Document:

Exhibit 4.1

PROSPER MARKETPLACE, INC.

 

2015 EQUITY INCENTIVE PLAN

 

1.        Purposes of the Plan. The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the business of the Company. This Plan is intended to replace the Amended and Restated Prosper Marketplace Inc. 2005 Stock Plan (the “Prior Plan”). The Prior Plan shall be terminated and replaced and superseded by this Plan on the date on which this Plan is approved by the Company’s stockholders (unless terminated earlier), except that any awards granted under the Prior Plan (“Prior Awards”) shall remain in effect pursuant to their terms.

2.         Definitions. The following definitions shall apply as used herein and, except as defined otherwise in an Award Agreement, in the Award Agreements.

“Administrator” means the Board and any Committee or individual appointed to administer the Plan under Section 4.

“Award” means an award described in Section 6.

“Award  Agreement” means the written agreement evidencing the grant of an Award, including any amendments thereto.

“Board” means the Board of Directors of the Company.

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

“Committee” means any committee that is composed of at least two members of the Board.

“Common Stock” means the common stock of the Company.

“Company” means Prosper Marketplace, Inc., a Delaware corporation, or any successor entity.

“Consultant” means any person other than an Employee or a Director (solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Subsidiary to render consulting or advisory services to the Company or such Subsidiary.

 

“Corporate Transaction” means any of the following transactions:

 

	 	
(i)

	
any person (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, other than any person who currently owns more than a majority of the Company’s Common Stock, becoming the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the combined voting power of the then outstanding voting securities of the Company, except that any change in the ownership of the stock of the Company as a result  of a private financing  of the Company that is approved by the Board will not be considered a Corporate Transaction;

 

	 	
(ii)

	
a consolidation or merger of the Company with or into another entity, unless the stockholders of the Company immediately before such consolidation or merger own, directly or indirectly, a majority of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such consolidation or merger;

 

	 	
(iii)

	
the sale of all or substantially all of the assets of the Company; or

	 	
(iv)

	
the liquidation, dissolution or winding up of the entity.

 

For the avoidance of doubt, a transaction will not constitute a Corporate Transaction if: (i) its sole purpose is to change the jurisdiction of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.

“Director” means a member of the Board or the board of directors of any Subsidiary.

“Effective Time” shall have the meaning set forth in Section 12.

“Employee” means an employee of the Company or any Subsidiary (including a Director who is also an employee).

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

“Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

 

	 	
(i)

	
if the Common Stock is listed on one or more established stock exchanges or national market systems, including without limitation The Nasdaq Global Select Market, The Nasdaq Global Market or The Nasdaq Capital Market of The Nasdaq Stock Market LLC, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Common Stock is listed (as determined by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

	 	
(ii)

	
if the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such securities dealer on the date of determination, but if selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

 

	 	
(iii)

	
if neither (i) nor (ii) above applies, the fair market value determined by the Board using any measure of value that the Board determines to be appropriate (including, as it considers appropriate, relying on appraisals) in a manner consistent with the valuation principles under Section 409A of the Code, except as the Board may expressly determine otherwise.

 

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“Grantee” means an individual who receives an Award.

“Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

“Non-Qualified Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

“Option” means an option to purchase Shares.

“Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

“Plan” means this Prosper Marketplace, Inc. 2015 Equity Incentive Plan, as such may be amended or restated from time to time.

“Restricted Stock” means Shares issued under the Plan subject to restrictions determined by the Administrator and set forth in the applicable Award Agreement.

“Restricted Stock Units” means an Award based on the value of Common Stock that is an unfunded and unsecured promise to deliver Shares, cash, or other property upon the attainment of specified vesting or performance conditions, as determined by the Administrator and set forth in the applicable Award Agreement.

“SAR” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as determined by the Administrator and set forth in the applicable Award Agreement, measured by appreciation in the value of Common Stock.

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

“Service Provider” means an Employee, Director, or Consultant.

“Share” means a share of Common Stock.

“Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

“Unrestricted Stock” means Shares issued under the Plan that are not subject to vesting, forfeiture or similar restrictions pursuant to the applicable Award Agreement. For the sake of clarity, Shares that are only subject to restrictions on transfer, right of first refusal, market stand- off and other similar restrictions shall not, by virtue of such restrictions, be deemed to be “Restricted Stock.”

 

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3.        Stock Subject to the Plan.

(a)      Reserved Shares. Subject to the provisions of Sections 11 and 12, below, (i) the maximum aggregate number of Shares which may be issued pursuant to all Awards is 1,620,084 Shares plus that number of Shares returned to the Plan as a result of the forfeiture, cancellation or expiration of Prior Awards pursuant to the terms of Section 3(b), and (ii) the maximum aggregate number of Shares which may be issued pursuant to Incentive Stock Options is 1,620,084 Shares plus that number of Shares returned to the Plan as a result of the forfeiture, cancellation or expiration of Prior Awards pursuant to the terms of Section 3(b) (which, together with the 1,620,084 Shares, in no event shall exceed 12,382,204 Shares). The Shares may be authorized, but unissued, or reacquired Common Stock.

(b)      Shares Returned to Plan. Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited or repurchased by the Company, such Shares shall become available for future grant under the Plan. To the extent not prohibited by applicable law, any Shares covered by an Award which are surrendered (i) in payment of the Award exercise or purchase price or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determining the maximum number of Shares which may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator; provided, however, that in no event shall such Shares be added to the then- current number of Shares that may be issued pursuant to Incentive Stock Options. A Prior Award that remains outstanding after the Prior Plan terminates shall be treated as an Award for purposes of this subsection (b), and, accordingly, Shares may be returned to this Plan in connection with such award; provided, however, that in no event shall such Shares be added to the then-current number of Shares that may be issued pursuant to Incentive Stock Options.

4.        Administration of the Plan.

(a)      Administration by the Board. Subject to Sections 4(b) and 4(c), the Plan will be administered by the Board. The Board shall have authority to grant Awards  and determine recipients and terms thereof, to determine Fair Market Value, and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board shall have full discretionary authority to construe and interpret the terms of the Plan and any Award Agreements entered into under the Plan and to determine all facts necessary to administer the Plan and any Award Agreements. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan that is made in good faith.

(b)      Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more Committees. All references in the Plan to the “Administrator” shall mean the Board or a Committee of the Board or the officers referred to in Section 4(c) to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee or officers.

 

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(c)       Delegation to Officers.  To the extent permitted by applicable law, the Administrator may delegate to one or more officers of the Company the power to grant Awards, subject to any limitations under the Plan, to employees or officers of the Company or any of its present or future subsidiary corporations, and to exercise such other powers under the Plan as the Board may determine, provided, that the Board shall fix the terms of the Awards to be granted by such officers (including the exercise price of such Awards, which may include a formula by which the exercise price will be determined) and the maximum number of Shares (as defined below) subject to Awards that the officers may grant; provided further, however, that no officer shall be authorized to grant Awards to himself or herself.

(d)       Indemnification. In addition to such other rights of indemnification as they may have, members of the Board and any Committee (and any individuals to whom authority to act for the Board is delegated) shall be defended and indemnified by the Company to the extent permitted by law against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct. Upon the institution of any such action, suit, or proceeding, any such indemnified person against whom a claim is made shall notify the Company in writing and give the Company the opportunity, within thirty (30) days after such notice and at its own expense, to handle and defend the same before such indemnified person undertakes to handle it on his or her own behalf.

 

5.         Eligibility for Awards. Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees.

6.        Types and Terms of Awards.

(a)       General. Awards may be made under the Plan in the form of (i) Options, (ii) SARs, (iii) Restricted Stock, (iv) Restricted Stock Units, and (v) Unrestricted Stock.

(b)      Conditions of Awards. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, restrictions and restriction periods, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. The Administrator may determine the effect on an Award of the disability, death, termination or other cessation of employment, authorized leave of absence or other change in the employment of the Grantee. All of the terms and conditions of an Award shall be set forth in the applicable Award Agreement.

(c)          Discretion of Administrator. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Administrator need not treat Grantees uniformly.

 

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7.        Options and SARs.

(a)       General. The Administrator may grant Options and SARs under the Plan and determine the number of Shares to be covered by each Option and/or SAR, the exercise price and such other terms, conditions and limitations applicable to the exercise of each Option and/or SAR, as it deems necessary or advisable. Subject to Section 7(g), Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.

(b)       Exercise Price. The exercise price per Share subject to an Option or SAR shall be determined by the Administrator at the time of grant but shall not be less than 100% of the Fair Market Value on the date of grant. If an Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company or any Subsidiary or Parent of the Company, and an Incentive Stock Option is granted to such Employee, the exercise price of such Incentive Stock Option shall not be less than 110% of the Fair Market Value on the grant date. Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above as a substitution for a stock option or stock appreciation right in accordance with and pursuant to Section 424 of the Code, in the case of an Incentive Stock Option, and pursuant to Section 409A of the Code, in the case of a Non-Qualified Stock Option.

(c)       Term of Options and SARs. The term of each Option and SAR shall be fixed by the Administrator and set forth in the Award Agreement; provided, however, that no Option or SAR shall be exercisable more than ten (10) years after the date of grant. If an Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company or any Subsidiary or Parent of the Company, and an Incentive Stock Option is granted to such Employee, the term of such Option shall be no more than five (5) years from the date of grant. In the case of an Incentive Stock Option, the term of the Option shall expire no later than three (3) months after the Employee ceases to be an Employee, except that, if an Employee ceases to be an Employee because of a disability or the Employee dies while the Option is outstanding, the term of the Option shall expire no later than one year after the Employee becomes disabled or dies.

(d)      Exercisability; Rights of a Stockholder. Options and SARs shall become exercisable at such time or times, whether or not in installments, as shall be determined by the Administrator and set forth in the Award Agreement; provided, however, that the Administrator may at any time accelerate the exercisability of all or any portion of any Option or SAR. A Grantee shall have the rights of a stockholder only as to Shares acquired upon the exercise of an Option or SAR and not as to Shares underlying an unexercised Option or SAR.

(e)       Exercise of Options and SARs. Options and SARs may be exercised by delivery to the Company of a written notice of exercise in such form of notice (including electronic notice) and manner of delivery as is specified by the Administrator, together with payment in full as specified in subsection (e) for the number of Shares for which the Option or SAR is exercised. Shares subject to the Option will be delivered by the Company as soon as practicable following exercise. An Option may not be exercised for a fraction of a Share.

 

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(f)       Payment Upon Exercise. No Shares shall be delivered pursuant to any exercise of an Option or SAR until payment in full of all required tax withholding, and in the case of an Option, the aggregate exercise price. Payment may be made either by certified or bank check, or such other means as the Administrator may accept. As determined by the Administrator, in its sole discretion, at or after grant, payment in full or in part may be made in the form of previously acquired Shares based on the Fair Market Value on the date of exercise. Subject to the approval of the Administrator, Options may be exercised pursuant to such cashless exercise procedures as may be approved and implemented by the Administrator from time to time, including without limitation pursuant to broker-assisted exercise transactions and/or net exercise procedures.

 

(g)      Annual Limit on Incentive Stock Options. Each Option shall be designated in the Award Agreement as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Grantee during any calendar year (under all plans of the Company and any Subsidiary or Parent) exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options. For purposes of this Section 7(g), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

 

(h)      Early Exercise. The Award Agreement for an Option or SAR may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Option prior to full vesting. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or any Subsidiary or Parent or to any other restriction the Administrator determines to be appropriate.

8.        Restricted Stock, Restricted Stock Units and Unrestricted Stock.

(a)      General. The Administrator shall determine the terms and conditions of each Award Agreement for Restricted Stock, Restricted Stock Units and Unrestricted Stock. Subject to Section 9(a), Award Agreements for Restricted Stock and Restricted Stock Units shall include such restrictions as the Administrator may impose, which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Administrator may deem appropriate.

(b)      Stock Certificates. The Company may require that any stock certificates issued in respect of Shares of Restricted Stock shall be deposited in escrow by the Grantee, together with a stock power endorsed in blank, with the Company (or its designee). Following the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Grantee or if the Grantee has died, to the beneficiary designated, in a manner determined by the Administrator, by a Grantee. In the absence of an effective designation by a Grantee, the designated beneficiary shall be the Grantee’s estate.

(c)       Forfeiture and the Option to Purchase.Except as otherwise determined by the Administrator, upon a Grantee’s termination of employment or service (as determined under criteria established by the Administrator) for any reason during the applicable restriction period, the Company (or its designee) shall have the right, but shall not be obligated, to repurchase all or part of Shares of Restricted Stock still subject to restriction at their issue price or other stated or formula  price (or to require forfeiture of such Shares if issued at no cost) from the Grantee.

 

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9.         General Provisions Applicable to Awards.

(a)       Transferability of Awards. Except as the Administrator may otherwise determine or provide in an Award Agreement, Awards shall not be sold, assigned, hypothecated, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, and may be exercised, during the lifetime of the Grantee, only by the Grantee. If the Administrator makes an Award transferable, such Award may only be transferred (i) by will or (ii)by the laws of descent and distribution. References to a Grantee, to the extent relevant in the context, shall include references to authorized transferees.

(b)       Withholding. The Grantee must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Shares under an Award. The Company may decide to satisfy the withholding obligations through additional withholding on salary or wages. If the Company elects not to or cannot withhold from other compensation, the Grantee must pay the Company the full amount, if any, required for withholding or, if permitted by the Administrator in its discretion, have a broker tender to the Company cash equal to the withholding obligations. If provided for in an Award or approved by the Administrator in its sole discretion, a Grantee may satisfy such tax obligations in whole or in part by delivery of Shares, including Shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, that except as otherwise provided by the Administrator, the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares surrendered to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

(c)      Amendment of Awards. The Administrator may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Non-Qualified Stock Option. The Grantee’s consent to such action shall be required unless (A) the Administrator determines that the action, taking into account any related action, would not materially and adversely affect the Grantee’s rights under the Plan or (B) the change is permitted under Section 11 or 12 hereof.

10.      Conditions Upon Issuance of Shares.

(a)       General. If at any time the Administrator determines that the delivery of Shares pursuant to the exercise, vesting or any other provision of an Award is or may be unlawful under applicable laws, the vesting or right to exercise an Award or to otherwise receive Shares pursuant to the terms of an Award Agreement shall be suspended until the Administrator determines that such delivery is lawful, and shall be further subject to the approval of counsel for the Company with respect to such compliance. The Company shall have no obligation to effect any registration or qualification of the Shares under federal or state laws.

 

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(b)      Securities Law Compliance. As a condition to the exercise of an Award or the receipt of Shares pursuant to an Award, the Company may require (i) the person exercising such Award to make such representations and agreements as the Company may consider appropriate (A) to avoid violation of the Securities Act and (B) to agree to market standoff obligations in connection with any public offering of Shares of the Company, and (iii) that the certificates evidencing such Shares bear appropriate legends restricting transfer.

 

(c)       Repurchase Rights. Except to the extent determined otherwise by the Administrator, until such time as the Common Stock is first registered under Section 12 of the Exchange Act, the Company shall have the right of first refusal with respect to any proposed disposition by the Grantee (or any successor in interest) of any Shares issued under the Plan. Such right of first refusal shall be exercisable in accordance with the terms established by the Administrator and set forth in the document evidencing such right.

11.      Adjustments. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination or exchange of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Shares other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the number and class of securities and exercise price per Share of each outstanding Option and SAR, (iii)the number of Shares subject to and the repurchase price per Share subject to each outstanding Restricted Stock Award and Restricted Stock Unit Award, and (iv) the terms of each other outstanding Award shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner determined by the Administrator; provided, however, that each adjustment to Non-Qualified Stock Options shall satisfy the requirements of Treas. Reg. § 1.409A- 1(b)(5)(v)(D) (or any successor regulation) and each adjustment to Incentive Stock Options shall satisfy the requirements of Treas. Reg. § 1.424-1 (or any successor regulation); and provided, further, that the Administrator will make any adjustment to an Award as is required by Section 25102(o) of the California Corporations Code to the extent that the Company is relying upon the exemption afforded thereby with respect to the Award.

12.       Corporate Transactions. The Administrator may provide, in its discretion, with respect to the treatment of each outstanding Award (either separately for each Award or uniformly for all Awards), upon the consummation of a Corporate Transaction (such time to be referred to as the “Effective Time”), for any of the following:

(a)       any or all outstanding Options and SARs shall become vested and immediately exercisable, in whole or in part;

(b)       any or all outstanding Restricted Stock or Restricted Stock Units shall become non- forfeitable, in whole or in part;

 

(c)       any or all outstanding Options and SARs shall be cancelled in exchange for substitute stock options in a manner consistent with the requirements of Treas. Reg. § 1.409A- 1(b)(5)(v)(D) (or any successor regulation), in the case of a Non-Qualified Stock Option, and Treas. Reg. §1.424-1(a) (or any successor regulations), in the case of an Incentive Stock Option;

 

(d)       any Option shall be cancelled in exchange for cash and/or other substitute consideration with a value equal to (A) the number of Shares subject to that Option, multiplied by (B) the difference, if any, between the Fair Market Value per Share on the date of the Corporate Transaction and the exercise price of that Option; provided, that if the Fair Market Value per Share on the date of the Corporate Transaction does not exceed the exercise price of any such Option, the Administrator may cancel that Option without any payment of consideration therefor; or

 

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(e)       any Restricted Stock or Restricted Stock Units shall be cancelled in exchange for restricted stock of or restricted stock units in respect of the capital stock of any successor corporation;

(f)        any Restricted Stock shall be redeemed for cash and/or  other substitute consideration with a value equal to the Fair Market Value of an unrestricted Share on the date of the Corporate Transaction;

 

(g)       any Restricted Stock Unit shall, subject to Section 16, be cancelled in exchange for cash and/or other substitute consideration with a value equal to the Fair Market Value per Share on the date of the Corporate Transaction.

 

13.       Effective Date and Term of Plan; Stockholder Approval.

(a)       Adoption of Plan. The Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years from the date of adoption unless sooner terminated.

(b)       Stockholder Approval.  No Option or SAR granted under the Plan may be exercised, no Shares shall be issued under the Plan, and no Restricted Stock Unit shall be settled, until the Plan is approved by the Company’s stockholders. If such stockholder approval is not obtained within twelve (12) months after the date of the Board’s adoption of the Plan, then all Awards previously granted under the Plan shall terminate and cease to be outstanding, and no further Awards shall be granted under the Plan.

14       Amendment, Suspension or Termination of the Plan.

(a)       General. Subject to the terms of the Plan, the Board may at any time and from time to time, alter, amend, suspend or terminate the Plan, in whole or in part; provided that the Board shall obtain stockholder approval of any Plan amendment to the extent necessary to comply with applicable law, rule or regulation. In addition, in no event shall an amendment increase the maximum number of shares of Common Stock with respect to which Awards may be granted under the Plan without stockholder approval.

(b)       Limitation on Grants of Awards. No Award may be granted during any suspension of the Plan or after termination of the Plan.

(c)       No Effect on Outstanding Awards. Except as set forth in Section 13(b), no suspension or termination of the Plan shall adversely affect any rights under Awards outstanding at the time of such suspension or termination.

15.       No Employment or Services Rights. The Plan shall not confer upon any Grantee any right to employment or service with the Company or any Subsidiary or Parent, nor shall it interfere in any way with the right of the Company or any Subsidiary or Parent to terminate the Grantee’s employment or service at any time.

 

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16.       Compliance with Code Section 409A. It is intended that the provisions of the Plan comply with Section 409A of the Code (“Section 409A”), and all provisions of the Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. If an Award that is subject to Section 409A is payable upon a Corporate Transaction which is not a permissible payment event or time (as described in Treas. Reg. § 1.409A-3) then, for purposes of payment of such Award, no Corporate Transaction shall be deemed to have occurred with respect to that Award unless and until there occurs a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company (within the meaning in accordance with Treas. Reg. § 1.409A-3(i)(5)). To the extent required or advisable to avoid a violation of Section 409A, no discretion to require payment of an Award that is subject to Section 409A upon a Corporate Transaction shall be exercised if not set forth in writing by the time required under Section 409A. If an Award is subject to Section 409A, any payment made to a Grantee who is a “specified employee” of the Company or any Subsidiary shall not be made before such date as is six months after the Grantee’s “separation from service” to the extent required to avoid the adverse consequences of Section 409A of the Code.  For purposes of this Section 16, the terms “separation from service” and “specified employee” shall have the meanings set forth in Section 409A and the applicable Treasury regulations. Nothing in this Plan or in an Award Agreement shall be interpreted or construed to transfer any liability for any tax (including a tax or penalty due as a result of a failure to comply with Section 409A) to the Company or to any other individual or entity, and the Company shall have no liability to a Grantee, or any other party, if an Award that is intended to be exempt from, or compliant with, Section 409A is not so exempt or compliant.

17.       Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

18.       Severability. If any provision of the Plan or any Award is, becomes, or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Grantee, such provision shall be construed or deemed amended to conform with applicable laws, or if the provision cannot be so construed or deemed amended without, in the sole discretion of the Administrator, materially altering the intent of the Plan or the Award, such provision shall be severed as to the jurisdiction or Grantee and the remainder of the Plan and any such Award shall remain in full force and effect.

19.       Governing  Law.The validity and construction of the Plan and any Award Agreements thereunder shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rules or principles that might otherwise refer construction or interpretation of any provision of the Plan or an Award Agreement to the substantive law of another jurisdiction.

 

 

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PAGE 11Exhibit 10.1 - Sixth Amendment to the Credit Agreement

Exhibit 10.1
Execution Version

    

                                            
SIXTH AMENDMENT AND CONSENT AGREEMENT
This Sixth Amendment and Consent Agreement (this “Agreement”) is entered into as of May 8, 2015, by and among K2M HOLDINGS, INC., a Delaware corporation (“Holdings”), K2M, INC., a Delaware corporation (the “US Borrower”) and K2M UK LIMITED, a company incorporated in England and Wales with company registration number 06950302 and with its registered office at Abbey House, Wellington Way, Broakland Business Park, Weybridge, Surrey KT13 0TT (the “UK Borrower”, and collectively, jointly and severally with the US Borrower, the “Borrower”), the several banks and other financial institutions or entities party hereto, SILICON VALLEY BANK (“SVB”), as the Issuing Lender and the Swingline Lender, and Silicon Valley Bank, as administrative agent and collateral agent for the lenders (in such capacity, the “Administrative Agent”). 
WHEREAS,  reference is hereby made to that certain Credit Agreement dated as of October 29, 2012 by and among Holdings, Borrower, the several banks and other financial institutions or entities from time to time parties thereto (each a “Lender” and, collectively, the “Lenders”) and the Administrative Agent (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”) (capitalized terms used but not otherwise defined herein shall have the same meaning as in the Credit Agreement ); and
WHEREAS, the Loan Parties have advised the Administrative Agent and the Lenders that they intend to undertake to consummate certain intercompany transactions which will result in certain intercompany receivables being extinguished, as such transactions are more particularly described on Schedule 1 annexed hereto (collectively, the “Specified Transactions”);
WHEREAS, without the consent of the Lenders, certain aspects of the Specified Transactions  would violate certain terms of the Credit Agreement, and accordingly, the Loan Parties have requested that the Lenders consent to such intercompany transactions and to agree to certain amendments to the Credit Agreement in connection therewith.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
		
	1.
	Consent to Specified Transactions.  

		
	a.
	To the extent necessary under the Credit Agreement, the Administrative Agent and the Lenders hereby consent and agree that the consummation of the Specified Transactions shall not, in and of itself, constitute a Default or an Event of Default; provided that, the foregoing agreement and consent is subject to, conditioned upon, and shall only be effective to the extent consummated in accordance with, each of the following terms and conditions:

		
	i.
	The aggregate amount of all intercompany Investments in connection with the Specified Transactions shall not exceed $48,000,000, of which amount not more than $25,000,000 shall be funded with proceeds of Revolving Loans; and

		
	ii.
	The additional share of Capital Stock issued by UK Borrower in favor of US Borrower (as set forth in item 2 of Schedule 1) shall be of the same class and type and carry the same rights and remedies in favor of the holder thereof as the existing shares of Capital Stock issued by UK Borrower in favor of US Borrower, and, within fifteen (15) days (or such longer period as the Administrative Agent may agree in its discretion) following the issuance of such additional share of Capital Stock, the Loan Parties shall have taken all steps necessary to evidence and confirm the Administrative Agent’s first priority Lien in such Capital Stock (including, without limitation, delivery of the original share certificate therefor to the Administrative Agent, together with an original stock transfer power executed in blank and in form and substance reasonably satisfactory to the Administrative Agent);

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Exhibit 10.1
Execution Version

    

		
	iii.
	By no later than July 10, 2015 (or such later date as the Administrative Agent may agree in its discretion), all of the Specified Transactions shall have been consummated and US Borrower shall have received cash proceeds of not less than $42,000,000 in payment in full of the intercompany receivables described on Schedule 1 and, upon receipt of such cash proceeds, US Borrower shall repay in full the amount of Revolving Loans used by US Borrower to fund the Investments described on Schedule 1; and

		
	iv.
	Immediately before, and after giving effect to, each Specified Transaction, no Default or Event of Default shall exist (after giving effect to the consents set forth herein).

		
	b.
	The Administrative Agent and the Lenders hereby agree that the Investments made by the Loan Parties in connection with the Specified Transactions shall not be included in the amount of Investments otherwise permitted to be made pursuant to clause (f)(iii) of Section 7.8 of the Credit Agreement; provided that, immediately following the consummation of the Specified Transactions, the amount equal to the difference between the aggregate amount of Investments made in connection with the Specified Transactions and the aggregate amount of cash proceeds paid to US Borrower pursuant to clause (a)(iii) above, shall be included in determining compliance with Section 7.8(f)(iii) and, as applicable, Section 7.2(g)(iv).

		
	c.
	The Administrative Agent and the Lenders hereby agree that the Loan Parties’ failure to maintain minimum cash and Cash Equivalents with SVB or its Affiliates as required by Section 6.10 of the Credit Agreement, to the extent such failure occurs solely as a result of the Loan Parties’ use of cash on hand to make Investments in connection with the Specified Transactions, shall not constitute an Event of Default. 

		
	d.
	The consent by the Administrative Agent and the Lenders set forth in clause (a) above: (i) except as expressly set forth herein, shall in no way constitute a modification or waiver of the Administrative Agent’s or any Lender’s rights under the Credit Agreement or any other Loan Documents and (ii) relates solely to the transactions described therein and is not a consent to any related or other transaction, including but not limited to, any other matter relating to, or resulting from, the consummation of any of the Specified Transactions.

		
	2.
	Amendment to Credit Agreement. The Credit Agreement is hereby amended by amending and restating clause (f)(iii)(2) of Section 7.8 thereof in its entirety as follows:

“(2) before and immediately after giving effect to the making of any Investment under this clause (f)(iii), Borrower shall have Liquidity of at least $3,000,000;”
		
	3.
	Conditions Precedent to Effectiveness.  This Agreement shall not be effective until each of the following conditions precedent has been fulfilled to the satisfaction of the Administrative Agent:

		
	a.
	This Agreement shall have been duly executed and delivered by the respective parties hereto.  The Administrative Agent shall have received a fully executed copy hereof.

		
	b.
	The Agent shall have received evidence acceptable to it that all action on the part of the Loan Parties necessary for the valid execution, delivery and performance by the Loan Parties of this Agreement shall have been duly and effectively taken.

		
	c.
	All necessary consents and approvals to this Agreement shall have been obtained.

		
	d.
	Prior to and immediately after giving effect to this Agreement, no Default or Event of Default shall have occurred and be continuing.

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Exhibit 10.1
Execution Version

    

		
	e.
	Prior to and immediately after giving effect to this Agreement, (i) each of the representations and warranties of the Loan Parties contained in the Credit Agreement,  any other Loan Document or in any document or instrument delivered pursuant to or in connection with the Loan Documents or this Agreement, are true and correct on and as of the effective date of this Agreement (except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date), and (ii) no Default or Event of Default exists on the date hereof.

		
	f.
	The Lenders and the Administrative Agent shall have received payment from the Borrower of all amounts required to be paid pursuant to Sections 4 and 5 of this Agreement.  

		
	4.
	Agreement Fee.  To induce the Administrative Agent and the Lenders to enter into this Agreement, Borrower hereby agrees to pay to the Administrative Agent, for the ratable benefit of the Lenders, an agreement fee in an amount equal to Five Thousand Dollars ($5,000).  Such fee shall be fully earned and due and payable in full upon the effective date of this Agreement and Borrower agrees that, once paid, such fee will not be refundable (in whole or in part) under any circumstances.  

		
	5.
	Costs and Expenses.   The Borrower shall pay to the Administrative Agent all reasonable costs, out-of-pocket expenses, and fees and charges of every kind incurred by the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Agreement and any documents and instruments relating hereto or thereto (which costs include, without limitation, the reasonable fees, charges and disbursements of counsel for the Administrative Agent).

		
	6.
	Ratification of Loan Documents; Further Assurances.

  
		
	a.
	The Loan Parties hereby ratify, confirm and reaffirm each of the terms and conditions of the Loan Documents to which each is a party. The Loan Parties further acknowledge and agree that (i) except as specifically modified in this Agreement, all terms and conditions of the Loan Documents shall remain in full force and effect, and (ii) this Agreement constitutes a Loan Document and the failure by any Loan Party to comply with any term or condition hereof shall constitute and immediate Event of Default.

		
	b.
	The Loan Parties hereby ratify, confirm and reaffirm that all security interests and liens granted pursuant to the Loan Documents secure and shall continue to secure the payment and performance of all of the Obligations pursuant to the Loan Documents, whether now existing or hereafter arising.

		
	c.
	The Loan Parties shall cooperate with the Administrative Agent and shall execute and deliver to the Administrative Agent such further instruments and documents as the Administrative Agent shall reasonably request to carry out to its satisfaction the transactions contemplated by this Agreement and the other Loan Documents.

		
	7.
	Representations and Warranties. The Loan Parties hereby represent, warrant, and covenant to the Administrative Agent and the Lenders as follows:

		
	a.
	The Loan Parties hereby represent and warrant as of the date hereof that (i) each of the representations and warranties of the Loan Parties contained in the Credit Agreement,  any other Loan Document or in any document or instrument delivered pursuant to or in connection with the Loan Documents or this Agreement, are true and correct on and as of the effective date of this Agreement (except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date), and (ii) no Default or Event of Default exists on the date hereof. 

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Exhibit 10.1
Execution Version

    

		
	b.
	This Agreement is, and each other Loan Document to which it is or will be a party, when executed and delivered by each Loan Party that is a party thereto, will be the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally and equitable principals (whether enforcement is sought by proceedings in equity or at law).

		
	c.
	The execution and delivery by each Loan Party of this Agreement and the performance by each Loan Party of its obligations under the Credit Agreement, as amended by this Agreement, and under the other Loan Documents (i) have been duly authorized by all necessary corporate action on the part of such Loan Party, (ii) will not violate any provisions of the certificate of incorporation or bylaws such Loan Party and (iii) will not constitute a violation by such Loan Party of any applicable material Requirement of Law.

		
	d.
	Each Loan Party acknowledges that the Administrative Agent and the Lenders have acted in good faith and has conducted in a commercially reasonable manner its relationships with each Loan Party in connection with this Agreement and in connection with the other Loan Documents.  Each Loan Party understands and acknowledges that the Administrative Agent and the Lenders are entering into this Agreement in reliance upon, and in partial consideration for, the above representations, warranties, and acknowledgements, and agrees that such reliance is reasonable and appropriate.

		
	8.
	No Defenses.  The Loan Parties hereby acknowledge and agree that the Loan Parties have no offsets, defenses, claims, or counterclaims against the Administrative Agent or the Lenders or any of their respective, officers, directors, employees, attorneys, representatives, successors or assigns, with respect to the Obligations, or otherwise, and that if any Loan Party now has, or ever did have, any offsets, defenses, claims, or counterclaims against the Administrative Agent or the Lenders or any of their respective, officers, directors, employees, attorneys, representatives, successors or assigns, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and each Loan Party hereby RELEASES the Administrative Agent and the Lenders from any liability thereunder.

		
	9.
	Continuing Validity.  The Loan Parties understand and agree that in modifying the existing Obligations, the Administrative Agent and the Lenders are relying upon the Loan Parties representations, warranties, and agreements, as set forth in the Loan Documents.  Except as expressly modified pursuant to this Agreement, the terms of the Loan Documents remain unchanged and in full force and effect.  The Administrative Agent’s and the Lenders’ agreement to modifications to the existing Obligations pursuant to this Agreement in no way shall obligate the Administrative Agent or the Lenders to make any future modifications to the Obligations.  It is the intention of the Administrative Agent, the Lenders, the Borrower and Holdings to retain all makers of the Loan Documents as liable parties, unless the party is expressly released by the Administrative Agent in writing.  No maker will be released by virtue of this Agreement.

		
	10.
	Governing Law/Submission To Jurisdiction; Waivers.  Sections 10.13 and 10.14 of the Credit Agreement are hereby incorporated by reference in their entirety and shall apply to the terms of this Agreement.

		
	11.
	Counterparts.  This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.  Delivery of an executed signature page of this Agreement by facsimile or other electronic mail transmission shall be effective as delivery of a manually executed counterpart hereof (save in the case of UK Borrower where delivery of an executed copy of this Agreement by facsimile or other electronic mail transmission shall be effective as delivery of a manually executed version of this Agreement).  A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.

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Exhibit 10.1
Execution Version

    

		
	12.
	Binding Effect. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective representatives, permitted successors and assigns.

		
	13.
	Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.   

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Exhibit 10.1
Execution Version

    

In Witness Whereof, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

HOLDINGS:

K2M HOLDINGS, INC.

By: _/s/ Gregory Cole___________________
Name: Gregory Cole        
Title: CFO        

US BORROWER:

K2M, INC.

By:__/s/ Gregory Cole___    _____________
Name: Gregory Cole                        
Title: CFO        

UK BORROWER:

K2M UK LIMITED

By:__/s/ Gregory Cole_________________
Name: Gregory Cole          
Title: Director        

    

[Signature Page to Sixth Amendment and Consent Agreement]

6

Exhibit 10.1
Execution Version

    

ADMINISTRATIVE AGENT:

SILICON VALLEY BANK, as the Administrative Agent

By:  /s/ Christopher Leary    
Name: Christopher Leary    
Title:  VP    
    

[Signature Page to Sixth Amendment and Consent Agreement]

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Exhibit 10.1
Execution Version

    

LENDERS:

SILICON VALLEY BANK, as Issuing Lender, Swingline Lender, and as a Lender

By: /s/ Christopher Leary    
Name:  Christopher Leary    
Title:    VP    

[Signature Page to Sixth Amendment and Consent Agreement]

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Exhibit 10.1
Execution Version

    

COMERICA BANK, as a Lender 

By: /s/ Michael Fishback    
Name:  Michael Fishback    
Title:    VP    

Signature Page to Sixth Amendment and Consent Agreement]

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Exhibit 10.1
Execution Version

    

[Schedule 1 to Sixth Amendment and Consent Agreement]
SCHEDULE 1
“Specified Transactions”
The following transactions to be undertaken by the Loan Parties are, collectively, the “Specified Transactions” and individually, a “Specified Transaction”:
1.    The making of one or more cash Investments by (a) US Borrower in the UK Borrower and in K2M Germany GmbH (“K2M Germany”), and (b) UK Borrower and K2M Germany in K2M Solutions Italy Srl (“K2M Italy”); and
2.    In consideration of the Investment in item 1(a) above, concurrently with the making of such Investment, UK Borrower shall issue one (1) additional share of Capital Stock to US Borrower; and
3.    The repayment in full of certain intercompany receivables due from each of UK Borrower, K2M Germany and K2M Italy  to US Borrower and from K2M Germany to UK Borrower as of March 31, 2015.

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