the fee described in Exhibit C hereto (the “Loan Platform Servicing Fee”).  The Company hereby instructs the Corporate Administrator to deduct and withdraw from the Fee Account and pay to the Loan Platform Administrator any Loan Platform Servicing Fees due to the Loan Platform Administrator.

 

(b)           In the event the Loan Platform Administrator is entitled under this Agreement to reimbursement for any expenses incurred by it under this Agreement, it shall send the Company a written request for such reimbursement reasonably documented by the Loan Platform Administrator in accordance with the Platform Administration Standard.  The Company may request additional information if the same is reasonably required by the Company to determine the accuracy and validity of the reimbursement request.

 

(c)            If the Company in good faith disputes the Loan Platform Administrator’s right to reimbursement for any charge or the amount of any requested reimbursement, it shall notify the Loan Platform Administrator within ten (10) Business Days after receipt of the request for reimbursement.  Initial notification should be verbal, followed by written notification by such deadline, describing the basis of the dispute and the disputed amount if such dispute cannot be resolved immediately.  The Company shall pay the amounts due under this Agreement less the amount disputed, and the parties shall diligently and in good faith proceed to resolve such disputed amount.

 

(d)           The Company hereby instructs the Corporate Administrator to pay the Loan Platform Administrator from the Fee Account (but only from funds not allocated to the payment of Securities), any reimbursement amount not disputed by the Company within ten (10) Business Days of the date the Loan Platform Administrator submits the related reimbursement request to the Company and any disputed amount that is resolved in the Loan Platform Administrator’s favor.  If the Company determines after such tenth Business Day that it has good cause to dispute any reimbursement amount submitted by the Loan Platform Administrator, it shall promptly so notify the Loan Platform Administrator and the parties shall diligently and in good faith proceed to resolve the disputed amount.  Any such disputed amount that has previously been paid by the Company and is resolved in the Company’s favor shall be promptly refunded to the Company by the Loan Platform Administrator.

 

4.9           Loan Platform Administrator’s Licenses.

 

The Loan Platform Administrator shall maintain at all times during the term of this Agreement all material licenses and approvals required by applicable regulatory agencies and governmental authorities, including all material licenses and approvals necessary in each state where Members are located if the laws of such state require licensing or qualification in order to conduct the business of the Loan Platform Administrator with respect to the Borrower Loans, the Securities or the Members, including as contemplated in this Agreement, and in any event the Loan Platform Administrator shall remain in compliance with the laws and regulations of any such state to the extent necessary to ensure the enforceability of the Borrower Loans.

 

  

27

  

 

4.10         Loan Platform Administrator’s Power of Attorney.

 

The Company shall furnish the Loan Platform Administrator with any reasonably required documents related to the management of the Prosper System as the Loan Platform Administrator shall reasonably request to enable the Loan Platform Administrator to carry out its services and duties hereunder.  The Company shall execute any documentation furnished to it by the Loan Platform Administrator for recordation by the Loan Platform Administrator in the appropriate jurisdictions, as shall be necessary to effectuate the foregoing.

 

4.11         Indemnification by the Loan Platform Administrator.

 

(a)           The Loan Platform Administrator and any director, officer, employee or agent of the Loan Platform Administrator may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder, except to the extent the Loan Platform Administrator knows that such document is false, misleading, inaccurate or incomplete.

 

(b)           The Loan Platform Administrator agrees to indemnify, defend and hold the Company and its successors, assigns, officers, directors, employees and agents harmless from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel), joint or several (collectively, “Loan Platform Administrator Damages”), directly or indirectly resulting from or arising out of, (i) the failure of the Loan Platform Administrator to perform its duties in accordance with the terms of this Agreement, (ii) the material breach of any of the Loan Platform Administrator’s representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, confidentiality provisions, or (iii) infringement or misappropriation by the Loan Platform Administrator of any patent, copyright, trademark, servicemark, trade secret or other proprietary right of any other Person; provided, however, that the Loan Platform Administrator shall not be responsible for any Loan Platform Administrator Damages resulting from or arising out of (i) the failure of the Company to perform its duties in accordance with the terms of this Agreement (unless such failure resulted from the actions or omissions of the Loan Platform Administrator), (ii) the material breach of any of the Company’s representations, warranties, covenants or agreements contained in this Agreement, or (iii) compliance with any instructions of the Company to the extent that compliance with such instructions does not comply with Applicable Requirements.

 

(c)           Except as otherwise expressly provided herein, the Loan Platform Administrator shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its duties to provide platform administration services in accordance with this Agreement and which in its opinion may involve it in any expense or liability; provided, however, that the Loan Platform Administrator may, with the consent of the Company, which consent may be exercised by the Company in its sole and exclusive discretion, undertake any such action that it may deem necessary or desirable in respect of this Agreement and the rights and duties of the parties hereto.  In such event, or if the Loan Platform Administrator deems it necessary to defend any such action, the Loan Platform Administrator shall be entitled to reimbursement from the Company for its reasonable legal expenses and costs of such action.

 

  

28

  

 

(d)           Promptly upon receipt of notice of any claim, demand or assessment or the commencement of any suit, demand, action or proceeding in respect of which indemnity may be sought pursuant to Section 4.11, the Company will use its best efforts to notify the Loan Platform Administrator in writing thereof in sufficient time for the Loan Platform Administrator to respond to such claim or answer or otherwise plead in such action.  Except to the extent that the Loan Platform Administrator is prejudiced thereby, the omission of the Company to promptly notify the Loan Platform Administrator of any such claim or action shall not relieve the Loan Platform Administrator from any liability which it may have to the Company in connection therewith.  If any claim, demand or assessment shall be asserted or suit, action or proceeding commenced against the Company, the Loan Platform Administrator will be entitled to participate therein, and to the extent it may wish to assume the defense, conduct or settlement thereof, with counsel reasonably satisfactory to the Company.  After notice from the Loan Platform Administrator to the Company of its election to assume the defense, conduct, or settlement thereof, the Loan Platform Administrator will not be liable to the Company for any legal or other expenses consequently incurred by the Company in connection with the defense, conduct or settlement thereof.  The Company will cooperate with the Loan Platform Administrator in connection with any such claim and make its personnel, books and records relevant to the claim available to the Loan Platform Administrator.  In the event the Loan Platform Administrator does not wish to assume the defense, conduct or settlement of any claim, demand or assessment, the Company will not settle such claim, demand or assessment without the prior written consent of the Loan Platform Administrator, which consent shall not be unreasonably withheld.

 

4.12         Termination of the Loan Platform Administrator.

 

(a)           This Article IV shall be effective from the date hereof and shall extend until the Company or the Loan Platform Administrator terminates it pursuant to and in accordance with this Section 4.12.

 

(b)           In the event that the Loan Platform Administrator breaches any of its obligations under this Agreement in any material respect, the Company shall give prompt written notice to the Loan Platform Administrator.  If the Loan Platform Administrator breaches any of its obligations under this Agreement in any material respect and does not cure such breach within thirty (30) days from the date that the Loan Platform Administrator receives the Company’s notice of breach, the Company may terminate this Article IV.

 

(c)           Upon one hundred eighty (180) calendar days’ notice to the Loan Platform Administrator, the Company may terminate this Article IV without cause and at its sole option; provided, however, that the Company may not terminate this Article IV pursuant to this Section 4.12.(c) prior to the third anniversary of the effective date of the Agreement.

 

  

29

  

 

(d)           This Article IV shall terminate automatically and immediately, without the need for a notice from the Company, (i) upon the entry by a court having jurisdiction over the Loan Platform Administrator of (A) a decree or order for relief in respect of the Loan Platform Administrator in an involuntary case or proceeding under any applicable delinquency, bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudicating the Loan Platform Administrator as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of or for the Loan Platform Administrator under any applicable law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Loan Platform Administrator or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order not stayed or dismissed and in effect for a period of more than 60 consecutive days, or (ii) the commencement by the Loan Platform Administrator of a voluntary case or proceeding under any applicable delinquency, bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated bankrupt or insolvent, or the consent by the Loan Platform Administrator to the entry of a decree or order for relief in respect of the Loan Platform Administrator in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Loan Platform Administrator, or the filing by the Loan Platform Administrator of a petition or answer or consent seeking reorganization or relief under any applicable law, or the consent by the Loan Platform Administrator to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of or for the Loan Platform Administrator or of any substantial part of the Loan Platform Administrator’s property, or the making by the Loan Platform Administrator of an assignment for the benefit of creditors, or the admission by the Loan Platform Administrator in writing of the Loan Platform Administrator’s inability to pay its debts generally as they become due, or the taking of corporate action by the Loan Platform Administrator in furtherance of any such action.

 

(e)           In the event that the Company materially breaches any of its obligations under this Agreement with respect to the Loan Platform Administrator, the Loan Platform Administrator shall give prompt written notice to the Company.  If the Company commits any material breach of its obligations under this Agreement with respect to the Loan Platform Administrator, and such breach is not cured by the Company within thirty (30) days from the date that the Company receives the Loan Platform Administrator’s notice of breach, the Loan Platform Administrator may terminate its obligations under this Article IV.

 

(f)            Upon one hundred eighty (180) calendar days’ notice to the Company, the Loan Platform Administrator may terminate its obligations under this Article IV without cause and at its sole option; provided, however, that no such termination by the Loan Platform Administrator shall be effective unless a successor service provider acceptable to the Company has accepted appointment on terms acceptable to the Company.

 

(g) This Article IV shall terminate automatically and immediately, without the need for a notice from the Loan Platform Administrator, (i) upon the entry by a court having jurisdiction over the Company of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable delinquency, bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudicating the Company as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of or for the Company under any applicable law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order not stayed or dismissed and in effect for a period of more than 60 consecutive days, or (ii) the commencement by the Company of a voluntary case or proceeding under any applicable delinquency, bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated bankrupt or insolvent, or the consent by the Company to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable law, or the consent by the Company to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of or for the Company or of any substantial part of the Company’s property, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing of the Company’s inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action.

 

  

30

  

 

4.13         Transfer upon Termination.

 

(a)           The Loan Platform Administrator agrees in connection with any termination of its obligations under this Article IV to transfer the platform administration services to the Company or a successor service provider designated by the Company as soon as reasonably practicable.  Until such time of transfer, the services and obligations of the Loan Platform Administrator and the Loan Platform Administrator’s obligations to provide termination assistance shall continue in full force and effect, provided that Company shall use good faith, commercially reasonable efforts to cause the transfer of services and obligations as promptly as possible, and shall pay all fees, compensation or other amounts due under this Article IV, and otherwise perform all of its obligations under this Article IV, during such period.  Upon termination of the Loan Platform Administrator’s services and obligations under this Article IV, the Loan Platform Administrator shall prepare, execute and deliver to the successor entity designated by the Company any and all Borrower Loan Documents and other instruments in its possession with respect to the Borrower Loans, place in such successor’s possession all of the documents, information and records relating to the Company that are in its possession, and, in a timely manner, do or cause to be done all other acts or things necessary or appropriate to effect the purposes of such notice of termination, (i) at the Loan Platform Administrator’s sole cost and expense if the termination is pursuant to Sections 4.12(b), (d) or (f), or (ii) at the Company’s sole cost and expense if the termination is for any other reason.  Upon any transfer of services upon the termination of the Loan Platform Administrator’s obligations under this Article IV, the Company and the Loan Platform Administrator shall cooperatively send all transfer of services notices from the transferor service provider required by the Applicable Requirements to the Borrowers entitled to said notice.  Notwithstanding anything in this Agreement to the contrary, no termination fees shall be payable by any party upon any termination of this Agreement.

 

(b)           In connection with any termination or transfer, on the services transfer date, the Company shall reimburse the terminated or terminating Loan Platform Administrator for all related expenses subject to recovery or reimbursement hereunder, as well as any related unpaid fees, net of any amounts owed to the Company by the Loan Platform Administrator pursuant to this Article IV.

 

  

31

  

 

(c)           The indemnification of the Loan Platform Administrator set forth in this Article IV and the representations and warranties of the parties set forth in this Agreement, and any obligations of the parties in this Agreement that by their terms survive termination, shall survive the termination or assignment of this Article IV.

 

ARTICLE V

 

AGREEMENTS OF THE LOAN AND NOTE SERVICER

 

5.1           General Agreements of the Loan and Note Servicer.

 

(a)           Appointment of the Loan and Note Servicer.  The Company hereby appoints PMI as the initial Loan and Note Servicer, and PMI hereby accepts such appointment, to service the Borrower Loans and Securities on the Company’s behalf and otherwise provide services to the Company in accordance with the terms of this Agreement.

 

(b)           Authority of the Loan and Note Servicer.  The Loan and Note Servicer shall have full power and authority, acting alone or through agents (but subject to Section 10.2), to do or cause to be done any and all things in connection with such servicing that the Loan and Note Servicer may deem necessary or desirable, subject to and consistent with the terms of this Agreement and the Servicing Standard, and any and all things that may or must otherwise be authorized by the Company.

 

(c)           Servicing Standard.  The Loan and Note Servicer shall use commercially reasonable efforts to service and collect the Borrower Loans and Securities in accordance with industry standards customary for loans and notes of the same general type and character as the Borrower Loans and Securities, in each case (i) as long as PMI is the Loan and Note Servicer, in accordance with the provisions of the Company’s Limited Liability Company Agreement (in particular the sections governing the limitations on the Company’s activities), (ii) as long as PMI is the Loan and Note Servicer, in accordance with the provisions of the Unanimous Written Consent of the Board of Directors of Prosper Marketplace, Inc. dated [TBD], (iii) in accordance with the Applicable Requirements, and (iv) without regard to the following:

 

(A)           any relationship that the Loan and Note Servicer or any Affiliate of the Loan and Note Servicer may have with the related Borrower or Lender-Member; or

 

(B)           the Loan and Note Servicer’s right to receive compensation for its services hereunder.

 

The standard set forth in the immediately preceding sentence shall be referred to herein as the “Servicing Standard.”

 

5.2           General Services of the Loan and Note Servicer.

 

  

32

  

 

The Company and the Loan and Note Servicer agree that the duties of the Loan and Note Servicer under this Agreement shall include the following:

 

(a)           servicing the Borrower Loans and Securities, including the specific duties set forth below;

 

(b)           giving on the Company’s behalf such notices and communications as the Company may from time to time be required to give under this Agreement and the other Program Documents (including, without limitation, the Borrower Loan Documents), or that the Loan and Note Servicer, in accordance with the Applicable Requirements, deems it appropriate for the Company to give;

 

(c)           receiving notices on the Company’s behalf to the extent that any Program Document (including, without limitation, the Borrower Loan Documents), designates the Loan and Note Servicer as the person to whom notices to the Company thereunder are to be directed;

 

(d)           to the extent that a Responsible Officer of the Loan and Note Servicer has actual knowledge of any failure of a party to a Program Document (including, without limitation, the Borrower Loan Documents), to perform any of its obligations to the Company, notifying the Company, as soon as practicable, of such failure;

 

(e)            from time to time taking at the Company’s expense such actions as the Company may reasonably request, or as the Loan and Note Servicer deems appropriate under the Servicing Standard, to enforce the Company’s rights under any Program Document (including, without limitation, the Borrower Loan Documents) or document related thereto;

 

(f)            arranging for the execution by the Company of any documents and instruments necessary or incidental to the Program Documents (including, without limitation, the Borrower Loan Documents), and arranging for the execution of amendments to and waivers of the Program Documents (including, without limitation, the Borrower Loan Documents), deliverable by the Company thereunder or in connection therewith; provided that the Loan and Note Servicer shall not execute on behalf of the Company any amendment to this Agreement or waiver hereunder;

 

(g)           at the direction of the Company, from time to time designating employees and agents of the Loan and Note Servicer to as act as attorneys-in-fact for the Company; and

 

(h)           otherwise assisting the Company to the extent provided in this Agreement to enable the Company to perform its obligations and duties under and in connection with, and to comply with the terms of, each of the Program Documents (including, without limitation, the Borrower Loan Documents).

 

5.3           Securities-Related Services by the Loan and Note Servicer.

 

The Loan and Note Servicer’s duties on behalf of the Company in connection with the Company’s payment of its Securities shall include the following:

 

  

33

  

 

(a)           interact with the Trustee and the holders of Securities on behalf of the Company, including, without limitation, providing notices, reports, instructions, updates regarding the collateral and any other documentation required or requested by the Trustee and the holders of Securities pursuant to and in accordance with the Indenture and the PMI Indenture;

 

(b)            arrange for and provide to the Trustee and the holders of the Securities, pursuant to and in accordance with the Indenture  and PMI Indenture, any annual certifications, confirmations, opinions, tests or other documents with respect to the compliance by the Company and the collateral pledged by the Company thereunder with the terms and provisions of the Indenture  and the PMI Indenture;

 

(c)           arrange and supervise any audits by the Trustee, the holders of Securities or their authorized representatives to certify compliance by the Company and the collateral pledged thereunder with the terms and conditions of the Indenture and the PMI Indenture;

 

(d)           create, draft and otherwise generate reports and notices regarding maturities of Borrower Loans, delinquencies of Member-Borrowers and collection efforts and related expenses with respect to such delinquent member-Borrowers;

 

(e)            retain, instruct and supervise collection agencies to effect collections on delinquent Member-Borrowers;

 

(f)            deduct fees, expense and other items permitted by the Indenture or the PMI Indenture from any payments or collections obtained from Member-Borrowers;

 

(g)           maintain an electronic register of all series of Securities executed and authenticated under the Indenture or the PMI Indenture and any transfer of Securities effected pursuant to the Indenture or the PMI Indenture ; and

 

(h)           holding, maintaining and preserving books and records with respect to the Company’s payment of the Securities.

 

5.4           Servicing of Borrower Loans and Securities.

 

Until the principal and interest of each Borrower Loan and Security is paid in full, the Loan and Note Servicer shall–

 

(a)           require all Borrowers to make all Borrower Loan Payments into the Deposit Account in accordance with the applicable Borrower Loan Documents.

 

(b)           apply all Borrower Loan Payments collected from the Borrowers in accordance with the Indenture  or the PMI Indenture, as applicable, and maintain permanent account records capable of producing, in chronological order, the date and amount of each payment made or due on any Borrower Loan and Security and each other transaction affecting the amounts due from or to the Borrowers and indicating the latest outstanding balance of each Borrower Loan and Security.

 

  

34

  

 

(c)            post on the Prosper Website (or cause the Loan Platform Administrator to post), for access by the applicable Lender-Member, information regarding the delinquency status of any Borrower Loan or Security that is 30, 60 and 90 days past due or that has been charged off or written off.

 

(d)           cause (or cause the Loan Platform Administrator to cause) the Prosper System to deny any new Borrower Loans to any Borrower that has previously had any of its Borrower Loans or Securities charged off or written off;

 

(e)            make available to each Member through the Prosper Website (or cause the Loan Platform Administrator to make available in the Prosper Website), specified information concerning his or her Prosper Account as contemplated by the Prosper System.

 

(f)            maintain safe custody of all Borrower Loan Documents and maintain in connection therewith, and in connection with all other books and records created or held by the Loan and Note Servicer in accordance with this Agreement, such back-up computer systems and files as shall conform to industry standards and as the Loan and Note Servicer shall otherwise deem prudent.

 

(g)           without limitation to Section 5.4(f), the Loan and Note Servicer acknowledges that the Company has pursuant to Section 6.12 of each of the Indenture and the PMI Indenture granted to the Trustee a security interest over the Borrower Loan Documentation and the Company's rights thereunder for the benefit of the Holders of the Securities.  Accordingly, the Loan and Note Servicer hereby agrees, for the benefit of both the Company and the Trustee, that the Loan and Note Servicer will (i) hold the Borrower Loan Documentation as custodian for the Trustee, (ii) clearly indicate in its records that such documentation is subject to a lien under the Indenture or the PMI Indenture, and (iii) except in accordance with Section ___ of the Indenture or Section ___ of the PMI Indenture, not assign any such documentation or the Company’s rights thereunder to any Person other than the Trustee without the Trustee's consent and participation.

 

(h)           be responsible for monitoring and reconciling the balances in the Members’ Prosper Accounts in accordance with the Applicable Requirements.  The Loan and Note Servicer shall attempt to promptly resolve any discrepancies; and, unless the discrepancy has resulted from the mistake or negligence of the Account Bank, the Trustee or other Person that is not an Affiliate of the Loan and Note Servicer, or has resulted from causes not within the Loan and Note Servicer’s control, shall be responsible for all expenses and consequences for failure to reconcile and resolve such discrepancies.  The Loan and Note Servicer shall prevent Lender-Members from withdrawing amounts from their Prosper Accounts to the extent any such withdrawal would reduce the balance below the aggregate amount of the Lender-Member’s pending bids on Borrower Loan listings.

 

  

35

  

 

(i)            upon payment of a Borrower Loan or Security in full and receipt from the Company of any documents or information necessary to effect such release, prepare and file any necessary release or satisfaction documents and continue servicing such Borrower Loan or Security pending final settlement.

5.5           Collection of Borrower Loan Payments.

 

(a)           The Loan and Note Servicer shall (i) make and use commercially reasonable efforts to service and collect all Borrower Loans, in good faith, accurately and in accordance with the Servicing Standard and (ii) use commercially reasonable efforts to maintain backup servicing arrangements providing for the Borrower Loans to be serviced and collected in good faith, accurately and in accordance with industry standards customary for servicing loans such as the Borrower Loans, in each case of the foregoing clauses (i) and (ii), all in accordance with the Company’s obligations set forth in [Sections 3.6(a) and (b)]1, respectively, of each of the Indenture  and the PMI Indenture.

 

(b)           The Loan and Note Servicer may, subject to the Servicing Standard, waive, modify or vary any non-material term of any Borrower Loan or consent to the postponement of strict compliance with any such term or in any manner grant a non-material indulgence to any Borrower.  Notwithstanding the foregoing, in the event that any Borrower Loan is in default, or in the judgment of the Loan and Note Servicer, such default is reasonably foreseeable, or the Loan and Note Servicer otherwise determines that such action would be consistent with the Servicing Standard, and provided that the Loan and Note Servicer has reasonably and prudently determined that such action will not be materially adverse to the interests of the relevant Lender-Members, the Loan and Note Servicer may also waive, modify or vary any term of any Borrower Loan (including material modifications that would change the Loan Rate, defer or forgive the payment of principal or interest, change the payment dates or change the place and manner of making payments on such Borrower Loan), accept payment from the related Borrower of an amount less than the principal balance in final satisfaction of such Borrower Loan or consent to the postponement of strict compliance with any term or otherwise grant any indulgence to any Borrower.  If the Loan and Note Servicer approves modifications to the terms of any Borrower Loan it shall promptly on behalf of the Company notify the corresponding Lender-Members by email of the material terms of such modifications and the effect such modifications will have on their Securities, including any changes to the payments they will receive under the Securities.  The Loan and Note Servicer shall not make material modifications to any Borrower Loan that would conflict with the terms of this Agreement unless authorized in writing by the Company to do so.

 

5.6           Delinquency Control.

 

(a)           Subject to the Servicing Standard, the Loan and Note Servicer shall be responsible for protecting the Company’s interest in the Borrower Loans by dealing effectively with Borrowers who are delinquent or in default.  The Loan and Note Servicer’s Delinquent Loan servicing program shall include an adequate accounting system that will immediately and positively indicate the existence of Delinquent Loans, a procedure that provides for sending delinquent notices and assessing late charges, and a procedure for the individual analysis of distressed or chronically delinquent Borrower Loans.

 

1 Cross-reference needs to be confirmed once Indenture is finalized.

 

  

36

  

 

(b)           The Loan and Note Servicer shall provide the Company with a month-end collection and delinquency report identifying any Delinquent Loans, and, from time to time as the need may arise, provide the Company with Borrower Loan service reports relating to any items of information that the Loan and Note Servicer is otherwise required to provide hereunder, or detailing any matters the Loan and Note Servicer believes should be brought to the special attention of the Company.

 

(c)           Without limitation to Section 5.5 or Section 5.6(a), but subject to the Servicing Standard, the Loan and Note Servicer shall have sole discretion to determine (i) the timing and content of communications sent to delinquent Borrowers, and (ii) when and whether to (A) refer a Delinquent Loan for collection and engage or retain a collection agency on behalf of the Company to collect on such Delinquent Loan (any such engagement or retainer to be at the Company’s expense), (B) initiate legal action to collect a Delinquent Loan (any such legal action to be at the Company’s expense), (C) sell a Delinquent Loan to a third party, (D) accelerate the maturity of a Delinquent Loan that is at least 30 days past due, and/or (E) write off a Delinquent Loan or any portion thereof.  The Loan and Note Servicer shall be authorized to select and engage on the Company’s behalf any collection agency to which any Delinquent Loan is referred and to determine the amount of its compensation (which shall not, however, exceed 40% of the amount of collections obtained, in addition to any legal fees incurred in the collection effort, except as the Company may otherwise approve in writing).  The Company acknowledges and agrees that the Loan and Note Servicer shall be deemed to have undertaken commercially reasonable servicing and collection efforts if it refers a Delinquent Loan to a collection agency with five Business Days after such Borrower Loan first became thirty days past due.  The Company further acknowledges and agrees that the Loan and Note Servicer will write off Borrower Loans that are 120 days past due (and may also write off Delinquent Loans that are less than 120 days (but at least 31 days) past due if the Loan and Note Servicer deems such action appropriate).

 

5.7           Loan and Note Servicer Reports; Additional Duties.

 

The Loan and Note Servicer shall–

 

(a)           furnish to the Company and the Trustee such reports concerning the Borrower Loans, the Securities and/or the Loan and Note Servicer’s performance of its duties hereunder as may be agreed between the parties or required by the Indenture or the PMI Indenture.  Each such report shall be in such format and delivered on such dates as may be agreed between the parties.

 

(b)           on a monthly basis: (i) investigate any claims of breaches under the Lender Registration Agreement that would result in the Company having to repurchase the Securities or indemnify the Lender-Members, (ii) determine whether such claims are true, (iii) determine whether the Company has an obligation to repurchase the Securities or indemnify the Lender-Members, (iv) determine, in conjunction with the Company, whether to repurchase the Securities or indemnify the Lender-Members and (v) effect such repurchase or indemnification.

 

  

37

  

 

(c)           represent the Company at, or provide to the Company all such assistance as the Company may reasonably request in connection with, any arbitration proceedings initiated by the Company or by Members pursuant to the Borrower Registration Agreements, the Securities or the Lender Registration Agreements and, when deemed appropriate by the Loan and Note Servicer in light of the Servicing Standard, initiate arbitration proceedings under any such agreement or Loan Note on the Company’s behalf.

 

(d)           perform such other customary duties and execute such other customary documents in connection with its duties under this Agreement as the Company from time to time reasonably may require.

 

5.8           Loan and Note Servicer Books and Records.

 

(a)           Except when the Contract Administrator and the Loan and Note Servicer are the same Person, the Loan and Note Servicer shall provide to the Company an audited financial statement not later than ninety (90) days after the close of each of the Loan and Note Servicer’s fiscal years.  The Loan and Note Servicer shall make its servicing personnel available during regular business hours to respond to reasonable inquiries from the Company and upon the Company’s request shall give the Company’s authorized representative(s) opportunity upon notice at any time during the Loan and Note Servicer’s normal business hours to examine the Loan and Note Servicer’s books and records relating to its services hereunder.  The Loan and Note Servicer will keep records in accordance with industry standards pertaining to each Borrower Loan and Security, and such records shall be the property of the Company and upon termination of this Agreement shall be delivered to the Company at the Company’s expense.

 

(b)           Without limiting the generality of Section 5.8(a), the Loan and Note Servicer shall permit any officer, employee or designated representative of the Company, as well as any governmental regulator having supervisory authority over the Company, at any reasonable time during regular business hours and upon reasonable advance notice by the Company, to conduct an audit and examination on the Loan and Note Servicer’s premises of the Loan and Note Servicer’s books and records, operating procedures, collection guidelines and Borrower Loan Documents including, but not limited to, the Loan and Note Servicer’s compliance with the terms, conditions, requirements, procedures, covenants, representations and warranties of this Agreement, with respect to the Borrower Loans and the Securities; provided, however, that any such examination or audit shall be conducted upon prior notice and during normal business hours and shall be conducted so as not to materially disrupt the Loan and Note Servicer’s business activities.  The Loan and Note Servicer shall make its officers, employees and/or designated representatives available to the Company for all such audits and examinations and shall cooperate with the Company in all such audits and examinations.  All such access, audits or examinations shall be conducted without charge to the Company.  For the purposes of this Agreement with respect to any such examination or audit, the regular business hours of the Loan and Note Servicer are Monday through Friday, 9:00 am to 5:00 pm Pacific Standard Time; provided, however, that any audit and examination of the Loan and Note Servicer’s books and records, operating procedures, collection guidelines and practices, the Borrower Loan Documents or the Securities, and the Loan and Note Servicer’s compliance with the terms, conditions, requirements, procedures, covenants, representations and warranties of this Agreement, by the Company, any regulatory agency having supervisory authority over the Company or the Loan and Note Servicer or by any third party engaged by the Company shall in no way diminish, reduce, eliminate or nullify the Loan and Note Servicer’s liabilities or indemnification obligations or other obligations, responsibilities or duties under this Agreement.

 

  

38

  

 

5.9           Repurchase Obligation.

 

The Loan and Note Servicer acknowledges that pursuant to Sections 8 and 9 of the Lender Registration Agreements the Company is required under certain circumstances to repurchase Securities from Lenders, to indemnify the Lenders against losses resulting from the breach by the Company of certain of its representations in the Lender Registration Agreements, or to cure such breaches of representations (any such circumstance, a “Repurchase Event”).  The Loan and Note Servicer further acknowledges the Company is relying upon the Loan and Note Servicer, through the services it provides under this Agreement, to prevent the occurrence of Repurchase Events.  Accordingly, the Loan and Note Servicer agrees that if any Repurchase Event occurs it will at its election either (i) promptly cure such Repurchase Event, or (ii) if (A) the Company cannot satisfy its obligations to the applicable Lenders by curing such Repurchase Event, (B) such Repurchase Event is not susceptible of cure (as determined by the Loan and Note Servicer in its sole discretion), or (C) the Loan and Note Servicer elects in its sole discretion not to attempt any such cure, provide the Company with all funds it requires to repurchase the applicable Securities from the applicable Lenders at the time, and for the purchase price, specified in the applicable Lender Registration Agreement or to pay any indemnities due to such Lenders (“Repurchase Funds”).  The Loan and Note Servicer will deposit in the FBO Account any Repurchase Funds due from it hereunder and promptly apply the same on the Company’s behalf to repurchase the applicable Securities or to pay the required indemnities to the applicable Holders (as applicable).  The Company will promptly transfer to the Loan and Note Servicer any Security repurchased by the Company with Repurchase Funds but otherwise has no obligation to repay any Repurchase Funds that the Loan and Note Servicer may provide.  Each of the Company and the Loan and Note Servicer shall promptly notify the other party of any Repurchase Event that comes to its attention; provided that (i) the Company shall not be required to provide notice to the Loan and Note Servicer of any Repurchase Event that it reasonably believes is already known to the Loan and Note Servicer, and (ii) any failure by the Company to provide such notice shall not limit or otherwise affect the Loan and Note Servicer’s repurchase obligations under this Section 5.9.  The Company acknowledges that (i) the Loan and Note Servicer has no obligation to purchase Securities, and has no obligation to provide the Company with Repurchase Funds, except as stated in this Section 5.9, and that (ii) the Loan and Note Servicer does not guarantee the payment of any Security in whole or in part.

 

5.10         Loan and Note Servicer Advances.

 

(a)           The Loan and Note Servicer shall not be obligated to make any advances at any time for principal or interest payments on any Borrower Loan.  For as long as PMI is the Loan and Note Servicer, the Loan and Note Servicer may (but is not obligated to) advance from its own funds amounts due from the Company to third party service providers (including, without limitation, collection agencies) in connection with the servicing and/or collection of Borrower Loans; provided that (i) the Loan and Note Servicer reasonably expects the Company to repay such advances in the foreseeable future from the Company’s cash flow from operations and (ii) the Company is not insolvent at the time the Loan and Note Servicer makes any such advance.  Subject to Section 5.11, the Company shall reimburse the Loan and Note Servicer upon request for any amounts so paid by the Loan and Note Servicer but no such reimbursement shall be paid from any funds that, under the Indenture or the PMI Indenture, are allocated to the payment of Securities.  This Section 5.10 shall not be construed to limit the Loan and Note Servicer’s obligations under Section 5.9.

 

  

39

  

 

(b)           Anything herein contained in this Agreement to the contrary notwithstanding, the representations, warranties and covenants of the Loan and Note Servicer in this Agreement shall not be construed as a warranty or guarantee by the Loan and Note Servicer as to future payments by any Borrower.

 

5.11         Fees and Reimbursement of the Loan and Note Servicer.

 

(a)           The Company shall pay to the Loan and Note Servicer from time to time the fee described in Exhibit C hereto (the “Loan and Note Servicing Fee”).  The Company hereby instructs the Corporate Administrator to deduct and withdraw from the Fee Account and pay to the Loan and Note Servicer any Loan and Note Servicing Fees due to the Loan and Note Servicer.

 

(b)           In the event the Loan and Note Servicer is entitled under this Agreement to reimbursement for any expenses incurred by it under this Agreement, it shall send the Company a written request for such reimbursement reasonably documented by the Loan and Note Servicer in accordance with the Servicing Standard.  The Company may request additional information if the same is reasonably required by the Company to determine the accuracy and validity of the reimbursement request.

 

(c)           If the Company in good faith disputes the Loan and Note Servicer’s right to reimbursement for any charge or the amount of any requested reimbursement, it shall notify the Loan and Note Servicer within ten (10) Business Days after receipt of the request for reimbursement.  Initial notification should be verbal, followed by written notification by such deadline, describing the basis of the dispute and the disputed amount if such dispute cannot be resolved immediately.  The Company shall pay the amounts due under this Agreement less the amount disputed, and the parties shall diligently and in good faith proceed to resolve such disputed amount.

 

(d)           The Company hereby instructs the Corporate Administrator to pay the Loan and Note Servicer from the Fee Account, in the same manner as the Loan and Note Servicing Fee (but only from funds not allocated to the payment of Securities), any reimbursement amount not disputed by the Company within ten (10) Business Days of the date the Loan and Note Servicer submits the related reimbursement request to the Company and any disputed amount that is resolved in the Loan and Note Servicer’s favor.  If the Company determines after such tenth Business Day that it has good cause to dispute any reimbursement amount submitted by the Loan and Note Servicer, it shall promptly so notify the Loan and Note Servicer and the parties shall diligently and in good faith proceed to resolve the disputed amount.  Any such disputed amount that has previously been paid by the Company and is resolved in the Company’s favor shall be promptly refunded to the Company by the Loan and Note Servicer.

 

  

40

  

 

5.12         Loan and Note Servicer’s Licenses.

 

The Loan and Note Servicer shall maintain at all times during the term of this Agreement all material licenses and approvals required by applicable regulatory agencies and governmental authorities, including all material licenses and approvals necessary in each state where Members are located if the laws of such state require licensing or qualification in order to conduct the business of the Loan and Note Servicer with respect to the Borrower Loans, the Securities or the Members, including as contemplated in this Agreement, and in any event the Loan and Note Servicer shall remain in compliance with the laws and regulations of any such state to the extent necessary to ensure the enforceability of the Borrower Loans.

 

5.13         Loan and Note Servicer’s Power of Attorney.

 

The Company shall furnish the Loan and Note Servicer with any reasonably required documents related to the servicing of the Borrower Loans as the Loan and Note Servicer shall reasonably request to enable the Loan and Note Servicer to carry out its servicing duties hereunder.  The Company shall execute any documentation furnished to it by the Loan and Note Servicer for recordation by the Loan and Note Servicer in the appropriate jurisdictions, as shall be necessary to effectuate the foregoing.

 

5.14         Indemnification by the Loan and Note Servicer.

 

(a)           The Loan and Note Servicer shall not be liable to the Company or its successors, assigns, officers, directors, employees or agents, for any actions or omissions to act in connection with the servicing of the Borrower Loans or Securities pursuant to this Agreement or for errors in judgment, except as expressly provided in Section 5.9 and in this Section 5.14.

 

(b)           The Loan and Note Servicer agrees to indemnify, defend and hold the Company and its successors, assigns, officers, directors, employees and agents harmless from and against any and all claims, Loan and Note Servicer Damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel), joint or several (collectively, “Loan and Note Servicer Damages”), directly or indirectly resulting from or arising out of, except as otherwise provided in this Agreement, the acts or omissions of any permitted sub-loan and note servicer or loan and note servicer engaged by the Loan and Note Servicer to service the Borrower Loans or Securities as provided in Section 10.2 (including, without limitation, its failure to observe its covenants contained in Section 5.5(a) of this Agreement); provided, however, that the Loan and Note Servicer shall not be responsible for any Loan and Note Servicer Damages resulting from or arising out of (i) the failure of the Company to perform its duties in accordance with the terms of this Agreement (unless such failure resulted from the actions or omissions of the Loan and Note Servicer), (ii) the material breach of any of the Company’s representations, warranties, covenants or agreements contained in this Agreement, (iii) servicing of any Borrower Loans or Securities after the termination of this Article V, (iv) the absence or unavailability of any books, records, data, files and other Borrower Loan Documents or other documents evidencing or relating to a Borrower Loan, in any form, including but not limited to any documents necessary to service the Borrower Loans in accordance with Applicable Requirements, other than to the extent resulting from the actions or omissions of the Loan and Note Servicer, (v) compliance with any instructions of the Company to the extent that compliance with such instructions does not comply with Applicable Requirements.

 

  

41

  

 

(c)           The Loan and Note Servicer and any director, officer, employee or agent of the Loan and Note Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder, except to the extent the Loan and Note Servicer knows that such document is false, misleading, inaccurate or incomplete.

 

(d)           Except as otherwise expressly provided herein, Loan and Note Servicer shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its duties to service the Borrower Loans and Securities in accordance with this Agreement and which in its opinion may involve it in any expense or liability; provided, however, that Loan and Note Servicer may, with the consent of the Company, which consent may be exercised by the Company in its sole and exclusive discretion, undertake any such action that it may deem necessary or desirable in respect of this Agreement and the rights and duties of the parties hereto.  In such event, or if Loan and Note Servicer deems it necessary to defend any such action, Loan and Note Servicer shall be entitled to reimbursement from the Company for its reasonable legal expenses and costs of such action.

 

(e)           Promptly upon receipt of notice of any claim, demand or assessment or the commencement of any suit, demand, action or proceeding in respect of which indemnity may be sought pursuant to this Section 5.14, the Company will use its best efforts to notify the Loan and Note Servicer in writing thereof in sufficient time for Loan and Note Servicer to respond to such claim or answer or otherwise plead in such action.  Except to the extent that the Loan and Note Servicer is prejudiced thereby, the omission of the Company to promptly notify Loan and Note Servicer of any such claim or action shall not relieve Loan and Note Servicer from any liability which it may have to the Company in connection therewith.  If any claim, demand or assessment shall be asserted or suit, action or proceeding commenced against the Company, the Loan and Note Servicer will be entitled to participate therein, and to the extent it may wish to assume the defense, conduct or settlement thereof, with counsel reasonably satisfactory to the Company.  After notice from the Loan and Note Servicer to the Company of its election to assume the defense, conduct, or settlement thereof, Loan and Note Servicer will not be liable to the Company for any legal or other expenses consequently incurred by the Company in connection with the defense, conduct or settlement thereof.  The Company will cooperate with the Loan and Note Servicer in connection with any such claim and make its personnel, books and records relevant to the claim available to Loan and Note Servicer.  In the event the Loan and Note Servicer does not wish to assume the defense, conduct or settlement of any claim, demand or assessment, the Company will not settle such claim, demand or assessment without the prior written consent of Loan and Note Servicer, which consent shall not be unreasonably withheld.

 

5.15         Termination of the Loan and Note Servicer.

 

(a)           This Article V shall be effective from the date hereof and shall extend until the Company or the Loan and Note Servicer terminates it pursuant to and in accordance with this Section 5.15.

 

  

42

  

 

(b)           In the event that the Loan and Note Servicer breaches any of its obligations under this Agreement in any material respect, the Company shall give prompt written notice to the Loan and Note Servicer.  If the Loan and Note Servicer breaches any of its obligations under this Agreement in any material respect and does not cure such breach within thirty (30) days from the date that the Loan and Note Servicer receives the Company’s notice of breach, the Company may terminate this Article V.

 

(c)           Upon one hundred eighty (180) calendar days’ notice to the Loan and Note Servicer, the Company may terminate this Article V without cause and at its sole option; provided, however, that the Company may not terminate this Article V pursuant to this Section 5.15(c) prior to the third anniversary of the effective date of the Agreement.

 

(d)           This Article V shall terminate automatically and immediately, without the need for a notice from the Company, (i) upon the entry by a court having jurisdiction over the Loan and Note Servicer of (A) a decree or order for relief in respect of the Loan and Note Servicer in an involuntary case or proceeding under any applicable delinquency, bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudicating the Loan and Note Servicer as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of or for the Loan and Note Servicer under any applicable law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Loan and Note Servicer or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order not stayed or dismissed and in effect for a period of more than 60 consecutive days, or (ii) the commencement by the Loan and Note Servicer of a voluntary case or proceeding under any applicable delinquency, bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated bankrupt or insolvent, or the consent by the Loan and Note Servicer to the entry of a decree or order for relief in respect of the Loan and Note Servicer in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Loan and Note Servicer, or the filing by the Loan and Note Servicer of a petition or answer or consent seeking reorganization or relief under any applicable law, or the consent by the Loan and Note Servicer to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of or for the Loan and Note Servicer or of any substantial part of the Loan and Note Servicer’s property, or the making by the Loan and Note Servicer of an assignment for the benefit of creditors, or the admission by the Loan and Note Servicer in writing of the Loan and Note Servicer’s inability to pay its debts generally as they become due, or the taking of corporate action by the Loan and Note Servicer in furtherance of any such action.

 

(e)           In the event that the Company materially breaches any of its obligations under this Agreement with respect to the Loan and Note Servicer, the Loan and Note Servicer shall give prompt written notice to the Company.  If the Company commits any material breach of its obligations under this Agreement with respect to the Loan and Note Servicer, and such breach is not cured by the Company within thirty (30) days from the date that the Company receives the Loan and Note Servicer’s notice of breach, the Loan and Note Servicer may terminate its obligations under this Article V.

 

  

43

  

 

(f)            Upon one hundred eighty (180) calendar days’ notice to the Company, the Loan and Note Servicer may terminate its obligations under this Article V without cause and at its sole option; provided, however, that no such termination by the Loan and Note Servicer shall be effective unless a successor service provider acceptable to the Company has accepted appointment on terms acceptable to the Company.

 

(g)           This Article V shall terminate automatically and immediately, without the need for a notice from the Loan and Note Servicer, (i) upon the entry by a court having jurisdiction over the Company of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable delinquency, bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudicating the Company as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of or for the Company under any applicable law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order not stayed or dismissed and in effect for a period of more than 60 consecutive days, or (ii) the commencement by the Company of a voluntary case or proceeding under any applicable delinquency, bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated bankrupt or insolvent, or the consent by the Company to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable law, or the consent by the Company to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of or for the Company or of any substantial part of the Company’s property, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing of the Company’s inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action.

 

5.16         Transfer upon Termination.

 

(a)           The Loan and Note Servicer agrees in connection with any termination of its obligations under this Article V to transfer the platform administration services to the Company or a successor service provider designated by the Company as soon as reasonably practicable.  Until such time of transfer, the services and obligations of the Loan and Note Servicer and the Loan and Note Servicer’s obligations to provide termination assistance shall continue in full force and effect, provided that Company shall use good faith, commercially reasonable efforts to cause the transfer of services and obligations as promptly as possible, and shall pay all fees, compensation or other amounts due under this Article V, and otherwise perform all of its obligations under this Article V, during such period.  Upon termination of the Loan and Note Servicer’s services and obligations under this Article V, the Loan and Note Servicer shall prepare, execute and deliver to the successor entity designated by the Company any and all Borrower Loan Documents and other instruments in its possession with respect to the Borrower Loans, place in such successor’s possession all of the documents, information and records relating to the Company that are in its possession, and, in a timely manner, do or cause to be done all other acts or things necessary or appropriate to effect the purposes of such notice of termination, (i) at the Loan and Note Servicer’s sole cost and expense if the termination is pursuant to Sections 5.15(b), (d) or (f), or (ii) at the Company’s sole cost and expense if the termination is for any other reason.  Upon any transfer of services upon the termination of the Loan and Note Servicer’s obligations under this Article V, the Company and the Loan and Note Servicer shall cooperatively send all transfer of services notices from the transferor service provider required by the Applicable Requirements to the Borrowers entitled to said notice.  Notwithstanding anything in this Agreement to the contrary, no termination fees shall be payable by any party upon any termination of this Agreement.

 

  

44

  

 

(b)           In connection with any termination or transfer, on the services transfer date, the Company shall reimburse the terminated or terminating Loan and Note Servicer for all related expenses subject to recovery or reimbursement hereunder, as well as any related unpaid fees, net of any amounts owed to the Company by the Loan and Note Servicer pursuant to this Article V.

 

(c)           The indemnification and repurchase obligations of the Loan and Note Servicer set forth in this Article V and the representations and warranties of the parties set forth in this Agreement, and any obligations of the parties in this Agreement that by their terms survive termination, shall survive the termination or assignment of this Article V.

 

ARTICLE VI

 

AGREEMENTS OF THE COMPANY

 

6.1           Documentation.

 

The Company shall provide the Loan and Note Servicer with all Borrower Loan Documents or records in its possession or that are executed by Borrowers through the Prosper System.  The Loan and Note Servicer shall maintain safe custody of each such Borrower Loan Document on behalf of the Trustee in accordance with Sections 5.4(f) and 5.4(g).

 

ARTICLE VII

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND LICENSOR

 

As of the date hereof and as of each Loan Funding Date, PFL, in its capacity as the Company and the Licensor warrants and represents to the Licensee and each Service Provider as follows:

 

7.1           Authority.

 

PFL (i) is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and (ii) subject to compliance by the Corporate Administrator with its obligations under Sections 3.2(j), 3.2(l) and subject to compliance by the Loan Platform Administrator with its obligations under Section 4.3(e), (A) has all material licenses or charters and approvals necessary to carry on its business as now being conducted, including all licenses, charters or approvals required by applicable regulatory agencies and governmental authorities, and (B) is licensed, qualified and in good standing in each state where Members are located if the laws of such state require licensing or qualification in order to conduct business of the type conducted by PFL as contemplated in this Agreement or PFL is otherwise exempt under applicable law from such licensing and qualification.

 

  

45

  

 

7.2           Authorization, Enforceability and Execution.

 

PFL has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Agreement and to perform its obligations hereunder. PFL has duly authorized, executed and delivered this Agreement.  This Agreement constitutes the legal, valid and binding obligation of PFL, enforceable against it in accordance with its terms, except as such enforcement may be limited by (i) any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally, or (ii) the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law).  The signatory executing this Agreement on behalf of PFL is duly authorized to execute and deliver such document.

 

7.3           No Conflict.

 

Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, nor compliance with its terms and conditions, will (i) violate, conflict with, result in the breach of, or constitute a default under, be prohibited by, or require any additional approval under any of the terms, conditions or provisions of PFL’s limited liability company agreement or other formative documents, if any, or of any indenture or other agreement to which PFL is now a party or by which it is bound, or of any order, judgment or decree of any court or governmental authority applicable to PFL, (ii) result in the violation of any law, rule, regulation, order, judgment or decree to which PFL or its property is subject, or impair the ability of any Service Provider to provide its services hereunder, including servicing the Borrower Loans or Securities or (iii) result in the creation or imposition of any lien, charge or encumbrance of any material nature upon any of the properties, Borrower Loans or Securities of PFL.

 

7.4           No Consent.

 

No consent, approval, authorization or order of any court or governmental agency, instrumentality or body is required for the execution, delivery and performance by or compliance by PFL with this Agreement or if required, such approval has been obtained prior to the date of execution hereof.

 

7.5           No Litigation.

 

Except as otherwise disclosed by PFL to the Licensor and each Service Provider in writing, there is no litigation, proceeding, claim, demand or governmental investigation pending or, to the knowledge of PFL, threatened, nor is there any order, injunction or decree outstanding against or relating to PFL, the Borrower Loans or the Securities that could result in any material liability to the Licensor or any Service Provider or materially impair the ability of PFL, the Licensor or any Service Provider to perform its obligations hereunder.  PFL is not in default in any material respect with respect to any order of any court, governmental authority or arbitration board or tribunal to which PFL is a party or is subject, and PFL is not in violation of any laws, ordinances, governmental rules or regulations to which it is subject, which default or violation might materially and adversely affect any of the Borrower Loans or Securities or result in material cost or liability to the Licensor or any Service Provider.

 

  

46

  

 

7.6           The Borrower Loans and Securities.

 

The Company hereby makes the following representations and warranties to the Loan and Note Servicer in relation to each Borrower Loan and Security to the best of the Company’s knowledge as of the related Loan Funding Date only:

 

(a)           the Company has, on or before the Loan Funding Date, delivered or caused to be delivered to the Loan and Note Servicer, all of the books, records, data, files and other Borrower Loan Documents relating to such Borrower Loan and Security, to the extent in the Company’s possession;

 

(b)           after giving effect to the Company’s purchase from the Bank of each Borrower Loan, the Company is the record holder of such Borrower Loan; and

 

(c)           upon issuance of a Security the information inputted in the electronic register with respect to the holder of such Security is correct, true and accurate.

 

ARTICLE VIII

 

REPRESENTATIONS AND WARRANTIES OF THE LICENSEE AND THE SERVICE PROVIDERS

 

8.1           Representations and Warranties of the Licensor.

 

As of the date hereof and as of each Loan Funding Date, the Licensor warrants and represents to the Company and each Service Provider as follows:

 

(a)           Authority.

 

The Licensor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all material licenses and approvals necessary to carry on its business as now being conducted, including all licenses and approvals required by applicable regulatory agencies and governmental authorities.

 

(b)           Authorization, Enforceability and Execution.

 

The Licensor has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Agreement, and to perform its obligations hereunder. The Licensor has duly authorized, executed and delivered this Agreement.  This Agreement constitutes the legal, valid and binding obligation of the Licensor, enforceable against it in accordance with its terms, except as such enforcement may be limited by (i) any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally, or (ii) the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law).  The signatory executing this Agreement on behalf of the Licensor is duly authorized to execute and deliver such document.

 

  

47

  

 

(c)           No Conflict.

 

Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, nor compliance with its terms and conditions, (i) violates, conflicts with, results in the breach of, or constitutes a default under, is prohibited by, or requires any additional approval under any of the terms, conditions or provisions of the Licensor’s certificate of incorporation or other formative documents or of any mortgage, indenture, deed of trust, loan or credit agreement or instrument to which the Licensor is now a party or by which it is bound, or of any order, judgment or decree of any court or governmental authority applicable to the Licensor, (ii) results in the violation of any law, rule, regulation, order, judgment or decree to which the Licensor or its property is subject, or impairs the ability of the Licensor to license the Prosper System to the Company or (iii) results in the creation or imposition of any lien, charge or encumbrance of any material nature upon any properties of the Licensor.

 

(d)           No Consent.

 

No consent, approval, authorization or order of any court or governmental agency, instrumentality or body is required for the execution, delivery and performance by or compliance by the Licensor with this Agreement or if required, such consent, approval, authorization or order has been obtained prior to the date of execution hereof.

 

(e)            No Litigation.

 

Except as otherwise disclosed by the Licensor in the Licensor’s periodic reports under the Exchange Act under the heading “Legal Proceedings”, there is no litigation, proceeding, claim, demand or governmental investigation pending or, to the knowledge of the Licensor, threatened, nor is there any order, injunction or decree outstanding against or relating to the Licensor, which, if decided against the Licensor, could have a material adverse effect upon the Prosper System or materially impair the ability of the Licensor to perform its obligations hereunder.  The Licensor is not in default in any material respect with respect to any order of any court, governmental authority or arbitration board or tribunal to which the Licensor is a party or is subject, and the Licensor is not in violation of any laws, ordinances, governmental rules or regulations to which it is subject, which default or violation might materially and adversely affect the Prosper System or result in material cost or liability to the Company.

 

(f)            License Warranty.

 

The Licensor warrants (a) that it is the sole and exclusive owner of the Prosper System with the requisite power and authority to license the Prosper System in accordance with this Agreement; and (b) that neither the Prosper System nor the Company’s operation of the Prosper System nor the Licensor’s performance of its obligations hereunder will infringe any patent, copyright, trademark, trade secret or other proprietary right of any third party.

 

  

48

  

 

8.2           Representations and Warranties of Service Providers.

 

As of the date hereof and as of each Loan Funding Date, each Service Provider warrants and represents, for itself, to the Company and the Licensor as follows:

 

(a)           Authority.

 

Such Service Provider is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all material licenses and approvals necessary to carry on its business as now being conducted, including all licenses and approvals required by applicable regulatory agencies and governmental authorities, and is licensed, qualified and in good standing in each state where Members are located if the laws of such state require licensing or qualification in order to conduct business of the type conducted by such Service Provider as contemplated in this Agreement.

 

(b)           Authorization, Enforceability and Execution.

 

Such Service Provider has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Agreement, and to perform its obligations hereunder. Such Service Provider has duly authorized, executed and delivered this Agreement.  This Agreement constitutes the legal, valid and binding obligation of such Service Provider, enforceable against it in accordance with its terms, except as such enforcement may be limited by (i) any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally, or (ii) the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law).  The signatory executing this Agreement on behalf of such Service Provider is duly authorized to execute and deliver such document.

 

(c)           No Conflict.

 

Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, nor compliance with its terms and conditions, (i) violates, conflicts with, results in the breach of, or constitutes a default under, is prohibited by, or requires any additional approval under any of the terms, conditions or provisions of such Service Provider’s certificate of incorporation or other formative documents or of any mortgage, indenture, deed of trust, loan or credit agreement or instrument to which such Service Provider is now a party or by which it is bound, or of any order, judgment or decree of any court or governmental authority applicable to such Service Provider, (ii) results in the violation of any law, rule, regulation, order, judgment or decree to which such Service Provider or its property is subject, or impairs the ability of such Service Provider to provide the administrative, management or servicing services agreed hereunder or service the Borrower Loans or the Securities, as applicable, or (iii) results in the creation or imposition of any lien, charge or encumbrance of any material nature upon any of the Prosper System, the Borrower Loans or Securities or any properties of such Service Provider.

 

(d)           No Consent.

 

No consent, approval, authorization or order of any court or governmental agency, instrumentality or body is required for the execution, delivery and performance by or compliance by such Service Provider with this Agreement or if required, such consent, approval, authorization or order has been obtained prior to the date of execution hereof.

 

  

49

  

 

(e)            No Litigation.

 

Except as otherwise disclosed by such Service Provider in such Service Provider’s periodic reports under the Exchange Act under the heading “Legal Proceedings”, there is no litigation, proceeding, claim, demand or governmental investigation pending or, to the knowledge of such Service Provider, threatened, nor is there any order, injunction or decree outstanding against or relating to such Service Provider, which, if decided against such Service Provider, could have a material adverse effect upon any of the Prosper System, Borrower Loans or Securities or materially impair the ability of such Service Provider to perform its obligations hereunder.  Such Service Provider is not in default in any material respect with respect to any order of any court, governmental authority or arbitration board or tribunal to which such Service Provider is a party or is subject, and such Service Provider is not in violation of any laws, ordinances, governmental rules or regulations to which it is subject, which default or violation might materially and adversely affect any of the Prosper System, Borrower Loans or Securities or result in material cost or liability to the Company.

 

ARTICLE IX

 

ANNUAL REPORTING

 

9.1           Service Providers’ Compliance Statement.

 

On or before March 31 of each calendar year, commencing in 2013, each Service Provider shall deliver to the Company one or more statements of compliance addressed to the Company and signed by an authorized officer of such Service Provider, to the effect that (i) a review of such Service Provider’s activities during the immediately preceding calendar year (or applicable portion thereof) and of its performance under this Agreement during such period has been made under such officer’s supervision, and (ii) to the best of such officer’s knowledge, based on such review, such Service Provider has fulfilled all of its obligations under this Agreement in all material respects throughout such calendar year (or applicable portion thereof) or, if there has been a failure to fulfill any such obligation in any material respect, specifically identifying each such failure known to such officer and the nature and the status thereof.

 

ARTICLE X

 

MISCELLANEOUS

 

10.1         Independence of Parties.

 

Each Service Provider shall have the status of, and act as, an independent contractor.  Nothing herein contained shall be construed to create a partnership or joint venture between the Company and any of the Service Providers.

 

  

50

  

 

10.2          Assignment of Duties.

 

A Service Provider’s duties and obligations under this Agreement may not be assigned by such Service Provider without the prior written consent of the Company; provided, however, that this Agreement shall be assumed by any entity into which such Service Provider may be merged or consolidated, or any entity succeeding to the business of such Service Provider.  This Section does not prohibit a Service Provider from engaging service providers to assist such Service Provider in the performance of specific functions related to its obligations under this Agreement or to perform component services required for its duties hereunder, including the servicing; provided, however, no Service Provider engage the services of another service provider to perform a substantial portion of the primary day-to-day servicing obligations of such Service Provider without the prior written consent of the Company, which consent may be exercised in the Company’s sole and exclusive discretion; and provided, further that the appointment of any other such service provider by a Service Provider shall be at the sole cost and expense of the Service Provider engaging the same, the provision of services thereby shall be subject to the terms and conditions of this Agreement, the Service Provider appointing the same shall be fully liable for the acts and omissions of every service provider appointed or engaged by it, and the repurchase and indemnification obligations of the appointing or engaging Service Provider shall apply with respect to the acts or omissions of said appointed or engaged service provider as if the relevant Service Provider had performed the relevant services directly.  This Section does not limit or impair a Service Provider’s right to terminate this Agreement in accordance with Articles III, IV or V, as applicable. of this Agreement.  The Company may not assign this Agreement without the prior written consent of the Licensor and the Service Providers; provided, however, that (i) the Parties acknowledge and agree that the Company may pledge its rights under this Agreement to the Trustee pursuant to the Indenture, and (ii) this Agreement may be assigned to any entity into which the Company may be merged or consolidated, or any entity succeeding to the business of the Company.

 

10.3         Entire Agreement.

 

This Agreement contains the entire agreement among the Parties hereto and cannot be modified in any respect except by an amendment in writing signed by all Parties; provided, that any amendment, modification or waiver of PMI’s obligations set forth in Section 5.5(a), PMI’s indemnification obligations for breaches of Section 5.5(a), or of the terms of Section 10.19 that would adversely affect the rights of the holders of the Securities thereunder, shall also require the written consent of the holders of at least a majority in aggregate Principal Amount of Outstanding Securities under each of the Indenture and the PMI Indenture of each series adversely affected by such proposed amendment, modification or waiver.

 

10.4         Invalidity.

 

The invalidity of any portion of this Agreement shall in no way affect the remaining portions hereof.

 

10.5         Effect.

 

Except as otherwise stated herein, this Agreement shall remain in effect until the Termination Date, unless sooner terminated pursuant to the terms hereof.

 

10.6         Damage Limitation.

 

IN NO EVENT WILL ANY PARTY BE LIABLE TO THE OTHERS FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND INCLUDING, BUT NOT LIMITED TO LOST PROFITS, LOSS OF GOODWILL OR BUSINESS INTERRUPTION, ARISING OUT OF THIS AGREEMENT.

 

  

51

  

 

10.7         Applicable Law; Jurisdiction; Waiver of Jury Trial.

 

(a)           THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES, OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

(b)           Each of the Parties  hereto  hereby  irrevocably  and  unconditionally  consents to submit to the non-exclusive jurisdiction of the courts of the State of New York and of the United States, in each case located in the County of New York for any litigation or proceeding arising out of or relating to this Agreement (and agrees not to commence any litigation or proceeding  relating thereto except in such courts), and further agrees that service of any process, summons, notice or document  by U.S. registered mail to its respective address set forth in Section 10.8 of this Agreement shall be effective service of process for any litigation or proceeding brought against it in any such court.  Each of the Parties hereto hereby irrevocably  and unconditionally  waives any objection  to the laying of venue of any litigation or proceeding arising out of this Agreement in the courts of the State of New York or the United States, in each case located in the County of New York, and hereby further irrevocably and unconditionally  waives and agrees not to plead or claim in any such court that any such litigation or proceeding  brought in any such court has been brought in an inconvenient forum.

 

(c)           WAIVER OF JURY TRIAL.     EACH PARTY HERETO HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM,  SETOFF,  DEMAND,  ACTION  OR CAUSE  OF ACTION  (i) ARISING OUT OF OR IN ANY WAY RELATED  TO THIS AGREEMENT, OR (ii) IN ANY WAY IN CONNECTION WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF THE PARTIES TO THIS AGREEMENT OR THE  EXERCISE  OF  ANY PARTY'S  RIGHTS AND REMEDIES UNDER  THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP  OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.

 

10.8         Notices.

 

Except as otherwise specifically provided in this Agreement, all notices, requests, demands and other communications which are required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given upon receipt or upon three (3) Business Days after the mailing thereof, sent by certified mail, return receipt requested, to the attention of the person named at the address set forth on the signature page hereof.

 

  

52

  

 

10.9         Waivers.

 

The Company, the Licensor and the Service Providers may, in writing:

(a)           waive compliance with any of the terms, conditions or covenants required to be complied with by any other Party hereunder; and

 

(b)           waive or modify performance of any of the obligations of any other Party hereunder.

 

The waiver by any Party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other subsequent breach.

 

10.10       Binding Effect.

 

This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their successors and assigns.

 

10.11       Headings and Section References.

 

Headings of the Articles and Sections in this Agreement are for reference purposes only and shall not be deemed to have any substantive effect.  All references in this Agreement to Sections or subsections are references to Sections or subsections of this Agreement unless otherwise specified.

 

10.12       Exhibits.

 

The exhibits to this Agreement are hereby incorporated and made a part hereof and are integral parts of this Agreement.

 

10.13       Counterparts.

 

This Agreement may be executed simultaneously in any number of counterparts.  Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument.

 

10.14       Confidentiality.

 

(a)           Confidential Information.  The Company, the Licensor and the Service Providers agree that “Confidential Information” means nonpublic information revealed by or through a Party (the “Disclosing Party”) to any other Party (a “Receiving Party”), including (i) information expressly or implicitly identified as originating with or belonging to third parties, or marked or disclosed as confidential in writing, (ii) information traditionally recognized as proprietary trade secrets or reasonably understood to be confidential, (iii) information about the Borrower Loans and the Members, including Member Information as defined below and (iv) all copies of all of the foregoing.  Except for Member Information (as defined below) where the obligations of confidentiality always apply except as stated in Section 10.14(d), Confidential Information shall not include information that: (1) is publicly available through no action of the Receiving Party and through no breach of any confidentiality obligation owed to the Disclosing Party; (2) has been in the Receiving Party’s possession without restrictions on disclosure prior to disclosure by the Disclosing Party; (3) has been developed by or become known to the Receiving Party without access to any Confidential Information of the Disclosing Party and without breach of a confidentiality obligation owed to the Disclosing Party and outside the scope of any agreement with the Disclosing Party; or (4) is obtained rightfully from third parties not bound by an obligation of confidentiality.

 

  

53

  

 

(b)           Member Information.  For the purposes of this Agreement, “Member Information” shall mean any non-public, personally identifiable information about a Member, including any combination of a Member’s name plus any of his or her social security number, driver’s license or other identification number or credit or debit card number, or other account number utilized by a Service Provider, revealed by or through a Disclosing Party to a Receiving Party.

 

(c)           Safeguards.  The Service Providers and the Company agree to maintain appropriate administrative, technical and physical safeguards for all Confidential Information (including, for the avoidance of doubt, all Member Information).  These safeguards shall (i) ensure the confidentiality of Confidential Information; (ii) protect against any anticipated threats or hazards to the security or integrity of Confidential Information; (iii) protect against unauthorized access to or use of Confidential Information that could result in substantial harm or inconvenience to the Disclosing Party or any Member; and (iv) provide for proper disposal of all Confidential Information to ensure that unauthorized Persons do not obtain access thereto.  The Company and the Service Providers agree to maintain all such safeguards in accordance with applicable laws, rules, regulation and guidance.

 

(d)           Certain Permitted Disclosures.  For the avoidance of doubt, nothing in Sections 10.14(a)–(c) shall prevent a Loan and Note Servicer Provider from (i) disclosing Performance Information to credit reporting agencies, (ii) posting (or permitting Members to post) information on the Prosper Website or the Note Trader Platform in connection with Loan Listings, Borrower Loans or Securities, or (iii) posting on the Prosper Website or disclosing in the Prospectus pooled Performance Information concerning the Borrower Loans; provided that each posting or disclosure made by a Service Provider pursuant to clause (ii) or (iii) shall comply with the Privacy Policy and no such posting or disclosure by a Service Provider shall include any Prohibited Information.  A Service Provider shall not be responsible to the Company for any Prohibited Information posted on the Prosper Website by a Borrower-Member without a Service Provider’s consent; provided that if a Service Provider becomes aware that any Borrower-Member has posted Prohibited Information, such Service Provider shall take in relation thereto such actions as such Service Provider then deems to be in the Company’s best interest (including, if such Service Provider so determines, cancellation of the relevant Loan Listing or deletion of the Prohibited Information).

 

  

54

  

 

(e)            Privacy Laws. In addition to the above, the Company and each Loan and Note Servicer Provider shall comply with all applicable federal and state laws, rules and regulations of regulatory agencies governing the privacy rights of each party hereto and the Members.

 

(f)            Breach. Each Party hereto agrees to notify the other Parties hereto promptly upon knowledge of any breach in security resulting in unauthorized access to Confidential Information or Member Information. Each Party hereto agrees to provide any assistance to the other Parties hereto that is necessary to contain and control the incident to prevent further unauthorized access to or use of Confidential Information or Member Information including preserving records and other evidence, compiling information enabling the preparation and filing of any necessary reports and notifying regulators and any affected Members.

10.15       Insurance.

 

Each Service Provider shall at all times during the term of this Agreement obtain and maintain insurance with responsible companies in such amounts and against such risks as are customarily carried by business entities engaged in similar businesses similarly situated, and will furnish the Company on request full information as to all such insurance, and provide within fifteen (15) days after receipt of such request the certificates or other documents evidencing such policies.  Without limitation to the foregoing, each Service Provider (or in case all Service Providers are the same Person, such Person), shall maintain insurance coverage for itself and its subsidiaries that encompasses employee dishonesty, forgery or alteration, theft, disappearance and destruction, robbery and safe burglary, property (other than money and securities) and computer fraud in an aggregate amount of at least $1,000,000 per occurrence.

 

10.16       Disaster Recovery.

 

Each Service Provider shall have in place comprehensive disaster recovery and business continuity plans including contact information that specifies the procedures to be followed with respect to the continued provision of services described in this Agreement in the event such Service Provider’s (or any of its sub-loan and note servicer’s) facilities or equipment are destroyed or damaged.  Each Service Provider shall make such plans or summaries thereof available to the Company for review.  Such plans shall provide for backup and record protection for records relating to the Company, the Prosper System, the Securities and the servicing of the Borrower Loans for such time as records are required to be retained in accordance with the Applicable Requirements.  Each Service Provider shall test the operation and effectiveness of such plan at least annually and furnish to the Company a summary of the test results thereof.  In the event that a Service Provider’s plan fails in whole or in part the test required hereby, such Service Provider shall conduct a re-test.

 

10.17       Background Check.

 

Each Service Provider shall conduct, or has conducted, a criminal background check at its own expense on each of its employees engaged in providing services under this Agreement prior to the commencement of such services.  No Service Provider employee shall be eligible to perform services for the Company if he or she, to such Service Provider’s knowledge, (1) has been convicted of or was placed in a pre-trial diversion program for any crime involving dishonesty or breach of trust including, but not limited to, check kiting or passing bad checks; embezzlement, drug trafficking, forgery, burglary, robbery, theft, perjury; possession of stolen property, identity theft, fraud, money laundering, shoplifting, larceny, falsification of documents; and/or (2) has been convicted of any sex, weapons or violent crime including but not limited to homicide, attempted homicide, rape, child molestation, extortion, terrorism or terrorist threats, kidnapping, assault, battery, and illegal weapon possession, sale or use.

 

  

55

  

 

10.18       Separate Identity.

 

Whenever a Service Provider is an Affiliate of the Company, such Service Provider undertakes to the Company that for so long as any Securities are outstanding such Service Provider will (i) maintain its own books, records and bank accounts separate from those of the Company, (ii) hold itself out to the public and all other Persons as a legal entity separate from the Company, (iii) have a board of directors separate from that of the Company, (iv) not commingle its assets with those of the Company, (v) maintain financial statements separate from those of the Company; provided that such Service Provider’s consolidated financial statements may include the Company’s financial information subject to disclosure in such consolidated financial statements that such Service Provider’s assets are not available to satisfy Company obligations and that the Company’s assets are not available to satisfy such Service Provider obligations, (vi) maintain an arm’s-length relationship with the Company, (vii) allocate fairly and reasonably between itself and the Company any overhead for shared office space, (viii) use stationery, invoices and checks separate from those of the Company, (ix) correct any known misunderstanding regarding its separate identity from the Company, (x) not use Company assets to pay its own obligations or hold out its own assets as being available to satisfy Company obligations, and (xi) not guarantee any obligations of the Company (it being understood that such Service Provider’s obligations under Sections 5.9 and 5.14 shall not be deemed to contravene this Section 10.18).  The terms of this Section 10.18 shall survive any termination of this Agreement.

 

10.19        No Third-party Beneficiary.

 

There are no third-party beneficiaries to this Agreement; provided, however, that the holders of the Securities (and the Trustee on their behalf), shall be deemed express third party beneficiaries of, and shall be entitled to enforce, the obligations of PMI set forth in Section 5.5(a) and PMI’s indemnification obligations for breaches of Section 5.5(a).

 

10.20       Limited Recourse.

 

The obligations of the Company under this Agreement are solely the obligations of the Company.  No recourse shall be had for the payment of any amount owing by the Company under this Agreement or for the payment by the Company of any fee in respect hereof or any other obligation or claim of or against the Company arising out of or based upon this Agreement, against any organizer, member, director, officer, manager or employee of the Company or any of its Affiliates; provided, however, that the foregoing shall not relieve any such Person of any liability it might otherwise have as a result of fraudulent actions or omissions taken by it.  The Licensor and each Service Provider agrees that the Company shall be liable for any claims that the Licensor or any Service Provider may have against the Company (including, without limitation, any claim for the payment of fees or expense reimbursements) only to the extent that the Company has funds available to pay such claims that are not, under the Indenture or the PMI Indenture, allocated to the payment of Securities, and that, to the extent that any such claims remain unpaid after the application of such funds in accordance with the Indenture  or the PMI Indenture, such claims shall be extinguished.  The terms of this Section 10.20 shall survive any termination of this Agreement.

 

  

56

  

 

10.21       No Petition.

 

The Licensor and each Service Provider hereby covenants and agrees that it will not institute against, or join or assist any other person in instituting against, the Company any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other similar proceeding under the laws of any jurisdiction for one year and a day after all of the Securities have been paid in full.  The terms of this Section 10.21 shall survive any termination of this Agreement.

 

10.22        Informal Dispute Resolution.

 

Each Party shall appoint one or more responsible persons to administer this Agreement.  In the event of a dispute, those persons shall attempt to resolve the dispute in good faith.  Prior to bringing any formal or legal action, a senior executive, at the level of president or above, of each Party shall meet and attempt to resolve the dispute.

 

10.23       Taxes.

 

Under no circumstances shall the Company be responsible for any taxes of the Licensee or any Service Provider.

 

10.24       Severability.

 

In case any of Articles III, IV or V shall be terminated by the Company, the Corporate Administrator, Loan Platform Administrator or Loan and Note Servicer, as applicable, the validity, legality and enforceability of the remaining provisions or obligations under this Agreement shall not in any way be affected or impaired thereby.

 

[SIGNATURE PAGE FOLLOWS]

 

  

57

  

IN WITNESS WHEREOF, each Party has caused this Agreement to be signed in its corporate name on its behalf by its proper official duly authorized as of the day, month and year first above written.

 

	  	
Company:

	  	  
	  	
PROSPER FUNDING LLC

	  	  
	  	
By:

	  
	  	  	
Name:

	  
	  	  	
Title:

	  
	  	  	
Address:

	
111 Sutter Street, 22nd Floor

	  	  	  	
San Francisco, CA  94104

	  	  	  	  
	  	  	  	Tax Identification No.:	
 

	  	  	  	  
	  	
Licensor:

	  	  
	  	
PROSPER FUNDING LLC

	  	  
	  	
By:

	  
	  	  	
Name:

	  
	  	  	
Title:

	  
	  	  	
Address:

	
111 Sutter Street, 22nd Floor

	  	  	  	
San Francisco, CA  94104

	  	  	  	  
	  	  	  	Tax Identification No.:	
 

	  	  	  	  
	  	
Licensee:

	  	  
	  	
PROSPER MARKETPLACE, INC.

	  	  	  	  
	  	
By:

	  
	  	  	
Name:

	  
	  	  	
Title:

	  
	  	  	
Address:

	
111 Sutter Street, 22nd Floor

	  	  	  	
San Francisco, CA  94104

	  	  	  	  
	  	  	  	Tax Identification No.:	 

Signature page to Administration Agreement

 

  

 

  

 

	  	
Corporate Administrator:

	  	  
	  	
PROSPER MARKETPLACE, INC.

	  	  	  
	  	
By:

	  
	  	  	
Name:

	  
	  	  	
Title:

	  
	  	  	
Address:

	
111 Sutter Street, 22nd Floor

	  	  	  	
San Francisco, CA  94104

	  	  	  	  
	  	  	  	
Tax Identification No.:

	  	  	  	  
	  	
Loan Platform Administrator:

	  	  	  
	  	
PROSPER MARKETPLACE, INC.

	  	  	  	  
	  	
By:

	  
	  	  	
Name:

	  
	  	  	
Title:

	  
	  	  	
Address:

	
111 Sutter Street, 22nd Floor

	  	  	  	
San Francisco, CA  94104

	  	  	  	  
	  	  	  	
Tax Identification No.:

	  	  	  	  
	  	
Loan and Note Servicer:

	  	  	  
	  	
PROSPER MARKETPLACE, INC.

	  	  	  	  
	  	
By:

	  
	  	  	
Name:

	  
	  	  	
Title:

	  
	  	  	
Address:

	
111 Sutter Street, 22nd Floor

	  	  	  	
San Francisco, CA  94104

	  	  	  	  
	  	  	  	
Tax Identification No.:

  

2

  

Exhibit A

Borrower Registration Agreement

 

  

A-1

  

Exhibit B

Lender Registration Agreement

 

  

B-1

  

Exhibit C

Fees

License Fee

From and after the date of this Agreement, on the last Business Day of each calendar month, Licensee shall pay to Licensor a License Fee equal to the product of $150.00 and the number of borrower listings posted on the Prosper System since the preceding monthly License Fee payment date (or, in the case of the first such payment date, since the date of this Agreement); provided that on the last Business Day of each Calendar year during the term of the License on or after 2013, Licensee shall also pay to Licensor an additional amount equal to either zero or the difference, if positive, between $2,500,000 and the aggregate amounts paid through such date in respect of such monthly License Fee amounts already paid through such date during such calendar year.

Corporate Administration Fee

From and after the date of this Agreement, on the last Business Day of each calendar month, commencing on December 28, 2012 or such later date as agreed among the Parties, the Company shall pay to the Corporate Administrator by (in respect of its provision of the services specified in Article III of this Agreement) an amount equal to one-twelfth (1/12) of the following specified annual Corporate Administration Fees:

	
Year

	 	
Annual Corporate 

Administration Fee

	 
	  	 	 	 
	
2012

	 	$	800,000	 
	  	 	 	 	 
	
2013

	 	$	865,000	 

 

provided, that, in the case of the first such payment date, the amount due shall be pro-rated by the number of days since the date on which the Corporate Administrator started to provide the services specified in Article III of this Agreement and the first such payment date; provided, further, that in the case of the last payment of the Corporate Administration Fee due under Article III of this Agreement, the amount due shall be pro-rated by the number of days from the last monthly fee payment date and the date on which the Corporate Administrator stopped providing the services specified in Article III of this Agreement.

 

  

C-1

  

Loan Platform Servicing Fee

From and after the date of this Agreement, on the last Business Day of each calendar month, commencing on December 28, 2012 or such later date as of which at least 12,000 Borrower Loans have been funded through the Prosper System after the date hereof, the Company shall pay to the Loan Platform Administrator (in respect of its provision of the services described in Article IV of this Agreement) an amount equal to the product of $112.50 and the number of Borrower Loans funded since the last monthly fee payment date (or, in the case of the first such payment date, since the date of this Agreement).

Loan and Note Servicing Fee

From and after the date of this Agreement, on the last Business Day of each calendar month, commencing on December 28, 2012 or such later date as agreed among the Parties, the Company shall pay to the Loan and Note Servicer (in respect of its provision of the services described in Article V of this Agreement) an amount equal to 90% of all servicing fees collected by or on behalf of the Company and all nonsufficient funds fees collected by or on behalf of the Company since the preceding Loan and Note Servicing Fee payment date (or, in the case of the first such payment date, since the Date of this Agreement).

 

 

 C-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00209-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00209-of-00352.parquet"}]]