Document:

ex10_9.htm

Exhibit 10.9

 

CONFIDENTIAL TREATMENT REQUESTED

 

 

WEBBANK

 

PROSPER MARKETPLACE, INC.

 

and

 

PROSPER FUNDING LLC

 

 

SECOND AMENDED AND RESTATED

LOAN SALE AGREEMENT

 

 

Dated as of ______________ ___, 2012

 

  

  

 

 

This SECOND AMENDED AND RESTATED LOAN SALE AGREEMENT (this “Agreement”), dated as of ___________  ___, 2012 (“Effective Date”), is made by and among WEBBANK, a Utah-chartered industrial bank having its principal location in Salt Lake City, Utah (“Bank”), PROSPER MARKETPLACE, INC., a Delaware corporation, having its principal location in San Francisco, California (“PMI”), and PROSPER FUNDING LLC, a Delaware limited liability company and a wholly-owned subsidiary of PMI, also having its principal location in San Francisco, California (“PFL”).

 

WHEREAS, Bank and PMI are parties to a Second Amended and Restated Loan Account Program Agreement, dated as of the Effective Date (the “Loan Account Program Agreement”);

 

WHEREAS, Bank desires to sell to PMI, and PMI desires to purchase from Bank, the Loan Accounts established by Bank pursuant to the Loan Account Program Agreement;

 

WHEREAS, Bank and PMI previously entered into an Amended and Restated Loan Sale Agreement dated as of September 14, 2010 (the “Existing Sale Agreement”), pursuant to which PMI agreed to purchase certain loan accounts originated by Bank;

 

WHEREAS, PMI has filed a Registration Statement on Form S-1 with the Securities and Exchange Commission (the “SEC”), pursuant to which PMI issues and sells notes, the payments of which are tied to the payments made by borrowers on the loans PMI acquires under the Existing Sale Agreement;

 

WHEREAS, PMI wishes to provide its note purchasers with greater protection against the possibility of PMI becoming insolvent by having PFL, rather than PMI, acquire Loan Accounts from Bank and issue and sell the corresponding notes;

 

WHEREAS, PFL has filed a Registration Statement on Form S-1 with the SEC, pursuant to which PFL will offer and sell notes, the payments of which will be tied to the payments made by borrowers on the loans acquired by PFL (the “New Public Offering”);  and

 

WHEREAS, the Parties therefore desire to amend and restate the Existing Sale Agreement on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions and mutual covenants and agreements herein contained, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.             Definitions; Effectiveness.

 

	 	
(a) 

	
The terms used in this Agreement shall be defined as set forth in Schedule 1; provided, however,  that any capitalized terms not defined in Schedule 1 shall have the respective meanings attributed to such terms under the Loan Account Program Agreement. The rules of construction set forth in Schedule 1 shall apply to this Agreement.

 

	 	
(b) 

	
This Agreement shall be effective as of the Effective Date and, as of the Effective Date, shall supersede and replace the Existing Sale Agreement (except that, as provided in section 1(c), the Existing Sale Agreement will govern the purchase of Loan Accounts originated prior to the Effective Date).  This Agreement shall apply to all Loan Accounts originated by Bank during the term of this Agreement, beginning on the Effective Date.  Loans originated on or after the Effective Date shall not be subject to the Existing Sale Agreement.

 

  

1

 

 

	 	
(c) 

	
All Loan Accounts originated by Bank prior to the Effective Date shall be governed by the terms of the Existing Sale Agreement as in effect at the time that such Loan Accounts were originated, and shall not be subject to the terms of this Agreement.

 

	 	
(d) 

	
This Agreement shall not operate so as to render invalid or improper any action heretofore taken under the Existing Sale Agreement.

 

2.             Purchase of Loan Accounts; Payment to Bank; Reporting to Bank.

 

	 	
(a) 

	
The terms of Schedule 2 shall apply as if fully set forth in this Agreement.

 

	 	
(b) 

	
On each Closing Date, PMI shall purchase the Loan Accounts established by Bank that are identified on the Funding Statement received by Bank [1].   [*], PMI shall deposit a sum equal to the Funding Amount for that Funding Statement by wire transfer into the Control Account.  [*], in consideration of PMI’s purchase of the Loan Accounts [*], Bank may authorize the disbursement of such Funding Amount from the Control Account to Bank per the terms of the Control Account Agreement. Notwithstanding any provision of the Control Account Agreement to the contrary, under no circumstances shall Bank direct or otherwise authorize the disbursement or other disposition of any funds from the Control Account to Bank or any other person or entity other than in accordance with the previous sentence.

 

	 	
(c)

	
[*], PMI shall pay Bank the Holding Period Interest Charge for all Loan Accounts purchased by PMI during the immediately preceding month.

 

	 	
(d)

	
To the extent that such materials are in Bank’s possession, upon PMI’s request, Bank agrees to cause to be delivered to PMI, at PMI’s cost, loan files on all Loan Accounts purchased by PMI pursuant to this Agreement within [*] of the related Closing Date.  Such loan files shall include the application for the Loan Account, the Loan Account Agreement, confirmation of delivery of the Loan Account Agreement to the Borrower, and such other materials as PMI may reasonably require (all of which may be in electronic form); provided that Bank may retain copies of such information as necessary to comply with Applicable Laws.

 

3.             Ownership of Loan Accounts.

 

	 	
(a) 

	
On and after each Closing Date, subject to PMI’s payment of the Purchase Price [*], PMI shall be the sole owner for all purposes (e.g., tax, accounting and legal) of the Loan Accounts purchased from Bank on such date.  Bank agrees to make entries on its books and records to clearly indicate the sale of the Loan Accounts to PMI as of each Closing Date.  PMI agrees to make entries on its books and records to clearly indicate the purchase of the Loan Accounts as of each Closing Date.

 

	
*

	
Confidential Treatment Requested

 

  

2

  

 

	 	
(b) 

	
Bank does not assume and shall not have any liability to PMI for the repayment of any Loan Proceeds or the servicing of the Loan Accounts after the related Closing Date.

 

	 	
(c) 

	
The Prosper Parties may not (i) securitize the Loan Accounts, or any amounts owing thereunder, or (ii) issue an “asset-backed security” (as defined under 17 C.F.R. § 229.1101(c) or Section 3(a)(77) of the Securities Exchange Act of 1934) backed by the Loan Accounts or any amounts owing thereunder, in each case, without the prior written consent of Bank, which consent may be withheld or conditioned in Bank’s sole discretion.

 

	 	
(d) 

	
PMI shall maintain the Control Account Agreement in effect on the Control Account at all times.

 

4.             Representations and Warranties of Bank.

 

	 	
(a) 

	
Bank hereby represents and warrants to PMI as of the Effective Date of this Agreement and as of each Closing Date that:

 

	
  

	
(1)

	
Bank is an FDIC-insured Utah-chartered industrial bank, duly organized, validly existing under the laws of the State of Utah and has full corporate power and authority to execute, deliver, and perform its obligations under this Agreement; the execution, delivery and performance of this Agreement and the transfer of the Loan Accounts have been duly authorized and are not in conflict with and do not violate the terms of the charter or bylaws of Bank and will not result in a material breach of or constitute a default under, or require any consent under, any indenture, loan or agreement to which Bank is a party;

 

	
  

	
(2)

	
All approvals, authorizations, licenses, registrations, consents, and other actions by, notices to, and filings with, any Person that may be required in connection with the execution, delivery, and performance of this Agreement by Bank, have been obtained (other than those required to be made to or obtained from Borrowers);

 

	
  

	
(3)

	
This Agreement constitutes a legal, valid, and binding obligation of Bank, enforceable against Bank in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws now or hereafter in effect (including the rights and obligations of receivers and conservators under 12 U.S.C. §§ 1821(d) and (e)), which may affect the enforcement of creditors’ rights in general, and (ii) as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity);

 

	
  

	
(4)

	
There are no proceedings or investigations pending or, to the best knowledge of Bank, threatened against Bank (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by Bank pursuant to this Agreement, (iii) seeking any determination or ruling that, in the reasonable judgment of Bank, would materially and adversely affect the performance by Bank of its obligations under this Agreement, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or (v) would have a materially adverse financial effect on Bank or its operations if resolved adversely to it;

 

  

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(5)

	
Bank is not Insolvent; and

 

	
  

	
(6)

	
The execution, delivery and performance of this Agreement by Bank comply with Utah and federal banking laws specifically applicable to Bank’s operations; provided that Bank makes no representation or warranty regarding compliance with Utah or federal banking laws relating to consumer protection, consumer lending, usury, loan collection, anti-money laundering, data security or privacy as they apply to the operation of the Program.

 

	 	
(b) 

	
The representations and warranties set forth in this Section 4 shall survive the sale, transfer and assignment of the Loan Accounts to PMI pursuant to this Agreement and, with the exception of those representations and warranties contained in subsection 4(a)(4), shall be made continuously throughout the term of this Agreement.  In the event that any investigation or proceeding of the nature described in subsection 4(a)(4) is instituted or threatened against Bank, Bank shall promptly notify PMI of such pending or threatened investigation or proceeding (unless prohibited from doing so by Applicable Laws or the direction of a Regulatory Authority).

 

5.             Representations and Warranties of the Prosper Parties.

 

	 	
(a) 

	
Each Prosper Party hereby represents and warrants to Bank, as of the Effective Date and each Closing Date that:

 

	
  

	
(1)

	
Such Prosper Party is a corporation (in the case of PMI) or a limited liability company (in the case of PFL), duly organized and validly existing in good standing under the laws of the State of Delaware, and has full power and authority to execute, deliver, and perform its obligations under this Agreement; the execution, delivery, and performance of this Agreement have been duly authorized, and are not in conflict with and do not violate the terms of its articles or bylaws (in the case of PMI) or its limited liability company agreement (in the case of PFL) and will not result in a material breach of or constitute a default under or require any consent under any indenture, loan, or agreement to which PMI is a party;

 

	
  

	
(2)

	
All approvals, authorizations, consents, and other actions by, notices to, and filings with any Person required to be obtained for the execution, delivery, and performance of this Agreement by such Prosper Party, have been obtained;

 

	
  

	
(3)

	
This Agreement constitutes a legal, valid, and binding obligation of such Prosper Party, enforceable against such Prosper Party in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or hereafter in effect, which may affect the enforcement of creditors’ rights in general, and (ii) as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity);

 

  

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(4)

	
There are no proceedings or investigations pending or, to the best knowledge of  such Prosper Party, threatened against such Prosper Party (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by such Prosper Party pursuant to this Agreement, (iii) seeking any determination or ruling that, in the reasonable judgment of such Prosper Party, would materially and adversely affect the performance by such Prosper Party of its obligations under this Agreement, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or (v) except as set forth on Schedule 5(a)(4) with respect to PMI, that would have a materially adverse financial effect on such Prosper Party or its operations if resolved adversely to it;

 

	
  

	
(5)

	
Such Prosper Party is not Insolvent; and

 

	
  

	
(6)

	
The execution, delivery and performance of this Agreement by such Prosper Party comply with Applicable Laws.

 

	 	
(b) 

	
The representations and warranties set forth in this Section 5 shall survive the sale, transfer and assignment of the Loan Accounts to PMI pursuant to this Agreement and, with the exception of those representations and warranties contained in subsection 5(a)(4), shall be made continuously throughout the term of this Agreement.  In the event that any investigation or proceeding of the nature described in subsection 5(a)(4) is instituted or threatened against a Prosper Party, such Prosper Party shall promptly notify Bank of such pending or threatened investigation or proceeding (unless prohibited from doing so by Applicable Laws or the direction of a Regulatory Authority).

 

6.             Conditions Precedent to the Obligations of PMI.

 

	 	
(a) 

	
The obligations of PMI under this Agreement are subject to the satisfaction of the following conditions precedent on or prior to each Closing Date:

 

	
  

	
(1)

	
As of each Closing Date, no action or proceeding shall have been instituted or threatened against PMI or Bank to prevent or restrain the consummation of the transactions contemplated hereby, and, on each Closing Date, there shall be no injunction, decree, or similar restraint preventing or restraining such consummation;

 

	
  

	
(2)

	
The representations and warranties of Bank set forth in Section 4 shall be true and correct in all material respects on each Closing Date as though made on and as of such date; and

 

	
  

	
(3)

	
The obligations of Bank set forth in this Agreement to be performed on or before each Closing Date shall have been performed in all material respects as of such date by Bank.

 

7.             Conditions Precedent to the Obligations of Bank.

 

	 	
(a)

	
The obligations of Bank in this Agreement are subject to the satisfaction of the following conditions precedent on or prior to each Closing Date:

 

  

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(1)

	
As of each Closing Date, no action or proceeding shall have been instituted or threatened against a Prosper Party or Bank to prevent or restrain the consummation of the purchase or other transactions contemplated hereby, and, on each Closing Date, there shall be no injunction, decree, or similar restraint preventing or restraining such consummation;

 

	
  

	
(2)

	
The representations and warranties of the Prosper Parties set forth in the Program Documents shall be true and correct in all material respects on each Closing Date as though made on and as of such date; and

 

	
  

	
(3)

	
The obligations of the Prosper Parties set forth in the Program Documents to be performed on or before each Closing Date shall have been performed in all material respects as of such date by the Prosper Parties.

 

8.             Term and Termination.

 

	 	
(a) 

	
This Agreement shall have an initial term beginning on the Effective Date and ending thirty-six (36) months thereafter (the “Initial Term”) and shall renew automatically for two (2) successive terms of one (1) year each (each a “Renewal Term,” collectively, the Initial Term and Renewal Term(s) shall be referred to as the “Term”), unless PMI provides notice of non-renewal to Bank or Bank provides notice of non-renewal to PMI, in each case, at least ninety (90) days prior to the end of the Initial Term or any Renewal Term or this Agreement is earlier terminated in accordance with the provisions hereof.

 

	 	
(b) 

	
In the event that PMI terminates the Loan Account Program Agreement pursuant to Section 10(c) thereof, this Agreement shall automatically terminate on the effective date of termination of the Loan Account Program Agreement.

 

	 	
(c) 

	
Bank shall have the right to terminate this Agreement immediately upon written notice to the Prosper Parties in any of the following circumstances:

 

	
  

	
(1)

	
any representation or warranty made by a Prosper Party in this Agreement shall be incorrect in any material respect and shall not have been corrected within thirty (30) Business Days after written notice thereof has been given to such Prosper Party;

 

	
  

	
(2)

	
either Prosper Party shall default in the performance of any obligation or undertaking under this Agreement and such default shall continue for thirty (30) Business Days after written notice thereof has been given to such Prosper Party;

 

	
  

	
(3)

	
either Prosper Party shall commence a voluntary case or other proceeding seeking liquidation, reorganization, or other relief with respect to itself or its debts under any bankruptcy, insolvency, receivership, conservatorship or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, conservator, custodian, or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of a trustee, receiver, liquidator,  conservator, custodian, or other similar official or to any involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;

 

  

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(4)

	
an involuntary case or other proceeding, whether pursuant to banking regulations or otherwise, shall be commenced against either Prosper Party seeking liquidation, reorganization, or other relief with respect to it or its debts under any bankruptcy, insolvency, receivership, conservatorship or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, conservator, custodian, or other similar official of it or any substantial part of its property or an order for relief shall be entered against either Party under the federal bankruptcy laws as now or hereafter in effect;

 

	
  

	
(5)

	
there is a materially adverse change in the financial condition of either Prosper Party;

 

	
  

	
(6)

	
any Party has terminated the Loan Account Program Agreement and any applicable notice period provided in the Loan Account Program Agreement has expired; or

 

	
  

	
(7)

	
Bank is deemed to be a “sponsor” or “securitizer” under any rule, regulation or order the Securities and Exchange Commission with respect to any security issued by a Prosper Party.

 

	 	
(d) 

	
PMI shall have the right to terminate this Agreement immediately upon written notice to Bank in any of the following circumstances:

 

	
  

	
(1)

	
any representation or warranty made by Bank in this Agreement shall be incorrect in any material respect and shall not have been corrected within thirty (30) Business Days after written notice thereof has been given to Bank;

 

	
  

	
(2)

	
Bank shall default in the performance of any obligation or undertaking under this Agreement and such default shall continue for thirty (30) Business Days after written notice thereof has been given to Bank;

 

	
  

	
(3)

	
Bank shall commence a voluntary case or other proceeding seeking liquidation, reorganization, or other relief with respect to itself or its debts under any bankruptcy, insolvency, receivership, conservatorship or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, conservator, custodian, or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of a trustee, receiver, liquidator,  conservator, custodian, or other similar official or to any involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;

 

  

7

  

 

	
  

	
(4)

	
an involuntary case or other proceeding, whether pursuant to banking regulations or otherwise, shall be commenced against Bank seeking liquidation, reorganization, or other relief with respect to it or its debts under any bankruptcy, insolvency, receivership, conservatorship or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, conservator, custodian, or other similar official of it or any substantial part of its property or an order for relief shall be entered against Bank under the federal bankruptcy laws as now or hereafter in effect;

 

	
  

	
(5)

	
there is a materially adverse change in the financial condition of Bank; or

 

	
  

	
(6)

	
any Party has terminated the Loan Account Program Agreement and any applicable notice period provided in the Loan Account Program Agreement has expired.

 

	 	
(e) 

	
Bank may terminate this Agreement immediately upon written notice to PMI if PMI defaults on its obligation to make a payment to Bank as provided in Section 2 of this Agreement.

 

	 	
(f) 

	
The termination of this Agreement either in part or in whole shall not discharge any Party from any obligation incurred prior to such termination, including any obligation with respect to Loan Accounts sold prior to such termination.

 

	 	
(g) 

	
Upon termination of this Agreement, PMI shall purchase any Loan Accounts established by Bank under the Loan Account Program Agreement prior to and on the date of termination of the Loan Account Program Agreement that have not already been purchased by PMI and any Loan Accounts originated by Bank after termination of this Agreement, if such Loan Accounts are originated in accordance with Section 10(e) of the Loan Account Program Agreement.

 

	 	
(h) 

	
Bank may terminate this Agreement immediately upon written notice to PMI if Bank incurs any Loss that would have been subject to indemnification under Section 10(a) but for the application of Applicable Laws that limit or restrict Bank’s ability to seek such indemnification.

 

	 	
(i) 

	
The terms of this Section 8 shall survive the expiration or earlier termination of this Agreement.

 

9.             Confidentiality.

 

	 	
(a) 

	
Each Party agrees that Confidential Information of each other Party shall be used by such Party solely in the performance of its obligations and exercise of its rights pursuant to the Program Documents.  Except as required by Applicable Laws or legal process, no Party (the “Restricted Party”) shall disclose Confidential Information of any other Party to third parties; provided, however, that the Restricted Party may disclose Confidential Information of the other Party (i) to the Restricted Party’s Affiliates, agents, representatives or subcontractors for the sole purpose of fulfilling the Restricted Party’s obligations under this Agreement (as long as the Restricted Party exercises reasonable efforts to prohibit any further disclosure by its Affiliates, agents, representatives or subcontractors), provided that in all events, the Restricted Party shall be responsible for any breach of the confidentiality obligations hereunder by any of its Affiliates, agents (other than a Prosper Party as agent for Bank), representatives or subcontractors, (ii) to the Restricted Party’s auditors, accountants and other professional advisors, or to a Regulatory Authority, or (iii) to any other third party as mutually agreed by the Parties.

 

  

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(b) 

	
A Party’s Confidential Information shall not include information that:

 

	
  

	
(1)

	
is generally available to the public;

 

	
  

	
(2)

	
has become publicly known, without fault on the part of the Party who now seeks to disclose such information (the “Disclosing Party”), subsequent to the Disclosing Party acquiring the information;

 

	
  

	
(3)

	
was otherwise known by, or available to, the Disclosing Party prior to entering into this Agreement; or

 

	
  

	
(4)

	
becomes available to the Disclosing Party on a non-confidential basis from a Person, other than a Party to this Agreement, who is not known by the Disclosing Party after reasonable inquiry to be bound by a confidentiality agreement with the non-Disclosing Party or otherwise prohibited from transmitting the information to the Disclosing Party.

 

	 	
(c) 

	
Upon written request or upon the termination of this Agreement, each Party shall, within thirty (30) days, return to each other Party all Confidential Information of the other Party in its possession that is in written form, including by way of example, but not limited to, reports, plans, and manuals; provided, however, that each Party may maintain in its possession all such Confidential Information of each other Party required to be maintained under Applicable Laws relating to the retention of records for the period of time required thereunder or stored on such Party’s network as part of standard back-up procedures (provided that such information shall remain subject to the confidentiality provisions of this Section 9).

 

	 	
(d) 

	
In the event that a Restricted Party is requested or required (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) to disclose any Confidential Information of any other Party, the Restricted Party shall provide such other Party with prompt notice of such request(s) so that the other Party may seek an appropriate protective order or other appropriate remedy and/or waive the Restricted Party’s compliance with the provisions of this Agreement.  In the event that the other Party does not seek such a protective order or other remedy, or such protective order or other remedy is not obtained, or the other Party grants a waiver hereunder, the Restricted Party may furnish that portion (and only that portion) of the Confidential Information of the other Party which the Restricted Party is legally compelled to disclose and shall exercise such efforts to obtain reasonable assurance that confidential treatment shall be accorded any Confidential Information of the other Party so furnished as the Restricted Party would exercise in assuring the confidentiality of any of its own Confidential Information.

 

  

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(e) 

	
Notwithstanding any provisions of this Agreement to the contrary, PFL agrees that PMI may use, retain and disclose all Confidential Information of PFL obtained by PMI without regard to the provisions of this Section 9.

 

	 	
(f) 

	
The terms of this Section 9 shall survive the expiration or earlier termination of this Agreement.

 

10.           Indemnification.

 

	 	
(a) 

	
PMI agrees to defend, indemnify, and hold harmless Bank and its Affiliates, and the officers, directors, employees, representatives, shareholders, agents and attorneys of such entities (the “Indemnified Parties”) from and against any and all claims, actions, liability, judgments, damages, costs and expenses, including reasonable attorneys’ fees (“Losses”) to the extent arising from Bank’s participation in the Program as contemplated by the Program Documents (including Losses arising from a violation of Applicable Laws or a breach by PMI or its agents or representatives of any of PMI’s representations, warranties, obligations or undertakings under the Program Documents, and including Securitization Losses), unless such Loss results from (i) the gross negligence or willful misconduct of Bank, or (ii) Bank’s failure to timely transfer the Funding Amount to the Disbursement Account to the extent required under Section 6(b) of the Loan Account Program Agreement, provided that PMI or PFL, as applicable is not in breach of any of its obligations under the Program Documents, including, but not limited to, PMI’s or PFL’s obligations with respect to the purchase of Loan Accounts under this Agreement or the Stand By Loan Purchase Agreement.

 

	 	
(b) 

	
To the extent permitted by Applicable Laws, any Indemnified Party seeking indemnification hereunder shall promptly notify PMI, in writing, of any notice of the assertion by any third party of any claim or of the commencement by any third party of any legal or regulatory proceeding, arbitration or action, or if the Indemnified Party determines the existence of any such claim or the commencement by any third party of any such legal or regulatory proceeding, arbitration or action, whether or not the same shall have been asserted or initiated, in any case with respect to which PMI is or may be obligated to provide indemnification (an “Indemnifiable Claim”), specifying in reasonable detail the nature of the Loss and, if known, the amount or an estimate of the amount of the Loss; provided, that failure to promptly give such notice shall only limit the liability of PMI to the extent of the actual prejudice, if any, suffered by PMI as a result of such failure.  The Indemnified Party shall provide to PMI as promptly as practicable thereafter information and documentation reasonably requested by PMI to defend against the Indemnifiable Claim.

 

	 	
(c) 

	
PMI shall have ten (10) days after receipt of any notification of an Indemnifiable Claim (a “Claim Notice”) to notify the Indemnified Party of PMI’s election to assume the defense of the Indemnifiable Claim and, through counsel of its own choosing, and at its own expense, to commence the settlement or defense thereof, and the Indemnified Party shall cooperate with PMI in connection therewith if such cooperation is so requested and the request is reasonable; provided that PMI shall hold the Indemnified Party harmless from all its reasonable out-of-pocket expenses, including reasonable attorneys’ fees, incurred in connection with the Indemnified Party’s cooperation; provided, further, that if the Indemnifiable Claim relates to a matter before a Regulatory Authority, the Indemnified Party may elect, upon notice to PMI, to assume the defense of the Indemnifialbe Claim at the cost of and with the cooperation of PMI.  If PMI assumes responsibility for the settlement or defense of any such claim, (i) PMI shall permit the Indemnified Party to participate at the Indemnified Party’s expense in such settlement or defense through counsel chosen by the Indemnified Party; provided that, in the event that both PMI and the Indemnified Party are defendants in the proceeding and the Indemnified Party shall have reasonably determined and notified PMI that representation of both parties by the same counsel would be inappropriate due to the actual or potential differing interests between them, then the fees and expenses of one such counsel for all Indemnified Parties in the aggregate shall be borne by PMI; and (ii) PMI shall not settle any Indemnifiable Claim without the Indemnified Party’s consent.

 

  

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(d) 

	
If PMI does not notify the Indemnified Party within ten (10) days after receipt of the Claim Notice that it elects to undertake the defense of the Indemnifiable Claim described therein, or if PMI fails to contest vigorously any such Indemnifiable Claim, or if the Indemnified Party elects to control the defense of an Indemnifiable Claim as permitted by Section 10(c), then, in each case, the Indemnified Party shall have the right, upon notice to PMI, to contest, settle or compromise the Indemnifiable Claim in the exercise of its reasonable discretion; provided that the Indemnified Party shall notify PMI prior thereto of any compromise or settlement of any such Indemnifiable Claim.  No action taken by the Indemnified Party pursuant to this paragraph (d) shall deprive the Indemnified Party of its rights to indemnification pursuant to this Section 10.

 

	 	
(e) 

	
PMI agrees to defend, indemnify, and hold harmless PFL, Bank and their respective Affiliates, and the officers, directors, employees, representatives, shareholders, agents and attorneys of such entities (the “PMI Indemnified Parties”) from and against any and all claims, actions, liability, judgments, damages, costs and expenses, including reasonable attorneys’ fees (“PMI Losses”) to the extent arising from (I) Securitization Losses or (II) PMI’s actions or nonperformance hereunder (including actions or nonperformance of PFL’s obligations), but solely in its various capacities as corporate administrator, loan servicer or platform administrator on behalf of PFL after the Changeover Date, as contemplated by the Program Documents (including PMI Losses arising from a violation of Applicable Laws or a breach by PMI or its agents or representatives of any of PMI’s representations, warranties, obligations or undertakings under applicable the Program Documents, but solely in its various capacities as corporate administrator, loan servicer or platform administrator), unless such PMI Loss results from (i) in the case of indemnification of PFL or its Affiliates, and the officers, directors, employees, representatives, shareholders, agents and attorneys of such entities, (A) the gross negligence or willful misconduct of PFL, (B) a breach by PFL of any of PFL’s representations, warranties, obligations or undertakings under this Agreement, or (C) a breach by PFL of any of PFL’s other representations, warranties, obligations or undertakings under this Agreement, and (ii) in the case of indemnification of Bank or its Affiliates, and the officers, directors, employees, representatives, shareholders, agents and attorneys of such entities,  (A) the gross negligence or willful misconduct of Bank, or (B) Bank’s failure to timely transfer the Funding Amount to the Disbursement Account to the extent required under Section 6(b) of the Loan Account Program Agreement, provided that the Prosper Parties are not in breach of any of their respective obligations under the Program Documents.

 

  

11

  

 

	 	
(f) 

	
To the extent permitted by Applicable Laws, any PMI Indemnified Party seeking indemnification hereunder shall promptly notify PMI, in writing, of any notice of the assertion by any third party of any claim or of the commencement by any third party of any legal or regulatory proceeding, arbitration or action, or if the PMI Indemnified Party determines the existence of any such claim or the commencement by any third party of any such legal or regulatory proceeding, arbitration or action, whether or not the same shall have been asserted or initiated, in any case with respect to which PMI is or may be obligated to provide indemnification (a “PMI Indemnifiable Claim”), specifying in reasonable detail the nature of the PMI Loss and, if known, the amount or an estimate of the amount of the PMI Loss; provided, that failure to promptly give such notice shall only limit the liability of PMI to the extent of the actual prejudice, if any, suffered by PMI as a result of such failure.  The PMI Indemnified Party shall provide to PMI as promptly as practicable thereafter information and documentation reasonably requested by PMI to defend against the PMI Indemnifiable Claim.

 

	 	
(g)

	
PMI shall have ten (10) days after receipt of any notification of a PMI Indemnifiable Claim (a “PMI Claim Notice”) to notify the PMI Indemnified Party of PMI’s election to assume the defense of the PMI Indemnifiable Claim and, through counsel of its own choosing, and at its own expense, to commence the settlement or defense thereof, and the PMI Indemnified Party shall cooperate with PMI in connection therewith if such cooperation is so requested and the request is reasonable; provided that PMI shall hold the PMI Indemnified Party harmless from all its reasonable out-of-pocket expenses, including reasonable attorneys’ fees, incurred in connection with the PMI Indemnified Party’s cooperation; provided, further, that if the PMI Indemnifiable Claim relates to a matter before a Regulatory Authority, the PMI Indemnified Party may elect, upon notice to PMI, to assume the defense of the PMI Indemnifiable Claim at the cost of and with the cooperation of PMI.  If PMI assumes responsibility for the settlement or defense of any such claim, (i) PMI shall permit the PMI Indemnified Party to participate at the PMI Indemnified Party’s expense in such settlement or defense through counsel chosen by the PMI Indemnified Party; provided that, in the event that both PMI and the PMI Indemnified Party are defendants in the proceeding and the PMI Indemnified Party shall have reasonably determined and notified PMI that representation of both parties by the same counsel would be inappropriate due to the actual or potential differing interests between them, then the fees and expenses of one such counsel for all PMI Indemnified Parties in the aggregate shall be borne by PMI; and (ii) PMI shall not settle any PMI Indemnifiable Claim without the PMI Indemnified Party’s consent.

 

	 	
(h)

	
If PMI does not notify the PMI Indemnified Party within ten (10) days after receipt of the PMI Claim Notice that it elects to undertake the defense of the PMI Indemnifiable Claim described therein, or if PMI fails to contest vigorously any such PMI Indemnifiable Claim, or if the PMI Indemnified Party elects to control the defense of an PMI Indemnifiable Claim as permitted by Section 10(g), then, in each case, the PMI Indemnified Party shall have the right, upon notice to PMI, to contest, settle or compromise the PMI Indemnifiable Claim in the exercise of its reasonable discretion; provided that the PMI Indemnified Party shall notify PMI prior thereto of any compromise or settlement of any such PMI Indemnifiable Claim.  No action taken by the PMI Indemnified Party pursuant to this paragraph (h) shall deprive the PMI Indemnified Party of its rights to indemnification pursuant to this Section 10.

 

  

12

  

 

	 	
(i) 

	
All amounts due under this Section 10 shall be payable not later than ten (10) days after written demand therefor.

 

	 	
(j) 

	
The terms of this Section 10 shall survive the expiration or earlier termination of this Agreement.

 

11.           Assignment.  This Agreement and the rights and obligations created under it shall be binding upon and inure solely to the benefit of the Parties and their respective successors, and permitted assigns.  Except as set forth in Section 32 hereof, none of the Parties shall be entitled to assign or transfer any rights or obligations under this Agreement (including by operation of law) without the prior written consent of the other Parties, which shall not be unreasonably withheld or delayed.  Except as set forth in Section 32 hereof, no assignment made in conformity with this Section 11 shall relieve a Party of its obligations under this Agreement.  

 

12.           Third Party Beneficiaries.  Nothing contained herein shall be construed as creating a third-party beneficiary relationship between any Party and any other Person.

 

13.           Proprietary Materials. Bank hereby provides the Prosper Parties with a non-exclusive right and non-assignable license to use and reproduce Bank’s name, logo, registered trademarks and service marks (collectively “Marks”) as necessary to fulfill the Party’s obligations under this Agreement; provided, however, that (a) the Prosper Parties shall obtain Bank’s prior written approval for the use of Bank’s Marks and such use shall at all times comply with written instructions provided by Bank regarding the use of its Marks; and (b) the Prosper Parties acknowledge that, except as specifically provided in this Agreement, the shall acquire no interest in Bank’s Marks.  Upon termination of this Agreement, the Prosper Parties shall cease using Bank’s Marks.  No Party may use another Party’s Marks in any press release without the prior written consent of the other Parties.

 

14.           Notices.  All notices and other communications that are required or may be given in connection with this Agreement shall be in writing and shall be deemed received (a) on the day delivered, if delivered by hand; (b) or the day transmitted, if transmitted by facsimile or e-mail with receipt confirmed; or (c) three (3) Business Days after the date of mailing to the other party, if mailed first-class mail postage prepaid, at the following address, or such other address as either party shall specify in a notice to the other:

 

	 	
To Bank:

	  	
WebBank

	 
	 	  	  	
Attn: Senior Vice President – Strategic 
Partners

	 
	 	  	  	
215 S. State Street, Suite 800

	 
	 	  	  	
Salt Lake City, UT  84111

	 
	 	  	  	
Tel. (801) 456-8398

	 
	 	  	  	
Fax:  (801) 456-8398

	 
	 	  	  	
Email:  strategicpartnerships@webbank.com

	 
	 	 	 	 	 
	 	 	 	
With a copy to:

	 
	 	 	 	
WebBank

	 
	 	 	 	

Attn:  Compliance Officer

	 
	 	 	 	

215 S. State Street, Suite 800

	 
	 	 	 	

Salt Lake City, UT  84111

	 
	 	 	 	

Tel. (801) 456-8363

	 
	 	 	 	

Fax:  (801) 456-8363

	 
	 	 	 	

Email:  complianceofficer@webbank.com

	 
	 	 	 	 	 
	 	

To PMI or PFL:

	 	

c/o Prosper Marketplace, Inc.

	 
	 	 	 	

111 Sutter Street, 22nd Floor

	 
	 	 	 	

San Francisco, CA  94104

	 
	 	 	 	

Attn:  Kirk T. Inglis

	 
	 	 	 	

E-mail Address:  kirk@prosper.com

	 
	 	 	 	

Telephone:  (415) 593-5432

	 
	 	 	 	

Facsimile:  (415) 362-7233

	 

 

  

13

  

 

15.           Relationship of Parties.  The Parties agree that in performing their respective responsibilities pursuant to this Agreement, they are in the position of independent contractors.  This Agreement is not intended to create, nor does it create and shall not be construed to create, a relationship of partner or joint venturer or any association for profit between and among Bank and the Prosper Parties.

 

16.           Retention of Records.  Any Records with respect to Loan Accounts purchased by PMI pursuant hereto retained by Bank shall be held as custodian for the account of Bank and PMI as owners thereof.  Bank shall provide copies of Records to PMI upon reasonable request of PMI.

 

17.           Agreement Subject to Applicable Laws.  If (a) any Party has been advised by legal counsel of a change in Applicable Laws or any judicial decision of a court having jurisdiction over such Party or any interpretation of a Regulatory Authority that, in the view of such legal counsel, would have a materially adverse effect on the rights or obligations of such Party under this Agreement or the financial condition of such Party, (b) any Party receives a request of any Regulatory Authority having jurisdiction over such Party, including any letter or directive of any kind from any such Regulatory Authority, that prohibits or restricts such Party from carrying out its obligations under this Agreement, or (c) any Party has been advised by legal counsel that there is a material risk that such Party’s or any other Party’s continued performance under this Agreement would violate Applicable Laws, then the affected Party shall provide written notice to each other Party of such advisement or request and the Parties shall meet and consider in good faith any modifications, changes or additions to the Program or the Program Documents that may be necessary to eliminate such result.  Notwithstanding any other provision of the Program Documents, including Section 8 hereof, if the Parties are unable to reach agreement regarding such modifications, changes or additions to the Program or the Program Documents within ten (10) Business Days after the Parties initially meet, any Party may terminate this Agreement upon five (5) days’ prior written notice to the other Parties.  A Party may suspend performance of its obligations under this Agreement, or require each other Party to suspend its performance of its obligations under this Agreement, upon providing the other Parties with advance written notice, if any event described in subsection 17(a), (b) or (c) above occurs.

 

18.           Expenses.    

 

	 	
(a) 

	
Each Party shall bear the costs and expenses of performing its obligations under this Agreement, unless expressly provided otherwise in the Program Documents.

 

	 	
(b) 

	
Each Party shall be responsible for payment of any federal, state, or local taxes or assessments associated with the performance of its obligations under this Agreement.

 

  

14

  

 

19.           Examination.  Each Party agrees to submit to any examination that may be required by a Regulatory Authority having jurisdiction over any other Party, during regular business hours and upon reasonable prior notice, and to otherwise provide reasonable cooperation to such other Party in responding to such Regulatory Authority’s inquiries and requests related to the Program.

 

20.           Inspection; Reports.  Each Party, upon reasonable prior notice from any other Party, agrees to submit to an inspection of its books, records, accounts, and facilities relevant to the Program, from time to time, during regular business hours subject to the duty of confidentiality such Party owes to its customers and banking secrecy and confidentiality requirements otherwise applicable to such Party under Applicable Laws.  All expenses of inspection shall be borne by the Party conducting the inspection.  Notwithstanding the obligation of each Party to bear its own expenses of inspection, PMI shall reimburse Bank for reasonable out of pocket expenses incurred by Bank in the performance of periodic on site reviews of PMI’s financial condition, operations and internal controls, not to exceed the maximum amount per visit of [*].

 

21.           Governing Law; Waiver of Jury Trial.  This Agreement shall be interpreted and construed in accordance with the laws of the State of Utah, without giving effect to the rules, policies, or principles thereof with respect to conflicts of laws.  THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING HEREUNDER.  The terms of this Section 21 shall survive the expiration or earlier termination of this Agreement.

 

22.           Manner of Payments.  Unless the manner of payment is expressly provided herein, all payments under this Agreement shall be made by wire transfer to the bank accounts designated by the respective Parties.  Notwithstanding anything to the contrary contained herein, no Party shall fail to make any payment required of it under this Agreement as a result of a breach or alleged breach by any other Party of any of its obligations under this Agreement or any other agreement, provided that the making of any payment hereunder shall not constitute a waiver by the Party making the payment of any rights it may have under the Program Documents or by law.

 

23.           Brokers.  None of the Parties has agreed to pay any fee or commission to any agent, broker, finder, or other person for or on account of services rendered as a broker or finder in connection with this Agreement or the transactions contemplated hereby that would give rise to any valid claim against any other Party for any brokerage commission or finder’s fee or like payment.

 

24.           Entire Agreement.  The Program Documents, including this Agreement and its schedules and exhibits (all of which schedules and exhibits are hereby incorporated into this Agreement), constitute the entire agreement among the Parties with respect to the subject matter hereof, and supersede any prior or contemporaneous negotiations or oral or written agreements with regard to the same subject matter.

 

25.           Amendment and Waiver. Except as set forth in Section 32 hereof, this Agreement may be amended only by a written instrument signed by all of the Parties. The failure of a Party to require the performance of any term of this Agreement or the waiver by a Party of any default under this Agreement shall not prevent a subsequent enforcement of such term and shall not be deemed a waiver of any subsequent breach. All waivers must be in writing and signed by the Party against whom the waiver is to be enforced.

 

	
*

	
Confidential Treatment Requested

 

  

15

  

 

26.           Severability.  Any provision of this Agreement which is deemed invalid, illegal or unenforceable in any jurisdiction, shall, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining portions hereof in such jurisdiction or rendering such provision or any other provision of this Agreement invalid, illegal, or unenforceable in any other jurisdiction.

 

27.           Interpretation.  The Parties acknowledge that each Party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments thereto, and the same shall be construed neither for nor against any Party, but shall be given a reasonable interpretation in accordance with the plain meaning of its terms and the intent of the Parties.

 

28.           Jurisdiction; Venue.  The Parties consent to the personal jurisdiction and venue of the federal and state courts in Salt Lake City, Utah for any court action or proceeding.  The terms of this Section 28 shall survive the expiration or earlier termination of this Agreement.

 

29.           Headings.  Captions and headings in this Agreement are for convenience only and are not to be deemed part of this Agreement.

 

30.           Counterparts.  This Agreement may be executed and delivered by the Parties in any number of counterparts, and by different parties on separate counterparts, each of which counterpart shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument.

 

31.           Financial Statements. (a) Within ninety (90) days following the end of PFL’s fiscal year, PFL shall deliver to Bank a copy of PFL’s audited financial statements prepared by an independent certified public accountant, and (b) within forty-five (45) days following the end of each of PFL’s fiscal quarters (other than year-end), PFL shall deliver to Bank a copy of PFL’s unaudited financial statements, in each case as of the year or quarter then ended and prepared in accordance with generally accepted accounting principles; provided that, as long as PFL is required to file periodic reports under the Securities Exchange Act of 1934, such filings shall satisfy the financial statement delivery requirements set forth above.  PFL shall also deliver such additional unaudited financial statements and other information as Bank may request from time to time, within a reasonable period of time following such request.

 

32.           New Public Offering.

 

	 	
(a) 

	
On the Changeover Date, this Agreement shall automatically be amended as follows, effective as of the Changeover Date:

 

  

16

  

 

	
  

	
(1)

	
Except as set forth in subparagraph (4) through (6) below, all duties, obligations, covenants, representations and warranties of PMI hereunder shall be assigned by PMI to, and shall be fully assumed by, PFL, upon which assumption, PMI shall be fully released and discharged from any and all such duties, obligations, covenants, representations and warranties to the extent relating to any period, or any acts or omissions occurring, subsequent to such assignment and assumption;

 

	
  

	
(2)

	
Except as stated in subparagraphs (4) through (6) below, PMI shall assign to PFL all of its rights under this Agreement, and all covenants, representations and warranties made by Bank for the benefit of PMI shall be deemed to be made by it for the benefit of PFL;

 

	
  

	
(3)

	
Except as stated in subparagraphs (4) through (6) below, all references to PMI in this Agreement shall be deemed references to PFL;

 

	
  

	
(4)

	
The obligations and rights of PMI under Sections 10(e) through (h) hereof shall not be assigned to PFL; rather PMI shall remain solely liable to PFL and Bank in respect of such obligations and shall remain solely entitled to exercise any rights of PMI set forth in Sections 10(e) through (h);  For the avoidance of doubt, the Parties hereby acknowledge and agree that the obligations of PMI under Sections 10(a) through (d) hereof shall be assumed by PFL.  After the Changeover Date, PFL shall provide to Bank the indemnity set forth in Sections 10(a) through (d).  The references to “PMI” in Sections 10(a) through (d) shall thereafter refer to “PFL” (not “PMI”), except with respect to the references to “PMI” in Section 10(a)(ii), which shall not be deemed to be replaced with “PFL”;

 

	
  

	
(5)

	
All references to “PMI” in the introductory paragraph, the recitals, Sections 5(a)(1), 5(a)(4), 8(b), 9(e) and 14, this Section 32, the signature page and Schedule 5(a)(4) of this Agreement shall not be deemed to be replaced with “PFL” but shall continue to be references to PMI; and

 

	
  

	
(6)

	
PMI shall remain obligated to perform, and shall remain entitled to exercise, from and after the Changeover Date any obligations or rights that apply to it in its capacity as a “Party” or a “Prosper Party” as stated in this Agreement, and any obligation or rights arising prior to the Changeover Date.

 

	 	
(b) 

	
Bank acknowledges and agrees that PFL and PMI are separate legal entities and that neither Prosper Party has guaranteed the performance by the other Prosper Party of its obligations hereunder.  Accordingly, Bank agrees that (i) PFL shall have no liability for the performance by PMI of its obligations, and (ii) subject to Section 10, PMI shall have no liability for the performance by PFL of its obligations.

 

	 	
(c) 

	
The Prosper Parties shall written notice to the Bank of the Changeover Date at least ten (10) Business Days in advance thereof.

 

33.           Performance By Servicer.  Bank acknowledges and agrees that after the Changeover Date (a) PMI will continue to perform its obligations under the Sections listed in Sections 32(a)(4) through (6) as party to this Agreement for and on behalf of itself, and (b) PMI may perform, on behalf of PFL, any obligations of PFL to Bank under this Agreement (other than payment obligations), but solely in its various capacities as corporate administrator, loan servicer, platform administrator or similar capacity under any administration, corporate administration, loan servicing, platform administration or similar agreement entered into between PMI and PFL pursuant to which PFL appoints PMI as corporate administrator, loan servicer, platform administrator or in a similar capacity to provide corporate administration, loan servicing, platform administration or similar services to PFL in relation to the New Public Offering.  The Prosper Parties may not amend the Servicing Agreement or transfer the corporate administration, loan servicing, platform administration or similar services to any party other than PMI or PFL without the written consent of Bank.

 

  

17

  

 

34.           Limited Recourse.  The obligations of PFL under this Agreement are solely the obligations of PFL.  No recourse shall be had for the payment of any amount owing by PFL under this Agreement, or any other obligation of or claim against PFL arising out of or based upon this Agreement, against any organizer, member, director, officer, manager or employee of PFL 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.  Each of Bank and PMI agrees that PFL shall be liable for any claims against PFL only to the extent that PFL has funds available to pay such claims at any time.  PFL agrees that Bank shall have recourse to the Control Account as permitted under the Control Account Agreement.  The terms of this Section 34 shall survive any termination of this Agreement.

 

35.           No Petition.  Each of Bank and PMI hereby covenants and agrees that it will not institute against, or join or assist any other Person in instituting against, PFL 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 borrower payment dependent notes of PFL have been paid in full.  The terms of this Section 35 shall survive any termination of this Agreement.

 

[Signature Page Follows]

 

  

18

  

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized officers as of the date first written above.

 

WEBBANK

 

	
By:

	 	  	  
	
Name:

	 	  	  
	
Title:

	 	  	  

 

PROSPER MARKETPLACE, INC.

	
By:

	 	  	  
	
Name:

	 	  	  
	
Title:

	 	  	  

 

PROSPER FUNDING LLC

 

	
By:

	  	  	  
	
Name:

	  	  	  
	
Title:

	  	  	  

 

  

  

  

 

Schedule 1

 

Definitions

 

	 	
(a) 

	
“ACH” means the Automated Clearinghouse.

 

	 	
(b) 

	
“Affiliate” means, with respect to a Party, a Person who directly or indirectly controls, is controlled by or is under common control with the Party.  For the purpose of this definition, the term “control” (including with correlative meanings, the terms controlling, controlled by and under common control with) means the power to direct the management or policies of such Person, directly or indirectly, through the ownership of twenty-five percent (25%) or more of a class of voting securities of such Person.

 

	 	
(c) 

	
“Agreement” has the meaning set forth in the introductory paragraph.

 

	 	
(d) 

	
“Applicable Laws” means all federal, state and local laws, statutes, regulations and orders applicable to a Party or relating to or affecting any aspect of the Program (including the Loan Accounts), and all requirements of any Regulatory Authority having jurisdiction over a Party, as any such laws, statutes, regulations, orders and requirements may be amended and in effect from time to time during the term of this Agreement.

 

	 	
(e) 

	
“Borrower” means an Applicant or other Person for whom Bank has established a Loan Account and/or who is liable, jointly or severally, for amounts owing with respect to a Loan Account.

 

	 	
(f) 

	
“Business Day” means any day, other than (i) a Saturday or Sunday, or (ii) a day on which banking institutions in the State of Utah are authorized or obligated by law or executive order to be closed.

 

	 	
(g) 

	
“Claim Notice” shall have the meaning set forth in subsection 10(c).

 

	 	
(h) 

	
“Closing Date” means each date on which PMI pays Bank the Purchase Price for a Loan Account and, pursuant to Section 2 hereof, acquires such Loan Account from Bank.

 

	 	
(i) 

	
“Confidential Information” means the terms and conditions of this Agreement, and any proprietary information or non-public information of a Party, including a Party’s proprietary marketing plans and objectives, that is furnished to  another Party in connection with this Agreement.

 

	 	
(j) 

	
“Changeover Date” means the date on which the New Public Offering commences.

 

	 	
(k) 

	
“Control Account” means an account established by PMI and held at the Control Institution in accordance with the terms of the Control Account Agreement.

 

	 	
(l) 

	
“Control Account Agreement” means the account agreement attached hereto as Exhibit A.

 

  

  

  

 

	 	
(m) 

	
“Control Institution” means the depository institution at which the Control Account is established, which initially shall be Wells Fargo Bank, N.A., and may be changed by agreement among the Parties.

 

	 	
(n) 

	
“Disclosing Party” shall have the meaning set forth in subsection 9(b)(2).

 

	 	
(o) 

	
“Effective Date” shall have the meaning set forth in the introductory paragraph of this Agreement.

 

	 	
(p) 

	
“Existing Program Agreement” means the Amended and Restated Loan Account Program Agreement dated as of September 14, 2010 between Bank and PMI.

 

	 	
(q) 

	
“Existing Sale Agreement” shall have the meaning set forth in the recitals to this Agreement.

 

	 	
(r) 

	
“Funding Date” shall have the meaning set forth in the Loan Account Program Agreement.

 

	 	
(s) 

	
“Holding Period Interest Charge” means, for each Loan Account purchased by PMI from Bank hereunder, [*].

 

	 	
(t) 

	
“Indemnifiable Claim” shall have the meaning set forth in subsection 10(b).

 

	 	
(u) 

	
“Indemnified Parties” shall have the meaning set forth in subsection 10(a).

 

	 	
(v) 

	
“Insolvent” means the failure to pay debts in the ordinary course of business, the inability to pay its debts as they come due or the condition whereby the sum of an entity’s debts is greater than the sum of its assets.

 

	 	
(w) 

	
“Loan Account” means a consumer installment loan account established by Bank pursuant to the Loan Account Program Agreement.  For purposes of this Agreement, each Loan Account includes all rights of Bank to payment under the applicable Loan Account Agreement with such Borrower.

 

	 	
(x) 

	
“Loan Account Agreement” means the document containing the terms and conditions of a Loan Account including all disclosures required by Applicable Laws.

 

	 	
(y) 

	
“Loan Account Program Agreement” shall have the meaning set forth in the recitals to this Agreement.

 

	 	
(z) 

	
“Losses” shall have the meaning set forth in subsection 10(a).

 

	 	
(aa) 

	
“Marks” shall have the meaning set forth in Section 13.

 

	
*

	
Confidential Treatment Requested

 

  

2

  

 

	 	
(bb) 

	
“New Public Offering” shall have the meaning set forth in the recitals to this Agreement.

 

	 	
(cc) 

	
“Party” means PFL, PMI or Bank and “Parties” means PFL, PMI and Bank.

 

	 	
(dd) 

	
“Person” means any legal person, including any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, governmental entity, or other entity of similar nature.

 

	 	
(ee) 

	
“Program” means the consumer installment loan program contemplated by the Program Documents pursuant to which Bank shall establish Loan Accounts and disburse Loan Proceeds to Borrowers.

 

	 	
(ff) 

	
“Program Documents” means the Loan Account Program Agreement, the Stand By Loan Purchase Agreement, and this Agreement.

 

	 	
(gg) 

	
“Prosper Parties” means PFL and PMI.

 

	 	
(hh) 

	
“Purchase Price” means, with respect to a Loan Account, the sum of (i) the principal amount of the Loan Proceeds disbursed pursuant to such Loan Account, (ii) the related Origination Fee and (iii) the Holding Period Interest Charge for such Loan Account.

 

	 	
(ii) 

	
“Records” means any Loan Account Agreements, applications, change-of-terms notices, credit files, credit bureau reports, transaction data, records, or other documentation (including computer tapes, magnetic files, and information in any other format).

 

	 	
(jj) 

	
“Regulatory Authority” means any federal, state or local regulatory agency or other governmental agency or authority having jurisdiction over a Party and, in the case of Bank, shall include, but not be limited to, the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation.

 

	 	
(kk) 

	
“Restricted Party” shall have the meaning set forth in subsection 9(a).

 

	 	
(ll) 

	
“Securitization Losses” means Losses or PMI Losses that arise as a result of or in connection with (i) any security issued by a Prosper Party, (ii) any security issued by a Prosper Party being deemed to be an “asset-backed security” (as defined under 17 C.F.R. § 229.1101(c) or Section 3(a)(77) of the Securities Exchange Act of 1934) or (iii) Bank being deemed to be a “sponsor” or “securitizer” under any rule, regulation or order the Securities and Exchange Commission with respect to any security issued by a Prosper Party.

 

	 	
(mm) 

	
“Servicing Agreement” means any administration, corporate administration, loan servicing, platform administration or similar agreement pursuant to which PFL appoints PMI as corporate administrator, loan servicer, platform administrator or in a similar capacity to provide services to PFL in relation to the Loan Accounts and the New Public Offering.

 

	 	
(nn) 

	
“Stand By Loan Purchase Agreement” means that Stand By Loan Purchase Agreement, dated as of even date herewith, between Bank and PMI.

  

3

  

 

II.           Construction

 

As used in this Agreement:

	
  

	
(a)

	
All references to the masculine gender shall include the feminine gender (and vice versa);

	
  

	
(b)

	
All references to “include,” “includes,” or “including” shall be deemed to be followed by the words “without limitation”;

	
  

	
(c)

	
References to any law or regulation refer to that law or regulation as amended from time to time and include any successor law or regulation;

	
  

	
(d)

	
References to “dollars” or “$” shall be to United States dollars unless otherwise specified herein;

	
  

	
(e)

	
Unless otherwise specified, all references to days, months or years shall be deemed to be preceded by the word “calendar”;

	
  

	
(f)

	
All references to “quarter” shall be deemed to mean calendar quarter; and

	
  

	
(g)

	
The fact that a Party has provided approval or consent shall not mean or otherwise be construed to mean that: (i) such Party has performed any due diligence with respect to the requested or required approval or consent, as applicable; (ii) such Party agrees that the item or information for which the other Party seeks approval or consent complies with any Applicable Laws; (iii) such Party has assumed the other Party’s obligations to comply with all Applicable Laws arising from or related to any requested or required approval or consent; or (iv) except as otherwise expressly set forth in such approval or consent, such Party’s approval or consent impairs in any way such Party’s rights or remedies under the Agreement, including indemnification rights for PMI’s or PFL’s failure to comply with all Applicable Laws.

 

  

4

  

 

Schedule 2

 

The following terms shall apply as if fully set forth in the Agreement:

 

	
  

	
(a)

	
Bank hereby agrees to sell, transfer, assign, set-over, and otherwise convey to PMI, without recourse and with servicing released, on each Closing Date, the Loan Accounts established by Bank [*].  All of the foregoing shall be in accordance with the procedures set forth in this Schedule 2 and Section 2 of the Agreement.  In consideration for Bank’s agreement to sell, transfer, assign, set-over and convey to PMI such Loan Accounts, PMI agrees to purchase such Loan Accounts from Bank, and PMI shall pay to Bank the Purchase Price in accordance with subsections 2(b) and 2(c) of the Agreement.

 

	 	
(b) 

	
[*], PMI shall pay Bank a monthly fee, which shall be calculated as follows:

 

	 	
(i) 

	
[*];

 

	 	
(ii) 

	
[*];

 

	 	
(iii) 

	
[*].

 

	 	
(c) 

	
[*].

 

	 	
(d) 

	
With each such monthly payment, PMI shall deliver to Bank a report setting forth the calculation of the payment PMI is obligated to make to Bank pursuant to this Schedule 2.

 

	 	
(e) 

	
If the Changeover Date does not occur at the opening of business on the first day of a calendar month, the monthly fee due from the Prosper Parties pursuant to subparagraph (b) above for the calendar month in which the Changeover Date occurs shall be allocated between them pro rata with reference to the Funding Amount of the Loan Accounts purchased by each of them in such month.

 

	
*

	
Confidential Treatment Requested

 

  

5

  

 

Schedule 5(a)(4)

Litigation

On November 26, 2008, plaintiffs, Christian Hellum, William Barnwell and David Booth, individually and on behalf of all other plaintiffs similarly situated, filed a class action lawsuit against PMI and certain of its executive officers and directors in the Superior Court of California, County of San Francisco, California.  The suit was brought on behalf of all persons who had purchased loan notes through PMI’s platform from January 1, 2006 through October 14, 2008.  The lawsuit alleges that PMI offered and sold unqualified and unregistered securities in violation of the California and federal securities laws.  The lawsuit seeks damages and the right of rescission against PMI and the other named defendants, as well as treble damages against PMI and the award of attorneys’ fees, experts’ fees and costs, and pre-judgment and post-judgment interest.

On February 25, 2011, the plaintiffs filed a Third Amended Complaint, which removed David Booth as a plaintiff and added Brian Russom and Michael Del Greco as plaintiffs.  The new plaintiffs are representing the same putative class and prosecuting the same claims as the previously named plaintiffs. On February 29, 2012, the court granted the plaintiffs’ motion for class certification.

PMI’s insurance carrier with respect to the class action lawsuit, Greenwich Insurance Company (“Greenwich”), denied coverage.  On August 21, 2009, PMI filed suit against Greenwich in the Superior Court of California, County of San Francisco, California.  The lawsuit sought a declaration that PMI was entitled to coverage under its policy with Greenwich for losses arising out of the class action lawsuit as well as damages and the award of attorneys’ fees and pre- and post-judgment interest.

On January 26, 2011, the court issued a final statement of decision finding that Greenwich has a duty to defend the class action lawsuit, and requiring that Greenwich pay PMI’s past and future defense costs in the class action suit up to $2 million.  Greenwich subsequently made payments to PMI in the amount of $2 million to reimburse PMI for the defense costs it had incurred in the class action suit.  As a result, Greenwich has now satisfied its obligations with respect to PMI’s defense costs for the Hellum suit, with the exception of $142,584 in pre-judgment interest that Greenwich will be required to pay to PMI when a final judgment has been entered in the suit and all appeals have been exhausted.

On July 1, 2011, PMI and Greenwich entered into a Stipulated Order of Judgment pursuant to which PMI agreed to dismiss its remaining claims against Greenwich.  On August 12, 2011, Greenwich filed a notice of appeal of the court’s decision regarding Greenwich’s duty to defend up to $2 million. On July 16, 2012, the California Court of Appeal affirmed the trial court’s decision.

 

  

  

  

 

Exhibit A

Control Account Agreementex10_10.htm

Exhibit 10.10

 

CONFIDENTIAL TREATMENT REQUESTED

 

 

WEBBANK

 

and

 

PROSPER MARKETPLACE, INC.

 

 

SECOND AMENDED AND RESTATED

LOAN ACCOUNT PROGRAM AGREEMENT

 

 

Dated as of ______________ __, 2012

 

  

  

  

 

SCHEDULES AND EXHIBITS

 

	 	
SCHEDULE 1

	 	
Definitions

	 
	 	 	 	 	 
	 	
SCHEDULE 7(b)(4)

	 	
Litigation

	 
	 	 	 	 	 
	 	
EXHIBIT A

	 	
The Program Website

	 
	 	 	 	 	 
	 	
EXHIBIT B

	 	
Credit Policy

	 
	 	 	 	 	 
	 	
EXHIBIT C

	 	
Form of Application

	 
	 	 	 	 	 
	 	
EXHIBIT D

	 	
Loan Account Documentation

	 
	 	 	 	 	 
	 	
EXHIBIT E

	 	
Sample Funding Statement

	 
	 	 	 	 	 
	 	
EXHIBIT F

	 	
Insurance Requirements

	 
	 	 	 	 	 
	 	
EXHIBIT G

	 	
Program Compliance Manual

	 
	 	 	 	 	 
	 	
EXHIBIT H

	 	
Third-Party Service Contractors

	 
	 	  	 	  	 
	 	
EXHIBIT I

	 	
Bank Secrecy Act Policy

	 

 

  

  

  

 

This SECOND AMENDED AND RESTATED LOAN ACCOUNT PROGRAM AGREEMENT (this “Agreement”), dated as of ___________ ____, 2012 (“Effective Date”), is made by and between WEBBANK, a Utah-chartered industrial bank having its principal location in Salt Lake City, Utah (“Bank”), and PROSPER MARKETPLACE, INC., a Delaware corporation, having its principal location in San Francisco, California (“Company”).

 

WHEREAS, Company is in the business of providing certain services necessary for the origination of consumer installment loans;

 

WHEREAS, Bank is in the business of originating various types of consumer loans, including installment loans;

 

WHEREAS, Bank and Company have entered into an Amended and Restated Loan Account Program Agreement, dated as of September 14, 2010,  pursuant to which Bank originates installment loans for qualifying consumers identified by Company, and Company markets and provides an online interface and certain other operational services in support of such loan program (the “Existing Program Agreement”); and

 

WHEREAS, effective as of the Effective Date, the Parties desire to amend and restate the terms of the Existing Program Agreement on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions and mutual covenants and agreements herein contained, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bank and Company mutually agree as follows:

 

        

	
1.

	
Definitions; Effectiveness.

 

	
  

	
(a)

	
The terms used in this Agreement shall be defined as set forth in Schedule 1, and the rules of construction set forth in Schedule 1 shall apply to this Agreement.

 

	
  

	
(b)

	
This Agreement shall be effective as of the Effective Date and, as of the Effective Date, shall supersede and replace the Existing Program Agreement.  This Agreement shall apply to all Loan Accounts originated by Bank during the term of this Agreement, beginning on the Effective Date.  Loans originated on or after the Effective Date shall not be subject to the Existing Program Agreement.

 

	
  

	
(c)

	
All Loan Accounts originated by Bank prior to the Effective Date shall be governed by the terms of the Existing Program Agreement as in effect at the time that such Loan Accounts were originated, and shall not be subject to the terms of this Agreement.

 

	
  

	
(d)

	
This Agreement shall not operate so as to render invalid or improper any action heretofore taken under the Existing Program Agreement.

 

	
2.

	
Program Marketing and Services.

 

	
  

	
(a)

	
Bank hereby retains Company to serve as Bank’s marketing and operations vendor for the Program.  As such, Company shall perform the following services for Bank and the Program:

 

  

1

  

 

	
  

	
(1)

	
Company shall promote and otherwise market the Program and the Loan Accounts at Company’s own cost.  In performing such promotion and other marketing services, (A) Company may devote such monetary and other resources as it deems appropriate in its sole discretion; and (B) Company may use any form of media, provided that Company shall discontinue the use of any specific form of media or media channel if directed to do so by Bank.  Company’s promotion and marketing efforts shall not be required to produce any minimum number of Loan Accounts or other benefits to the Program during the Term of this Agreement or any year, month, or other period under this Agreement.  Company may refer to Bank and the Program in promotional and marketing materials, including marketing scripts, upon the condition that any references to Bank and/or the Program in any such materials (and any changes in such materials) must receive the prior written approval of Bank; provided, however, that Bank’s prior written approval shall not be required with respect to lender- oriented communications by Company to its existing customers unless such communications also contain any information (i) directed towards, or about, Borrowers or Applicants, or (ii) describing or otherwise about the application process, in which case Bank’s prior written approval of such communications shall be required.  Bank may require a change in such materials upon written notice provided to Company to the extent that such change is required by Applicable Laws, or to the extent that Bank determines such change is necessitated by safety and soundness concerns.  Company shall ensure that all promotional and marketing materials shall be accurate and not misleading in all material respects.  Company shall ensure that all promotional and marketing materials and strategies comply with Applicable Laws.

 

	
  

	
(2)

	
Company shall host and maintain the Program Website and provide customer support, regulatory compliance, administrative, and other operational services to support Bank’s origination of Loan Accounts and the Program generally.  Company shall provide such services in a manner consistent with Company’s obligations specified in this Agreement and as the Parties may mutually agree in writing from time to time.

 

	
  

	
(b)

	
Bank acknowledges and agrees that (i) pursuant to Section 12 of this Agreement, Company is licensing to Bank valuable Proprietary Material of Company for use in the marketing and operation of the Program, which includes but is not limited to use of the Program Website; (ii) because the value of such Proprietary Material may be affected by Bank’s lending activities under the Program, Company requires Bank to perform and Bank hereby agrees to perform Bank’s lending activities under the Program with due regard to Company’s interests in such Proprietary Material and in close coordination with Company as specified hereafter in this Agreement; and (iii) the compensation to be paid by Bank to Company under this Agreement is in consideration of Company’s licensing of such Proprietary Material to Bank as well as Company’s marketing and operational services to Bank and the Program under this Agreement.

 

	
3.

	
Extension of Credit.  Company acknowledges that approval of an Application creates a creditor-borrower relationship between Bank and Borrower which involves, among other things, the disbursement of Loan Proceeds.  Nothing in this Agreement shall obligate Bank to extend credit to an Applicant or disburse Loan Proceeds if Bank determines that doing so would be an unsafe or unsound banking practice or that such extension of credit would be in violation of the Credit Policy.  Bank shall use reasonable commercial efforts to provide Company prior notice of a decision not to extend credit to an Applicant or disburse Loan Proceeds in reliance on the preceding sentence and, in all instances where Bank does not provide such prior notice, Bank shall provide Company prompt notice after making a decision not to extend credit to an Applicant or disburse Loan Proceeds in reliance on the preceding sentence.

 

  

2

  

 

	
4.

	
Consumer Documents and Credit Policy.  The following documents, terms and procedures (“Consumer Finance Materials”) that have been approved by Bank and that will be used by Bank initially with respect to the Loan Accounts are attached to this Agreement:  (i) the Program Website (screen shots of each page of the Program Website) as Exhibit A; (ii) Credit Policy as Exhibit B; (iii) form of Application, including disclosures required by Applicable Laws, as Exhibit C; and (iv) form of Loan Account Agreement, privacy policy and privacy notices, and all other Applicant and Borrower communications as Exhibit D.  The Consumer Finance Materials shall not be changed without the prior written consent of both Parties, which consent shall not be unreasonably withheld or delayed; provided, however, that Bank may change the Consumer Finance Materials upon written notice provided to Company but without Company’s prior written consent, to the extent that such change is required by Applicable Laws or necessitated by safety and soundness concerns.  The Parties acknowledge that each Loan Account Agreement and all other documents referring to the creditor for the Program shall identify Bank as the creditor for the Loan Accounts.  Company shall ensure that the Consumer Finance Materials comply with Applicable Laws.

 

	
5.

	
Loan Account Processing and Origination.

 

	
  

	
(a)

	
On behalf of Bank, Company shall process Applications received from Applicants via the Program Website (including retrieving credit reports) to determine whether the Applicant meets the eligibility criteria set forth in the Credit Policy and Bank’s “Know Your Customer” and anti-money laundering criteria (collectively, the “Bank Secrecy Act Policy”), which is attached hereto as Exhibit I, and which may be updated by Bank from time to time and such updates shall be effective upon notice to Company as set forth herein.  Company shall respond to all inquiries from Applicants regarding the application process.

 

	
  

	
(b)

	
Company shall forward to Bank mutually agreed information including name, address, social security number and date of birth, regarding Applicants who meet the eligibility criteria set forth in the Credit Policy.  Company shall have no discretion to override the Credit Policy with respect to any Applications.

 

	
  

	
(c)

	
Subject to the terms of this Agreement, Bank shall establish Loan Accounts with respect to Applicants who meet the eligibility criteria set forth in the Credit Policy.

 

	
  

	
(d)

	
Pursuant to procedures mutually agreed to by the Parties, Company shall deliver adverse action notices to Applicants who do not meet Credit Policy criteria or are otherwise denied by Bank.

 

	
  

	
(e)

	
Company shall deliver Program privacy notices and Loan Account Agreements to Borrowers.

 

	
  

	
(f)

	
Company shall hold and maintain, as custodian for Bank, all documents of Bank pertaining to Loan Accounts.  Company shall periodically provide to Bank copies of records required to be maintained under the Bank Secrecy Act Policy and such other documents regarding Loan Accounts as requested by Bank, at intervals mutually agreed to by the Parties, but no less frequently than monthly.

 

  

3

  

 

	
  

	
(g)

	
Company shall perform the obligations described in this Section 5 and deliver any customer communications to Applicants and Borrowers as necessary to carry on the Program, all at Company’s own cost and in accordance with Applicable Laws.

 

	
  

	
(h)

	
Company shall service the Loan Accounts during the period that the Loan Accounts are owned by Bank, in compliance with Applicable Law and in accordance with banking industry standards customary for loans and notes of the same general type and character.

 

	
  

	
(i)

	
Pursuant to Section 16, as Bank reasonably requires and upon reasonable advance written notice to Company, Bank will periodically audit Company for compliance with the terms of this Section 5 and the Agreement as a whole, including compliance with the standards set forth herein for Loan Account origination.

 

	
6.

	
Funding Loans.

 

	
  

	
(a)

	
Company shall provide a Funding Statement to Bank by e-mail or as otherwise mutually agreed by the Parties by [*].  Each Funding Statement shall (i) identify those Applicants whose Applications satisfy the requirements of the Credit Policy and with respect to whom Company requests that Bank establish Loan Accounts, and (ii) provide the Funding Amount to be disbursed by Bank on such Funding Date.  The Funding Statement shall be in the form of Exhibit E.

 

	
  

	
(b)

	
Subject to timely receipt of the Funding Statement, Bank shall transfer the Funding Amount from the Funding Account to the Disbursement Account by wire transfer initiated by Bank by no later than [*].  Company shall provide Bank the account number and routing number for the Disbursement Account prior to the first Funding Date.

 

	
  

	
(c)

	
Subject to timely receipt of the Funding Amount, Company shall disburse Loan Proceeds to Borrowers by ACH transfers from the Disbursement Account in accordance with the Funding Statement on the Funding Date.  Bank authorizes Company to deduct and retain from the Funding Amount the aggregate amount of the Origination Fees set forth on the Funding Statement as a Program servicing fee.

 

	
  

	
(d)

	
To the extent that the aggregate principal balance of Loan Accounts held by Bank (or its Affiliates) would exceed the Program Threshold Amount following the funding of any Loan Account, Bank may elect not to fund such Loan Account.

 

	
  

	
(e)

	
In addition to any other rights or remedies available to Bank under this Agreement or by law, Bank shall have the right to suspend payments of the Funding Amounts due to the Disbursement Account during the period commencing with the occurrence of any monetary default by Company or PFL, as applicable, under the Program Documents and ending when such condition has been cured, subject to the following:  (1) if the monetary default is not material, Bank shall notify Company of such default, and Bank shall not suspend payments of Funding Amounts unless Company or PFL, as applicable, fails to cure such default within two (2) Business Days of receipt of such notice from Bank; and (2) if the monetary default is material, Bank may suspend payments of the funding Amounts without giving Company or PFL, as applicable, an opportunity to cure.  For purposes of the foregoing, the failure by Company or PFL, as applicable, to purchase any Loan Accounts under the Loan Sale Agreement, or Company’s or PFL’s breach of its indemnification obligations under the Program Documents, or Company’s or PFL’s failure to timely deposit money as required by Section 2(b) of the Loan Sale Agreement, shall be deemed a material default of the Program Documents.  Notwithstanding Bank’s suspension rights under this Section, Bank may also exercise any right to terminate this Agreement as permitted herein.

 

 

	
*

	
Confidential Treatment Requested

 

  

4

  

 

	
7.

	
Representations and Warranties.

 

	
  

	
(a)

	
Bank hereby represents and warrants, as of the Effective Date, or covenants, as applicable, to Company that:

 

	
  

	
(1)

	
Bank is an FDIC-insured Utah-chartered industrial bank, duly organized, validly existing under the laws of the State of Utah and has full corporate power and authority to execute, deliver, and perform its obligations under this Agreement; the execution, delivery and performance of this Agreement have been duly authorized, and are not in conflict with and do not violate the terms of the charter or bylaws of Bank and will not result in a material breach of or constitute a default under, or require any consent under, any indenture, loan or agreement to which Bank is a party;

 

	
  

	
(2)

	
All approvals, authorizations, licenses, registrations, consents, and other actions by, notices to, and filings with, any Person that may be required in connection with the execution, delivery, and performance of this Agreement by Bank, have been obtained (other than those required to be made to or received from Borrowers and Applicants);

 

	
  

	
(3)

	
This Agreement constitutes a legal, valid, and binding obligation of Bank, enforceable against Bank in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws now or hereafter in effect, including the rights and obligations of receivers and conservators under 12 U.S.C. §§ 1821 (d) and (e), which may affect the enforcement of creditors’ rights in general, and (ii) as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity);

 

	
  

	
(4)

	
There are no proceedings or investigations pending or, to the best knowledge of Bank, threatened against Bank (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by Bank pursuant to this Agreement, (iii) seeking any determination or ruling that, in the reasonable judgment of Bank, would materially and adversely affect the performance by Bank of its obligations under this Agreement, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or (v) would have a materially adverse financial effect on Bank or its operations if resolved adversely to it;

 

  

5

  

 

	
  

	
(5)

	
Bank is not Insolvent;

 

	
  

	
(6)

	
The execution, delivery and performance of this Agreement by Bank comply with Utah and federal banking laws specifically applicable to Bank’s operations; provided that Bank makes no representation or warranty regarding compliance with Utah or federal banking laws relating to consumer protection, consumer lending, usury, loan collections, anti-money laundering, data security or privacy as they apply to the operation of the Program; and

 

	
  

	
(7)

	
The Proprietary Materials Bank licenses to Company pursuant to Section 12, and their use as contemplated by this Agreement, do not violate or infringe upon, or constitute an infringement or misappropriation of, any U.S. patent, copyright or U.S. trademark, service mark, trade name or trade secret of any person or entity and Bank has the right to grant the licenses set forth in Section 12 below.

 

	
  

	
(b)

	
Company hereby represents and warrants, as of the Effective Date, or covenants, as applicable, to Bank that:

 

	
  

	
(1)

	
Company is a corporation, duly organized and validly existing in good standing under the laws of the State of Delaware, and has full power and authority to execute, deliver, and perform its obligations under this Agreement; the execution, delivery, and performance of this Agreement have been duly authorized, and are not in conflict with and do not violate the terms of the articles or bylaws of Company and will not result in a material breach of or constitute a default under or require any consent under any indenture, loan, or agreement to which Company is a party;

 

	
  

	
(2)

	
All approvals, authorizations, consents, and other actions by, notices to, and filings with any Person required to be obtained for the execution, delivery, and performance of this Agreement by Company, have been obtained;

 

	
  

	
(3)

	
This Agreement constitutes a legal, valid, and binding obligation of Company, enforceable against Company in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or hereafter in effect, which may affect the enforcement of creditors’ rights in general, and (ii) as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity);

 

	
  

	
(4)

	
There are no proceedings or investigations pending or, to the best knowledge of Company, threatened against Company (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by Company pursuant to this Agreement, (iii) seeking any determination or ruling that, in the reasonable judgment of Company, would materially and adversely affect the performance by Company of its obligations under this Agreement, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement, or (v) except as set forth on Schedule 7(b)(4), that would have a materially adverse financial effect on Company or its operations if resolved adversely to it;

 

  

6

  

 

	
  

	
(5)

	
Company is not Insolvent;

 

	
  

	
(6)

	
The execution, delivery and performance of this Agreement by Company, the Consumer Finance Materials and the promotional and marketing materials and strategies shall all comply with Applicable Laws;

 

	
  

	
(7)

	
The Proprietary Materials Company licenses to Bank pursuant to Section 12, and their use as contemplated by this Agreement, do not violate or infringe upon, or constitute an infringement or misappropriation of, any U.S. patent, copyright or U.S. trademark, service mark, trade name or trade secret of any person or entity and Company has the right to grant the license set forth in Section 12 below; and

 

	
  

	
(8)

	
Company shall comply with Title V of the Gramm-Leach-Bliley Act and the implementing regulations of the FDIC, including but not limited to applicable limits on the use, disclosure, storage, safeguarding and destruction of Applicant information, and shall maintain commercially reasonable data security and disaster recovery protections that at the least are consistent with industry standards for the consumer lending industry.

 

	
  

	
(c)

	
Company hereby represents and warrants to Bank as of each Funding Date that:

 

	
  

	
(1)

	
For each Loan Account and each disbursement of Loan Proceeds:  (i) to the best of Company’s knowledge, all information in the related Application is true and correct, provided, however, that Company’s representation and warranty in this regard shall be subject to the following limitations: (A) Company does not verify the self-reported income, employment and occupation or other information provided by Applicants in listings, (B) each Applicant’s debt-to-income ratio is determined by Company from a combination of the Applicant’s self-reported income and information from the Applicant’s credit report and not otherwise verified by Company, (C) credit data that appears in Applications is taken directly from a credit report obtained on the Applicant from a credit reporting agency, without any review or verification by Company, (D) Company does not verify any statements by Applicants as to how Loan Proceeds are to be used and does not confirm after loan disbursement how Loan Proceeds were used, and (E) Applicants’ home ownership status is not verified by Company but is derived from the Applicant’s credit report, in that if the credit report reflects an active mortgage loan the Applicant is presumed to be a homeowner; (ii) the Loan Account is fully enforceable and all required disclosures to Borrowers have been delivered in compliance with Applicable Laws; (iii) the Loan Account Agreement and all other Loan Account documents are genuine and legally binding and enforceable, conform to the requirements of the Program and were prepared in conformity with the Program Compliance Manual; (iv) all necessary approvals required to be obtained by Company have been obtained; (v) nothing exists that would prohibit the sale of the Loan Accounts by Bank to Company or PFL, as applicable, under the Loan Sale Agreement, provided that Bank has taken no action (independent of action taken by Company on Bank’s behalf) that would prohibit the sale of the Loan Accounts by Bank to Company or PFL, as applicable, under the Loan Sale Agreement; and (vi) Bank is the sole owner of the Loan Accounts prior to any such sale of the Loan Accounts to Company or PFL, as applicable, provided that Bank has taken no action (independent of action taken by Company on Bank’s behalf) that diminishes Bank’s ownership rights in the Loan Accounts;

 

  

7

  

 

	
  

	
(2)

	
Each Borrower listed on a Funding Statement is eligible for a Loan Account under the Credit Policy; and each Borrower has submitted an Application; and

 

	
  

	
(3)

	
The information on each Funding Statement is true and correct in all respects.

 

	
  

	
(d)

	
The representations and warranties of Bank and Company contained in this Section 7, except those representations and warranties contained in subsections 7(a)(4) and 7(b)(4), are made continuously throughout the term of this Agreement.  In the event that any investigation or proceeding of the nature described in subsections 7(a)(4) and 7(b)(4) is instituted or threatened against either Party, such Party shall promptly notify the other Party of the pending or threatened investigation or proceeding (unless prohibited from doing so by Applicable Laws or the direction of a Regulatory Authority).

 

	
8.

	
Other Relationships with Borrowers.

 

	
  

	
(a)

	
Separate from the obligation to market Loan Accounts offered by Bank, and subject to the Program privacy policy and Applicable Laws, Company shall have the right, at its own expense, to solicit Applicants and/or Borrowers with offerings of other goods and services from Company and parties other than Bank, provided, however, that in the event that Company uses Bank’s name and/or Proprietary Materials in connection with such offerings, Company shall obtain Bank’s prior approval for such use.

 

	
  

	
(b)

	
Except as necessary to carry out its rights and responsibilities under this Agreement and the Loan Sale Agreement, Bank shall not use Applicant and/or Borrower information and shall not provide or disclose any Applicant and/or Borrower information to any Person, except to the extent required to do so under Applicable Laws or legal process.

 

	
  

	
(c)

	
Notwithstanding subsection 8(b), (i) Bank may make solicitations for goods and services to the public, which may include one or more Applicants or Borrowers; provided that Bank does not (A) target such solicitations to specific Applicants and/or Borrowers, (B) use or permit a third party to use any list of Applicants and/or Borrowers in connection with such solicitations or (C) refer to or otherwise use the name of Company; and (ii) Bank shall not be obligated to redact the names of Applicants and/or Borrowers from marketing lists acquired from third parties (e.g., subscription lists) that Bank uses for solicitations.

 

	
  

	
(d)

	
The terms of this Section 8 shall survive the expiration or earlier termination of this Agreement.

 

  

8

  

 

	
9.

	
Indemnification.

	
  

	
(a)

	
Company agrees to defend, indemnify, and hold harmless Bank and its Affiliates, and the officers, directors, employees, representatives, shareholders, agents and attorneys of such entities (the “Indemnified Parties”) from and against any and all claims, actions, liability, judgments, damages, costs and expenses, including reasonable attorneys’ fees (“Losses”) to the extent arising from Bank’s participation in the Program as contemplated by this Agreement (including Losses arising from a violation of Applicable Laws or a breach by Company or its agents or representatives of any of Company’s representations, warranties, obligations or undertakings under this Agreement), unless such Loss results from (i) the gross negligence or willful misconduct of Bank, or (ii) Bank’s failure to timely transfer the Funding Amount to the Disbursement Account to the extent required under Section 6(b), provided that Company and PFL are not in breach of any of their respective obligations under the Program Documents, including, but not limited to, their obligations with respect to the purchase of Loan Accounts under the Loan Sale Agreement before or after, respectively, the Changeover Date (as defined therein) or the Stand By Loan Purchase Agreement.

 

	
  

	
(b)

	
To the extent permitted by Applicable Laws, any Indemnified Party seeking  indemnification hereunder shall promptly notify Company, in writing, of any notice of the assertion by any third party of any claim or of the commencement by any third party of any legal or regulatory proceeding, arbitration or action, or if the Indemnified Party determines the existence of any such claim or the commencement by any third party of any such legal or regulatory proceeding, arbitration or action, whether or not the same shall have been asserted or initiated, in any case with respect to which Company is or may be obligated to provide indemnification (an “Indemnifiable Claim”), specifying in reasonable detail the nature of the Loss and, if known, the amount or an estimate of the amount of the Loss; provided, that failure to promptly give such notice shall only limit the liability of Company to the extent of the actual prejudice, if any, suffered by Company as a result of such failure.  The Indemnified Party shall provide to Company as promptly as practicable thereafter information and documentation reasonably requested by Company to defend against the Indemnifiable Claim.

 

	
  

	
(c)

	
Company shall have ten (10) days after receipt of any notification of an Indemnifiable Claim (a “Claim Notice”) to notify the Indemnified Party of Company’s election to assume the defense of the Indemnifiable Claim and, through counsel of its own choosing, and at its own expense, to commence the settlement or defense thereof, and the Indemnified Party shall cooperate with Company in connection therewith if such cooperation is so requested and the request is reasonable; provided that Company shall hold the Indemnified Party harmless from all its reasonable out-of-pocket expenses, including reasonable attorneys’ fees, incurred in connection with the Indemnified Party’s cooperation; provided, further, that if the Indemnifiable Claim relates to a matter before a Regulatory Authority, the Indemnified Party may elect, upon notice to Company, to assume the defense of the Indemnifiable Claim at the cost of and with the cooperation of Company.  If the Company assumes responsibility for the settlement or defense of any such claim, (i) Company shall permit the Indemnified Party to participate at the Indemnified Party’s expense in such settlement or defense through counsel chosen by the Indemnified Party; provided that, in the event that both Company and the Indemnified Party are defendants in the proceeding and the Indemnified Party shall have reasonably determined and notified Company that representation of both parties by the same counsel would be inappropriate due to the actual or potential differing interests between them, then the fees and expenses of one such counsel for all Indemnified Parties in the aggregate shall be borne by Company; and (ii) Company shall not settle any Indemnifiable Claim without the Indemnified Party’s consent.

 

  

9

  

 

	
  

	
(d)

	
If the Company does not notify the Indemnified Party within ten (10) days after receipt of the Claim Notice that it elects to undertake the defense of the Indemnifiable Claim described therein, or if Company fails to contest vigorously any such Indemnifiable Claim, or if the Indemnified Party elects to control the defense of an Indemnifiable Claim as permitted by Section 9(c), then, in each case, the Indemnified Party shall have the right, upon notice to the Company, to contest, settle or compromise the Indemnifiable Claim in the exercise of its reasonable discretion; provided that the Indemnified Party shall notify Company prior thereto of any compromise or settlement of any such Indemnifiable Claim.  No action taken by the Indemnified Party pursuant to this paragraph (d) shall deprive the Indemnified Party of its rights to indemnification pursuant to this Section 9.

 

	
  

	
(e)

	
All amounts due under this Section 9 shall be payable not later than ten (10) days after written demand therefor.

 

	
  

	
(f)

	
The terms of this Section 9 shall survive the expiration or earlier termination of this Agreement.

 

	
10.

	
Term and Termination.

 

	
  

	
(a)

	
This Agreement shall have an initial term beginning on the Effective Date and ending thirty-six (36) months thereafter (the “Initial Term”) and shall renew automatically for two (2) successive terms of one (1) year each (each a “Renewal Term,” collectively, the Initial Term and Renewal Term(s) shall be referred to as the “Term”), unless either Party provides notice of non-renewal to the other Party at least ninety (90) days prior to the end of the Initial Term or any Renewal Term or this Agreement is earlier terminated in accordance with the provisions hereof.

 

	
  

	
(b)

	
This Agreement shall terminate immediately upon the expiration or earlier termination of the Loan Sale Agreement or the Stand By Loan Purchase Agreement.

 

	
  

	
(c)

	
[Omitted].

 

	
  

	
(d)

	
A Party shall have a right to terminate this Agreement immediately upon written notice to the other Party in any of the following circumstances:

 

	
  

	
(1)

	
any representation or warranty made by the other Party in this Agreement shall be incorrect in any material respect and shall not have been corrected within thirty (30) Business Days after written notice thereof has been given to such other Party;

 

	
  

	
(2)

	
the other Party shall default in the performance of any obligation or undertaking under this Agreement and such default shall continue for thirty (30) Business Days after written notice thereof has been given to such other Party;

 

	
  

	
(3)

	
the other Party shall commence a voluntary case or other proceeding seeking liquidation, reorganization, or other relief with respect to itself or its debts under any bankruptcy, insolvency, receivership, conservatorship or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, conservator, custodian, or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of a trustee, receiver, liquidator,  conservator, custodian, or other similar official or to any involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;

 

  

10

  

 

	
  

	
(4)

	
an involuntary case or other proceeding, whether pursuant to banking regulations or otherwise, shall be commenced against the other Party seeking liquidation, reorganization, or other relief with respect to it or its debts under any bankruptcy, insolvency, receivership, conservatorship or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, conservator, custodian, or other similar official of it or any substantial part of its property; or an order for relief shall be entered against either Party under the federal bankruptcy laws as now or hereafter in effect; or

 

	
  

	
(5)

	
there is a materially adverse change in the financial condition of the other Party.

 

	
  

	
(e)

	
Bank shall not be obligated to approve Applications or establish new Loan Accounts after termination of this Agreement; provided, that Bank shall originate Loan Accounts to Applicants to whom Bank has issued a lending commitment prior to termination, unless this Agreement is terminated pursuant to subsection 10(b) or by Bank pursuant to subsection 10(d).

 

	
  

	
(f)

	
The termination of this Agreement either in part or in whole shall not discharge any Party from any obligation incurred prior to such termination.

 

	
  

	
(g)

	
Upon termination of this Agreement, Company shall purchase all Loan Accounts established by Bank prior to and on the date of termination that have not already been purchased by Company.  After termination, Company shall purchase all Loan Accounts originated by Bank pursuant to subsection 10(e).

 

	
  

	
(h)

	
Company’s failure to obtain the approval of Bank as required by Sections 2(a)(1), 4 or 30, and Company’s failure to provide any notice required by Section 32, shall each constitute a material breach of this Agreement.  In addition to any other remedies permitted by Applicable Law or this Agreement and without limiting Bank’s rights under Section 9, Bank may also invoice Company for, and Company agrees to pay, liquidated damages in the amount of [*].  The Parties agree that it would be difficult to determine the precise damages to Bank in the event of such a breach by Company, and the Parties have therefore agreed on the foregoing liquidated damages as a reasonable approximation of the damages to Bank in the event of such a breach.

 

 

	
*

	
Confidential Treatment Requested

 

  

11

  

 

	
  

	
(i)

	
Bank may terminate this Agreement immediately upon written notice to Company if Bank incurs any Loss that would have been subject to indemnification under Section 9(a) but for the application of Applicable Laws that limit or restrict Bank’s ability to seek such indemnification.

 

	
  

	
(j)

	
The terms of this Section 10 shall survive the expiration or earlier termination of this Agreement.

 

	
11.

	
Confidentiality.

 

	
  

	
(a)

	
Each Party agrees that Confidential Information of the other Party shall be used by such Party solely in the performance of its obligations and exercise of its rights pursuant to the Program Documents.  Except as required by Applicable Laws or legal process, neither Party (the “Restricted Party”) shall disclose Confidential Information of the other Party to third parties; provided, however, that the Restricted Party may disclose Confidential Information of the other Party (i) to the Restricted Party’s Affiliates, agents, representatives or subcontractors for the sole purpose of fulfilling the Restricted Party’s obligations under this Agreement (as long as the Restricted Party exercises reasonable efforts to prohibit any further disclosure by its Affiliates, agents, representatives or subcontractors), provided that in all events, the Restricted Party shall be responsible for any breach of the confidentiality obligations hereunder by any of its Affiliates, agents, representatives or subcontractors, (ii) to the Restricted Party’s auditors, accountants and other professional advisors, or to a Regulatory Authority or (iii) to any other third party as mutually agreed by the Parties.

 

	
  

	
(b)

	
A Party’s Confidential Information shall not include information that:

 

	
  

	
(1)

	
is generally available to the public;

 

	
  

	
(2)

	
has become publicly known, without fault on the part of the Party who now seeks to disclose such information (the “Disclosing Party”), subsequent to the Disclosing Party acquiring the information;

 

	
  

	
(3)

	
was otherwise known by, or available to, the Disclosing Party prior to entering into this Agreement; or

 

	
  

	
(4)

	
becomes available to the Disclosing Party on a non-confidential basis from a Person, other than a Party to this Agreement, who is not known by the Disclosing Party after reasonable inquiry to be bound by a confidentiality agreement with the non-Disclosing Party or otherwise prohibited from transmitting the information to the Disclosing Party.

 

	
  

	
(c)

	
Upon written request or upon the termination of this Agreement, each Party shall, within thirty (30) days, return to the other Party all Confidential Information of the other Party in its possession that is in written form, including by way of example, but not limited to, reports, plans, and manuals; provided, however, that either Party may maintain in its possession all such Confidential Information of the other Party required to be maintained under Applicable Laws relating to the retention of records for the period of time required thereunder or stored on such Party’s network as part of standard back-up procedures (provided that such information shall remain subject to the confidentiality provisions of this Section 11).

 

  

12

  

 

	
  

	
(d)

	
In the event that a Restricted Party is requested or required (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) to disclose any Confidential Information of the other Party, the Restricted Party shall provide the other Party with prompt notice of such request(s) so that the other Party may seek an appropriate protective order or other appropriate remedy and/or waive the Restricted Party’s compliance with the provisions of this Agreement.  In the event that the other Party does not seek such a protective order or other remedy, or such protective order or other remedy is not obtained, or the other Party grants a waiver hereunder, the Restricted Party may furnish that portion (and only that portion) of the Confidential Information of the other Party which the Restricted Party is legally compelled to disclose and shall exercise such efforts to obtain reasonable assurance that confidential treatment shall be accorded any Confidential Information of the other Party so furnished as the Restricted Party would exercise in assuring the confidentiality of any of its own Confidential Information.

 

	
  

	
(e)

	
The terms of this Section 11 shall survive the expiration or earlier termination of this Agreement.

 

	
12.

	
Proprietary Material.

 

	
  

	
(a)

	
Each Party (“Licensing Party”) hereby provides the other Party (“Licensee”) with a non-exclusive right and license to use and reproduce the Licensing Party’s name, logo, registered or other trademarks and service marks (collectively, “Marks”) on the Applications, Loan Account Agreements, and other Consumer Finance Materials (including the Program Website), Program marketing materials, and any other publicly distributed or available Program materials, and to otherwise use the Marks and such copyrights, patents, and other intellectual property as the Licensing Party may designate or otherwise make available from time to time in the Licensing Party’s sole discretion (collectively with the Marks, “Proprietary Material”) for the purposes of or otherwise in connection with the fulfillment of Licensee’s obligations under this Agreement; provided, however, that (i) the Licensee shall at all times comply with any and all written instructions provided by the Licensing Party from time to time regarding the use of the Licensing Party’s Proprietary Material, and (ii) each Licensee acknowledges that, except for the license specifically provided in this Agreement, it shall acquire no interest in the Licensing Party’s Proprietary Material.  Upon termination of this Agreement, each such license will terminate, and the Licensee shall cease using the Licensing Party’s Proprietary Material. Neither Party may use the other Party’s Marks in any press release without the prior written consent of the other Party.

 

	
  

	
(b)

	
Bank hereby acknowledges and agrees that, as between Bank and Company (i) as of the Effective Date, Company is the sole and exclusive owner of all pre-existing Marks, copyrights, patents, other intellectual property rights, software, other technology, and other tangible and intangible property used on or in connection with the Program Website, and its Company run predecessors;  and (ii) Company shall be the sole and exclusive owner of any and all modifications to such tangible and intangible property during the Term of this Agreement, including but not limited to any and all trademark, service mark, copyright, patent, and other intellectual property rights in and to such modifications, except as the Parties may otherwise agree in writing.  For avoidance of doubt, Company shall not obtain any rights in Bank’s Marks (other than the license described in subsection 12(a)) by virtue of incorporation of Bank’s Marks into the Program Website.

 

  

13

  

 

	
13.

	
Relationship of Parties.  The Parties agree that in performing their respective responsibilities pursuant to this Agreement, they are in the position of independent contractors.  This Agreement is not intended to create, nor does it create and shall not be construed to create, a relationship of partner or joint venturer or any association for profit between Bank and Company.

 

	
14.

	
Expenses.

 

	
  

	
(a)

	
Except as set forth herein, each Party shall bear the costs and expenses of performing its obligations under this Agreement.

 

	
  

	
(b)

	
Company shall pay all wire transfer and ACH costs for transfers by Bank under the Program.  Company shall reimburse Bank for all third party fees incurred by Bank in connection with the performance of the Program Documents.  Bank shall provide Company with notice of third party fees to be incurred by Bank in connection with performance of the Program Documents as soon as practicable after Bank becomes aware of such fees.

 

	
  

	
(c)

	
Company shall pay all costs of any credit reports it obtains on Applicants or Borrowers and any adverse action notices it delivers to Applicants or Borrowers in accordance with Company’s Application processing and Loan Account servicing responsibilities under this Agreement.

 

	
  

	
(d)

	
Each Party shall be responsible for payment of any federal, state, or local taxes or assessments associated with the performance of its obligations under this Agreement and for compliance with all filing, registration and other requirements with regard thereto.

 

	
  

	
(e)

	
Company shall be responsible for (i) all of Bank’s out-of-pocket legal fees directly related to the Program, including Bank’s attorneys’ fees and expenses in connection with the preparation, negotiation, execution, and delivery of the Program Documents; any amendment, modification, administration, collection and enforcement of the Program Documents; any modification of the Consumer Finance Materials or other documents or disclosures related to the Program; or any dispute or litigation arising out of or related to the Program; and (ii) all of Bank’s out-of-pocket costs and expenses for any other third-party professional services related to the Program, including the services of any third-party compliance specialists in connection with Bank’s preparation of policies and procedures and Bank’s review of the Program.  To the extent that such fees are expected to exceed [*], Bank will provide oral or email notification to the extent reasonably practicable.  Company shall also pay for an annual audit of the Program by a third-party firm.  Bank shall invoice Company for such fees.  Company shall pay such invoice within thirty (30) days of receipt of such invoice.

 

	
  

	
(f)

	
Company shall reimburse Bank for all reasonable costs associated with Bank’s assignment to Company of Loan Accounts pursuant to Section 10.

 

	
*

	
Confidential Treatment Requested

 

  

14

  

 

	
15.

	
Examination.  Each Party agrees to submit to any examination that may be required by a Regulatory Authority having jurisdiction over the other Party, during regular business hours and upon reasonable prior notice, and to otherwise provide reasonable cooperation to the other Party in responding to such Regulatory Authority’s inquiries and requests related to the Program.

 

	
16.

	
Inspection; Reports.  Each Party, upon reasonable prior notice from the other Party, agrees to submit to an inspection of its books, records, accounts, and facilities relevant to the Program, from time to time, during regular business hours subject to the duty of confidentiality each Party owes to its customers and banking secrecy and confidentiality requirements otherwise applicable to each Party under Applicable Laws.  All expenses of inspection shall be borne by the Party conducting the inspection.  Notwithstanding the obligation of each Party to bear its own expenses of inspection, Company shall reimburse Bank for reasonable out of pocket expenses incurred by Bank in the performance of periodic on site reviews of Company’s financial condition, operations and internal controls, not to exceed the maximum amount per visit of [*].  Company shall store all documentation and electronic data related to its performance under this Agreement and shall make such documentation and data available during any inspection by Bank or its designee.  With such reasonable frequency and in such reasonable manner as mutually agreed by the Parties, Company shall report to Bank regarding the performance of its obligations.

 

	
17.

	
Governing Law; Waiver of Jury Trial.  This Agreement shall be interpreted and construed in accordance with the laws of the State of Utah, without giving effect to the rules, policies, or principles thereof with respect to conflicts of laws.  THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING HEREUNDER. The terms of this Section 17 shall survive the expiration or earlier termination of this Agreement.

 

	
18.

	
Severability.  Any provision of this Agreement which is deemed invalid, illegal or unenforceable in any jurisdiction, shall, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining portions hereof in such jurisdiction or rendering such provision or any other provision of this Agreement invalid, illegal, or unenforceable in any other jurisdiction.

 

	
19.

	
Assignment.  This Agreement and the rights and obligations created under it shall be binding upon and inure solely to the benefit of the Parties and their respective successors, and permitted assigns.  Neither Party shall be entitled to assign or transfer any interest under this Agreement (including by operation of law) without the prior written consent of the other Party, which shall not be unreasonable withheld or delayed.  No assignment made in conformity with this Section 19 shall relieve a Party of its obligations under this Agreement.  Company may use subcontractors in the performance of its obligations under this Agreement, subject to Bank’s prior written approval of each such subcontractor, which approval shall not be unreasonably withheld or delayed.  A list of subcontractors already approved by Bank is attached in the form of Exhibit H hereto.

 

	
20.

	
Third Party Beneficiaries. Nothing contained herein shall be construed as creating a third-party beneficiary relationship between either Party and any other Person.

 

	
*

	
Confidential Treatment Requested

 

  

15

  

 

	
21.

	
Notices.  All notices and other communications that are required or may be given in connection with this Agreement shall be in writing and shall be deemed received (a) on the day delivered, if delivered by hand; (b) on the day transmitted, if transmitted by facsimile or e-mail with receipt confirmed; or (c)  three (3) business days after the date of mailing to the other Party, if mailed first-class postage prepaid, at the following address, or such other address as either Party shall specify in a notice to the other:

 

	 	
To Bank:

	
WebBank

	 
	 	  	
Attn: Senior Vice President – Strategic

	 
	 	  	
Partners

	 
	 	  	
215 S. State Street, Suite 800

	 
	 	  	
Salt Lake City, UT  84111

	 
	 	  	
Tel. (801) 456-8398

	 
	 	  	
Fax:  (801) 456-8398

	 
	 	  	
Email:strategicpartnerships@webbank.com

	 
	 	  	  	 
	 	  	
With a copy to:

	 
	 	  	
WebBank

	 
	 	  	
Attn:  Compliance Officer

	 
	 	  	
215 S. State Street, Suite 800

	 
	 	  	
Salt Lake City, UT  84111

	 
	 	  	
Tel. (801) 456-8363

	 
	 	  	
Fax:  (801) 456-8363

	 
	 	  	
Email:  complianceofficer@webbank.com

	 

 

	 	
To Company:

	
Prosper Marketplace, Inc.

	 
	 	  	
111 Sutter Street, 22nd Floor

	 
	 	  	
San Francisco, CA  94104

	 
	 	  	
Attn:  Kirk T. Inglis

	 
	 	  	
E-mail Address: kirk@propser.com

	 
	 	  	
Telephone: (415) 593-5432

	 
	 	  	
Facsimile: (415) 362-7233

	 

 

	
22.

	
Amendment and Waiver.  This Agreement may be amended only by a written instrument signed by each of the Parties.  The failure of a Party to require the performance of any term of this Agreement or the waiver by a Party of any default under this Agreement shall not prevent a subsequent enforcement of such term and shall not be deemed a waiver of any subsequent breach.  All waivers must be in writing and signed by the Party against whom the waiver is to be enforced.

 

	
23.

	
Entire Agreement.  The Program Documents, including this Agreement and its schedules and exhibits (all of which schedules and exhibits are hereby incorporated into this Agreement), constitute the entire agreement between the Parties with respect to the subject matter hereof, and supersede any prior or contemporaneous negotiations or oral or written agreements with regard to the same subject matter.

 

	
24.

	
Counterparts. This Agreement may be executed and delivered by the Parties in any number of counterparts, and by different parties on separate counterparts, each of which counterpart shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument.

  

16

  

 

	
25.

	
Interpretation.  The Parties acknowledge that each Party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments thereto, and the same shall be construed neither for nor against either Party, but shall be given a reasonable interpretation in accordance with the plain meaning of its terms and the intent of the Parties.

 

	
26.

	
Agreement Subject to Applicable Laws.  If (a) either Party has been advised by legal counsel of a change in Applicable Laws or any judicial decision of a court having jurisdiction over such Party or any interpretation of a Regulatory Authority that, in the view of such legal counsel, would have a materially adverse effect on the rights or obligations of such Party under this Agreement or the financial condition of such Party, (b) either Party receives a request of any Regulatory Authority having jurisdiction over such Party, including any letter or directive of any kind from any such Regulatory Authority, that prohibits or restricts such Party from carrying out its obligations under this Agreement, or (c) either Party has been advised by legal counsel that there is a material risk that such Party’s or the other Party’s continued performance under this Agreement would violate Applicable Laws, then the Parties shall meet and consider in good faith any modifications, changes or additions to the Program or the Program Documents that may be necessary to eliminate such result.  Notwithstanding any other provision of the Program Documents, including Section 10 hereof, if the Parties are unable to reach agreement regarding such modifications, changes or additions to the Program or the Program Documents within ten (10) Business Days after the Parties initially meet, either Party may terminate this Agreement upon five (5) days’ prior written notice to the other Party.  A Party may suspend performance of its obligations under this Agreement, or require the other Party to suspend its performance of its obligations under this Agreement, upon providing the other Party advance written notice, if any event described in subsections 26(a), (b) or (c) above occurs.

 

	
27.

	
Force Majeure.  If any Party is unable to carry out the whole or any part of its obligations under this Agreement by reason of a Force Majeure Event, then the performance of the obligations under this Agreement of such Party as they are affected by such cause shall be excused during the continuance of the inability so caused, except that should such inability not be remedied within thirty (30) days after the date of such cause, the Party not so affected may at any time after the expiration of such thirty (30) day period, during the continuance of such inability, terminate this Agreement on giving written notice to the other Party and without payment of a termination fee or other penalty.  To the extent that the Party not affected by a Force Majeure Event is unable to carry out the whole or any part of its obligations under this Agreement because a prerequisite obligation of the Party so affected has not been performed, the Party not affected by a Force Majeure Event also is excused from such performance during such period.  A “Force Majeure Event” as used in this Agreement shall mean an unanticipated event that is not reasonably within the control of the affected Party or its subcontractors (including, but not limited to, acts of God, acts of governmental authorities, strikes, war, riot and any other causes of such nature), and which by exercise of reasonable due diligence, such affected Party or its subcontractors could not reasonably have been expected to avoid, overcome or obtain, or cause to be obtained, a commercially reasonable substitute therefore.  No Party shall be relieved of its obligations hereunder if its failure of performance is due to removable or remediable causes which such Party fails to remove or remedy using commercially reasonable efforts within a reasonable time period.  Either Party rendered unable to fulfill any of its obligations under this Agreement by reason of a Force Majeure Event shall give prompt notice of such fact to the other Party, followed by written confirmation of notice, and shall exercise due diligence to remove such inability with all reasonable dispatch.

 

  

17

  

 

	
28.

	
Jurisdiction; Venue.  The Parties consent to the personal jurisdiction and venue of the federal and state courts in Salt Lake City, Utah for any court action or proceeding.  The terms of this Section 28 shall survive the expiration or earlier termination of this Agreement.

 

	
29.

	
Insurance.  Company agrees to maintain insurance coverage on the terms and conditions specified in Exhibit F at all times during the term of this Agreement and to notify Bank promptly of any cancellation or lapse of any such insurance coverage.

 

	
30.

	
Compliance with Applicable Laws; Program Compliance Manual.  Company shall comply with Applicable Laws, the Bank Secrecy Act Policy and the Program Compliance Manual in its performance of this Agreement, including Loan Account solicitation, Application processing and preparation of Loan Account Agreements and other Loan Account documents.  The Program Compliance Manual shall not be changed without the prior written consent of both Parties, which consent shall not be unreasonably withheld or delayed; provided, however, that Bank may change the Program Compliance Manual upon written notice provided to Company but without Company’s prior written consent, to the extent that such change is required by Applicable Laws, or to the extent that Bank determines such change is necessitated by safety and soundness concerns.  A copy of the Program Compliance Manual is attached hereto as Exhibit G.  Without limiting the foregoing, Company shall:

 

	
  

	
(a)

	
apply to all Applicants customer identification procedures that comply with Section 326 of the USA PATRIOT Act of 2001 (“Patriot Act”) and the implementing regulations applicable to Bank (31 C.F.R. § 103.121);

 

	
  

	
(b)

	
retain for five (5) years after a Loan Account is purchased from Bank, and deliver to Bank upon request: (i) the Applicant’s name, address, social security number, and date of birth obtained pursuant to such customer identification procedures; (ii) a description of the methods and the results of any measures undertaken to verify the identity of the Applicant; and (iii) a description of the resolution of any substantive discrepancy discovered when verifying the identifying information obtained;

 

	
  

	
(c)

	
screen all Applicants against the Office of Foreign Assets Control list of Specially Designated Nationals and Blocked Persons, and reject any Applicant whose name appears on such list and notify Bank thereof;

 

	
  

	
(d)

	
monitor, identify and report to Bank any suspicious activity that meets the thresholds for submitting a Suspicious Activity Report under the Bank Secrecy Act and the implementing regulations applicable to Bank (31 C.F.R. § 103.18);

 

  

18

  

 

	
  

	
(e)

	
implement an anti-money laundering program to assist Bank in its compliance with Section 352 of the Patriot Act and the implementing regulations applicable to Bank (31 C.F.R. § 103.120);

 

	
  

	
(f)

	
in addition to the information retained pursuant to subsection (b) above, retain the account number identifying a Borrower’s Loan Account for at least one (1) year after purchasing the Borrower’s Loan Account from Bank;

 

	
  

	
(g)

	
upon receipt of a government information request forwarded by Bank to Company, (i) compare the names, addresses, and social security numbers on such government list provided by Bank with the names, addresses, and social security numbers of Borrowers for all Loan Accounts purchased from Bank within the prior twelve (12) months, and (ii) within one (1) week of receipt of such an information request, deliver to Bank a certification of completion of such a records search, which shall indicate whether Company located a name, address, or social security number match and, if so, provide for any such match: the name of the Borrower, the account number identifying the Borrower’s Loan Account, and the Borrower’s social security number, date of birth, address, or other similar identifying information provided by the Borrower, to assist Bank in its compliance with Section 314(a) of the Patriot Act and the implementing regulations applicable to Bank (31 C.F.R. § 103.100);

 

	
  

	
(h)

	
provide to Bank electronic copies of the information retained pursuant to subsections (b) and (g) above as mutually agreed to by the Parties, immediately upon request;

 

	
  

	
(i)

	
(i) maintain policies and procedures in a form approved by Bank (“Red Flags Policy”) to (1) detect relevant red flags that may arise in the performance of Company’s obligations, (2) take appropriate steps to address such red flags and to prevent and mitigate the effect of identity theft, (3) report to Bank on such policies and procedures on a regular basis, and (4) otherwise assist Bank in complying with the provisions of § 605A of the Fair Credit Reporting Act, 15 U.S.C. § 1681c-1, and applicable implementing regulations; (ii) identify a program administrator responsible for the Red Flags Policy; (iii) conduct annual training regarding the Red Flags Policy; and (iv) provide a written report regarding the Red Flags Policy no less frequently than annually, by the date designated by the Bank, which report shall (1) address material matters related to the program, (2) evaluate issues such as the effectiveness of the Red Flags Policy in addressing the risk of identity theft in connection with the opening of covered accounts and with respect to existing covered accounts, (3) identify service provider arrangements, (4) identify significant incidents involving identity theft and management's response, and (5) provide recommendations for material changes to the Red Flags Policy;

 

	
  

	
(j)

	
develop and implement a compliance management system (“CMS”) to provide an internal control process for the business functions and processes directed towards Applicants and Borrowers, the elements of which CMS shall include (i) an overall policy statement governing the CMS, (ii) specific procedures for approvals of additions or changes to the CMS, including a description of items subject to the CMS, a process for internal review and approval by Company and its legal counsel, and a process for internal review and approval by Bank and its legal counsel, and (iii) documentation of Company’s testing process, including testing/review of Company’s website and user acceptance testing (UAT); the scope of the CMS shall include, at a minimum, the Consumer Finance Materials, all policy changes, new products, advertisements, press releases, and the website(s) used in connection with the Program;

 

  

19

  

 

	
  

	
(k)

	
maintain a compliance training program for its officers, directors, employees, and agents that is acceptable to Bank; as part of the program, Company shall, subject in each case to the approval of Bank, (i) identify applicable Company officers, directors, employees, and agents and assign appropriate training courses to each and (ii) determine a schedule of each training course and when each applicable officer, director, employee, and agent shall take each such course; Company shall provide reports to Bank regarding the compliance training program on a quarterly basis or, if requested by Bank, more frequently;

 

	
  

	
(l)

	
designate a dedicated compliance officer for purposes of the Program, acceptable to Bank, who shall oversee reviews of Company’s compliance with laws and regulations that may be applicable, including, to the extent applicable, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act, the Truth-in-Lending Act and Regulation Z, the Federal Trade Commission (FTC) Act, the Consumer Financial Protection Act, and laws prohibiting unfair, deceptive, or abusive acts or practices; and, in the event of the termination of the employment of the compliance officer, promptly employ a replacement compliance officer acceptable to Bank;

 

	
  

	
(m)

	
cooperate with and bear the expenses of a compliance audit of the Program on an annual basis, and such other audits as may be requested by Bank from time to time in its reasonable discretion, in each case to be conducted by a third-party audit firm that is selected by and reports to Bank; the scope of each audit shall be determined by Bank (considering in good faith input received by Company); Bank shall receive all draft and final reports of the audit firm and shall be included in any meetings or correspondence related to the audit; the auditor shall deliver the final audit report to Bank, and Bank shall provide a copy of the report to Company;

 

	
  

	
(n)

	
provide to Bank, on an annual basis in writing, a report by the compliance officer of the results of all audits and reviews of the Program, and significant issues to be addressed (if any), as well as Company’s resolutions of such issues (if applicable); and

 

Company will  provide to Bank a certification letter, each quarter, that it is complying with its obligations under this section.  Bank will comply with any reporting requirements of the Utah Department of Financial Institutions or the FDIC applicable to Bank’s performance of this Agreement. The terms of subsections (b), (f) and (g) of this section 30 shall survive the expiration or earlier termination of this Agreement.

	
31.

	
Prohibition on Tie-In Fees.  Company shall not directly or indirectly impose or collect any fees, charges or remuneration relating to the processing or approval of an Application, the establishment of a Loan Account, or the disbursement of Loan Proceeds, unless such fee, charge or remuneration is set forth in the Consumer Finance Materials or approved by Bank.

 

	
32.

	
Notice of Consumer Complaints and Regulatory Inquiries. Company shall notify Bank if it becomes aware of any investigations or proceedings by any state attorney general, Regulatory Authority, or the Better Business Bureau, or of any customer complaint that is directed or referred to any state attorney general, Regulatory Authority, or the Better Business Bureau, relating to any aspect of the Program within five (5) days of becoming aware of such investigation or proceeding or complaint, and Company shall provide Bank with all documentation relating thereto, subject to any legal prohibitions on disclosure of such investigation or proceeding. In addition, Company shall provide Bank with periodic reporting, in a form and on a schedule mutually agreed upon by the Parties, summarizing customer complaints received by Company and the resolution thereof by Company. Company shall cooperate in good faith and provide such assistance, at Bank’s request, to permit Bank to promptly resolve or address any investigation, proceeding, or complaint.

  

20

  

 

	
33.

	
Headings.  Captions and headings in this Agreement are for convenience only, and are not to be deemed part of this Agreement.

 

	
34.

	
Privacy Law Compliance.  Subject to Applicable Laws, Bank and Company shall comply with the privacy policy agreed upon by both Parties with respect to Applicants and Borrowers.

 

	
35.

	
Manner of Payments.  Unless the manner of payment is expressly provided herein, all payments under this Agreement shall be made by wire transfer to the bank accounts designated by the respective Parties.  Notwithstanding anything to the contrary contained herein, neither Party shall fail to make any payment required of it under this Agreement as a result of a breach or alleged breach by the other Party of any of its obligations under this Agreement or any other agreement, provided that the making of any payment hereunder shall not constitute a waiver by the Party making the payment of any rights it may have under the Program Documents or by law.

 

	
36.

	
Referrals.  Neither Party has agreed to pay any fee or commission to any agent, broker, finder, or other person for or on account of such person’s services rendered in connection with this Agreement that would give rise to any valid claim against the other Party for any commission, finder’s fee or like payment.

 

	
37.

	
Financial Statements.  (a) Within ninety (90) days following the end of Company’s fiscal year, Company shall deliver to Bank a copy of Company’s audited financial statements prepared by an independent certified public accountant, and (b) within forty-five (45) days following the end of each of Company’s fiscal quarters (other than year-end), Company shall deliver to Bank a copy of Company’s unaudited financial statements, in each case as of the year or quarter then ended and prepared in accordance with generally accepted accounting principles; provided that, as long as Company is required to file periodic reports under the Securities Exchange Act of 1934, such filings shall satisfy the financial statement delivery requirements set forth above.  Company shall also deliver such additional unaudited financial statements and other information as Bank may request from time to time, within a reasonable period of time following such request.

 

	
38.

	
Information Security.

 

	
  

	
(a)

	
In connection with the Program, Company shall be responsible for maintaining an information security program that is designed, after consulting with Bank, to: (i) ensure the security and confidentiality of Applicant or Borrower information held on behalf of Bank; (ii) protect against any anticipated and emergent threats or hazards to security or integrity of such information held on behalf of Bank; (iii) protect against unauthorized access to or use of such information held on behalf of Bank that could result in substantial harm or inconvenience to any Applicant or Borrower; and (iv) ensure the proper disposal of customer information.

 

  

21

  

 

	
  

	
(b)

	
At least once annually, Company shall conduct an information technology audit consistent with banking industry practices, which shall include review of Company’s information security program.  Such audit shall be conducted by a third-party audit firm that is acceptable to Bank; the scope of each audit shall be subject to the advance approval of Bank.  Company shall promptly provide a copy of the audit report.  Company shall promptly take action to correct any errors or deficiencies identified in any report or audit described in this Section 38, unless Bank agrees that correction is not required, and shall develop, with the approval of Bank, a schedule for the correction of such errors and deficiencies.

 

	
  

	
(c)

	
Company shall immediately (and in any event within twenty-four (24) hours after becoming aware) notify Bank of any actual, suspected or threatened breach in information security involving personally identifiable information of Applicants or Borrowers.  In any such event Company agrees that it will fully cooperate with Bank in investigating any such breach or unauthorized access.  With respect to any such breach in data security, Company agrees to take action promptly, at its own expense, to investigate the breach, to identify, mitigate and remediate the effects of the breach and to implement any other reasonable and appropriate measures in response to the breach.  Company will also provide Bank with all available information regarding such breach to assist Bank in implementing its information security response program and, if applicable, in notifying affected Applicants or Borrowers.  Company shall pay for the costs of any such notification, which notification shall be subject to the advance consent of Bank.

 

	
39.

	
Disaster Recovery and Business Continuity.  Company shall maintain a disaster recovery and business continuity program and related policies acceptable to Bank (collectively, the “Business Continuity Plans”).  Company agrees that such Business Continuity Plans shall be at least consistent with industry standards for the consumer and small business lending industry and in compliance with all Applicable Laws.  Company shall test its Business Continuity Plans at least once annually, and shall promptly provide Bank a copy of the report of such tests.

 

  

22

  

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized officers as of the date first written above.

 

WEBBANK

 

	
By:

	 	  	  
	
Name:

	 	  	  
	
Title:

	 	  	  

 

PROSPER MARKETPLACE, INC.

 

	
By:

	 	  	  
	
Name:

	 	  	  
	
Title:

	 	  	  

 

  

23

  

 

Schedule 1

I.           Definitions

	
  

	
(a)

	
“ACH” means the Automated Clearinghouse.

 

	
  

	
(b)

	
“Affiliate” means, with respect to a Party, a Person who directly or indirectly controls, is controlled by or is under common control with the Party.  For the purpose of this definition, the term “control” (including with correlative meanings, the terms controlling, controlled by and under common control with) means the power to direct the management or policies of such Person, directly or indirectly, through the ownership of twenty-five percent (25%) or more of a class of voting securities of such Person.

 

	
  

	
(c)

	
“Applicable Laws” means all federal, state and local laws, statutes, regulations and orders applicable to a Party or relating to or affecting any aspect of the Program including the Loan Accounts, the Program promotional and marketing materials and the Consumer Finance Materials, and all requirements of any Regulatory Authority having jurisdiction over a Party, as any such laws, statutes, regulations, orders and requirements may be amended and in effect from time to time during the term of this Agreement.

 

	
  

	
(d)

	
“Applicant” means an individual who is a consumer who requests a Loan Account from Bank by posting a listing on the Program Website.

 

	
  

	
(e)

	
“Application” means any request from an Applicant for a Loan Account in the form required by Bank including such requests received through the Program Website.

 

	
  

	
(f)

	
“Bank” shall have the meaning set forth in the introductory paragraph of this Agreement.

 

	
  

	
(g)

	
“Bank Secrecy Act Policy” shall have the meaning set forth in subsection 5(a).

 

	
  

	
(h)

	
“Borrower” means an Applicant or other Person for whom Bank has established a Loan Account and/or who is liable, jointly or severally, for amounts owing with respect to a Loan Account.

 

	
  

	
(i)

	
“Business Day” means any day, other than (i) a Saturday or Sunday, or (ii) a day on which banking institutions in the State of Utah are authorized or obligated by law or executive order to be closed.

 

	
  

	
(j)

	
“Claim Notice” shall have the meaning set forth in subsection 9(c).

 

	
  

	
(k)

	
“Confidential Information” means the terms and conditions of this Agreement, and any proprietary information or non-public information of a Party, including a Party’s proprietary marketing plans and objectives, that is furnished to the other Party in connection with this Agreement.

 

	
  

	
(l)

	
“Consumer Finance Materials” shall have the meaning set forth in Section 4.

 

	
  

	
(m)

	
“Credit Policy” means the minimum requirements of income, residency, employment history, credit history, and/or other such considerations that Bank uses to approve or deny an Application and to establish a Loan Account.

 

  

1

  

 

	
  

	
(n)

	
“Disbursement Account” means an account established by Company and held at the Disbursement Institution against which wire transfers and ACH transfers are settled for payment of Loan Proceeds to Borrowers.

 

	
  

	
(o)

	
“Disbursement Institution” means the depository institution at which the Disbursement Account is established, which initially shall be Wells Fargo Bank, N.A. and may be changed upon mutual agreement of the Parties.

 

	
  

	
(p)

	
“Disclosing Party” shall have the meaning set forth in subsection 11(b)(2).

 

	
  

	
(q)

	
“Effective Date” shall have the meaning set forth in the introductory paragraph of this Agreement.

 

	
  

	
(r)

	
“Existing Program Agreement” shall have the meaning set forth in the recitals.

 

	
  

	
(s)

	
“Force Majeure Event” shall have the meaning set forth in Section 27.

 

	
  

	
(t)

	
“Funding Account” means an account established and owned by Bank and held at the Funding Institution against which wire transfers or ACH transfers are settled for the payment of Loan Proceeds and Origination Fees to Company.

 

	
  

	
(u)

	
“Funding Amount” means the aggregate amount, as listed on a Funding Statement, of all Loan Proceeds to be disbursed by Bank to Borrowers through Company’s Disbursement Account on each Funding Date and the related Origination Fees.

 

	
  

	
(v)

	
“Funding Date” means the Business Day on which any pending Applications are approved.

 

	
  

	
(w)

	
“Funding Institution” means the depository institution at which the Funding Account is established, which initially shall be Zions First National Bank and may be changed by Bank upon reasonable advance notice to Company.

 

	
  

	
(x)

	
“Funding Statement” means the statement prepared by Company on a Business Day that contains (i) a list of all Applicants who meet the eligibility criteria set forth in the Credit Policy, for whom Bank is requested to establish Loan Accounts; and (ii) the computation of the Funding Amount and all information necessary for the transfer of Loan Proceeds and Origination Fees from the Funding Account to the Disbursement Account and distribution by Company of the Loan Proceeds to the accounts designated by the corresponding Borrowers, including depository institution names, routing numbers and account numbers; and (iii) such other information as shall be reasonably requested by Bank and mutually agreed to by the Parties.

 

	
  

	
(y)

	
“Indemnifiable Claim” shall have the meaning set forth in subsection 9(b).

 

	
  

	
(z)

	
“Indemnified Parties” shall have the meaning set forth in subsection 9(a).

 

	
  

	
(aa)

	
“Insolvent” means the failure to pay debts in the ordinary course of business, the inability to pay its debts as they come due or the condition whereby the sum of an entity’s debts is greater than the sum of its assets.

 

	
  

	
(bb)

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

 

  

2

  

 

	
  

	
(cc)

	
“Licensing Party” shall have the meaning set forth in Section 12.

 

	
  

	
(dd)

	
“Loan Account” means a consumer installment loan account established by Bank pursuant to the Program.

 

	
  

	
(ee)

	
“Loan Account Agreement” means the document containing the terms and conditions of a Loan Account including all disclosures required by Applicable Laws.

 

	
  

	
(ff)

	
“Loan Sale Agreement” means that Second Amended and Restated Loan Sale Agreement, dated as of even date herewith, among Bank, PMI and PFL, pursuant to which Bank agrees to sell to PMI or PFL, and PMI or PFL agree to purchase from Bank, the Loan Accounts.

 

	
  

	
(gg)

	
“Loan Proceeds” means the funds disbursed to a Borrower pursuant to a Loan Account established by Bank under the Program.

 

	
  

	
(hh)

	
“Losses” shall have the meaning set forth in subsection 9(a).

 

	
  

	
(ii)

	
“Marks” shall have the meaning set forth in subsection 12(a).

 

	
  

	
(jj)

	
“Origination Fee” means the up-front fee a Borrower pays to Bank under the Loan Account Agreement for origination of a Loan Account in the form of a pre-paid finance charge.

 

	
  

	
(kk)

	
“Party” means either Company or Bank and “Parties” means Company and Bank.

 

	
  

	
(ll)

	
“Person” means any legal person, including any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, governmental entity, or other entity of similar nature.

 

	
  

	
(mm)

	
“PFL” means Prosper Funding LLC, a Delaware limited liability company and a wholly-owned subsidiary of Company.

 

	
  

	
(nn)

	
“Program” means the installment loan program pursuant to which Bank shall establish Loan Accounts and disburse Loan Proceeds to Borrowers pursuant to the terms of this Agreement, initially as described in Exhibit A attached hereto.

 

	
  

	
(oo)

	
“Program Compliance Manual” means the policies and procedures for the implementation of the Program by Company, including the policies and procedures regarding the (i) solicitation and receipt of Applications, (ii) underwriting of Loan Accounts, (iii) processing of Applications, (iv) requirements of the USA PATRIOT Act Customer Identification Program, and (iv) initial and periodic Office of Foreign Assets Control screenings.

 

	
  

	
(pp)

	
“Program Documents” means this Agreement, the Loan Sale Agreement, and the Stand By Loan Purchase Agreement.

 

  

3

  

 

	
  

	
(qq)

	
“Program Threshold Amount” means [*].

 

	
  

	
(rr)

	
“Program Website” means any part of the website located at www.prosper.com, together with any other website on which the Program is offered to public, that contains (A) any information directed towards Borrowers or Applicants, (B) any information about Borrowers or Applicants, or (C) any part of the application process or information concerning or describing the application process, which shall be hosted and maintained by Company.

 

	
  

	
(ss)

	
“Proprietary Material” shall have the meaning set forth in subsection 12(a).

 

	
  

	
(tt)

	
“Regulatory Authority” means any federal, state or local regulatory agency or other governmental agency or authority having jurisdiction over a Party and, in the case of Bank, shall include, but not be limited to, the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation.

 

	
  

	
(uu)

	
“Restricted Party” shall have the meaning set forth in subsection 11(a).

 

	
  

	
(vv)

	
“Stand By Loan Purchase Agreement” means that Stand By Loan Purchase Agreement, dated as of even date herewith, between the Parties.

 

	
  

	
(ww)

	
“Trigger Event” shall have the meaning set forth in subsection 10(c).

 

II.           Construction

As used in this Agreement:

	
  

	
(a)

	
All references to the masculine gender shall include the feminine gender (and vice versa);

	
  

	
(b)

	
All references to “include,” “includes,” or “including” shall be deemed to be followed by the words “without limitation”;

	
  

	
(c)

	
References to any law or regulation refer to that law or regulation as amended from time to time and include any successor law or regulation;

	
  

	
(d)

	
References to “dollars” or “$” shall be to United States dollars unless otherwise specified herein;

	
  

	
(e)

	
Unless otherwise specified, all references to days, months or years shall be deemed to be preceded by the word “calendar”;

	
  

	
(f)

	
All references to “quarter” shall be deemed to mean calendar quarter; and

	
  

	
(g)

	
The fact that Bank or Company has provided approval or consent shall not mean or otherwise be construed to mean that: (i) either Party has performed any due diligence with respect to the requested or required approval or consent, as applicable; (ii) either Party agrees that the item or information for which the other Party seeks approval or consent complies with any Applicable Laws; (iii) either Party has assumed the other Party’s obligations to comply with all Applicable Laws arising from or related to any requested or required approval or consent; or (iv) except as otherwise expressly set forth in such approval or consent, either Party’s approval or consent impairs in any way the other Party’s rights or remedies under the Agreement, including indemnification rights for Company’s failure to comply with all Applicable Laws.

 

	
*

	
Confidential Treatment Requested

 

  

4

  

 

Schedule 7(b)(4)

Litigation

On November 26, 2008, plaintiffs, Christian Hellum, William Barnwell and David Booth, individually and on behalf of all other plaintiffs similarly situated, filed a class action lawsuit against PMI and certain of its executive officers and directors in the Superior Court of California, County of San Francisco, California.  The suit was brought on behalf of all persons who had purchased loan notes through PMI’s platform from January 1, 2006 through October 14, 2008.  The lawsuit alleges that PMI offered and sold unqualified and unregistered securities in violation of the California and federal securities laws.  The lawsuit seeks damages and the right of rescission against PMI and the other named defendants, as well as treble damages against PMI and the award of attorneys’ fees, experts’ fees and costs, and pre-judgment and post-judgment interest.

On February 25, 2011, the plaintiffs filed a Third Amended Complaint, which removed David Booth as a plaintiff and added Brian Russom and Michael Del Greco as plaintiffs.  The new plaintiffs are representing the same putative class and prosecuting the same claims as the previously named plaintiffs. On February 29, 2012, the court granted the plaintiffs’ motion for class certification.

PMI’s insurance carrier with respect to the class action lawsuit, Greenwich Insurance Company (“Greenwich”), denied coverage.  On August 21, 2009, PMI filed suit against Greenwich in the Superior Court of California, County of San Francisco, California.  The lawsuit sought a declaration that PMI was entitled to coverage under its policy with Greenwich for losses arising out of the class action lawsuit as well as damages and the award of attorneys’ fees and pre- and post-judgment interest.

On January 26, 2011, the court issued a final statement of decision finding that Greenwich has a duty to defend the class action lawsuit, and requiring that Greenwich pay PMI's past and future defense costs in the class action suit up to $2 million.  Greenwich subsequently made payments to PMI in the amount of $2 million to reimburse PMI for the defense costs it had incurred in the class action suit.  As a result, Greenwich has now satisfied its obligations with respect to PMI’s defense costs for the Hellum suit, with the exception of $142,584 in pre-judgment interest that Greenwich will be required to pay to PMI when a final judgment has been entered in the suit and all appeals have been exhausted.

On July 1, 2011, PMI and Greenwich entered into a Stipulated Order of Judgment pursuant to which PMI agreed to dismiss its remaining claims against Greenwich.  On August 12, 2011, Greenwich filed a notice of appeal of the court's decision regarding Greenwich’s duty to defend up to $2 million. On July 16, 2012, the California Court of Appeal affirmed the trial court’s decision.

 

  

  

  

 

Exhibit A

The Program Website

(screen shots of each page of the Program Website)

 

  

  

  

 

Exhibit B

Credit Policy

 

  

  

  

 

Exhibit C

Form of Application

 

  

  

  

 

Exhibit D

Loan Account Documentation

 

  

  

  

 

Exhibit E

Sample Funding Statement

 

  

  

  

 

Exhibit F

Insurance Requirements

 

(a)           From the Effective Date and until termination of this Agreement, Company shall maintain insurance of the following kinds and amounts, or in amounts required by Applicable Laws, whichever is greater.

 

(i)           A blanket fidelity bond and an errors and omissions insurance policy, with broad coverage on all officers and employees acting in any capacity with regard to handling funds, money, or documents.  The fidelity bond and errors and omissions insurance shall be in a form reasonably acceptable to Bank and shall protect and insure against losses, including forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of such persons.  No provision of this paragraph requiring the fidelity bond and errors and omissions insurance shall diminish or relieve Company from its duties and obligations as set forth in this Agreement.  The minimum coverage under any such bond and insurance policy shall be at least [*], with the exception of [*] minimum coverage for forgery.

 

(ii)           Commercial general liability insurance written on an occurrence basis against claims on account of bodily injury, death or property damage.  Such insurance shall have a combined single limit of not less than [*] per occurrence and [*] annual aggregate for bodily injury, death and property damage.

 

(iii)          Worker’s Compensation and employers’ liability insurance affording (A) protection under the Worker’s Compensation Law containing an all states endorsement and (B) Employers’ Liability Protection subject to a limit of not less than [*].

 

(iv)          Upon reasonable request by Bank, such other insurance as may be maintained by Persons engaged in the same or similar business and similarly situated.

 

(b)             Insurance policies required to be maintained hereunder shall be procured from insurance companies reasonably acceptable to Bank.  Liability insurance limits may be provided through any combination of primary and/or excess insurance policies.  If requested by Bank, Company shall cause to be delivered to Bank annually a certified true copy of each fidelity bond and insurance policy required under this Agreement.

 

	
*

	
Confidential Treatment Requested

 

  

  

  

 

Exhibit G

Program Compliance Manual

 

  

  

  

 

Exhibit H

Third-Party Service Contractors

	
Third-Party Service Contractor

	 	
Service Provided

 

  

  

  

 

Exhibit I

Bank Secrecy Act Policy

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